It is still too early to think that we are near or past the bottom of this economic downturn. However, in my mind, we are in the “working out” stage of the downturn, especially in the current economic restructuring we are going through, and we cannot expect this stage to be a short one. 

The problem with many analysts and policy makers is that they continue to see our economic problems in Keynesian terms and think that the difficulties being experienced in banking and financial markets as a liquidity issue. Hence the search for evidence pointing to “green shoots” and for an “easing of credit.” Every day we hear when new statistics are released that the numbers just presented are “less bad” than before and this indicates that the economy is getting worse at a slower pace. An obvious sign that we are near the bottom!

In

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It was another stellar day for all the precious metals yesterday…gold, silver platinum and palladium. Gold was up a hair over two percent…and the other three metals were up four percent plus.

Gold rose almost from the Globex open at the start of Friday morning trading in the Far East…and really moved to the upside the moment that Sydney closed for the weekend. From there, it rose steadily through London and the Comex open…with the peak price coming at the 4:00 p.m. London close…11:00 a.m. in New York. However, gold managed to close very close to its highs of the day [for a gain of almost $20] by the time electronic trading on the Globex system was over at 5:15 p.m. late Friday afternoon. The usual N.Y. commentator added this…”Aggregate estimated volume was only 100,104 lots and less than 25,000 contracts traded in the last three hours.”

However, the star performer was

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This post provides links to some thought-provoking articles I have read over the past few days that you may also find of interest.

• Paul McCulley (Pimco - Global Central Bank Focus): The shadow banking system and Hyman Minsky’s economic journey, May 2009. As we look for answers about the current financial crisis, it’s clear that creative financing played a massive role in propelling the global financial system to hazy new heights - before leading the way into the depths of a systemic crisis. But how did financing get so creative? It didn’t happen within the confines of a regulated banking system, which submits to strict regulatory requirements in exchange for the safety of government backstopping. Instead, financing got so creative through the rise of a “shadow banking system,” which operated legally, yet almost completely outside the realm of bank regulation. The rise of this system drove

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MUNICH -- May 25 2009 -- The United States Congress is currently formulating comprehensive clean energy legislation that will be critical to the growth of solar and other renewable energy sources in the U.S. and around the world.

This morning, the Joint Economic Committee of the U.S. Congress took up the implications of rising world oil demand for the U.S. economy. I was invited to participate along with Daniel Yergin, Co-Founder and Chairman of Cambridge Energy Research Associates.

I have some more discussion at the Washington Post as well as the following links:

Full statement of my testimony Background supportive research Website for the JEC session

We made a brief trip back to France for a board meeting. Returning to London, people all seemed to be in mourning. Black is the color in London. Everyone wears black. Black pants, black skirts, black coats…

…the cabs are black…and so is the mood.

Last week, the Bank of England and European Central Bank announced new initiatives aimed at putting some brighter colors in the economy. Both banks are going to take up forms of QE – quantitative easing.

Whoa…don’t touch that dial! (A reminder for younger readers: TVs and radios used to have dials, which you turned to change the channel. Announcers would begin with ‘Don’t touch that dial’ when they had something important to say.)

We’re not going to discuss QE – promise!

On Friday, for the benefit of new readers, we were trying to explain The World According to The Daily Reckoning. Today, we continue our explanation –

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Is gold bullion coming back to life? Should one read anything into its rise of 3.6% over the past two days to above $900?

The yellow metal solidly outperformed stock markets for the bulk of the equity bear market that commenced in October 2009. However, as investors waved safe havens goodbye and embraced risky assets since early March, gold lost its luster.

Could gold’s treading water simply be ascribed to “Armageddon hedging” having dissipated, or is it perhaps the threat of the IMF’s plan to sell 403 metric tons of gold once approved by US Congress (unlikely before late in 2009)?

The Financial Times this morning published an article on how dearly gold sales over the years have cost European Central banks after copying the Bank of England’s program of large-scale gold sales that commenced in 1999, thereby triggering a

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Well, the gold chart looked pretty bleak very early Friday morning…with gold touching the $880 level in London as I turned my computer off from writing Friday’s rant. I must admit that I turned the computer back on about lunch time yesterday with some fear and trepidation, but was pleasantly surprised that the price I’d seen last night [just before the London a.m. fix] was the low tick of the day. From there it worked its way a few dollars higher…right into Comex floor trading in New York.

But a tiny attempt to run to the upside into positive price territory, that started just before noon Eastern, ran into another not-for-profit seller about an hour later. From there, gold sold off quietly into the close of electronic trading on the Globex. According to the usual New York commentator, estimated volume was 50,990 lots with a switch effect of 7,874 contracts.

Although it

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Barring some dramatic – and unforeseen – news this week, expect investors to tread water until Thursday, when the government is expected to release the results of the bank stress tests it conducted on the 19 largest U.S. banks.

The stress-test results are expected to show that the 19 banks may have to raise between $100 billion to $150 billion – or even more – in new capital. Investors will cause the shares of the strong players to zoom northward, and will likely savage the shares of the weakest players.

“I can’t think of a time since I’ve been watching banks when there’s been so much uncertainty about the true value of a key set of assets,” Douglas Elliott, a fellow at the Brookings Institution, a Washington think tank, told Reuters.

The U.S. bank stress tests have transfixed the world financial markets for weeks, exacerbating the ongoing financial crisis – worsening the U.S.

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Top Stories     

Sources: Treasury considers more mortgage-modification incentives Providing cash payments to holders of second-mortgage liens is among the options being considered by the U.S. Treasury to encourage lenders to modify mortgages as an alternative to foreclosure, sources said. Incentives for “short sales,” in which the lender gets some money but less than the full amount due under the loan, are also being discussed, the sources said. Reuters (21 Apr.)

European, U.S. banks face steep funding needs, IMF says To return to capital levels similar to those immediately before the financial crisis, banks in Europe and the U.S. must raise $875 billion in equity, the International Monetary Fund said. The IMF’s Global Financial Stability Report delves ...