Tuesday, November 30, 2010


"This morning’s Case Shiller data shows more of what we’ve been seeing in other housing data despite being a lagging indicator. Clearly, the weakness in the housing market is back..."

at http://pragcap.com/sp-case-shiller-housing-double-dip

Contagion Watch!: And Now, Belgium?.

"This is not a heartening sign.

Borrowing costs for Belgium, not usually lumped into the “worrisome peripheral eurozone” crowd, have started to surge in recent days.

Richard Barley of the Heard on the Street crew churned out a good explainer on why Belgium should be closely watched recently. He wrote..."

at http://blogs.wsj.com/marketbeat/2010/11/30/contagion-watch-and-now-belgium/?mod=wsj_share_twitter

Here’s Something That You Will Not Find Elsewhere – Proof That Ireland Will Have To Default…

"...As any who have been following me know, I believe that several European countries are bound to default, ie. restructure their debt. Ireland is in that camp. What makes me so sure about this? Well, its simple math. I can illustrate incontrovertible evidence that shows that Ireland is on an unsustainable path - a path made even more unsustainable by the recent bailout.

Let's take a look at the cumulated funding requirement of Ireland over the next 15 years..."

at http://www.zerohedge.com/article/here%E2%80%99s-something-you-will-not-find-elsewhere-%E2%80%93-proof-ireland-will-have-default%E2%80%A6?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

Monday, November 29, 2010

Financial Contagion Could Spread to "Core" Eurozone Countries and the U.S.

"It's not just the "peripheral" European countries which are in trouble.

As Ambrose Evans-Pritchard reported yesterday:

The escalating debt crisis on the eurozone periphery is starting to contaminate the creditworthiness of Germany and the core states of monetary union..."

at http://www.marketoracle.co.uk/Article24620.html

These Are The 20 Banks Most Exposed To The European Sovereign Debt Crisis

"Deutsche Bank have broken down the debt threat facing Europe's banks, and it isn't pretty for many of them.

In fact, many banks have significant exposures to Total Bank Value (TBV) associated with the already bailed out Greek and Irish sovereigns, as well as the likely next to fall, Portugal.

We've included both the exposure level, by % of TBV, and the risks associated with the exposures.

This information is particularly important in light of the eurozone leaders' new plan to establish a means for member states to restructure (partially default) by 2013..."

at http://www.businessinsider.com/these-are-the-20-banks-most-exposed-to-the-european-sovereign-debt-crisis-2010-11?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+clusterstock+%28ClusterStock%29##ixzz16hlNo7bX


"...If you’re attempting to visualize the problems in the housing market look no further than the following three charts (via Mortgage News Daily):

at http://pragcap.com/housing-market-3-pictures


"Spanish bond yields are hitting 8 year highs as markets look past Portugal and assume that Spain is soon to be on the chopping block. Less than a week ago I asked if the Euro crisis was systemic? In that note I highlighted Credit Suisse’s note citing 6.5% yields as the breaking point..."

at http://pragcap.com/moving-spain

Charles Nenner, the EU was a mistake from the beginning

"The Euro is coming down against the dollar "based on the fact that the economy in the states is much stronger than in Europe," Charles Nenner, founder and president of Charles Nenner Research, told CNBC Monday..."

at http://marcfaberchannel.blogspot.com/2010/11/charles-nenner-eu-was-mistake-from.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MarcFaberBlog+%28Marc+Faber+Blog%29

Sunday, November 28, 2010

Next Debt Crisis May Start in Washington: Bair

"The US needs to take urgent action to cut its debt in order to prevent the next financial crisis, which may start in Washington, Sheila Bair, chair of the Federal Deposits Insurance Corp. (FDIC) wrote in an editorial in the Washington Post.

The federal debt has doubled over the past seven years, to almost $14 trillion, and the growth is a result of both the financial crisis and the government's "unwillingness over many years to make the hard choices necessary to rein in our long-term structural deficit," Bair wrote..."
at http://www.cnbc.com/id/40378597

The Euro Zone’s Debt Crisis Timeout Is Expiring!

"...Now, the euro-member countries are in trouble for all of the reasons Milton Friedman, one of the most influential economists of the 20th century, cited prior to that currency’s inception a decade ago.

He said:

A “one size fits all” monetary policy doesn’t give the member countries the flexibility needed to stimulate their economies.

A fractured fiscal policy forced to adhere to rigid EU rules doesn’t enable member governments to navigate their country-specific problems, such as deficit spending and public works projects.

Nationalism will emerge. Healthier countries will not see fit to spend their hard earned money to bail out their less responsible neighbors.

A common currency can act as handcuffs in perilous times. Exchange rates can be used as a tool to revalue debt and improve competitiveness of one’s economy.

Friedman predicted the euro would succumb to these flaws and fail within 10 years. If Ireland represents the catalyst for round two of the European sovereign debt contagion, his timing may not have been too far off..."

at http://www.marketoracle.co.uk/Article24604.html

Marc Faber : Excessive monetary growth leading to excessive debt growth

"Marc Faber :.."What I think its important to understand the cause of the crisis, the cause of the crisis is excessive monetary growth leading to excessive debt growth, to the Nasdaq bubble, to the housing bubble that then led to overconsumption in the US and a symptom of over consumption in the country is always growth in trade deficit that then shifts production overseas because one trade deficit in one country is offset by trade surplus somewhere else. And to simplify matters lets say it was China.

So actually, the US monetary policies have been very good for Asia, specifically for China because it fostered industrial production growth in China, employment growth, wage increases, domestic consumption, increased demand for raw materials, that then lifted commodity prices. For that actually the developing world, the emerging economies including China, India , Vietnam, Brazil and so forth should all send a thank you note to Bernanke...."
at http://marcfaberchannel.blogspot.com/2010/11/faber-excessive-monetary-growth-leading.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MarcFaberBlog+%28Marc+Faber+Blog%29

Saturday, November 27, 2010

S&P Rating vs. CDS Implied Rating of European Sovereign Credit; Huge Flaws in the Bond Rating Methodology

"An interesting article by Index Universe shows how Ratings Differences Highlight Eurozone Risk.

The article compares risk as measured by a Standard and Poor’s rating vs. a CDS rating that is calculated based on credit market derivatives. A table highlights the differences.

Where the CDS-implied rating is better than that given by S&P, the difference is a positive number. When the CDS-implied rating is worse, a negative number is the outcome.

Some of the differences are enormous..."

at http://globaleconomicanalysis.blogspot.com/2010/11/s-rating-vs-cds-implied-rating-of.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

Greece ? Ireland ? Portugal ? Spain ? Italy ? UK ? ?

"It is now common knowledge that there is a potential domino effect of European sovereign debt contagion in roughly the following order:

Greece → Ireland → Portugal → Spain → Italy → UK

While some people have been writing about this for well over a year, many others have joined the party late (there are now over 600,000 hits from a Google search discussing this topic.)

It is also now common knowledge that while Greece and Ireland have relatively small economies, there will be real trouble if the Spanish domino falls.

Iceland has the world’s 112th biggest economy, Ireland the 38th, and Portugal the 36th. In contrast, Spain has the world’s 9th biggest economy, Italy the 7th and the UK the 6th. A failure by one of the latter 3 would be devastating for the world economy..."

at http://www.zerohedge.com/article/greece-%3F-ireland-%3F-portugal-%3F-spain-%3F-italy-%3F-uk-%3F?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

Marc Faber : FEDs dollars create bubbles and overconsumption

"Marc Faber :" As you know I have been very critical of the Federal Reserve for the last 20 years because the Federal Reserve with its expansionary monetary policies and without the policy paying attention to excessive credit growth created first the Nasdaq bubble and later on the housing bubble and in 2008 the commodities bubble. So I have been very critical of these policies for a very long time, including of course now QE2 as I was also skeptical about the success of QE1 for the simple reason that the Federal Reserve can control the quantity of the money.

In other words, Bernanke as he said and wrote the US can drop dollar bills from helicopters onto the US, but what they don’t control is where these dollar bills will flow to, and as it happens it went into bubbles in US creating over consumption, and symptom of overconsumption was then the trade and current account deficit that shifted production and capital spending overseas and shifted economic growth to emerging economies and now QE2 what it will do is essentially it will foster bubbles, in commodities, in precious metals and in the capital markets of emerging economies where the capital will flow to."

at http://marcfaberchannel.blogspot.com/2010/11/marc-faber-feds-dollars-create-bubbles.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MarcFaberBlog+%28Marc+Faber+Blog%29

Friday, November 26, 2010

Systemic coupling round-up

"Time to count up the systemic implications of the Irish crisis, following up on some of today’s links and other news.

First, the usual contagion to Portugal and Spain is now in full swing, propelled by another barrage of bumbling Euroannouncements:

Weber announced that if necessary, the EU would increase the ceiling of the EFSF (to a level that looked intended to accommodate a Spanish bailout); the EU and German government immediately denied any such intention.

Second, there is the coupling to the UK, both financial, as mentioned here en passant, and economic.

