WORLD
Seems the market has digested Greece…But are we ready for Spain? Or Portugal? Or Italy?
Why Greece Needs to Leave the Euro Zone
There are many things Alexis Tsipras likes about Germany. The leader of Greece’s Coalition of the Radical Left (Syriza) party drives his BMW motorcycle to work at the Greek parliament in the morning, Germany’s über-leftist Oskar Lafontaine is one of his political allies, and when it comes to his daily work, his colleagues have noticed a certain tendency toward Prussian-style perfection. Tsipras could easily count as a friend of the Germans, if it weren’t for the German chancellor. Greek magazines have frequently caricatured Angela Merkel dressed in a Nazi uniform, because she imposes her fondness for balanced budgets and austerity on the rest of Europe. The Greeks, says Tsipras, want to “put an end” to the Germans’ requirements and their “brutal austerity policy.”
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Here’s a chart that basically tells you all you need to know about China…Does this mean China will not impose monetary policy of it’s own? No. They are already taking measures. The magic in this chart (and we are collecting others like it – i.e. utility usage, the Baltic Dry), is the near impossibility of fabrication.
Big banks’ lending grinds to halt in first half of May
China’s “Big Four” banks made almost no new loans in the first two weeks of May, after a surprise drop in new loans in April, highlighting liquidity strains that have persisted despite the central bank’s monetary easing.Citing an unidentified insider, the China Securities Journal reported that two of the banks saw only minor loan growth of less than 10 billion yuan ($1.59 billion), while new lending actually contracted at the other two. The article didn’t say which banks fell into either category.The “Big Four” – Industrial & Commercial Bank of China Ltd, China Construction Bank Corp, Bank of China Ltd and Agricultural Bank of China Ltd – usually account for 30 percent of new yuan loans each year.
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It is interesting how the attention remains firmly directed toward Europe. And perhaps it is a trap to attach too much logic or rationalization to the idea that when the spotlight moves further west, we will see the same. Perhaps it’s no coincidence that the US has seemed to be turning hostile toward it’s own. Anticipation?
At Least 100,000 March in Spain Over Austerity
Tens of thousands of protesters in Madrid flooded into the central Puerta del Sol plaza in the evening and aimed to stay for three days. But authorities warned they wouldn’t allow anyone to camp out overnight, and up to 2,000 riot police were expected to be on duty. “I’m here to defend the rights that we’re losing and for the young people who have it so tough,” 57-year-old middle school teacher Roberto Alonso said. “They’re better educated than ever. But they don’t have work. They don’t have anything. They’re behind and they’ll stay that way.”
Global lenders face ‘killer losses’ on Greek debt
The euro tumbled to a four-month low and European stock markets dropped as political leaders and economists warned that the next round of elections called in Athens amounted to a vote on Greek membership of the euro“What’s at stake isn’t just the next Greek government,” said Guido Westerwelle, Germany’s foreign minister. “What’s at stake is the Greek people’s commitment to Europe and the euro.”
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Bad money chasing out the good…But where is all that ‘good’ money headed? Short term, my bet is on the dollar, the final bubble of all bubbles – that very few see.
High earners say au revoir to France – Telegraph
The annual mass exodus from the French capital sees the city’s inhabitants while away the August heat in the countryside. But this week many of the biggest earners across the Channel have been mulling a départ which could be rather more permanent. The toppling of Nicolas Sarkozy by François Hollande, the first socialist president to lead the country in 17 years, has sent ripples of fear through the wealthier arrondissements of Paris. Their new president may block the eurozone austerity advocated by Germany’s Angela Merkel, but he is not opposed to his richer citizens feeling the squeeze.
European leaders and financial markets braced for Greece exit from euro
Financial markets are hastily making preparations for a Greek exit from the euro after a day of political and economic turmoil ended with Europe’s policy elite admitting for the first time that it may prove impossible to keep the single currency intact.With attempts in Athens to form a government after last week’s election looking increasingly doomed, European leaders abandoned their taboo on talking about the possibility that Greece might have to leave the euro.
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Wow.
