Jim’s Mailbox

Posted at 9:34 AM (CST) by & filed under Jim's Mailbox.

Dear Jim,

As the markets are slowly but persistently moving upwards, mainly due to demand from India and China, it is worthwhile to know the reasons why individuals in these countries are drawn to gold much more than any other country. To add to that knowledge, I’d like to share some interesting excerpts from a recent interview by Aelred Connelly (Public Relations Officer, LBMA) with Shekhar Bhandari (Head of Precious Metals, Kotak Mahindra Bank).

"Gold usage started in early Indian civilization. Indian gold values have been built over 4,000 years and it takes a minimum of 20 to 30 years for a marginal (or small) shift in behavior. In India, women are the biggest owners of gold, not because they love it, but because the men in the family have given it to them as a form of social security. Gold is regarded as auspicious and as a connotation for wealth, prosperity, social security, safety and liquidity. In the short term, there are three main factors that determine demand for gold in India: the monsoon season, the number of weddings and the number of births."

"It is estimated that India ‘invested’ $166 billion in the 10 years between 2002 and 2012, buying a total of 6,300 tons of gold, which has now doubled in value to $335 billion. "

" It is estimated that anything between $2,000 and $2 million would be spent on a typical wedding in India. Gold jewelry forms an Important part of a wedding, and the amount of jewelry purchased in a typical wedding would range between 20 to 2,000 grams."

The entire two page interview can be downloaded here…

Best regards,
CIGA Prashanth

Jim,

Here we go. QE to the mooooon, as Jackie would say.

CIGA Wolfgang

France Declares Austerity Over as Germany Offers Wiggle Room
By James Hertling – May 6, 2013 7:39 AM ET

French Finance Minister Pierre Moscovici declared the era of austerity over after his German counterpart offered flexibility on deficit cutting amid renewed bickering between Europe’s two biggest economies.

“We’re witnessing the end of the dogma of austerity” as the only tool to fight the euro debt crisis, Moscovici said yesterday on Europe 1 radio. “We’ve been pleading for a growth policy for a year. Austerity on its own impedes growth.”

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Jim,

Bit by Bitcoin will increase in volume, not necessarily in value, if successful.

I’m not a fan of Bitcoin. It opens the door to questions like:

How does this affect money supply and how can it be included in government stats?

Where does the money you pay for bitcoin sit?

How can you be assured the supply will be capped at 21 million? I’m sure they said the about US currency.  The  implication that they can increase it from 11 million to 21 million means there truly is no ceiling.

CIGA Wolfgang

Dear Wolfgang,

This is Bitcoin’s surrender to the "New Normal" in its own adventure into QE of a sorts.

A computer cyber virtual currency form must not embarrass the dollar as it just did.

Jim

Bitcoin vs. Ben Bernanke
By James Freeman | The Wall Street Journal – Fri, May 3, 2013 5:57 PM EDT

Could a virtual currency created by an anonymous Internet hacker someday replace the U.S. dollar? What seems like a ridiculous question has become more intriguing as trading in the digital money called Bitcoin has surged more than 300% in the past year to roughly 60,000 transactions per day.

Gavin Andresen, the 46-year-old lead software developer for the Bitcoin project, is eager to find the answer. "I’m hoping to learn," he says, whether "a nongovernmental global currency" is possible. "Can you get from where we are to the vision of billions of people all over the world using Bitcoin just like they use any other currency? That’s the grand experiment."

For Mr. Andresen, a Princeton graduate who once wrote technical standards for 3-D graphics on the Internet, Bitcoin has already begun to replace the U.S. dollar. In November, the Bitcoin Foundation, where he serves as chief scientist, began paying him in the virtual currency. So far he has persuaded his barber to accept this new money, but only from Mr. Andresen. A haircut costs half a Bitcoin.

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