Thursday, October 27, 2011

Political and Economic Forecasting and Gold?

Right now the news on most economies isn't that hot.

But it is election season here in New Zealand and we wouldn't want a bad set of world ecomonic and local data to get in the way of voter sentiment would we? reports: Yesterday’s PREFU release forecasted a government operating deficit before investment gains and losses of NZ$943 million in the 2013/14 year, before a NZ$1.450 billion surplus in 2014/15.

It may have been easier for Governments in the 2000 - 2006 era to forecast surpluses. Money was easy to obtain, tax takes were on the boil.

Forcasting deficits any further out than a couple of years leaves so much room to manouever so Governments, and their 'paid' economists, can cover their butts by mentioning the old 'it depends how the World economy goes' mantra. Tails we win, heads we win.

Who can really take the forecast above seriously? Investors, probably not, it's their money they are careful about. Government, perhaps, it's your money they are not careful about.

NZ and every western economy will be in increasingly crippling debt unless this debt is dealt with. Interest payments alone will wreak havoc with positive forcasts. If we are relying on the old model of debt for growth, we are spitting in the wind. This model is broken.

This from The Daily Reckoning recently. "The core problem is that debt-financed growth is no longer real growth. The world's huge debt loads need to be extinguished. And then savings can become the basis of new credit, dealt out prudently by banks to enterprises that create real value and real returns for investors."

Gold (and silver) are reflecting the confidence that people have in Governments. They are looking at Merkel, Cameron and Sarkozy, and their divergent agendas, and not seeing much peace. They are protecting themselves with the oldest and most stable wealth preservers in history.

The NZ Government, and others around the world, predict growth in their economies based on forecasts as good as any Oracle in a Greek tragedy. Political games are played with figures. And your money and wealth.

Gold in New Zealand dollars: $2155.53 per oz
Previous all time high: $2284.16 per oz (19 Aug, 2011)

Silver in New Zealand dollars: $41.69 per oz
Previous all time high: $59.19
per oz (30 Apr, 2011)

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