Is The Russia/Ukraine/Putin/Obama Mess Going To Make Precious Metals Jump In Price Especially Palladium? Will It End Up Bankrupting The US?

URL and to post comments: http://dollarvigilante.com/blog/2014/4/17/a-new-cold-war-means-a-new-record-price-for-this-precious-me.html Thursday,April 17, 2014 [Editor's Note: The following post is by TDV Editor-in-Chief, Jeff Berwick] Palladium could be heading for a record. Here's why:  Tensions in the Ukraine have turned investors' attention towards precious metals.  In times of political conflict, especially military, precious metals generally do well. But some people might have been surprised just how the tensions have affected precious metals.  Palladium has risen to its highest level since 2011. Escalating tensions in Ukraine are the reason, in particular the supply of palladium from Russia, the world’s biggest producer, could be restricted. This is especially true if US politicians and "experts" continue mouthing off about how the US government should go after Russia's banking and financial system. As if the US government is not in a precarious situation enough... In 1999-2000 palladium ran to $1,090. Could it be heading to its old high? There are lots of reason to believe so...and also to believe we are at the beginning of the next price run in the precious metals, including gold and silver. But for now palladium is the big story.  Palladium has already increased 13 percent this year. There is crisis in Ukraine, as well as in South Africa, the world's second largest producer of palladium.  I have never seen such perfect conditions for the continued rise in the price of palladium. Demand has never been higher and the supply is volatile.  UKRAINE The situation in Ukraine has caused a mess geopolitically. In the country itself, capital controls have already been instituted, which we have covered at The Dollar Vigilante continuously.  7 percent of deposits were withdrawn from Ukrainian banks in the week after the fall of Kiev. The Ukraine Central Bank's early capital controls: Sets limits on foreign currency purchases. Limits purchasees to 15,000 Hryvnia per person per day ($1,300). Ukraine central bank limit purchases to 150,000 Hryvnia per person per month ($13,000). The European Union and the US have been quick to aid Ukraine through the International Monetary Fund.  The US has also threatened sanctions, and some US banks have even moved in that direction, like JP Morgan.  But the Kremlin has taken a similar stance in response to (mainly) US antagonisms. A Kremlin economist, Sergei Glazyev, told RIA Novosti that this would lead to a crash of the US financial system. “We would find a way not just to reduce our dependency on the United States to zero but to emerge from those sanctions with great benefits for ourselves,” said the Kremlin economic aide. “We have wonderful economic and trade relations with our Southern and Eastern partners,” he said. “We will find a way not just to eliminate our dependence on the US but also profit from these sanctions.” Obama has already ceased trade and energy talks with Russia. The State Department said: “At this point, we are not just considering sanctions. Given the actions Russia is taking, it is likely we will put those in place and we are preparing that.” All this gives Russia reason to begin playing the game of geopolitical chess. Russia's strength? It's commodities and resources. PALLADIUM TO RECORD LEVELS? I don't foresee tensions over Russia mellowing out. Of course there is room for a correction in the palladium price, but there is little reason why it should face any troubles overtaking the $1,090 mark should questions over supply remain.  Western companies reliant on palladium are now forced to stockpile. This puts them in a precarious situation as in 1999 Ford went long palladium at the top of the market, and lost a lot of money. You can see how palladium has responded in bitcoin terms: Palladium is a volatile metal. But we feel that it belongs in a diversified and balanced precious metals portfolio. Especially considering its supply problems.  Our special report, Getting Your Gold Out Of Dodge, is 127 pages on how to internationalize your precious metals holdings, something which could prove to be more important than even owning precious metals in the first place. We analyze the hundreds of options investors have to store worldwide, with more actionable info of this kind than you'll find anywhere else. Our conference, The TDV Wealth Management Crisis Conference, can help sophisticated million dollar entrepreneurs and others make the changes to their savings plan to ensure they keep their wealth, something many people who don't see the writing on the wall won't have the luxury of.  Join the discussion at The Dollar Vigilante.

Anarcho-Capitalist.  Libertarian.  Freedom fighter against mankind’s two biggest enemies, the State and the Central Banks.  Jeff Berwick is the founder of The Dollar Vigilante, CEO of TDV Media & Services and host of the popular video podcast,Anarchast.  Jeff is a prominent speaker at many of the world’s freedom, investment and gold conferences as well as regularly in the media including CNBC, CNN and Fox Business.