Third, there is the shadowy shadow banking connection to Germany and elsewhere, set out here.

Fourth, the “elsewhere” may include not only France and the UK, but also the States..."

at http://www.nakedcapitalism.com/2010/11/systemic-coupling-round-up.html

The Pain would come from Spain

"First, a great overview from Raphael Minder at the NY Times: A Spanish Bailout Would Test Europe’s Strained Finances

[A]ny bailout of Spain — with an economy twice the size of [Greece, Ireland and Portugal] combined — could severely stress the ability of Europe’s stronger countries to help the financially weaker ones, and spell deep trouble for the euro, Europe’s common currency.

The looming question is whether Spanish banks are really as healthy as the government and the banks say they are. ... Last July, Spanish banks emerged relatively unscathed from stress tests carried out across Europe ... But the credibility of the stress tests has since been undermined by the collapse of Irish banks..."

at http://www.calculatedriskblog.com/2010/11/pain-would-come-from-spain.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+CalculatedRisk+%28Calculated+Risk%29

Pettis: Will Europe face defaults?

"From Michael Pettis on Europe: Chinese inflation and European defaults

Its official – Spain and Portugal will need to be bailed out soon. How do I know? In one of my favorite TV shows, Yes Minister, the all-knowing civil servant Sir Humphrey explains to cabinet minister Jim Hacker that you can never be certain that something will happen until the government denies it.

And Portugal and Spain have just rejected the possibility of a bailout (a joke with a lot of truth).

Pettis offers a few pessimistic predictions including:

Greece will be forced to default and restructure its debt, and the restructuring will come with a significant amount of debt forgiveness. The idea that it can grow its way out of the current debt burden is a fantasy.

And ...

Greece will not be the only defaulter. Spain, Portugal, Ireland, Italy, Belgium and much of Eastern Europe will also face severe financial distress and possible default..."

at http://www.calculatedriskblog.com/2010/11/pettis-will-europe-face-defaults.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+CalculatedRisk+%28Calculated+Risk%29

Serial Bailouts Fatally Wound the Euro; Nigel Farage To European Parliament: "The Euro Game Is Up… Just Who The Hell Do You Think You Are?"

"I have been warning since 2007 that European banks were in at least as bad a shape as US banks. Recent events in Greece, Ireland, Portugal, and Spain should make it clear to even the Euro bulls just how severe the stress on the Euro is..."

at http://globaleconomicanalysis.blogspot.com/2010/11/serial-bailouts-fatally-wound-euro.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

Merkel's Dilemma; Eurozone Borrowing Costs Hit Record; Expect Sovereign Defaults

"The Spiegel Online shows the severe problem facing facing Germany in terms of investments at risk, the enormous amount of money owed German banks by the PIGS (Portugal, Ireland, Greece, and Spain)..."

at http://globaleconomicanalysis.blogspot.com/2010/11/merkels-dilemma-eurozone-borrowing.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

Bank of China Adviser Tell US to Sell Gold

"Please consider PBOC Researcher Calls on U.S. to Sell Gold, People’s Daily Says

The U.S. should cut its government spending and sell some gold reserves to balance its budget and fund its recovery, the People’s Daily overseas edition reported, citing Xia Bin, an adviser to the People’s Bank of China.

The U.S. has to resolve its “twin deficits” in the government budget and the current account, Xia was quoted as saying. Three ways that may help the U.S. achieve that target include reducing military expenses, selling part of its gold reserves and relaxing some export limits on technology, he said.

“The U.S. has more than 8,000 tons of gold reserves; why can’t it sell some of it since the country wants to raise funds for economic recovery but doesn’t want to add more burden to the fiscal deficit,” Xia told the newspaper..."

at http://globaleconomicanalysis.blogspot.com/2010/11/spain-portugal-deny-need-for-bailouts.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

Sean Corrigan Explains The Rules Of The "Multi-Trillion Shell Game" And What To Expect Next

"Diapason's Sean Corrigan does a succinct review of how the "multi-trillion" ponzi has progressed, where we are now (a point where even intellectually challenged anchors on CNBC gasp in wonder that entire countries are failing merely to save a few not so good bankers), and where we are headed: "under the rules of this multi-trillion shell game, the sovereigns guarantee the ECB which funds the banks which buy the government debt which provides for everyone else's guarantees." All in all, nothing that should surprise our readers (as should none of the things that are "suddenly" headline news), but still one of the better summaries of how and why we are now at a point where even the second biggest economy in the world (the EU) is unable to stop the unraveling. It is only fitting that America is today demonstrating to the world the apogee of its consumerist orgy, even as the austerity belt is tightening for yet more hundreds of millions of people all across the world, and where resentment toward America is once again reaching unprecedented levels. At this point it is just a matter of time before said unraveling crosses the Atlantic..."

at http://www.zerohedge.com/article/sean-corrigan-explains-rules-multi-trillion-shell-game-and-what-expect-next?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

Currency Crisis! So What Happens If The Dollar And The Euro Both Collapse?

"Some analysts are warning that the U.S. dollar is in danger of collapse because of the exploding U.S. government debt, the horrific U.S. trade deficit and the new round of quantitative easing recently announced by the Federal Reserve. Other analysts are warning the the euro is in danger of collapse because of the very serious sovereign debt crisis that is affecting nations such as Greece, Portugal, Ireland, Italy, Belgium and Spain. So what happens if the dollar and the euro both collapse? Well, it would certainly throw the current world financial order into a state of chaos, but what would emerge from the ashes? Would the nations of the world go back to using dozens of different national currencies or would we see a truly global currency emerge for the very first time?

Up until recently, the idea of a world currency was absolutely unthinkable for most people. In fact, the notion that all of the major nations around the globe would agree to a single currency still seems far-fetched to most analysts. However, if enough "chaos" is produced by a concurrent collapse of the U.S. dollar and the euro, would that be enough to get the major powers around the world to agree to a new financial world order?

Let's hope not, but it is getting hard to deny that we are heading for a major currency crisis, and if the U.S. dollar and/or the euro collapse, the world will certainly never be the same afterwards..."

at http://theeconomiccollapseblog.com/archives/currency-crisis-so-what-happens-if-the-dollar-and-the-euro-both-collapse

China, Russia quit dollar

"China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday..."

at  http://www.chinadaily.com.cn/china/2010-11/24/content_11599087.htm

Howard Davidowitz WE ARE BROKE !

"The U.S. economy "is a complete disaster, "Here are the numbers...we're broke," Davidowitz declares, noting the U.S. government goes $5 billion deeper into debt every day and is facing $1 trillion-plus annual deficits for the next decade. "In other words, we're bankrupt."

at http://marcfaberchannel.blogspot.com/2010/11/howard-davidowitz-we-are-broke.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MarcFaberBlog+%28Marc+Faber+Blog%29

Wednesday, November 24, 2010

United STRAITS of America: The Muni Bond Crisis Is Here

"This November, the whole world tuned in as the greater part of the U.S.A.'s 50 states turned red -- and no, I don't mean the political shift to a republican majority during the November 2 mid-term elections. I mean "in the red" -- as in, financially fercockt, overdrawn, up to their eyeballs in debt.

Here are the latest stats: California, Florida, Illinois, and New Jersey now suffer "Greek-like deficits," alongside draconian budget cuts, job furloughs, suspensions of city services, and the growing "rent-a-cop" trend of firing city workers and then hiring outside contractors to fill those positions.

Next is the fact that the municipal bond market has been melting like a snow cone in the Sahara desert. According to recent data, 35 muni bond issues totaling $1.5 billion have defaulted since January 2010, three times the average annualized rate going back to 1983. Also, in the week ending November 19, investors withdrew a record $3.1 billion from mutual and exchange-traded funds specializing in municipal debt, triggering the largest one-day rise in yields since the panic of '08..."

at http://www.marketoracle.co.uk/Article24540.html

Bubble Chart of Exposure to and Bailout of Ireland

"Here’s a great graphic on the Irish bailout, quantifying the exposure of foreign banks to Ireland as well as the pots of money from which the 85 billion euros for the Irish bailout is coming. My understanding about the funds which Ireland is only ‘discussing‘ taking, the breakdown is as follows: 45 billion for the state, 20 billion to recapitalise banks and another 20 billion just in case. If I hear differently in the next few hours, I will revise the figures.

As for the graphic, hat tip to Barry Ritholtz..."

at http://www.creditwritedowns.com/2010/11/chart-of-the-day-bubble-chart-of-exposure-to-and-bailout-of-ireland.html

Nation has 8.6-month glut of new homes on market, Census Bureau says

"New home sales dropped to an annualized rate of 283,000 in October, leaving 202,000 new homes (8.6 months worth) on the market, according to a report released Wednesday by the Census Bureau and the Department of Housing and Urban Development.

New home sales are down 8.1% from September and 28.5% from October 2009.

The National Association of Realtors reported Tuesday that existing home sales trended down in October also, dipping 2.2% compared to September.