Debt to Revenue
Japan’s WTF Chart
Is there now any doubt after seeing this why the proverbial four horseman are really just one giant black swan, only not one of failed bond auctions or something quite as dramatic, but something as simple and mundane as the smallest uptick higher in rates which would blow up the entire global financial farce, starting with the most imbalanced domino of all – the land of the rising sun?… And that at least Greece is not Japan?
Euroland’s €1 trillion question: after Greece goes, can Spain stay in?
Luckily SunGard APT doesn’t make films. Pretty much nothing happens in its version of that great euro drama Acropolis Now. The specialist in “multifactor risk models” popped up yesterday to tell us that a Greek exit from the euro would take 3pc off the UK stock market and see the oil price fall 5pc. The euro itself would strengthen 5pc against the dollar. And Greek equities would get away with a 20pc drop. On that basis, can someone kick Greece out right now? Really, if that’s all that’s going to happen, let’s get on with it.
DOMESTIC/JP Morgan Aftermath
JPMorgan Chase Executive Resigns in Trading Debacle
The huge scope of the complex credit bet caught senior bank officials off-guard when it began to sour last month and has set off renewed regulatory scrutiny of the industry. Mr. Dimon has largely sidestepped blame for the loss, although he has offered numerous apologies for the blunder, the biggest of his eight-year tenure at JPMorgan, the nation’s largest bank. Ina Drew, a 55-year-old banker who has worked at the company for three decades and is the chief investment officer, has offered to resign and will step aside Monday, said several bank executives who would not speak publicly because the resignations had not been completed.
Jamie Dimon Personally Approved The Concept Of The Disastrous Trade, Losses Could Total $5 Billion
Here’s how Dimon first found out about the losses:On April 30, associates who were gathered in a conference room handed Mr. Dimon summaries and analyses of the losses. But there were no details about the trades themselves. “I want to see the positions!” he barked, throwing down the papers, according to attendees. “Now! I want to see everything!”When Mr. Dimon saw the numbers, these people say, he couldn’t breathe.
JPMorgan Chase Fought Rule on Risky Trading
Several visits over months by the bank’s well-connected chief executive, Jamie Dimon, and his top aides were aimed at persuading regulators to create a loophole in the law, known as the Volcker Rule. The rule was designed by Congress to limit the very kind of proprietary trading that JPMorgan was seeking. Even after the official draft of the Volcker Rule regulations was released last October, JPMorgan and other banks continued their full-court press to avoid limits.
The American Foreclosure Process Has Ground To A Halt
Something funny happened in the aftermath of the US fraudclosure settlement, in which millions of backlogged housing units were supposed to enter the foreclosure process and begin the clearing of the nearly 9 million housing units in shadow inventory: nothing. Because as RealtyTrac disclosed overnight, in April the US saw a mere 188,780 foreclosures events of various type (NOD, auction, REO) take place. Why is this number significant? Because it is the lowest in 5 years, despite shadow inventory in the US now being virtually the highest ever. But, but, “this is precisely what the foreclosure settlement was supposed to prevent” one may ask… That would be correct. Next question. In other words, not only did banks get away scott free from being litigated to the 7th circle of hell, but for them the “profitable” business model continues to be one where house lending is largely irrelevant. And why not: with NIMs are record lows, banks couldn’t care less if the houses and marked down loans against them in the asset pool go up or down. The real money is made elsewhere: like hedging the IG9.
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Once again, given that we’re reading about this already, one might not be surprised in the least if this number goes much higher. One way to manage perception is to ‘roll out the drama early’ in the hopes of desensitizing the mainstream to the impact of the what this truly represents.
JPMorgan’s Trading Loss Is Said to Rise at Least 50%
The trading losses suffered by JPMorgan Chase have surged in recent days, surpassing the bank’s initial $2 billion estimate by at least $1 billion, according to people with knowledge of the losses.When Jamie Dimon, JPMorgan’s chief executive, announced the losses last Thursday, he indicated they could double within the next few quarters. But that process has been compressed into four trading days as hedge funds and other investors take advantage of JPMorgan’s distress, fueling faster deterioration in the underlying credit market positions held by the bank.
