IMF or Chinese Gold?
Research for Online Investors

by John Dalt

3/12/10

Has China bought the IMF gold?  On March 9th, Pravda carried the headline “IMF sells 191 tons of gold.”  The gold market did not respond.  This was the remainder of the ‘mother-lode’ of gold that needed to be removed from the marketplace and supply.  India bought most the first half of the 403.3 tonnes of gold the IMF had to sell in the fall of 2009.  News of the India sale sent gold higher on strong buying.  Is the headline correct? Or is it as accurate as the “news” that appeared in Pravda during the dark ages of communism?  We don’t know, as there is no other confirmation available.  We checked China Daily and Global Times but found no mention of the purchase.

China inflation hit a 16-month high last month at a 2.7% year-over-year increase.  China’s National Bureau of Statistics (NBS) tried to reassure markets, “…price rises this year will be moderate and controllable.”  The government has set a target of 3% for consumer inflation in 2010.  The NBS showed fixed asset investment rose 26.6% in the first two months of the year. Exports jumped 45.7% in February over February last year.  Industrial output was up 20.7% since the beginning of the year.  You can read the complete news story “China’s CPI rises 2.7% in February on seasonal factors.”

China is building a high-speed rail system inside the country and coordinating with 17 other countries to extend the lines into Europe and Asia.  The international rail network will eventually tie 81,000 kilometers of railways together.  Discrepancies in technical standards of different countries must be addressed before the new “silk road” becomes a reality.

The U.S. budget deficit for February was $220.9 billion, the largest monthly total in history.  Larger than a handful of years during wars and economic upheaval.  We did it all in one month.  Last year the U.S. government borrowed one dollar out of every two dollars it spent.  Last month the U.S. borrowed two dollars out of every three dollars spent!  Revenue was $107 billion, expenditures $328 billion.  Where are the violin players?  We might as well have music while the ship sinks.

Maybe today's article is a synopsis why our government is rushing to socialism.  China is growing, has a trade surplus, and building bullet trains to Europe while trying to hold back growth with tighter lending standards.  The U.S. is borrowing more and more money every month, and trying to pass laws that will require more spending.  We are pumping money into banks so they will loan it to business.  Business doesn’t want to go in debt with a cloudy future.  Who knows what the next government restriction, regulation or tax will be on success?

This may make sense, if you are a world improver bureaucrat.

''Life's tough... it's even tougher if you're stupid.''--John Wayne

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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