Collectively in 2010, the annualized rate of new home sales is 273,000. This is down 14% from 2009..."

at http://www.housingwire.com/2010/11/24/nation-has-8-6-month-glut-of-new-homes-on-market-census-bureau-says?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+housingwire%2FuOVI+%28HousingWire%29

The LATAM contagion effect

"All eyes were on Spanish bond yields AGAIN on Wednesday. Especially as news emerged that the country was freezing, due to market volatility, the start of its €13.5bn issue programme set to sell state-guaranteed power revenue bonds.

But as BNP Paribas points out in an earlier note in the day, investors who are paying close attention here should probably be equally mindful of LATAM spreads.

Mexico and Brazil specifically. These two countries, they note, are amongst the most exposed to the Spanish banking sector and sovereign.

Although, as they explained, it’s Mexico which has by far the biggest exposure..."

at http://ftalphaville.ft.com/blog/2010/11/24/415286/the-latam-contagion-effect/


"As Ireland announced a 4 year austerity plan (wait a minute, didn’t they do that 2 years ago? Yes, yes they did) the situation in Spain and Portugal continues to deteriorate. The Irish austerity measures virtually guarantee a continuation in the Irish depression and the EMU is ready to impose further depression on the rest of the periphery. The Portuguese are already protesting planned cuts and markets are preparing in case the crisis in Europe deteriorates further. Portuguese 10 year yields surged this morning to 7% while Spanish 10 year yields surged to fresh highs of 5.05%. It looks like the bond vigilantes are on the move and they’ve circled their next targets..."

at http://pragcap.com/spanish-portuguese-yields-hit-fresh-highs

The FHFA Confirms That The Housing Double Dip Is Here

"This morning’s new home sales report and the FHFA House Price Index are confirming that housing is indeed double dipping. According to the latest new homes sales report median prices plunged -13.9% in October to $194,900. The average price fell -8% to $248,200. Supply of new homes rose sharply to 8.6 months..."

at http://www.businessinsider.com/the-fhfa-confirms-that-the-housing-double-dip-is-here-2010-11?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29

Rewind: Irish Banks pass Stress Tests in July 2010

at http://www.calculatedriskblog.com/2010/11/rewind-irish-banks-pass-stress-tests-in.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+CalculatedRisk+%28Calculated+Risk%29

European Sovereign Default Risk Hits All Time High

"...Credit Default Swaps Soar in Spain, Portugal. In spite of the Irish bailout, Spain, Portugal Bank Debt Risk Soars as Traders Look South..."

at http://globaleconomicanalysis.blogspot.com/2010/11/irelands-string-and-sealing-wax-fix.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

US Foreclosure Inventories 7.4 Times Normal and Rising

"...Delinquencies remain about 2.7 times historical average, foreclosure inventories are 7.4 times and rising..."

at http://globaleconomicanalysis.blogspot.com/2010/11/us-foreclosure-inventories-74-times.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

Just How Irrelevant And Misleading Is The UMichigan Consumer Confidence Index?

"The biggest driver for today's stock market ramp, aside from the initial claims number which next week will be revised substantially worse, was the UMich Consumer Confidence index, which "beat" expectations of 69.5 coming at a five month of 71.6. The fact that a self-referential index can be market moving in the first place is mindboggling: this particular index is mostly driven by moves in the stock market, and any higher read in the index send the lithium addicted stock market higher, which in turn leads to a higher subsequent read in confidence and so on ad inf. This self-recursion probably explains why it is such a favorite of the Fed, which has now openly made clear that it will do anything to facilitate any and every ponzi component to the US economy, of which UMich is precisely one. Yet philosophical matters aside, what is most troubling is the ever increasing divergence between the UMich index on one hand, and another "confidence" index, which is far more comprehensive, far more exhaustive, and far more frequent in its polling: the weekly ABC Consumer Comfort index. If you have not heard of it before, it is precisely due to these three qualifications. And being far more indicative of the true state of how people perceive the economy, it is inevitable that there would be a massive divergence between UMich and the ABC indices. As the chart below demonstrates, this is precisely the case. While UMich is almost back to its December 2007 level, a reading that is so ridiculous when one considers that America now has 42 million people on foodstamps (and had under 28 million in Deceber 2007), the ABC index is now just 5 points away from its all time lows, and its yesterday print of -47 is the lowest it has been since August. All this begs the question: why does the market pretend to trade base off an index as discredited and flawed as the UMichigan Consumer Sentiment..."

at http://www.zerohedge.com/article/just-how-irrelevant-and-misleading-umichigan-consumer-confidence-index?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

Weak $29 Billion 7 Year Auction Prices At 2.25%, Bid To Cover Drops

"The series of increasingly weak Treasury auctions continues with today's 7 Year $29 billion offering, which just priced at a 2.25% high yield. The yield was a materially higher 28 bps compared to October's 1.97%, and shows that the peak of the curve belly, the point that recently was most desired, is now being shunned the most. The Bid To Cover slumped to an 8 month low 2.63, the lowest since March's 2.61. And most notable, indirect bidders have come at an 8 month low as well, taking down just 42.2%, forcing Primary Dealers who have traditionally have a backseat role in stabilizing the 7 Year to step up and buy almost a majority of the auction (and 57.8% when including Direct Bidders). Now that as (so far only) Zero Hedge disclosed the Fed is the biggest holder of US Treasurys, we expect to see ever decreasing interest by foreign bidders in auctions going forward, especially in the belly, where the Fed will soon be the main holder of securities..."

at  http://www.zerohedge.com/article/weak-29-billion-7-year-auction-prices-225-bid-cover-drops?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

Tuesday, November 23, 2010

How to Profit as China Dumps Japan's Debt

"Keith Fitz-Gerald writes: As a veteran trader, I have a tendency to look past the day's top headlines. That's why a recent Bloomberg News story - which stated that China sold a net total of 769.2 billion yen ($9.24 billion) worth of Japanese debt in September - really caught my eye..."

at http://www.marketoracle.co.uk/Article24500.html

After Bailout for Irish, Questions Linger Over Portugal, Spain

at http://www.pbs.org/newshour/bb/business/july-dec10/ireland2_11-22.html?utm_source=feedburner&utm_medium=%24%7Bfeed%7D&utm_campaign=Feed%3A+%24%7Bupdate%7D+%28%24%7BPIIE+Update%7D%29

Irish PM Dissolves Government; Spanish Banks Face Debt Challenge; Greece May "Shut-Down"; Meaning of "Guarantee"; Should Ireland Ditch the Euro?

"Things continue to simmer in Europe with problems appearing on multiple fronts in Ireland, Spain, Portugal, and Greece.

Here are a few of highlights: Irish Prime Minister Brian Cowen announced he would step down once a series of fiscal packages and budgets were in place next month; Portugal Struggles to Meet Deficit Goal; High Frequency Economics Ltd. says Greece May ‘Shut Down’ on Cash Shortage.

After a look at a few articles I take a look at suggestions for Ireland to abandon the Euro, and a critical look at the meaning of "guarantee".

at http://globaleconomicanalysis.blogspot.com/2010/11/irish-pm-dissolves-government-spanish.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

Weak 5 Year Auction Prices At 1.41% High Yield, Lowest Bid To Cover In 6 Months As Foreign Investors Flee

"With today's $35 billion 5 year auction pricing at 1.41%, we continue to see confirmation that the recent strength in the belly of the curve is quickly turning into pronounced weakness. The Bid To Cover was 2.65, the lowest since June or 2.58, but most notably those mysterious Directs came and took down a record 15.6% of the auction: the largest in history. Offsetting this was the complete collapse in Indirect interest, as foreign institutions took only 31.5% of the auction, the lowest Indirect take down since April 2009. The result was that Primary Dealers got stuck with saving the auction as usual, taking down more than half, or 52.9% to be precise, the highest since June. That foreign interest in the bond was so low is not surprising to us: as we highlighted yesterday, the Fed is now the largest holder of US Treasury debt. At this point the divergence will accelerate, as PDs and the Fed end up owning ever more of each and every auction (and subsequent monetization), while China et al is increasingly relegated to stand by status..."

at http://www.zerohedge.com/article/weak-5-year-auction-prices-141-high-yield-lowest-bid-cover-6-months-foreign-investors-flee?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

Monday, November 22, 2010

What will it take for the media to care about the $2 trillion foreclosure crisis?

"The week of Nov. 15-19 was a big week in Washington D.C. for troubled homeowners, housing counselors and anyone in the mortgage industry who cares about what is happening to real estate in this country — or it should have been.

The Senate Banking Committee and the House Financial Service’s Subcommittee on Housing and Community Opportunity held hearings that week to get a handle on foreclosure issues.

Two major issues that were discussed: robo-signing of documents submitted to the courts around the country and the failures of the Housing Affordable Modification Program, known as HAMP.

You would think that every media outlet would have covered these hearings since the foreclosures crisis, considering the alleged misdeeds of the mortgage industry would be something the public would want to know about since it will affect every homeowner in America.

But that did not happen.