JP Morgan investment unit played by different high-risk rules
The JP Morgan Chase unit that lost more than US$2 billion through a failed hedging strategy had looser risk controls than the rest of the bank, according to people familiar with the situation.The risk of losses is tallied by the bank using a so-called value at risk (VaR) calculation. However, the Chief Investment Office, the unit responsible for the high-profile loss that JP Morgan disclosed last Thursday, had a separate VaR system.It used a less stringent calculation that gave a lower risk assessment of its trades, according to people who previously worked at the bank.
California budget hole deepens to $16 bln – governor
California’s budget deficit will swell tonearly $7 billion greater than expected due to weak tax revenuesand slow progress in cutting spending, Governor Jerry Brown saidon Saturday.Brown said the shortfall for the state’s 2012-2013 fiscalyear now stands at $16 billion, up from a previous estimate of$9.2 billion made in January.”We are now facing a $16 billion shortfall, not the $9billion we thought in January,” Brown announced in a videoposted on YouTube. “This means we will have to go much furtherand make cuts far greater than I asked for at the beginning ofthe year.”
CURRENCY WARS
No real surprise here. Only more evidence of the race to debase. This occurring amidst the backdrop of trade alternatives and the defeat of the Gold excise tax.
India likely intervened in forex market to support rupee
India’s central bank likely intervened in the foreign exchange market today, underscoring its determination to prevent the rupee from weakening below the psychologically important level of 54 to the U.S. dollar, dealers said. The Reserve Bank of India likely started selling dollars when the greenback was trading around INR53.90, four dealers told Dow Jones Newswires. The dollar was at INR53.80 as of 1004 GMT after the suspected intervention, down from an intraday high of INR53.91 and compared with INR53.63 late Friday in Asia. The rupee’s all-time low against the dollar is 54.2925, which it touched on Dec. 15.
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Just in case you were wondering if they will try…and regardless of the futility, interest rates MUST stay low or there will be default. So they will print, and primary dealer money velocity will be light a fuse under commodities once again.
UK may need more QE, warns Bank of England’s Adam Posen as he steps down from the MPC -
Known as an arch dove, in favour of looser monetary policy, Mr Posen had repeatedly called for more quantitative easing (QE) until he unexpectedly voted against an extension to the £325bn programme in April. “I had been hopeful in the last few months that after we did an additional £125bn [of QE] that was getting close to enough. Now I’m debating whether I was premature to think that,” he said yesterday .
Fed minutes: More members open to stimulus measures
Minutes of the central bank’s April 24-25 meeting released Wednesday stated that “several members” thought additional Fed support could be needed if the recovery lost momentum or if the risks to the economy became great enough.The minutes did not spell out what circumstances would trigger further Fed efforts to lower interest rates to boost the economy. But they did note some threats to the U.S. economy. One is Europe’s debt crisis. Another is the risk that spending cuts and tax increases that could take effect at year’s end if Congress can’t reach a budget agreement could slow growth more than expected.
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Here’s a chart highlighting the world’s youth unemployment. Either this is a precursor to the real ‘Hunger Games’, or it is simply one more ominous indicator.
Analysis: Argentines jump through new hoops to get dollars
Argentina’s quest to keep dollars in the country is spawning illegal money trades inside offices and even schools. But big companies have fewer ways to skirt currency controls and must adapt to the country’s offbeat, changeable rules.President Cristina Fernandez, a feisty populist, vowed to “fine-tune” economic policy after winning re-election in October. She has since limited imports, imposed capital controls and seized a majority stake in top energy company YPF.
Asia Times Online :: India dumps Iran, squeezes Obama
The cloud cover of sophistry that has been characteristic of India’s Iran policy in recent years lifted on Tuesday when the government admitted in parliament that it had taken a policy decision to reduce oil imports from Iran. The frank admission came on a day when an emissary from Washington, Carlos Pascual, special envoy on energy matters in the United States State Department, arrived with the proclaimed intention of weaning New Delhi away from Tehran’s fuel.
PM’s
Debate Breaks Out in Germany over Foreign Gold Reserves
Germany has gold reserves of just under 3,400 tons, the second-largest reserves in the world after the United States. Much of that is in the safekeeping of central banks outside Germany, especially in the US Federal Reserve in New York. One would think that with such a valuable stash, worth around €133 billion ($170 billion), the German government would want to keep a close eye on its whereabouts. But now a bizarre dispute has broken out between different German institutions over how closely the reserves should be checked.OAS_RICH(‘Middle2′);Germany’s federal audit office, the Bundesrechnungshof, which monitors the German government’s financial management, is unhappy with how Germany’s central bank, the Bundesbank, keeps tabs on its gold. According to media reports, the auditors are dissatisfied with the fact that gold reserves in Frankfurt are more closely monitored than those held abroad.
