Laser-guided smart-bombs: Made in Iran

"Iranian state TV has announced the production of laser-guided munitions and other advanced military equipment. But as the country prepares to celebrate the anniversary of the 1979 revolution, the West may rain on their parade.
­Among the latest developments announced Monday on Iranian state TV was the “Basir” precision-guided artillery shell.
Defense Minister General Ahmad Vahidi said the “Basir”, which translates as “insightful”, is an “intelligent” ammunition capable of identifying its own targets and effective at a range of up to 20 kilometers.
Vahidi also said “only five countries in the world” have the ability to produce such high-tech munitions, the semi-official Fars News agency reports.
Vahidi also announced the production of new a reconnaissance aircraft and cruise missile, as well as other domestically manufactured weapons and electronic equipment which would soon be implemented by Iranian forces.
Sources within the Iranian military say a series of major developments in weapons technology will be announced to coincide with the 34th anniversary of the 1979 revolution this coming February, Interfax reports..."

at http://rt.com/news/iran-laser-guided-shell-065/

Is the Next Phase To Be Commodity Wars?

"As the global trade system that had existed under the Bretton Woods II money regime evolves and changes, we may see more struggles for key commodities.

These will be characterized by local and regional military tensions as well as financial assaults on the relevant sovereign credit and currencies.

Reuters
12 Companies Join German Commodity Alliance
By Michael Hogan
Jan 30, 2012 3:23pm GMT

HAMBURG, Jan 30 (Reuters) - Twelve German companies have joined the new German alliance aimed at securing raw materials supplies in the face of growing competition for key commodities, the Federation of German industry BDI said on Monday.

In October 2010, Germany's government approved a new commodities strategy aimed at helping German industry secure supplies in the face of intense competition from China and other newly-industrialised countries which will include partnerships with supplier countries and greater cooperation between German commodity consumers..."

at  http://jessescrossroadscafe.blogspot.com/2012/01/is-next-phase-to-be-commodity-wars.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+JessesCafeAmericain+%28Jesse%27s+Caf%C3%A9+Am%C3%A9ricain%29

A Housing Bottom Is Nowhere In Sight

at http://www.ritholtz.com/blog/2012/01/a-housing-bottom-is-nowhere-in-sight/

The 5 Scariest Debt And Unemployment Charts From The CBO Report

"The Congressional Budget Office has released its updated 10-year budget and economic forecast. Actually, the CBO offers two forecasts. It has a baseline forecast, which assumes current law stays in place. It also has an a “alternative” forecast which assumes current tax and spending policy stays in place as is — even if the law says it must change in coming years.That scenario incorporates the following assumptions:

– Expiring tax provisions (other than the payroll tax reduction) are extended [under current law, those expirations will boost individual income taxes in a variety of ways by amounts totaling $3.8 trillion from 2013 through 2022];
– The AMT is indexed for inflation after 2011 [under current law, its parameters are fixed, and the number of taxpayers affected by the AMT will jump from 4 million in calendar year 2011 to 30 million in 2012];
– Medicare’s payment rates for physicians’ services are held constant at their current level [under current law, those rates are scheduled to drop by 27 percent this March and more in later years]; and
– The automatic spending reductions required by the Budget Control Act do not take effect [under current law, they will impose reductions totaling about $109 billion a year starting in January 2013].

I like to refer to the “alternative fiscal scenario” as the “realistic fiscal scenario.” It is certainly the scarier scenario over the long term. For instance, annual budget deficits would average 5.4 percent of GDP over the 2013–2022 period under the alternative fiscal scenario, rather than the 1.5 percent reflected in CBO’s baseline projections. Debt held by the public would climb to 94 percent of GDP in 2022, the highest figure since just after World War II.
With that background, here are some of the scariest debt and economic charts I pulled out of the CBO report:"

1. Huge deficits as far as the eye can see

2. Total debt held by the public reaches its highest level since just after World War II



at  http://www.businessinsider.com/the-5-scariest-debt-and-unemployment-charts-from-the-cbo-report-2012-1?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+clusterstock+%28ClusterStock%29#ixzz1l4OMIozE

SUPER POWERS CAN HANDLE SUPER DEBT?