On Tuesday and Thursday nights last week, I checked the websites of six major media outlets, but but did not find one mention of the hearings..."

at http://www.housingwire.com/2010/11/22/what-will-it-take-for-the-media-to-care-about-the-2-trillion-foreclosure-crisis?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+housingwire%2FuOVI+%28HousingWire%29

Irish bailout a gamble, Eurozone days numbered

"Debt-stricken Ireland WILL receive a massive bailout of over a hundred billion dollars from the European Union and International Monetary Fund. It's the second emergency rescue package organized by the Eurozone, after similar measures were taken for Greece..."

at http://economycollapse.blogspot.com/

CoreLogic: Shadow Housing Inventory pushes total unsold inventory to 6.3 million units

"From CoreLogic: Shadow Inventory Jumps More Than 10 Percent in One Year, Pushing Total Unsold Inventory to 6.3 Million Units..."

at http://www.calculatedriskblog.com/2010/11/corelogic-shadow-housing-inventory.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+CalculatedRisk+%28Calculated+Risk%29

RealtyTrac Opines On The Coming Wave Of GSE Foreclosure Buybacks: "The Final Liability Will Be Enormous"

"As if an insolvent Europe was not enough (and everything seemed so good one short month ago), foreclosure expert firm RealtyTrac opines on the issue of fraudclosure and just how big the impact will be on the GSEs, and thus, on the upstream lenders who sold Fannie and Freddie MBS that had material misrepresentations. Add this to the over 240,000 REO properties held by the GSEs, and one can see why Jim Saccacio, CEO of RealtyTrac says: "Not only do the GSEs have an REO problem, they also have a guarantee problem because they promised to make good on the securities they sold to mortgage investors. The potential liability of the GSEs is a matter of debate but there's little doubt that the final total will be enormous.” Oops.

And just how enormous? We have previously summarized various third party estimates, but here it is courtesy of RealtyTrac, all compiled in a tidy little package:

Some of the loss estimates are astronomical.

•The Federal Housing Finance Agency (FHFA) says Fannie Mae and Freddie Mac have borrowed $148 billion to date from the Treasury but that additional draws could range “from $221 billion to $363 billion through 2013.”

•Credit Suisse says Fannie Mae and Freddie Mac could face $321 billion in losses if home values decline by 10 percent in a year, are flat the next year and rise 3 percent annually thereafter. Of course, if things don't go so well then the losses could amount to $448 billion.

•Standard & Poor's says “the ultimate taxpayer cost to resolve Fannie Mae and Freddie Mac could reach $280 billion, including the $148 billion already invested — money largely spent to make good on loans gone bad.” Things could get worse, however. S&P says that $280 billion “could swell to $685 billion, by our estimate, with the establishment of a new entity to replace Fannie and Freddie that the government would initially capitalize.”

at http://www.zerohedge.com/article/realtytrac-opines-coming-wave-gse-foreclosure-buybacks-final-liability-will-be-enormous?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

Yield For Today's $35 Billion 2 Year Auction Joins Rest Of Curve In Rising

"After recent 7, 10 and 30 Year auctions all came in at a higher yield than prior, today it was the 2 Year's turn. Today's $35 billion 2 Year bond came at a 0.52% high yield, substantially wider than the previous 0.40% which was an all time record. And despite the rise in the rate, the Bid to Cover still came at a near all time high of 3.60, lower only compared to September's 3.78 and October 2009's 3.63%..."

at http://www.zerohedge.com/article/yield-todays-35-billion-2-year-auction-joins-rest-curve-rising?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

Sunday, November 21, 2010

Russia, India and China Forming Strategic Geopolitical Alliance

"Russia, India and China are pursuing common goals in their international policies and economic development.

In what is the latest step to promote trilateral cooperation in a variety of fields, the foreign ministers of China, Russia and India met for two days last week in Wuhan, capital of central Hubei province. Tenth of its kind, the meeting was shown as being conducive to deepening trilateral ties between Beijing, Moscow and New Delhi.

Due to the increasing influence of these three countries in regional and world affairs, cooperation opens up opportunities for increased development.

These three members of what has been called BRIC (Brazil, Russia, India and China), cover an entire 40 percent of the world population, with a combined GDP of more than 15 percent of the world total. The three also enjoy a particularly advantageous geopolitical position, along with an abundance of labor, natural resources and scientific and technological advantages. The geographic location of the three countries also facilitates the deepening of triangular trade..."

at http://www.marketoracle.co.uk/Article24452.html

Yuan can become alternative reserve currency to US dollar: ADB

"China's yuan could rapidly become an internationally used currency and serve as an alternative to the U.S. dollar in central bank reserves, the Asian Development Bank said in a report on Thursday.

"The renminbi has yet to become an international currency. It could become one much more quickly than many anticipate," the ADB said in a joint study with Columbia University's the Earth Institute.

"The internationalization of the renminbi has the potential to become an alternative to the U.S. dollar -- as did the euro -- and help nudge the global reserve system toward a multi-currency reserve structure," it said.

The study, undertaken by 11 economists from around the world, including academics Joseph Stiglitz and Barry Eichengren, did not provide a timeline for when the yuan could become a reserve currency..."

at http://www.reuters.com/article/idUSTRE65N1H720100624

Gerald Celente Currency Wars and Trade Wars will bring Real Wars

"Gerald Celente ..."...this is the beginning of the end of the Euro , the Euro was built in a time of high expectations , it was a time of economic euphoria , as though growth will never end , and growth does end ..., this is more than a domino effect in Europe , this is a global economic crisis and nothing is changed since the crisis begun in 2007 other than the central banks dumping trillion of dollars and trying to save a failing system , you cannot have a currency that's gonna cover all the basis of all the economies equally , you look at Ireland the biggest problem right now in today's news next week it might be Spain what we are seeing the beginning of is going to be currency wars and trade wars , and when you equal trade wars plus currency wars you start looking at real wars , it happened before and it's unfolding in front of us again , we see Italy we can see Portugal Spain Greece , the small countries opting out of the Euro ..look everybody that's alive today that remembers when the Euro came on back in the late nineties and the early two thousand is how inflation sky rocketed in those countries this is a scheme that could have never worked from the beginning , we said it wouldn't work when it happened ...."

at http://economycollapse.blogspot.com/2010/11/gerald-celente-currency-wars-and-trade.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+blogspot%2FCRkw+%28The+Economy++Collapse%29

Will Bernanke Next Monetize Municipal Debt?

"As municipal bond yields surged (and their prices dropped) this month, market participants began asking themselves whether an increase in municipal bankruptcies was around the corner..."

at http://seekingalpha.com/article/237990-will-bernanke-next-monetize-municipal-debt?source=feed

Scrap dollar as sole reserve currency: U.N. report

"A new United Nations report released on Tuesday calls for abandoning the U.S. dollar as the main global reserve currency, saying it has been unable to safeguard value..."

at http://www.reuters.com/article/idUSTRE65S40620100629

Following the Path of Japan and the Madness of Bernanke Fighting Just That

"I have been saying for 5 years the US would follow the path of Japan. An interesting chart in the New York Times shows this is indeed what has happened..."

at http://globaleconomicanalysis.blogspot.com/2010/11/following-path-of-japan-and-madness-of.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

Saturday, November 20, 2010

Europe’s Dirty Secret, Financial Elite Looting Public Treasuries

"In a revealing admission concerning the relationship between capitalist governments and international financial interests, the Financial Times on Tuesday wrote of “Europe’s dirty secret.”

The newspaper editorialized against the plan of the European Union, the European Central Bank (ECB) and the International Monetary Fund to loan Ireland tens of billions of euros in order to guarantee in full the investments of international bankers and bondholders in the country’s failing banking system.

Under the plan, Ireland will effectively surrender sovereignty over its economic policy to the EU and the IMF and agree to claw back the latest bailout of the global financial elite by imposing a new and even more savage round of attacks on the wages and living standards of the working class.

The Financial Times argued that using the €440 billion European Financial Stability Facility (EFSF) to cover the bad debts of the financial elite by propping up zombie banks, while driving the Irish state closer to default, would be “a fatal mistake.” The Times insisted that such a policy was shortsighted and self-defeating, since sovereign defaults would trigger new financial panics and bankruptcies.

“It would,” the Times wrote, “keep the Irish people indentured to those who recklessly fund their banks: EFSF funds must, after all, be paid back by taxpayers. It would also give an official EU imprimatur on Europe’s dirty secret: public treasuries will do anything to make private bank creditors whole.”

at http://www.marketoracle.co.uk/Article24419.html

Fed Money Printing Triggers Bond Market Crash

"My take? The Fed is right to worry. I say that because its QE2 program isn’t just not helping. It’s actually hurting the markets.

Take long-term Treasury yields …

As I’ve been pointing out recently, they’ve been rising rather than falling, and that move only gathered steam earlier this week. In fact, the yield on the 30-year Treasury bond hit 4.38 percent on Monday — the highest in six months! And ten-year yields hit a three-and-a-half-month high.