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This is most likely the most important development to arise from the ashes of the latest managed suppression in price. Central banks, especially those from the developing world have been and will likely continue to be net buyers for some time to come. (Know why they aren’t buying silver?)
Central Banks Aggressively Buying Gold, Commodity Report by Top Financial Newsletter Profit Confidential
In March 2012 alone, 57.9 tons of gold bullion were purchased by world central banks, according to a report by Michael Lombardi, lead contributor to Profit Confidential, and he believes more buying should be expected on any pullbacks.“To give some perspective on this number, in 2011, central banks bought just under 440 tons of gold bullion, a rate of 37 tons a month,” says Lombardi.In the recent Profit Confidential article, Half of World Gold Production Being Bought by Central Banks, Lombardi believes the central banks took advantage of the lower prices in gold bullion to buy significant amounts of the metal.“Should the current rate of buying by central banks continue at this pace, central banks will purchase a staggering 700 tons of gold bullion in 2012,” says Lombardi.
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I grabbed this quote from Ed Steer’s column this morning:
Once the market-neutral spread trades are removed from the Non-commercial category, the four largest short holders in silver are short 28.4% of the entire Comex futures market in silver. The five through eight traders bring that percentage up to 36.4%. And if one digs into the Disaggregated COT Report, there are even more spread trades that can be removed, so in actual fact, the percentages are even higher than I’ve stated. Eight traders out of hundreds, if not thousands of Comex futures contract holders in silver, have a short-side corner on the market. I ain’t making this up. These are the government’s own numbers.
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Palladium shortage to be 714,000 ounces in 2012: UBS
The Palladium market is expected to be in a 714,000 ounce deficit in 2012 as demand for the commodity continues to exceed supply, UBS stated in a report.In view of the same, the bank has raised its palladium price forecast for 2012 to $760/oz from the previous $725/oz. This shortage in the market is expected to continue for about the next 3 years until 2016 when the palladium will shift into surplus.
Calls for Indian gold bonds grow louder
In a major effort to mobilise the vast gold in the country and to reduce imports of the precious metal, the Indian government is contemplating a proposal to issue gold bonds. India accounts for nearly one third of the total world demand for gold, though it might soon cede that position to China.While India’s apex bank, the Reserve Bank of India, is considering the idea of issuing government gold bonds to attract dollar inflows from Non Resident Indians and to help stabilise the rupee which has slipped to a record low, the government is also said to be deliberating gold bonds for infrastructure companies.
Good point — paper derivatives are not the same thing.
Japanese pension fund buys gold — but only the ETF kind
Okayama Metal & Machinery has become the first Japanese pension fund to make public purchases of gold, in a sign of dwindling faith in paper currencies.Initially, the fund aims to keep about 1.5 per cent of its total assets of Y40 billion ($500 million) in bullion-backed exchange-traded funds, according to chief investment officer Yoshisuke Kiguchi, who said he was diversifying into gold to “escape sovereign risk.”The move into a non-yielding asset comes as funds in the world’s second-biggest pension market are under increasing pressure to meet promised payments, as domestic interest rates remain rooted near zero. This year, the first of Japan’s baby boomers turn 65, becoming eligible for payouts.
Global demand for gold grows 16pc
Gold demand grew 16pc over the past 12 months, with $59.7bn spent globally on the precious metal. The figure was boosted by China upping their investment by 10pc in a bid to hedge inflation. Gold demand globally hit 1,098 tonnes in the first three months of the year, 5pc off the record high, but a significant increase on the same period in 2011. The World Gold Council’s Gold Demand Trends report cited increased investment into the precious metal in China, as investor’s continue to hedge against feared inflation. Jewellery demand in China also increased to 156.6 tonnes – 30pc of the global appetite. This increase places China as the largest jewellery market for the third consecutive quarter.