Ukraine Is In Trouble. Will It Go Bankrupt? What Happens Then? Will Russia Save Them?

Free-fall: IMF to accelerate Ukraine’s economic collapse?

Patrick L Young 
rt.com
March 31, 2014

Will Maidan optimism be extinguished as the citizens of Ukraine realize their economic plight means considerable imminent hardship?

Ukraine is bankrupt. It has wavered on the cusp for some time. However, it is about to suffer the cruelest indignity: discovering that Western politicians who promised prosperity have been encouraging the IMF to deliver a leveraged poisoned chalice.

Maidan dreams are turning abruptly into a nightmare as coup gives way to penury. Siren voices from the West have lured the Ukrainian economic ship on to the rocks with the IMF about to launch a lifeboat – replete with economic subjugation as bondholders get paid and citizens suffer.

Western promises from the barricades of immediate milk and honey were always palpably false. Ukraine is on the cusp of economic trauma, forced to account for 20 years of negligent democracy and decades of Communist economic cancer, all in one short, sharp, shock…or what may prove an IMF-induced coma.

With Crimea returning to Russia’s secure embrace, the IMF has dusted off the package elected government first refused in 2010. One interesting point: if the IMF lends to Ukraine that affirms Crimea’s status: the IMF says it cannot lend money to a state illegally partitioned. The West has blinked on its ‘invasion’ rhetoric.

Unsurprisingly, the bailout fell primarily to the IMF as the EU, unable to support its failing currency zone, couldn’t afford a bailout. The EU remains an empire with multiple competing Presidential Emperors, but no clothes for any of them. Elsewhere, President Obama has become confused about Kosovo and offers token support. Therefore, Ukraine has been economically abandoned to IMF austerity before it even has a new president.

Kiev is poised to become the Athens of Central Europe – but not for architectural or cultural reasons. Ukraine’s governments lived in la-la land for years. Property laws are weak, stifling the ability to build businesses from the ground up. Then there’s the massive weight of bureaucracy (and let’s not forget corruption). Thus Ukraine has reverted to a quasi-medieval feudal economy where various oligarchical barons wield power while politicians divide the assets of the nation. Economic growth is an afterthought.

The rescue package is $27 billion with the IMF contributing $15-18 billion (the origins of $5 billion are unclear). However some $6.2 billion will be redeemed expiring bonds. That investors get privileged terms remains unreasonable.

Now the pain starts: First up, a sticking point which caused Yanukovich to pivot away from the EU pact: eliminating gas subsidies for citizens. Politics has long trumped economic logic in Ukraine. Now economic reality will bite in one shocking move. The unsustainable subsidy regime (7.5 percent of GDP) will be removed on May 1st making gas prices rocket by at least 50 percent!

With the government budget in permanent deficit, the IMF wants it shrunk. That means large widespread government cutbacks including civil service payrolls. Pensions could be halved as government strives to save billions.

IMF strictures mean the Central Bank must maneuver a narrow channel attempting to encourage stability while the currency falls. The hryvnia is already down 26 percent against the dollar this year and will likely fall more in future. This theoretically makes Ukrainian exports more competitive but where to export is a tricky issue: Russia, formerly home to 25 percent of Ukrainian exports, is no longer a free trade option. Perhaps London hipsters will embrace an austerity solidarity trend gripping venerable Ukrainian fridge technology?

The current 9 percent annual trade gap ($17 billion) will likely improve as shock therapy bites because imports become unaffordable. However, the more your currency falls, the more you need to pay off those dollar loans from the IMF.

Enduring a triple dip since 2008, economists predict the 2013 recession will involve a 5-20 percent GDP loss – a catastrophic depression akin to Greece. Nobody knows how much Ukraine may need to survive – a $50 billion package? The IMF may rapidly solve a century of economic mismanagement with one enormously recessionary package…but at what cost to Ukraine? Is a failed state in the making? Could economic pressure precipitate breakup from within?

Or will Ukraine simply avoid the pain? Twice since 2008 IMF loan tranches have been frozen due to government foot dragging on reform. Can any government stay the course? The Western embrace is about to turn very chilly for Ukraine’s citizens. Extreme nationalists are already voicing dissent.

The nightmare has barely begun: Will the Maidan yet swell with impoverished pensioners who cannot afford to heat their homes?