Good Morning,

Gold turned higher for the first time in nine session this morning. Yesterday's stock market rallies around the world gave way to selling overnight, as disappointment over China's spending programs replaced euphoria seen on Wednesday, regarding the same. Once Chinese officials clarified the substance of the economic revival effort, it became apparent that they were simply rehashing 'old news' and that no additional wads of money were being readied for launch at this time. Perhaps later in the year, if conditions warrant. Couple such a letdown with the emerging realization that GM might just stand for Gone to Mortuary and you have the makings of renewed jitters among investors.

If it's Thursday, it must be rate-cutting day over in the Old World. Spooked by crumbling internal conditions, the BoE and the ECB took out the big scissors and they both cut rates to record lows. Only - in the case of the BoE- such a record goes back to...1694, and the cut comes with promises to buy $105 billion in assets. The ECB's cut to a record low of 1.5% has not yet been assigned the 'quantitative easing' label, but it would surely appear that the Trichet troops are slowly (too slowly for some) warming up to the idea that such a trend needs to be adopted even by the steadfast holdout that the central bank has thus far been. Submerging economies have replaced emerging economies around the European Union, and things do not look a whole lot better on the home front. Well, at least they still have some wiggle room left. The Fed no longer enjoys such luxuries.

New York spot bullion opened today's session with a $7 -plus gain, quoted at $913 per ounce, as participants judged the recent losses (worst in seven months) as perhaps overdone. Players remain very much mindful that further liquidations could be in the cards, and that the

'danger' of falling to under the $900 level once again is still manifest. That, and the rising tide of scrap metal supplies is keeping the metal some $100 under its recent price achievement. Actually, there is a serious internecine war in the making in the gold market. Investors versus grandma's bedroom drawer contents. And, no doubt, one side is sitting on most of the ammo. Guess which one. Bears watching on a daily basis from here forward.

Silver added 22 cents and rose to $13.13 this morning, while platinum added a (for it) feeble $7 and palladium remained steady at $197 per ounce. Rumours of GM's passing rattled participants. Simply inconceivable, but then so is much of what is going on in today's economic world. Makes one think that perhaps this whole mess was an accident waiting to happen, subprime catalyst, or not. The corporate world looking like a Hollywood movie set. Nice facade, in front of an empty shell.

A few market technicians have called a double-top having been put into place in gold and now see scope for significant price erosion, especially if stocks ever come back to the world of the living. Risk appetite and an exodus from safe-haven assets could be the next black. Otherwise, all is still covered with blinders in the conspiracy clubs. They have declared that once gold got to the four-digit pinnacle, the US government issued orders to quash the rebellious asset in order to keep the masses on the defensive. Wonder who the heck ordered the average Indian to dump most of the gold he owns at current prices. Must be Uncle Sam/Darth Vader again. What a long reach he has!

That the world order is undergoing a massive shift remains largely doubt-free. What is surprising is the cast of characters vying for various roles. Such positions would have been (and were) unthinkable as recently as twenty years ago. But, as is already known, money makes the world...wobbly. Witness the Great Switcharoo. Unfolding under your own eyes. This is no longer the preview of coming attractions. It is the main feature. Enjoy the thrill, courtesy of 24/7 Wall Street:

It would not be fair to compare Mao Zedong to either President Bush or President Obama. Neither has swum the Yangtze River and neither was a rabid communist. Mao created the central government system that is currently being dismantled. Bush and Obama may be remembered by historians as the American leaders who centralized much of the financial and industrial portions of the US economy.

China and the US are passing one another going in opposite directions. Deng Xiaoping, who ran China after Mao had become a tourist attraction lying in a glass box in Beijing, began moving the country to a capitalist economy. By the time he died in 1997, China had begun vigorous trade with the outside world leading to remarkable years of GDP growth.

China now allows most of it major companies to be privatized and traded on public stock exchanges. It is the largest owner of US Treasuries in the world and a major investor in private businesses through its sovereign wealth fund. The Chinese banking system has clearly been developed by the government to encourage the creation of private enterprise.  Parts of the financial and commercial structure of China are still owned by the state, but the government's once-famous totalitarian grip on the economy appears to be loosening some each year.

The liberalization of China's business may recede to some extent because the recession will cause the level of government support for the economy to grow to keep GDP from contracting. The nation's prime minister says GDP will grow 8% this year, which seems nearly impossible.  But if the government does have to offer financial support to the banks and industry, it will certainly come with some strings attached and may even cause the central government to take larger shares in businesses that it had planed to  privatize.

But, the move in China seems to be relentlessly toward a free market economy. Because China has a rich treasury, it can afford to support a rotation to privatization without the immediate concern that its government will be troubled by huge deficits.

The US faces both large deficits and the need to take de facto control of parts of the credit, financial, and industrial sectors. In effect, the amount of the nation's economic activity controlled by the government will rise to a level which would have been unimaginable even months ago.

There is no way to predict what the American or Chinese system will look like in ten years.  If the recession in the US lasts another two years, the amount of GDP that is effectively under government control will increase rapidly as the Administration and Congress do whatever they can to keep large industries from collapsing.

On the other side of the Pacific, China may have the luxury of having an economy that continues to expand, even if it is at a much slower rate than at any time over the last decade. China can bankroll privatizations without worrying that the wealthy residents of the country will fight it in the legislature.

By the end of the downturn, the US may look more like China than China does, at least economically.

Repairs and tune-ups are on tap for the day. Now, if somebody can just take care of that darn scrap coming from the pipes in the back room...

Watch the dollar (above 89 again). Oh, and the unfolding Merrill executive bonus 'situation' - now that will make for some belly laughs!