Turkish gold sales to Iran soar as sanctions bite
Turkish gold sales to Iran in March soared over 30 times and gold companies said Iranians were turning to gold for savings and possibly trade as Western sanctions tighten.Sanctions to force Iran to curb its nuclear program have targeted its energy and banking sectors and new measures from both the United States and European Union take effect in July, aimed at strangling Tehran’s foreign earnings.
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Not a bad review of the various medical uses for silver. When discussing industrial demand and the sensitivity to macro-economic conditions, one must keep in mind that real silver is needed for these uses, and real silver is in ever-diminishing supply.
Silver in Medicine: Support for the Market? – International Business Times
Many readers have probably received a silver treatment at least once, as silver nitrate is commonly placed in the eyes of newborns to prevent infections that could cause blindness. Silver has also been widely used in dentistry to fabricate fillings.Today, the uses of silver for its healing and preventative properties are growing. Follow us For example, it was only in 2007 that the US Food and Drug Administration approved the marketing of silver-coated breathing tubes. Prior to this approval, according to the Centers for Disease Control and Prevention, every year, 15 percent of patients on ventilators contracted ventilator-associated pneumonia.
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When you see a headline like this one it’s hard to not immediately think of the ratio of Gold to Silver above ground supply. Conservative estimates of available investment-grade supply has that ratio at 5:1 – gold to silver!
Silver supply to pass the billion ounce mark this year-
Newly refined market economy silver supply is set to surpass one billion ounces for the first time in 2012, according to CPM Group’s Silver Yearbook 2012.Market economy silver mine supply was entirely responsible for the increase in total silver supply in 2011, with secondary silver declining during the year. Total refined market economy silver supply rose 22.6 million ounces to 995.1 million ounces in 2011.After rising for nine consecutive years, total silver supply is forecast to reach 1.01 billion ounces in 2012 with nearly all of the projected increase expected to come from higher mine production.
COMMENTARY
Is US Government Gold Price Suppression Illegal?-Patrick Heller
In my constant complaints about the US government, its trading partners, and allies suppressing gold prices, I have never accused them of acting illegally. That is because all of this chicanery is legal. Here’s why.The Gold Reserve Act enacted January 30, 1934 supplanted President Roosevelt’s 1933 Executive Order 6102 which made it illegal for Americans to own gold or gold certificates anywhere in the world, with some exceptions for jewelry and collector coins. (By the way, these laws made American gold ownership more illegal than owning heroin as heroin owned by a US citizen outside the US did not break an American law.)
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Here’s one that as my friend Walter likes to say, gets a triple “R” rating for- Repeated Re-reads Required. The issue of intrinsic value comes up often in debates about the worthiness of some amount of precious metal in one’s earthquake portfolio. Some who should know better will make the sweeping statement that gold has no real intrinsic value. They will often point out correctly that if you found yourself stranded in the desert, a glass of water could very well exceed the value of any gold you might have by an infinite amount. One might also point out that if you were to find yourself suddenly swept away and lost at sea, that any sort of floatation device would do. It might be a stretch to extend the analogy to issues of monetary importance, but the fact is that the world’s central banks have printed trillions of currency units, creating a ocean of un-backed debt-tickets with faith serving to provide it’s intrinsic worthiness and a political establishment that entertains no intention of letting up on the surge.
Must Read: “Another Perspective” | ZeroHedge
Despite the incessant negative chatter about gold by people in positions of influence, (or more likely because of it), there has been only a trifling allocation to it among financial asset investors. The vast majority of dedicated financial asset and derivative investors, including pension funds, mutual funds, individuals, and even futures speculators, remain either; a) unable to invest in it by charter, b) unconvinced that gold’s price will appreciate over a time horizon that matches their mandates, c) convinced that gold is a poor investment at today’s pricing because authorities will let bank system credit fail, or d) oblivious to what gold is and the economic forces behind it.Precious metals allocations account for only about 0.15% of global pension fund assets. Within the gold futures market, only 0.50% of front month contracts typically take delivery of bullion, implying gold futures remain a source of financial return among speculators, not a means of amassing a physical position. Meanwhile, all gold and silver ETFs combined held only 90 million gold-equivalent ounces as of the end of April, which at about $1,650 an ounce equaled only about $150 billion. (Compare that to Apple’s market cap.) And perhaps the most telling indicator of indifference to gold among financial asset investors: the total market capitalization of all publicly traded precious metal miners (representing trillions in below-ground physical reserves) is only about $360 billion.We think there are four main questions to be asked and answered: 1) how does one handicap what would be a multi-sigma event – whether or not gold will again gain formal monetary status; 2) over what time horizon might the perception of a significant change in the global monetary system occur (and would it include gold); 3) what would be a range of investment outcomes should such an event occur; and 4) how would such pro forma returns compare with the range of returns of other investments? We have devoted much of our research since 2007 to these questions and have written extensively about them. This paper, however, will only seek to place gold in proper perspective for Mr. Munger (and perhaps Mr. Dimon too).
