A Melman Minute By: Leonard Melman   NOTE: In order to complete Mr. Melman's forthcoming book on the essential fundamentals of the developing international financial crisis and its relationship to gold and silver, new "Melman Minutes" will be posted only three times per week, each Monday, Wednesday and Friday. Since the work has been expanded to include potential solutions to the growing list of seemingly insoluble dilemmas, the working title of the book has been revised to 'REVERSING THE WAY IN!"   MELMAN MINUTE - June 28, 2010 - - - - - Well, the rioters have gone home and financial journalists are working their fingers to the bone writing copy regarding the just concluded G-8 ad G-20 conferences held in Toronto over the past weekend.  After all the printers' ink and all the electronic data has been entered, the question which must be answered is, "just what was accomplished after all the gasping and panting?"  The answer may indeed be little of any concrete nature. After reviewing much of the commentary this morning, most analysts seemed to focus on two specific items as the major accomplishments of the get-togethers.  One was acceptance of the Canadian opposition to a special international tax against all important multi-national banks.  The other was an agreement that countries should begin to work toward reducing their budget deficits by cutting them in half by 2013. One last additional item specifically mentioned was that the conferences recognized the necessity of bringing the participating countries' Debt/GDP countries' ratios back into line with standards of sound fiscal responsibility.  Unfortunately, while the statement calls for progress to be made in that direction, it mentioned that the goal was to attain improvement by 2016.  Doesn't sound to us like anyone is taking that situation very seriously at all. From our point of view, the great difficulty is that the wording of communiqués relating to these goals was so muted that they may as well not have been mentioned at all.  Instead of a powerful, specific commitment to begin reducing deficits at all costs and bring Debt/GDP ratios into line beginning immediately, what we got were comments such as this from China's President, Ju Jintao:  "We must act in a cautious and appropriate way concerning the timing, pace and intensity of an exit from the stimulus packages..."  A portion of the final statement of the joint conference read, "...we need to follow through on delivering existing stimulus plans, while working to create the conditions for robust private demand" and President Obama noted, "...we must recognize that our fiscal health tomorrow will rest in no small measure on our ability to create jobs and growth today." Sounds to us like the kind of talk you would get from a drug addict, alarmed at the amount of contraband he is ingesting and promising to control such self-abuse, but insisting at the same time that he suffer absolutely no pain. In the meantime, the City of Toronto suffered through rioting and destruction and the Canadian taxpayer has spent over $1 billion to put on this show.  Sounds to us like they labored a mountain but brought forth a molehill.  Let's hope something more definitive comes out of the G-20's next meeting in Seoul, South Korea this coming November.       Every so often we come across a chart which raises more questions than answers.  One such chart is the ten-year saga of Exxon-Mobil (ticker: XOM), one of the world's truly giant corporation with a market capitalization (# shares x market price) of over one-quarter trillion dollars. Two fundamental facts would appear to point towards a brighter future for XOM; namely a gradually rising price for petroleum, now approaching $80 per barrel, and a presumed advancing world economic structure.  With that sort of background, one would normally expect XOM shares to be advancing toward new highs, but the opposite is the case.  After making a historic high in late 2008 near $96 per share, XOM has been trending downward, making a series of declining peaks and now threatens to break below its panic low of late 2008 at $57 per share. Clearly, something is out of whack.  Perhaps one concept might be that those who are looking for a strong economic revival are ignoring one central fact; the typical consumer is up to their very eyeballs in debt and simply are unable to consume in a manner sufficient to bring about a strong recovery.  We have noted several times that events in the U.K. seem to be a harbinger of what occurs slightly later in the USA and Canada.  If that is the case, an article in the Daily Mail newspaper of London should grab the attention of monetary authorities here in North America.  The article is headlined, "Families on the brink of 'insolvency crisis' after decade-long credit card binge."  The opening quote suffices to identify the problem as it reads:  "Families are drowning in debt after a decade-long binge on credit cards.  The Bank of England today warns lenders are writing off record quantities of credit card borrowings as thousands of individuals spiral into insolvency." A later quote is completely applicable toward both Canada and the USA and reads:  "...Lax lending standards and a huge appetite for consumption...has led tens of thousands of families to rack up unprecedented quantities of credit card debt, overdrafts and unsecured loans." We believe there is another important factor at work which will tend to exacerbate the situation.  Rising tax rates, both already enacted and also of a manner suggested at the G-8 and G-20 conferences, can only diminish net take-home wages or company profits, which will deprive even more families of the ability to honor their debts in a timely manner. All of this suggests more government stimulation, not less and more currency creation, not less in coming months and years.  Both of those factors would appear to augur well for higher monetary precious metals prices over time. One other article caught our eye this morning, a story which has only the vaguest connection to the just-concluded conferences.  It was a Wall Street Journal op-ed piece entitled, "Why Friedrich Hayek is Making a Comeback."  Hayek was a prominent economist and social commentator of the years just before and during World War Two and he often squared ff against his intellectual opponent, John Maynard Keynes. For the past seven decades, Keynesianism has dominated the political/economic thought processes in most nations, but something is changing and we believe it may be a growing worldwide awareness of the realization that the massive artificial creation of money of the past few years in particular could be setting the stage for truly massive trauma.  For whatever reason, a simple mention of Hayek's text, "The Road to Serfdom", on Glenn Beck's radio and television program sent that book soaring to the number one spot on Amazon's demand listings.  Most interesting indeed and we wonder if it could be another signal of a growing shift in public awareness. (Of course, we also hope to contribute to this awareness through our new book, "Reversing the Way In", now available through this site in both printed and electronic editions.) As of 9:45 AM PDT, markets this morning have been in a state of flux, to put things mildly.  After opening slightly higher, in fact making a historic new high near $1,264, gold has been hit by heavy selling and is now down almost $20 on the day to just under $1,240 while silver is down by over 30 cents.  Base metals are close to unchanged on balance and mining share indexes are off by about 1.5%.  Financial markets are split with the Dow Industrials close to unchanged but Canada's TSX Index, reflecting weaker mining shares, is off by about 70 points.  Crude oil is down slightly while the U.S. Dollar has shown modest strength so far this session.  Interest rate futures are little changed. - - - - - All quotes US$ unless otherwise noted. Next Melman Minute scheduled for Wednesday, June 30, 2010.    ◄  Previous Minute                                                                                                        Next Minute  ►
		DISCLAIMER The information presented above is based on data which we believe to be from reliable sources, but the accuracy of which cannot be guaranteed.  Any opinions or predictions contained herein are those of the editor and are likewise offered also for information purposes only. Any investment decisions should be made only following consultation with registered investment professionals.