Then there’s the mortgage market …

Yields on mortgage-backed securities surged almost half a percentage point in just a handful of recent days, presaging a rise in retail mortgage rates. So much for the Fed’s policy helping homeowners.

And then there’s the municipal bond market …

It has completely imploded in the past several days. Take a look at this chart of the iShares S&P National AMT-Free Municipal Bond Fund (MUB). It’s one of the most actively traded benchmark ETFs for the municipal bond market, with more than 1,100 securities in its portfolio.

You can see it’s in freefall, with one of the sharpest declines since the credit crisis days of late 2008. MUB has now lost every penny of gains it’s made in the past 15 months … in just a few days! Long-term muni yields, which move in the opposite direction of prices, surged by the most in 18 months!..."

at http://www.marketoracle.co.uk/Article24411.html

Little Evidence of a Light at the End of the Tunnel

"In yesterday's post, "Shaking My Head in Disbelief," I questioned why so many people were still talking about "the recession" when it supposedly ended almost a year-and-a-half ago. Of course, I was being facetious -- anybody who's been paying attention knows that the idea the U.S. is recovering is just that -- an idea, conjured up in the minds of giddy Wall Street traders and ivory tower economists. Perhaps no segment of the economy is more aware of the true state of affairs than the small business sector, which has been a traditional locomotive for growth in the U.S.. As the following reports make clear, small business is seeing little evidence of a light at the end of the tunnel..."

at http://www.financialarmageddon.com/2010/11/little-evidence-of-a-light-at-the-end-of-the-tunnel.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+financialarmageddon+%28Financial+Armageddon%29

Ireland and the US: Depth of Corporate Ties May Be Surprising

"Market participants are rightfully focused on the contagion of Ireland within Europe. However, the depth of US corporate ties to Ireland may surprise many investors. The value-added of majority owned affiliates of US companies account for more than a fifth of Ireland’s GDP. This is the greatest share that American affiliates account for in any country by a wide margin. In second place is Singapore, for example, and the value added of the majority owned US affiliates account for a little more than 11% of Singapore’s GDP. The US affiliates employ around 93k Irish workers (2008) half of whom are in manufacturing.

at http://www.creditwritedowns.com/2010/11/ireland-and-the-us-depth-of-corporate-ties-ay-be-surprising.html#ixzz15qKyuURa

Who Is Next In The Eurozone?

"The Eurozone seems to be the place where the party never ends these days, as one skeleton after the other comes rattling out of the closet. Indeed, one has the impression that history is in the making right now; and the only thing we can hope is that it will be for the better..."

at http://www.creditwritedowns.com/2010/11/who-is-next-in-the-eurozone.html

Justice for Some

"The mortgage debacle in the United States has raised deep questions about “the rule of law,” the universally accepted hallmark of an advanced, civilized society. The rule of law is supposed to protect the weak against the strong, and ensure that everyone is treated fairly. In America in the wake of the sub-prime mortgage crisis, it has done neither.

Part of the rule of law is security of property rights – if you owe money on your house, for example, the bank can’t simply take it away without following the prescribed legal process. But in recent weeks and months, Americans have seen several instances in which individuals have been dispossessed of their houses even when they have no debts..."

at http://www.project-syndicate.org/commentary/stiglitz131/English

Banks walk away from houses

"What could be worse than a foreclosure? An Un-foreclosure (HT: Columbus Dispatch) also known as a dropped foreclosure or a bank walkaway.

Although exact statistics are hard to come by, the un-foreclosure is apparently become very common in Ohio, Michigan and Indiana. At some point the bank decides the economics of taking title do not justify further action, and walks away.

The General Accountability Office is investigating the problem, and believes as many as 50% of the drops are in these three states. Senator Sherrod Brown (D, Ohio) has gotten involved.

The mortgage servicer forecloses on the property and evicts the former owners, but then fails to take title to the property, leaving the property in limbo. No owner equals no property taxes paid, no insurance, and probably no maintenance. The property is left to rot, damaging the neighborhood. Ironically, due to the failure of the bank to take title, the former owner may still be on the hook for property taxes, and not know it.

The bad news just keeps on coming..."

at http://www.angrybearblog.com/2010/11/banks-walk-away-from-houses.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+blogspot%2FHzoh+%28Angry+Bear%29

Run on Allied Irish Banks, Customers Pull 17% of Deposits; Ghost Estates and Broken Lives: the Human Cost of the Irish Crash

"A slow steady bleed has turned into a mad dash for cash at Allied Irish Banks. Allied Irish Banks has had to rely on Central Bank funding as customers withdraw $18 billion, a stunning 17 percent of its deposit base. Without Central Bank funding, there would indeed be outright panic..."

at http://globaleconomicanalysis.blogspot.com/2010/11/run-on-allied-irish-banks-customers.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

Three Potentially Disastrous Outcomes From Ben Bernanke's QE 2 Wager

"The three biggest problems with QE 2 are:

1) The potential for a US Dollar break-down
2) Treasuries falling and pushing interest rates UP
3) China retaliating.

Of these, #3 is the most worrisome for the global financial markets. Let’s be clear here, China is extremely adept at making investing/ financial decisions. And while we do need to take its decision to cut Treasury exposure seriously, I cannot believe China would actually telegraph that it was dumping Treasuries when the dumping really starts.

Moreover, China has shown that when it comes to real issues, it doesn’t mess around. Consider the September 7th news story in which a Chinese fishing boat crashed into two Japanese coast guard ships. Japan arrested the captain and his crew. China responded by cutting rare earth exports to Japan.

Rare earths are used in a multitude of electronics (hybrid cars, LCD screens, magnets, batteries, TVs, etc). China controls 93% of the world production of these elements. And Japan’s economy, which is focused on electronics manufacturing, is heavily dependent on these items for growth.

Consider this sequence of events.

1) A Chinese boat crashes into a Japanese coast guard ship.
2) Japan arrests the crew.
3) China CUTS its exports of critical resources that Japan NEEDS.

The message here is clear. China does NOT mess around and is more than happy to play hardball when it comes to issues it deems important. Moreover, when China holds a trump card, it’s not afraid to use it.

These are some of the trump cards China currently holds:

1) Rare earths production
2) US Treasuries ownership (a decision by the #1 holder to dump would start a global rush from the US Dollar)
3) Derivatives: China could simply tell its banks and firms to renege on all derivatives deals, not just the commodity ones (commodity derivatives only comprise 2% of global derivatives, interest rate-based derivatives, in contrast, comprise 80% or so of the $600 TRILLION derivative market.
4) Interest rates hikes.

In plain terms, China has ALL the trump cards when it comes to global monetary/ economic issues. For that reason, its decision to simply ban exports of rare earth elements to Japan during the fishing boat tussle should be seen as a MAJOR warning of how China will conduct its affairs as it continues its quest to become a global super power.

Which is why Bernanke’s decision to blame China for everything is NOT a good idea..."

at http://www.zerohedge.com/article/three-potentially-disastrous-outcomes-ben-bernankes-qe-2-wager?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

US Mint Reports Soaring November Month-To-Date Silver Coin Sales Surpass 2010 High Following Massive Rush Into Precious Metal

"Is Max Keiser's attempt to put JP Morgan out of business working following the mother of all silver physical squeezes? The price of silver has been stable in the past few days, but if the US official precious metal seller is to be trusted, this will not last long. According to the US Mint, sales of 1-ounce American Eagle silver coins are headed for the strongest month since at least May, Bloomberg reports. And according to our update, the May total has not only been passed, but the November MTD total is already the highest in 2010. More details: a record 3,775,000 silver coins have been sold this month, compared with 3,636,500 in May, according to data on the Mint website. Silver futures in New York touched a 30-year high of $29.34 an ounce on Nov. 9. American Eagle coins also are available in gold and platinum. The Mint said 62,500 ounces of gold Eagles have been sold in November. What is interesting is that sales of the coins continue at an astronomic pace despite the nearly 10% premium one has to pay over spot. What is more interesting, is that the Mint has not run out yet. Yet the refreshing thing, is that instead of buying paper certficates promising that one's presumed purchases of gold is held by the DTCC, Americans are once again going straight into physical..."

at http://www.zerohedge.com/article/us-mint-reports-soaring-november-month-date-silver-coin-sales-surpass-2010-high-following-ma?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

Friday, November 19, 2010

The three monkeys of mortgage bonds

"Have you forgotten about the mortgage-bond scandal yet? I’m sure a lot of bankers are hoping that you have. But Adam Levitin hasn’t, and his written testimony today to the House Financial Services Committee is well worth reading in full. He concludes:

The foreclosure process is beset with problems ranging from procedural defects that can be readily cured to outright fraud to the potential failure of the entire private label mortgage securitization system…

In the worst case scenario, there is systemic risk, as there could be a complete failure of loan transfers in private-label securitization deals in recent years, resulting in trillions of dollars of rescission claims against major financial institutions. This would trigger a wholesale financial crisis…"

at http://blogs.reuters.com/felix-salmon/2010/11/18/the-three-monkeys-of-mortgage-bonds/

Boehner Warns GOP on Debt Ceiling

"...If an increase in the current debt limit of $14.3 trillion does not pass, it would suggest the country may not meet its obligations and would shake the financial system. It could rock the bond market, rattle the dollar and scare away foreign buyers of U.S. debt..."

at http://blogs.wsj.com/washwire/2010/11/18/boehner-warns-gop-on-debt-ceiling/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wsj%2Fwashwire%2Ffeed+%28WSJ.com%3A+Washington+Wire%29

Fed’s Plosser: QE2 Benefits May Not Outweigh Costs.