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Here’s a rant…
This is how the euro ends – not with a whimper but a bang
With Greece unable to form a government and therefore now set on new elections, how’s this going to pan out? Very badly, is the almost certain answer. Let’s look first at the now odds on possibility of a Greek exit. The outcome of the last election was basically just a protest vote – the Greeks are against austerity, against the programme, but they also want to stay in the euro. They want to have their cake and eat it too, and they are gambling that when the Germans come to look into the abyss and realise the devastation a Greek exit will cause, they’ll give them the cake – oh, and let them default on all their external debts and provide big Marshall Plan style grants to rebuild their shattered economy to boot. And where do they expect the money to come from? The tooth fairy?
Devaluing the Dollar – Against What?
When people talk about devaluing the dollar, as opposed to reissuing it completely, the natural question is, against what? What would one devalue it against officially if you do not wish to reinstitute a formal gold standard, which is clearly the preference of the Western central bank.One likely candidate might be the SDR issued as a new currency for global trade, and for the pricing of international goods and commodities.
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Something is not quite right when all the fuss is about a social media company.
FadeBook
Forget that S&P 500 e-mini futures plunged to four-month lows at 1290; or Treasury yields crashed back to their record lows; or Gold and Silver’s surge today; or WTI’s plummet to almost a $90 handle; or Citi joining Morgan Stanley in the red year-to-date; or credit markets continuing into the red for the year; or IG9 10Y soaring further to 160bps – widest in 6 months. Today was all about one thing – the disaster that was/is/and will be Facebook – between late openings, overwhelmed systems, a dump to the syndicate bid and almost 600mm shares traded with the syndicate just soaking it all up at $38.00 early and into the close.
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Casey’s take on things seems disingenuous and irresponsible to say the least. The man provides advice about which mining companies to buy. How can one know anything about the value of these companies when the product they are producing is miss-priced to such a dramatic degree? Someone who must command a comprehensive knowledge about this sector hasn’t taken the time to look at how obvious it is? Here’s Chris Powell’s (measured) rebuttal.
Doug Casey: Precious metals market manipulation?
In an essay posted Thursday at GoldSeek, financial writer Doug Casey of Casey Research asks for evidence of gold market manipulation and some explanation of its purpose. Casey’s essay is headlined “Precious Metals Market Manipulation?” and it’s posted here:
http://news.goldseek.com/GoldSeek/1337282313.php
The evidence and explanation have long been posted in the “Documentation” file at GATA’s Internet site here:
http://www.gata.org/taxonomy/term/21
Maybe the most comprehensive treatment of the subject is the latest version of your secretary/treasurer’s “stump speech” here:
http://www.gata.org/node/10554
But we’re always adding to the “Documentation” file, like the acknowledgment by the late Dutch central banker and Bank for International Settlements President Jelle Zijlstra that Western central banks rig the gold market –
http://www.gata.org/node/11304–
so if he’s at all curious Casey might want to drop by occasionally for updates.
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Gold and silver have really stopped being money – they’ve just been hidden from view with the smoke and mirrors of central planning.
Guest Post: Gold Tells The Truth
John Maynard Keynes, Charlie Munger and Warren Buffett all said or implied that gold was a barbarous relic. But what’s the barbarous relic? The precious metal that shows prices without a veneer of manipulation, or the paper currency that smudges the true state of supply and demand through money printing, thus misleading markets and society? Charlie Munger says gold is not for civilised people, but in reality gold may be the most civilised currency of all — because it allows civilised people to purchase insurance against the risk of civilisation failing.
