European governments will be seen as hurting the populace with increasing taxation, public sector pay-cuts amidst rising unemployment. Civil unrest is an unintended consequence.

Perhaps the reason behind the large number of unsold tickets for the South African World Cup is the European Debt Crisis. Trouble at home has a way of scuttling leisure travel.

"Under pressure from Brussels and the White House, Spanish Prime Minister José Luis Rodriguez Zapatero made an about-turn yesterday, announcing a barrage of painful measures to curb his country's ballooning deficit.

The new austerity package – aimed at averting a bigger version of the Greek crisis, but likely to anger the Spanish unions – includes a 5 per cent pay cut for Spain's 2.5 million public sector workers this year, scrapping the €2,500 (£2,100) "baby cheque" for new mothers and a €6bn cut in public investment...."

Read more:

http://www.independent.c...-announced-1972211.html

A little gold goes a long way.

"ABU DHABI (AFP) – There's no mistaking what's in this vending machine. The well-heeled in the Gulf can now grab "gold to go" from a hotel lobby in the United Arab Emirates, when the need for a quick ingot strikes.

On Thursday, a day after its inauguration, the shiny machine attracted spectators of many different nationalities who gathered to watch whenever an enthusiast was struck with the urge to splurge on a bar of the precious metal...."

Read more:

http://news.yahoo.com/s/...doffbeat_20100513120103

Pray, I ask, who will bail out the United States?

"SPRINGFIELD, Ill. - For 35 years, frail senior citizens in southern Illinois could turn to the Shawnee Development Council for help cleaning the house, buying groceries or any of the chores that make the difference between living at home or moving to an institution.

No more. The council shut down the program Thursday because of a budget crisis created by the state of Illinois' failure to pay its bills.

Paralyzed by the worst deficit in its history, the state has fallen months behind in paying what it owes to businesses and organizations, pushing some of them to the edge of bankruptcy...."

Read more:

http://www.msnbc.msn.com...136518/ns/us_news-life/

Expect the British Pound to be thrown into the gallows as this story develops. It undermines any confidence the market would have had on the Pound as an alternative between the Dollar and the Euro.

Europe is brewing a toxic mix of public and private spending cuts amidst higher taxes and rising unemployment.

"THE government last night accused Labour of pursuing a “scorched earth policy” before the general election, leaving behind billions of pounds of previously hidden spending commitments.

The newly discovered Whitehall “black holes” could force even more severe public spending cuts, or higher tax rises, ministers fear.

Vince Cable, the business secretary, said: “I fear that a lot of bad news about the public finances has been hidden and stored up for the new government. The skeletons are starting to fall out of the cupboard.”....

Read more:

http://www.timesonline.c...tics/article7127819.ece

Confidence is the thread that binds all markets. Once shattered, not even the best intentions of a $1 trillion bailout package can restore it.

The wind beneath gold's wings is the fall of the Euro.

"It is increasingly difficult to get physical gold or silver in Germany, where the biggest buying stampede ever registered is taking place. Especially smaller online shops for precious metals didn´t have enough stock to cope with the demand, but even the biggest retailers warn of long waiting times and shortages.

Pro Aurum, one of the leading online shops for bullion in Germany, is displaying a "shop closed" message since Thursday. The leading German bullion website "Goldseiten.de" announced an enormous surge in visitors, which their four web servers couldn´t handle at the peaks. According to their statement, the demand of gold investors is now significantly stronger than after the Lehman collapse, even while the gold price is twice as high now. But the shops are better prepared this time and it is still possible to buy coins and bars at some places, which is also credited to the fact that the panic is limited to Europe at the moment...."

Read more:

http://uk.ibtimes.com/ar...due-to-panic-buying.htm

The decline of the West due to debt is being offset by the rise of the East. In the years ahead, Western lending institutions will be embroiled in domestic affairs, leaving them will little or no capacity to venture overseas. Eastern lending institutions are bolstered by a strong savings and investment culture.

"May 17 (Bloomberg) -- FirstRand Ltd., South Africa’s second-biggest lender, has completed its first transactions in Africa with China Construction Bank Corp. after the two agreed to cooperate last July.

“We’ve done a number of transactions with the Chinese bank including in Zambia and in South Africa,” FirstRand Chief Executive Officer Sizwe Nxasana said in a May 14 interview in Johannesburg. “There are more in the pipeline in Angola and Tanzania.”

Read more:

http://www.businessweek....ete-deals-update1-.html

KK. I remember what you said before. Interesting statement at the bottom of the article...

The country's best option is to seek concessional loans for financing the public investment part of its medium-term economic development plan, the fund said.

"Authorities are advised to re-engage donors and avoid excessive borrowing," it said in the statement which was compiled by the IMF and the International Development Association.

We need to re-engage donors...that's seems a bit of a backtrack. What conditions will they impose? Looking at our foreign debt its denominated as follows: 33% in Euro, 30% in Dollars, 27% in Yen and 10% others. What's your take on forex risk or other risks given foreign debt exposure?

We need to avoid excessive borrowing...true, but unlikely to happen. I heard MPC is meeting today. Grapevine connections tell me they plan 200 bn in domestic deficit financing for this year's budget. There seems to be no getting out of this debt issue.

As always I appreciate your thoughts, dude.

@ Scubidu. Thanks for the compliment.

Kenya's hands are tied as far as foreign exchange risk. The Euro debacle is a foretaste of what is to come for the Dollar. Loan repayments denominated in Dollars are presently rising whilst those in Euros are declining. That situation will reverse with time.

The best counterbalance to these liabilities is a strong asset base; gold is one prime candidate.

Mr Geithner should take a peek at the period in Roman history between 240 AD and 253 AD when the Roman Silver Denarius lost 98% of its value. The decline of Imperial Rome had began during the death of Marcus Aurelius in 180 AD and was accelerated from the reign of Maximinus I (235 - 238 AD). Then was a tyrannical age denoted with civil unrest and battles for the throne.

The market is the final arbiter.

"US Treasury Secretary Timothy Geithner has ruled out any possibility of US facing a Greece-like debt crisis and said that better-than-expected economy would help strengthen government accounts.

"It's not going to happen in the United States. The important thing is you are seeing in the US, a much stronger recovery than most people would expect even just three months ago," Geithner said in an interview.

Since the Greece crisis, the opposition Republicans have been warning that a similar crisis is awaiting to hit the US in the coming days."


Read more at: http://beta.profit.ndtv....t-crisis-in-us-49736?cp

By 2016, gold will be Kenya's highest earning mineral export.

"Rising gold prices in the international market jolted Kenya’s underperforming mining industry, changing tide against non-metal minerals such as soda ash and fluorspar that have dominated the sector.

Official data indicate earnings from gold rose almost four times to Sh2.3 billion in 2009 from Sh593 million the previous year.

It has also overtaken fluorspar that brought in only Sh123 million. Soda ash earned Kenya Sh6 billion.

Mines and geology department attributed the jump to the sharp rally in gold prices in 2009 and increased mining activity as favourable prices egged dealers...."

Read more:

http://www.businessdaily...0/-/uoxlti/-/index.html