"The benefits of the Federal Reserve’s plan to buy $600 billion in government bonds in an effort to lift the economy may not be enough to outweigh the costs, Federal Reserve Bank of Philadelphia President Charles Plosser said Thursday.

Plosser had already expressed doubts about the Fed’s bond purchases, known as quantitative easing. He repeated his concerns to reporters Thursday, but declined to say how he would have voted when the central bank took the controversial move Nov. 3..."

at http://blogs.wsj.com/economics/2010/11/18/feds-plosser-qe2-benefits-may-not-outweigh-costs/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wsj%2Feconomics%2Ffeed+%28WSJ.com%3A+Real+Time+Economics+Blog%29

Roubini: "There's Not Going To Be Anybody Coming From Mars Or The Moon To Bailout The IMF Or Eurozone"

"Nouriel Roubini spoke to CNBC this morning about the eurozone.
0:50 Huge increase in public debt in Ireland. We now have a bunch of "super sovereigns," in the IMF and EU. "There's not going to be anybody coming from Mars or the moon to bailout the IMF or eurozone." At some point, we need restructuring, or you'll break the back of the government.

2:00 The next one in line will be Portugal. But Spain is the real elephant in the room. If Spain falls off the cliff, there is not enough money out there right now to bail it out.

2:45 Spain is too big to fail on one side and too big to be bailed out. Debt and liabilities are huge, a mix of public and private sector.

3:15 Italy is OK, but France is paradoxical. France still has serious structural problems.

4:10 For a small change in France you have huge resistance to a little change. There is going to be way more down the line, and that's what the danger is.

4:50 The bond vigilantes are awake in the eurozone, but they're not awake in the U.S.

6:45 China should be letting their currency revalue, like Bernanke says.

8:00 There's about zero percent chance of any structural adjustment in Congress..."


"...VALUATION—-In addition, don’t believe the story that stocks are cheap. This misconception is based on the year-ahead forecasts of S&P 500 operating earnings. The use of operating earnings is a contrivance that began in the mid to late 1980s to make earnings look better than the reported earnings according to generally accepted accounting policy (GAAP). Prior to the bubble period that began in the late 1990s the S&P 500 sold at an average P/E of about 15 with a range of 22 to 7 going back 1926. Based on our 2010 trendline GAAP earnings of about $65 the S&P 500 is now at 18.2 times the average and far closer to the top of the range than the bottom. Secular bear markets have typically bottomed at 7 to 10 times earnings. Similar calculations by Robert Shiller and John Hussman indicate even higher valuations..."

at http://pragcap.com/5-reasons-stock-market-vulnerable

Who Gains From The Eurozone Fiasco? China

"Ireland will get a package of support from the EU and the IMF. Will the money and the accompanying policy changes be enough to stabilize the situation in Ireland or more broadly around Europe? Does it prevent Ireland from restructuring its debt – or move the Irish (and other parts of the European periphery) further in that direction?

And who gains from the delay and mismanagement we continue to see at the highest European levels?

This is complicated economic chess within Ireland, across Europe, and at the international level. In my Bloomberg column this morning, I suggest we look several moves ahead, recognizing the underlying political dynamic:

There is a much more general or global phenomenon in which powerful people cooperate to build an economic model that provides growth based on a great deal of debt. When the crisis comes, those who control the state try to save their favorite oligarchs, but there aren’t enough resources to go around

Here is the present problem: It’s not just the Irish elite that is under pressure and struggling to sort out who should be saved. It’s also the European bankers who funded them.

If the Europeans continue to fight among themselves, regarding who bears what losses – and who has to face what kind of public accountability – which other countries gain on the global stage?

Who has the ready money available to recapitalize the International Monetary Fund, if needed? And it will be needed if Spain comes under serious pressure.

Who understands the strategic concept that piles of “reserve currency” can give you great political leverage? It is hard to find such thinking among today’s generation of American politicians.

And who is already playing international economic chess at the highest level?


at http://baselinescenario.com/2010/11/19/who-gains-from-the-eurozone-fiasco-china/

James Turk: Gold $8000 Hyperinflation a sure thing

"Gold is in a 2nd stage of a bull market. We will see a more rapid price appreciation than in the past years. Price target until 2015: 8000 Dollar. Price manipulation has come to an end. Gold as natural alternative to currencies. Chances of hyperinflation 100%.Gold prohibition possible..."

at http://marcfaberchannel.blogspot.com/

China's New Drones Raise Eyebrows .

"China is ramping up production of unmanned aerial vehicles in an apparent bid to catch up with the U.S. and Israel in developing technology that is considered the future of military aviation.

Western defense officials and experts were surprised to see more than 25 different Chinese models of the unmanned aircraft, known as UAVs, on display at this week's Zhuhai air show in this southern Chinese city. It was a record number for a country that unveiled its first concept UAVs at the same air show only four years ago, and put a handful on display at the last one in 2008.

The apparent progress in UAVs is a stark sign of China's ambition to upgrade its massive military as its global political and economic clout grows..."

Hooray,ECB Saves Eurozone 2nd Time;Allied Irish Bonds Bid at 45% of Face Value, Anglo Irish SubDebt has 99.99% Default Odds;Irish Citizens "Namatized"

"Market participants are giddy today on the great news that Ireland will go deeper in debt in a foolish attempt to bail out the German and UK bondholders who were in turn foolish enough to lend ridiculous amounts of money to Irish banks in various real estate schemes.

The Irish government was of course foolish enough to guarantee all of this foolishness which means that Irish citizens many of whom were sucked into buying property at foolish prices are now on the hook to bail out the bondholders, rubbing salt into the wounds of Irish taxpayers, not all of whom were foolish enough to freely participate in the general foolishness.

Got that?

Here is a short video from the Wall Street Journal that explains why the bailout will not work..."

Bernanke Seeks New "International Monetary System", Accuses China of Currency Intervention, Warns of Rising Unemployment and "End of Tepid US Recovery

"In speeches before a European Central Bank conference in Frankfurt, Ben Bernanke went on an unprecedented attack, accusing China of throwing a monkey wrench into the global recovery, blaming China for slow global growth and a potential "End to the Tepid U.S. Recovery".

He also said "The current international monetary has a structural flaw" calling on the "global community, over time, to devise an international monetary system that more consistently aligns the interests of individual countries with the interests of the global economy as a whole."

Finally, he put up a misguided defense of Quantitative Easing that is sure to not go over well in the global community.

If Bernanke was trying to spook the markets, provoke China, cause a currency war, and get Congress to launch an extremely foolish set of tariffs, he would have been hard pressed to deliver a more powerful speech..."

Making The Last Use Of Reserve Currency Status

"I suspect many in the mainstream academia haven't realized what QE2 is. It is the last use of the dollar's reserve currency status, intended or otherwise.

In a fiat currency system, inflation should be the only risk, because fighting deflation should be trivial -- just print money. This is a fundamental advantage of a fiat system over the old gold standard. Unfortunately for the US, the dollar's reserve status means the geopolitical border is not the dam holding the water as in other countries. As Fed pours in more water, it leaks right out to lowlands (good investment destinations) all over the world. Given the current economic prospects in the world, the result is that QE2 cannot stoke inflation in the US, but causes very unwelcome interference in exactly the other places in the world where inflation is a big concern..."

at http://www.zerohedge.com/article/guest-post-making-last-use-reserve-currency-status?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

Thursday, November 18, 2010

Morgan Stanley: It's Starting To Look A Lot Like Stagflation

"While the world worries about inflation or deflation, Morgan Stanley believe their is another specter out there ready to haunt markets: stagflation.

Their opinion is that right now, the global monetary environment looks a lot like the 1970s, where high levels of liquidity forced OPEC to raise oil prices causing high inflation and low growth in the global economy.

Their findings also show great differences between the two time periods, including the flexibility of oil prices, and high U.S. unemployment.

But what's more worrying are the similarities. With quantitative easing 2 in place, global monetary policy is extremely loose, driving inflation, especially in emerging markets. If oil prices were to spike to catch up the result could be stagflation, as high oil prices limit global growth.

Nevertheless, the comparison is interesting and worth evaluating..."

Fierce clashes in Greece: Stones fly on police, tear gas used on students

"RussiaToday--November 18, 2010--Nearly 50 people have been arrested and one injured near the American embassy in Athens, during a rally marking a 1970s student anti-dictatorship uprising. More than 20,000 demonstrators clashed with riot police who responded with tear gas and stun grenades. Police also reported clashes in the southern city of Patras. People were venting their anger at the U.S. support for the Junta which then ruled Greece..."