Why J.P. Morgan’s Jamie Dimon Should Resign – Economic Intelligence
The Fed has engineered a massive wealth transfer from everyday Americans to large banks. They do this by holding interest rates near zero. Savers get nothing for their hard earned savings. However, banks get free money because they pay almost no interest. Banks then invest the money in Treasury notes and earn the difference. The Fed permits this to rebuild the capital of the banks. The Fed doesn’t mind hurting everyday Americans if they can prop up bank capital.
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Here’s a must read article from Chris Martenson, posted earlier at Zerohedge.com. Once again, the FED, along with all other major world central banks are fighting to escape a vortex of deflation. Is it possible to throw enough liquidity at the problem? No one knows. But the losses incurred can grow to become so powerful that the vortex becomes a black whole, imploding the entire system – to the point that all paper money, caught up in currency wars, is destroyed leaving only the “traditional” money in it’s wake..
Get Ready: We’re About To Have Another 2008-Style Crisis – Blogs at Chris Martenson
The reason we need another QE injection is that the same dynamic of debt destruction is again stalking the markets. As expected, the Fed has been waiting for a clear signal that it is time for more thin-air money, and again they are going to wait too long to prevent more damage from occurring.This time I am expecting a coordinated central bank action that will involve most or all of the major central banks of the OECD: Japan, UK, US, and Europe.One day, we will wake up to find some global message about the need for a coordinated response to a major crisis, and each of the central banks will be issuing some massive new amount of thin-air money. Of course the programs will be called something fancy that will require shortening to an acronym and will involve buying some form of debt (sovereign debt, but maybe also bank debt), and we’ll track this via central-bank balance-sheet expansion.Perhaps we’ll see this line go up a little steeper, or perhaps the same trajectory will be maintained a little longer:
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Pithy…
Accidentally Released – and Incredibly Embarrassing – Documents Show How Goldman et al Engaged in ‘Naked Short Selling’
It doesn’t happen often, but sometimes God smiles on us. Last week, he smiled on investigative reporters everywhere, when the lawyers for Goldman, Sachs slipped on one whopper of a legal banana peel, inadvertently delivering some of the bank’s darker secrets into the hands of the public.The lawyers for Goldman and Bank of America/Merrill Lynch have been involved in a legal battle for some time – primarily with the retail giant Overstock.com, but also with Rolling Stone, the Economist, Bloomberg, and the New York Times. The banks have been fighting us to keep sealed certain documents that surfaced in the discovery process of an ultimately unsuccessful lawsuit filed by Overstock against the banks.
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Here’s one to read, re-read, and read again.
Brodsky and Quaintance: Central banks aim to redistribute gold and push it way up | Gold Anti-Trust Action Committee
In their May letter, Paul Brodsky and Lee Quaintance of QB Asset Management in New York argue that the investment case for gold is to a great extent a matter of its likely official revaluation upward to support confidence-based currencies that have lost the market’s confidence. As improbable as it may seem lately, what with the constant suppression of gold and silver prices on the futures markets, Brodsky and Quaintance conclude that central banks now really mean to push the gold price up — way up — once the gold necessary for the plan has been obtained and redistributed among central banks. Brodsky and Quaintance write:”The key to a successful transition is a credible monetary reset. Gold is the default collateral for money because it has a long and established precedent in this role. All that would be needed would be a fairly equitable distribution of gold among global monetary authorities (taking place now?), and an agreed-upon exchange rate vis-a-vis baseless paper. It would have to be an exchange rate at which central banks could successfully monetize assets by tendering for physical gold with newly manufactured paper money, an exchange rate high enough to attract enough gold to cover unreserved credit held in the banking system. It’s a high figure. “The relative cost of holding physical gold today is minimal, (above-ground bullion or in-ground bullion through mining shares), against the negative real returns offered by the preponderance of financial assets in float. We suggest one keep identities straight; invest with central banks, not against them; and consider the hollow rhetoric of the establishment that may temporarily suppress its paper price a ‘gift.’ They are working for physical gold holders, not against them.”