"World renowned Harvard economist Niall Ferguson says the USA is now unlikely to default on its debt (actually only partially) and that the reason they won’t “run out” of money has nothing to do with their status as a currency issuer, but has everything to do with being a super power which gives them the ability to handle “super debts” (via Business Insider):

“I think we are going to get some defaults one way or the other. The U.S. is a different story. First of all I think the debt to GDP ratio can go quite a lot higher before there’s any upward pressure on interest rates. I think the more I’ve thought about it the more I’ve realized that there are good analogies for super powers having super debts. You’re in a special position as a super power. You get, especially, you know, as the issuer of the international reserve currency, you get a lot of leeway. The U.S. could conceivably grow its way out of the debt. It could do a mixture of growth and inflation. It’s not going to default. It may default on liabilities in Social Security and Medicare, in fact it almost certainly will. But I think holders of Treasuries can feel a lot more comfortable than anyone who’s holding European bonds right now.”

I don’t know what that means really. Japan isn’t really a super power, but they have handled a far larger debt load for far longer than the USA has. He doesn’t seem to recognize that being sovereign in your currency is the key factor here. But this position is a big change from the position he’s maintained for quite some time now. Interestingly, he concedes that Paul Krugman was somehow “right” about the USA’s position even though Professor Krugman only just recently that being a currency issuer is the key differentiating factor between Europe and the USA…."

at http://pragcap.com/super-powers-can-handle-super-debt

Case Shiller: House Prices fall to new post-bubble lows in November (seasonally adjusted)

"S&P/Case-Shiller released the monthly Home Price Indices for November (a 3 month average of September, October, and November). This release includes prices for 20 individual cities and and two composite indices (for 10 cities and 20 cities).

Note: Case-Shiller reports NSA, I use the SA data.

From S&P: Home Prices Continued to Decline in November 2011 According to the S&P/Case-Shiller Home Price Indices..."

at http://www.calculatedriskblog.com/2012/01/case-shiller-house-prices-fall-to-new.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+CalculatedRisk+%28Calculated+Risk%29

Portugal's Debt Will Be Restructured; 3-Year Government Bond Yield Tops 25%; CDS at Record High, Implies 72% Chance of Default

"Inquiring minds are watching Portuguese government bonds soar into the stratosphere, with record-high bond yields across the entire yield curve.

In all the images below, the numbers are accurate but the charts reflect yesterday. I have mentioned this to Bloomberg a number of times to no avail..."

Portugal 2-year Government Bonds


at http://globaleconomicanalysis.blogspot.com/2012/01/portugals-debt-will-be-restructured-3.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

You Ain't Seen Nothin' Yet; Another Trillion (or Two) Euro LTRO Coming Next Month

"Last month, Euopean banks tapped the ECB for €489bn in a long-term refinance operation dubbed LTRO. On February 29, another round of LTRO is coming up and expect banks to go for the gusto. Banks like cheap money to speculate and that is exactly what they will do.

The Financial Times reports Banks set to double crisis loans from ECB

European banks are preparing to tap the European Central Bank’s emergency funding scheme for up to twice as much as the ECB supplied in its debut €489bn auction last month, providing further evidence of the sector’s liquidity squeeze..."

at  http://globaleconomicanalysis.blogspot.com/2012/01/you-aint-seen-nothin-yet-another.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

Venezuela Completes Repatriation Of 160 Tons Of Gold, Gold At 2012 Highs

"Slowly but surely, ever more physical gold is being removed from circulation in conventional channels. Yesterday, it was Sprott who a week after doing a follow on offering in his PSLV ETF (i.e., adding more physical), reported that he was going to buy an as of yet undisclosed amount of gold for PHYS. This came just as Venezuela completed the rapatriation of its gold from European vaults, which means that it is substantially ahead of all of its other international peers who confidently continue to hold their gold stashed away in vaults situated primarily in London and NY. From Bloomberg: "Venezuela today received the last shipment of gold bars in an operation that repatriated 160 tons of the South American country’s reserves of the metal held abroad, said Nelson Merentes, president of the country’s central bank. Fourteen tons of gold arrived at the Caracas airport today on a flight from Europe, Merentes said. The gold bars were transported in a caravan, broadcast on state television, to vaults at the central bank where street banners proclaimed “Mission Complete.”" So now that the defections in the golden game theory equilibrium have commenced, the question is: who is next?..."