Rosie Sees "Trouble Ahead" Despite Sudden Resurgence Of Market Euphoria

"As Wall Street finally takes its Teleprompter General prescribed daily dose of Lithium, and the euphoria is back with a vengeance, as suddenly all the troubles seem so far away, here is David Rosenberg who again battles the prevailing mainstream mania (of the day, tomorrow who knows) and continues to see "Trouble Ahead."

at http://www.zerohedge.com/article/rosie-sees-trouble-ahead-despite-sudden-resurgence-market-euphoria?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

Wednesday, November 17, 2010

European Banks have $650 billion Exposure to Ireland; Germany’s Economy Minister says "EU Cannot Throw Money from Helicopters"

"In case you were wondering about why there is intense pressure on Ireland to accept a bailout from the EU and the IMF, look no further than the fact that European banks have $650 billion Exposure to Ireland.

Nonetheless, in a clear backhand slap in the face to Ben Bernanke, Germany’s Economy Minister says "the European Union cannot throw money from Helicopters".

Full Year of Muni Gains Wiped Out in 2 Weeks; California in Shambles, Philadelphia Downgraded; Issuance Soars; Horrid Muni Risk-Reward Setup

"A full year of municipal bond gains went up in smoke in the past two weeks. Worse yet, it's highly likely more blood is coming as issuance soars amid decreased demand from investors. A Moody's downgrade of Philadelphia, a complete mess in California, and a looming city bankruptcy in Michigan all weigh on the sector..."

Could The Financial Crisis Erupting In Ireland, Portugal, Greece And Spain Lead To The End Of The Euro And The Break Up Of The European Union?

"The Irish banking system is melting down right in front of our eyes. Ireland, Portugal, Greece and Spain are all drowning in debt. It is becoming extremely expensive for all of those nations to issue new debt. Officials all over Europe are begging Ireland to accept a bailout. Portugal has already indicated that they will probably be next in line. Most economists are now acknowledging that without a new round of bailouts the dominoes could start to fall and we could see a wave of debt defaults by European governments. All of this is pushing the monetary union in Europe to its limits. In fact, some of Europe's top politicians are now publicly warning that this crisis may not only mean the end of the euro, but also the end of the European Union itself..."

The Debt Problems of the European Periphery

"Last week’s renewed anxiety over bond market collapse in Europe’s periphery should come as no surprise.  Greece’s EU/IMF program heaps more public debt onto a nation that is already insolvent, and Ireland is now on the same track. Despite massive fiscal cuts and several years of deep recession Greece and Ireland will accumulate 150% of GNP in debt by 2014..."

IMF Reveals New SDR Weighting Tied to the "Big Four" In Rebuff to BRICs

"The 'Washington-based' IMF chose the status quo, merely tinkering slightly with the dollar-euro-pound-yen balance in its SDR. The Anglo-American financiers threw a bone to the Europeans with a slight increase. Japan retained its place in the colonial powers club. I find it almost incredible that the UK remains a financial power to the exclusion of the BRICs.

I cannot imagine that Russia and China will be pleased with this rebuff to their concerns, although they were granted more of the trappings of power at the G20.

Now that the SDR is off the table as a broadly acceptable replacement for the dollar reserve currency regime, at least for the next five years, we might expect more regionalization of trade and the formation of new trading blocs. This implies less financial stability as the developing and commodity nations begin to rebel against the current foundations of global finance that continue to subject them to the monetary policies of the Big Four: US, Europe, UK and Japan..."

Global Geopolitical Dislocation and the Worldwide Financial Crisis

"In conclusion, this accumulation of events, centred round a G20 summit that was patently incapable of resolving the sources of economic, financial and monetary tension between its principal members, contributed to a decisive advance in the world’s collective awareness of the process of global geographic dislocation under way. And in its turn, this increased awareness will, as from the beginning of 2011, accelerate and amplify the changes affecting the international system and our various societies, generating non-linear, chaotic phenomena..."

Tuesday, November 16, 2010

The Euro Back Under the Microscope, PIIGS Debt Crisis Round3

"...Investors, politicians and the media have had tunnel vision for the better part of the past five months. And it’s been directed squarely on the United States.

The world has been transfixed on the dollar. Experts have tirelessly surmised how the Fed’s recent decision to launch another round of quantitative easing was reckless. And they’ve claimed this action will do irreparable damage to the buck — the world’s primary reserve currency..."

Growing Signs of Renewed Debt Crisis in Europe

"Stefan Steinberg writes: There are growing signs of a renewed debt crisis in a number of European nations, as bond yields soar to record highs and the continent’s economic growth stagnates..."

A Fistful of Dominos

"...Without Congressional approval for additional debt, the U.S government cannot pay its bills – most notably, interest payments on treasury bonds, bills and notes.

If America defaults on those payments, or even misses them by just one day, the domino effect would be brutal...

•Domino #1: The country would lose its AAA credit rating and those bonds, bills and notes would no longer enjoy their status as the safest investments on the planet.

•Domino #2: In turn, a lower credit rating would mean that the United States would pay higher interest on its bonds in order to attract investors. Result?

•Domino #3: A tidal wave of selling through fixed income markets, driving interest rates higher still.

•Domino #4: Social Security would be hit hard, as its funds are invested in Treasuries. Suddenly, Social Security would have far less resources than just a day or two earlier.

•Domino #5: If money is pouring out of so-called “safe” investments, you can bet that in that kind of environment, the demand for riskier investments would be next to nil. Stocks and financial markets around the globe would plummet.

So why is this year’s Congressional raising of the debt limit different than every other?..."

Ireland Bailout Threatens to Reignite Euro Debt Crisis

"Don Miller writes: Ireland's reeling banking system, and the government's reluctance to accept outside help, is threatening to reignite the European debt crisis that nearly led to the demise of the European Union (EU) and its currency last spring..."

Looking Back at the Credit Crunch, Fall of the Mighty Dollar

"When politicians and policy makers see an economic problem, especially one with the scale of the financial crisis today, they feel obliged to solve it. Unfortunately, the measures they’ve implemented have not worked so far. In fact, their policies have the opposite effect because it reinforces imbalances. The monetary stimulus is just whetted the appetites of consumers to purchase even more imports. Meanwhile, the second round of quantitative easing might only make it worse.

So investors, analysts, politicians, and policy makers all over the world are looking for a solution – and found the culprit: the dollar. Because it is used as a reserve currency, Americans enjoy an almost boundless spending.

At the very start of the financial crisis, it was already clear to many that the dollar’s hegemony would be question. Along with this is the fear that America’s dominance will go right down with it. This process may take time, possibly more than a decade, but the process has been set in motion. And there is no doubt that countries including China, Brazil, and possibly even France will insist that it continues..."

at http://www.marketoracle.co.uk/Article24322.html

Sunday, November 14, 2010

International "Extend-and-Pretend" - Greece Needs IMF Extension

"...Inquiring minds are asking "Can the IMF Help Anyone?"

That's a good question. Mish readers may be shocked by my answer: "Yes It Can!"

The irony is no country in its right mind should ever accept "help" from the IMF.

This apparent paradox can be explained by the fact that "help" from the IMF is akin to tossing an anchor to a struggling swimmer..."

at http://globaleconomicanalysis.blogspot.com/2010/11/imf-ready-to-help-ireland-can-imf-help.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

The Euro Back Under the Microscope, PIIGS Debt Crisis Round3

"Investors, politicians and the media have had tunnel vision for the better part of the past five months. And it’s been directed squarely on the United States.

The world has been transfixed on the dollar. Experts have tirelessly surmised how the Fed’s recent decision to launch another round of quantitative easing was reckless. And they’ve claimed this action will do irreparable damage to the buck — the world’s primary reserve currency..."

at http://www.marketoracle.co.uk/Article24274.html

Friday, November 12, 2010

The Gold Standard Never Dies, Despite Bankster's Best Efforts to Kill it

"John Maynard Keynes thought he had pretty well killed gold as a monetary standard back in the 1930s. Governments of the world did their best to help him. It took longer than they thought. Gold in the money survived all the way to Nixon, and it was he who finally drove the stake in once and for all. That was supposed to be the end of it, and the beginning of the glorious new age of paper prosperity..."

at http://www.marketoracle.co.uk/Article24230.html

Bernanke QE2 Program Backfiring! Global Money War Intensifying!

"The reviews are coming in fast and furious — and they’re downright terrible!