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Just in case you were wondering why they chose to announce what might otherwise be considered a small loss.
The 2 Billion Dollar Loss By JP Morgan Is Just A Preview Of The Coming Collapse Of The Derivatives Market
When news broke of a 2 billion dollar trading loss by JP Morgan, much of the financial world was absolutely stunned. But the truth is that this is just the beginning. This is just a very small preview of what is going to happen when we see the collapse of the worldwide derivatives market. When most Americans think of Wall Street, they think of a bunch of stuffy bankers trading stocks and bonds. But over the past couple of decades it has evolved into much more than that. Today, Wall Street is the biggest casino in the entire world. When the “too big to fail” banks make good bets, they can make a lot of money. When they make bad bets, they can lose a lot of money, and that is exactly what just happened to JP Morgan. Their Chief Investment Office made a series of trades which turned out horribly, and it resulted in a loss of over 2 billion dollars over the past 40 days. But 2 billion dollars is small potatoes compared to the vast size of the global derivatives market. It has been estimated that the the notional value of all the derivatives in the world is somewhere between 600 trillion dollars and 1.5 quadrillion dollars. Nobody really knows the real amount, but when this derivatives bubble finally bursts there is not going to be nearly enough money on the entire planet to fix things.
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It’s all going to come back to who has the gold. As Jim Rickards points out, collectively, the EU may have more gold — but New York is where a lot of it is stored.
German Parliament wants accounting of gold reserves; Bundesbank resisting
The German parliament, the Bundestag, is looking at the accounting of German gold reserves at the Bundesbank. Parliament’s Budget Committee has requested, in opposition to the Bundesbank, a critical report by the Federal Audit Office, the newspaper Bild reports.”The decision has been unanimous,” the paper quoted the Christian Social Union budget expert Herbert Frankenhauser. The newspaper report alleged “account cheating” regarding the German gold reserves.
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As they say, if you allocate 5-10% of your portfolio to PM’s, you have 5-10% of your portfolio protected.
Gold bugs will be vindicated
For further proof, you need look no further than the average level of portfolio exposure, which across the global investment management industry is said to average less than one per cent. This is certainly not compatible with the level of risk in today’s markets, with many nations on the edge of bankruptcy. The result is that flaky gold bulls are experiencing the discomfort of rising panic. Let us go back to fundamentals. The Keynesians and Friedmanites are oblivious to the debt trap faced by all major currencies. Central banks are printing money to fund government deficits at the lowest possible interest cost. The inevitable consequence of printing money is price inflation, and price inflation always leads to higher interest rates. Higher interest rates exacerbate budget deficits.
A rumor that never was…
IMF To Buy Gold? Not
A great example today of the children’s game Chinese whispers (or Telephone for our America friends) and poor journalism in the gold blogosphere (thinking the internet is about journalism is idealistic of me, I know). I’ll focus on Zero Hedge as the example because they are a high profile website from which many other bloggers and commentators pick up stories. Knowing how influential they are, you’d expect them to at least apply some basic journalism fact checking before breaking news.
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Here’s a very well written essay posted at the Daily Reckoning earlier this week re-visiting the shocking lack of prosecution for the what went down over the last 4 years.
“Jon Corzine – What’s Going On?”
This is not the first time that rich, powerful and politically connected Wall Street types have walked away from prosecution. Prosecutors also took passes on Angelo Mozilo, former chairman and CEO of Countrywide and Richard Fuld, former CEO of Lehman Brothers. Both men disgraced their companies and their industries, while losing millions of dollars for investors who had entrusted their savings with them. Crony capitalism does not only lead to criminal behavior, it reflects a moral decay that threatens our capitalist system and the democracy that underlies it. When the defense uses what Matt Taibbi of Rolling Stone calls a “Wizard of Oz” defense — that the stealing was not deliberate; the misplacement of client funds was due to the chaos that attended the firm’s last few days — it’s obvious the perpetrators, with help from their attorneys, are obfuscating the truth.
AUDIO/VISUAL
When you back up far enough, you find yourself gazing down upon a currency war in full effect. Here is Jim Rickards on manipulation of currencies (interview starts at about the 3 minute mark):
Here’s another one from Gerald Celente, with Brian Sussman…