Unemployment Benefits Creating Permanent Unemployment

August 11, 2010

With a 9.5% jobless rate and some 15 million Americans looking for work, many employers are inundated with applicants. But a surprising number say they are getting an underwhelming response, and many are having trouble filling open positions.

“This is as bad now as at the height of business back in the 1990s,” says Dan Cunningham, chief executive of the Long-Stanton Manufacturing Co., a maker of stamped-metal parts in West Chester, Ohio, that has been struggling to hire a few toolmakers. “It’s bizarre. We are just not getting applicants.”

Employers and economists point to several explanations. Extending jobless benefits to 99 weeks gives the unemployed less incentive to search out new work.

The difficulty finding workers limits the economy’s ability to grow. It is particularly troubling at a time when 4.3% of the labor force has been out of work for more than six months—a level much higher than after any other recession since 1948.

Mr. Sperry sees extended jobless benefits as one of the main culprits behind his company’s hiring difficulties. Many of the applicants he saw at job fairs, he says, were just going through the motions so they could collect their unemployment checks.

Some workers agree that unemployment benefits make them less likely to take whatever job comes along, particularly when those jobs don’t pay much. Michael Hatchell, a 52-year-old mechanic in Lumberton, N.C., says he turned down more than a dozen offers during the 59 weeks he was unemployed, because they didn’t pay more than the $450 a week he was collecting in benefits. One auto-parts store, he says, offered him $7.75 an hour, which amounts to only $310 a week for 40 hours.


The longer the government subsidizes unemployment, the more of it we will get.  Most people aren’t going to accept a job unless it is a decent amount more than they can get from sitting at home collecting unemployment.  Temporary unemployment is fine, say three to a maximum of six months… after that, it needs to be cut off.  At the six month point, the most likely reason someone is still unemployed is that they are not willing to work for a lower wage, but if that is all that is available, well… then that is all that is available.  We can thank government intervention in the economy for that.


Taleb Says Government Bonds to Collapse, Avoid Stocks

August 11, 2010

Nassim Nicholas Taleb, who warned that unforeseen events can roil markets in “The Black Swan,” said he is “betting on the collapse of government bonds” and that investors should avoid stocks.

The financial system is riskier that it was than before the 2008 crisis that led the U.S. economy to the worst contraction since the Great Depression, Taleb said.


We may be reaching the “all in” time for gold/silver.

The head of Zimbabwe’s reserve bank explains the policies that have led to hyperinflation.

August 4, 2010

Interview from January 2009.

Robert Mugabe’s right-hand man, Gono generally keeps himself shielded from the foreign press, fortifying himself in luxury hotels or his 47-bedroom mansion in Harare. Gono is known in some circles as “Mr. Inflation” because he has overseen the printing of billions of dollars in worthless notes, most recently Zimbabwe’s trillion-dollar bill, to be launched later this year.

I found myself doing extraordinary things that aren’t in the textbooks. Then the IMF asked the U.S. to please print money. I began to see the whole world now in a mode of practicing what they have been saying I should not.

There is a very high level of indiscipline and corruption in the Zimbabwean economy. (says the man who lives in a 47 bedroom house and has the ability to print money… coincidence???)


Americans Renouncing Citizenship

August 3, 2010

At the US Embassy in London, there is a waiting list that none of the officials likes to discuss. On the list are Americans hoping to give up their citizenship, as they seek shelter from the Internal Revenue Service.

The rules are far less complicated than they were. A one-off exit tax is levied on all income and capital gains – this applies to those holding assets of more than $2m and includes pensions, deferred compensation, unrealised gains from properties and investments and interests in foreign trusts.

If you have less than $2m (€1.5m, £1.3m), you escape most penalties. “If you can get below that $2m net-asset-value snapshot, it’s fairly easy. You escape the exit tax,” says Richard Cassell, a partner at Withers, the law firm. “But few people want to write the cheque if they have more than that. It becomes painful.”

“Being American presents you with a very particular and peculiar set of problems from a tax perspective and over the next few years, it could get worse for the wealthy,” he adds.

Financial Times

Gold Takeovers Set Record

August 3, 2010

Global gold mining takeovers set a record this year with “chest-beating” miners chasing deals as the price of the metal surged, boosting fees at advisory banks BMO Capital Markets, HSBC Bank Plc and Merrill Lynch.

Takeovers may increase as China, the world’s largest gold producer, backs acquisitions abroad.

“Producers are under pressure to continue to buy or find gold to replenish the production pipeline and many companies look to do both.”

Barrick, the world’s biggest producer, and Newmont, the largest U.S. gold company, have both signaled in the past two months that they may consider “opportunistic” acquisitions.


Hopefully you have a large basket of junior miners to take advantage of these takeovers… it is like buying the high-quality seniors at a discount as you get shares of the senior when they take-over the junior, but more shares than if you just bought the senior to begin with.

China – Ready To Deploy Its Financial Warchest

August 3, 2010

BEIJING — China, the world’s largest gold producer, will support overseas investment plans by “large-scale” bullion companies by backing them financially, the People’s Bank of China said.

China “will place heavy emphasis on supporting large-scale gold producers in their development and overseas expansion plans,” the central bank said in the statement.

Chinese companies spent more than $30 billion last year buying mining assets and oil deposits to help secure raw material supplies to feed the nation’s growing economy.