I’m not talking about the latest romantic comedy or action movie. I’m talking about the reviews of the Federal Reserve’s quantitative easing, or “QE2,” program! Get a load of these comments …

• From the central bank president of Brazil, Henrique Meirelles: “Excess liquidity” resulting from QE2 is creating “risks for everyone” …

• From the vice foreign minister of China, Cui Tiankai: “Many countries are worried about the impact of the policy on their economies. It would be appropriate for someone to step forward and give us an explanation” …
• From the finance minister of Germany, Wolfgang Schäuble: “It’s our problem as well if the U.S. is no longer certain that the old recipes don’t work anymore.” Schäuble then delivered the coup de grâce, calling Bernanke’s gambit “clueless” …

• Jean-Claude Juncker of Luxembourg, the leader of a panel of euro-zone finance ministers, seconded the condemnation. He said: “I see more risks and possibilities of global excesses in the decisions that have been made by the Fed than benefits.”

at http://www.marketoracle.co.uk/Article24236.html

Thursday, November 11, 2010

Will the G20 Dump the U.S. Dollar as the World's Main Reserve Currency?

"Jason Simpkins writes: The Group of 20 (G-20) is meeting today (Thursday) and tomorrow (Friday) in Seoul, South Korea, and one of the main topics of discussion will be the role of the U.S. dollar in the post-crisis global economy.

Debate over the dollar's role as the world's main reserve currency rose to a fevered pitch in 2008 when the financial crisis, which began in the United States, first roiled global markets..."

at http://www.marketoracle.co.uk/Article24202.html

West Loses Resources War, China Controls Rare Earths and Middle East Has Crude Oil

"While most are anxiously anticipating a grand currency showdown at the G20 summit in Seoul this month, rare earths is bound to be one act of the G20 high Korean Drama amid the mounting worries among corporations and governments around the world about China’s recent export restrictions and embargo..."

Gold Jumps Back Above $1400, as Contagion Hits Eurozone Bonds

"THE PRICE OF GOLD gave back an earlier rise in London trade on Thursday morning, still recording its third-highest ever Gold Fix – and the fourth Fix this week above $1400 an ounce – as Asian stock markets closed marginally higher but European share markets stalled..."

at http://www.marketoracle.co.uk/Article24213.html

Wednesday, November 10, 2010

The "Current Housing Recession is Rivaling the Great Depression’s Real Estate Downturn [and] Will Easily Eclipse It In the Coming Months"

"Zillow's Stan Humphries said:

The length and depth of the current housing recession is rivaling the Great Depression’s real estate downturn, and, with encouraging signs fading, will easily eclipse it in the coming months.

During the Great Depression, home prices fell 25.9 percent in five years. The U.S. housing market is now down around 25 percent from its peak in 2006.

As housing price expert Robert Shiller pointed out in September 2008:

Home price declines are already approaching those in the Great Depression, when they plunged 30% during the 1930s [i.e. over a 10-year period]. With prices already down almost 20%, it's not a stretch to think we might exceed that drop this time around..."

at http://www.zerohedge.com/article/current-housing-recession-rivaling-great-depression%E2%80%99s-real-estate-downturn-and-will-easily-e?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

Is China's Renminbi Already The New World Reserve Currency?

"Tyler Durden writes: With the dollar tumbling overnight, many were scratching their heads as to what caused the move in the dollar. Citi's Stephen Englander provides a useful explanation, which fits perfectly with the commentary from PBoC advisor Li's earlier that the dollar's position as a reserve currency is now "absurd": namely that more and more in the world are starting to look at the CNY as the new reserve currency. And as we pointed out earlier, its fixing surge of over 0.5% overnight caused many to blink. Is China finally pushing to aggressively force the dollar out?..."

at http://www.marketoracle.co.uk/Article24170.html

Tuesday, November 9, 2010


"Clear Capital released their monthly Home Data Index Report today and it showed continued deterioration in national home prices. Prices are now off -6.8% from their August peak. It looks to me like the housing double dip is here and Ben Bernanke rolled out QE2 just in time to prepare for massive MBS purchases in 2011 when the banks hit another rough patch (via MarketWire)... "

Was Last Night's Launch Of A "Rogue" Missile A Warning To Asia?

"Many questions are swirling over last night's launch of a rogue rocket, which it appears was a submarine launched ICBM from the Pacific, 35 miles west of Los Angeles. So far pretty much everyone has denied any involvement, and as per the NYPost, "according to Fox News, NORAD and NORTHCOM would only say they were aware of the launch" even as "a navy spokesperson previously told KCBS that no navy activity was reported in the region." Yet the closest approximation for what the reason for the launch may have been comes from Robert Ellsworth, former defense secretary: "On viewing the footage, former deputy defense secretary Robert Ellsworth speculated on KCBS that the launch could be a show of military muscle. "It could be a test-firing of an intercontinental ballistic missile from a submarine ... to demonstrate, mainly to Asia, that we can do that," Ellsworth said." And China has not even sold and US bonds yet. So did China Dagong in turn retaliate earlier by downgrading the US? At this point we can only hope that the Chairman can confine his FX war to Forex terminals, without actually involving a few strategically placed mushroom clouds..."

Mark Fisher Slams Bernanke: "QE Is Going To End Bad...This Is Going To Be The Bubble Of All Bubbles"

"Today's must watch clip comes from Mark Fisher. Key highlights: "QE2 can't end right. Worthless paper after endless paper.... What's good for the equity markets is not necessarily good for the economy. The equity markets are not going to create jobs. If you have a paper bag full of money are you going to go out and hire workers and take risk with healthcare and all these other regulatory restrictions? No, you are going to go ahead and buy high yield, you will buy equities, you will buy risk assets. The fallacy in the whole thing is that you are not going to go ahead and create jobs just by pushing up the market by 20%, 15%. In fact, to some degree by pushing up commodity price to levels that are going to be obscene, which is what is going to happen, you are hurting everybody in mainstream America..."

at http://www.zerohedge.com/article/mark-fisher-slams-bernanke-qe-going-end-badthis-going-be-bubble-all-bubbles?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

German Finance Minister: 'The US has lived on borrowed money for too long'

QE2's Done, Now Euro and European Debt Crisis To Take Center Stage

"Over the past month or so, world`s focus, currency markets in particular, has been centered mainly on the U.S. over QE2, the November elections, and the Job`s Report. As such, there have been some interesting headlines coming out of Europe that went quietly under the radar as Wall Street became infatuated with their own bullish sentiment.

Now, with QE2 and mid-term election pretty much behind us, guess where the market’s attention will shift to next?

The euro, which has been strengthening across the board for a while, was noticeably weaker last week considering the bullish sentiment, which really bolsters the European currency during ebullient US and world market breakout moves to the upside..."

Rebirth of the Gold Standard

"When I suggested in an editorial last year that a gold standard should be adopted, I was summarily dismissed in the most condescending fashion by economists and journalists alike who proclaimed that I didn’t understand economics or currencies or monetary history.

I’m pleasantly thrilled to discover that the president of the World Bank, Robert Zoellick, also shares my ignorance. He announced today that he felt a gold standard was just the thing to be incorporated into a “co-operative monetary system that reflects emerging economic conditions.”

Writing in the Financial Times Monday, Zoellick pointed out that, “Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today.”

Gold Takes One More Step Towards Center Stage of the Global Monetary System!

"Before the Gold Forecaster came into being, it had become clear that gold was headed back into the monetary system. Why, you may well ask? It was because of the "Washington Agreement". This agreement changed the tone of central banker's approach to gold. This Agreement inspired the start of Gold Forecaster. Since then the newsletter has forecast the very events that are now taking place and has been right on each of gold's moves in price and in re-acceptance over this last decade.

What did the "Washington Agreement" do? Instead of harping on about it being a 'barbarous relic' and continuing to threaten to dump gold into the market and out of the monetary system, the European Central bankers involved in the agreement that bound them, reaffirmed that gold was an important Reserve Asset and restricted the sales of gold to a 400 tonne 'cap' on gold sales per annum. It was at that point that the gold price began to rise. While the establishment of the Euro was deemed to require these sales, central bankers were not keen to sell and some were even forced to do so by their government [France in particular]. This established that gold as an important part of the monetary system and that it was not going to be dumped into the market place then or in the future.

During the next nine years the world saw the restrained sales of gold by European central bankers, leaving the market believing that gold was not really going to be a credible part of the monetary scene in the future. But then came the 'credit crunch', the banking crises, the Sovereign debt crises and now quantitative easing, all of which has slowly sapped confidence in the system of government issued currencies. With the credibility and the value of currencies utterly reliant on the central banks and governments behind them any misbehavior in terms of a currencies value both home and abroad, would reflect itself eventually. With the U.S. dollar the heart of the currency system, when it began to be devalued through a continuing trade deficit over decades, doubts had already been established.

Riding in tandem with these currency debilitating events, was the emergence of Asia. With half the world's population living in Asia and less than half China's population making up the total population of the developed world, it is only a matter of time before the developed world is eclipsed economically by Asia..."

Monday, November 8, 2010

"Gold Standard" Call from World Bank

"..."The [world's monetary] system should consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values," writes Robert Zoellick – president of development lender the World Bank – calling for some element of a return to the Gold Standard in today's Financial Times.

Setting out a 5-step package "to address the fundamentals of growth" worldwide, Zoellick says that "Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today."