at http://www.zerohedge.com/news/venezuela-completes-repatriation-160-tons-gold

California To Run Out Of Cash In One Month, Controller Warns

"If anyone is tired of the daily European soap opera with surrealistic tragicomic overtones, they can simply shift their gaze to the 8th largest economy in the world: the insolvent state of California, whose controller just told legislators has just over a month worth of cash left. From the Sacramento Bee: "California will run out of cash by early March if the state does not take swift action to find $3.3 billion through payment delays and borrowing, according to a letter state Controller John Chiang sent to state lawmakers today. The announcement is surprising since lawmakers previously believed the state had enough cash to last through the fiscal year that ends in June." ....uh, oops? But sure, fix the problem of excess debt by more "borrowing" why not. As for the math: "But Chiang said additional cash management solutions are needed because state tax revenues are $2.6 billion less than what Gov. Jerry Brown and state lawmakers assumed in their optimistic budget last year. Meanwhile, Chiang said, the state is spending $2.6 billion more than state leaders planned on." Quick, someone come up with a plan that involves subsidies and tariffs on China, or something else that deflects from what the source of the problem really is. Because the last thing that anyone in America would want to bring up is this thing called "responsibility" for their actions, or, as in now becoming the default case, the lack thereof. And why do that, when time spent so much more productively scapegoating this, and blaming that for one's own massive errors of judgment..."

at  http://www.zerohedge.com/news/california-run-out-cash-one-month-controller-warns

The Case for Gold

"More and more people are asking if a gold standard will end the financial crisis in which we find ourselves. The question is not so much if it will help or if we will resort to gold, but when. All great inflations end with the acceptance of real money—gold—and the rejection of political money—paper. The stage is now set; monetary order is of the utmost importance. Conditions are deteriorating, and the solutions proposed to date have only made things worse. Although the solution is readily available to us, powerful forces whose interests are served by continuation of the present system cling tenaciously to a monetary system that no longer has any foundation. The time at which there will be no other choice but to reject the current system entirely is fast approaching. Although that moment is unknown to us, the course that we continue to pursue will undoubtedly hurtle us into a monetary abyss that will mandate a major reform..."

at http://mises.org/books/caseforgold.pdf

'Dr Doom' - economist who predicted financial meltdown of 2008 - now warns Iran conflict 'could spiral economy into global recession'

"Economist Nouriel Roubini, nicknamed 'Dr. Doom' for his gloomy predictions in the run-up to the financial meltdown four years ago, says the fallout from that crisis could last the rest of this decade.

Dr Roubini, widely acknowledged to have predicted the crash of 2008, sees tough times ahead for the global economy and is warning that without major policy changes things can still get much worse.

He said the biggest uncertainty is the possibility of a conflict with Iran over its nuclear program that involves Israel, the United States, or both..."
at http://www.dailymail.co.uk/news/article-2093165/Dr-Doom--economist-predicted-financial-meltdown-2008--warns-Iran-conflict-spiral-economy-global-recession.html#ixzz1kyKpKnMO

From an Historic Gold-Backed Fractional Reserve System to a Paper Farce Today

"...Eric Sprott made a recent comment posted in an article on Zerohedge.com, stating that “The financial system is a farce” . He couldn’t be more correct in his assumption. Not only is the present U.S. banking system based on a financial debt instrument called a Federal Reserve Note, but its fractional reserve ratio is virtually nonexistent.
In 1932, the United States had a fractional reserve banking system backed by gold. The member banks had different reserve requirements: central reserve city banks (13 percent), reserve banks (10 percent) and country banks (7 percent). All member banks had a 3 percent reserve requirement on time deposits. Even with these official reserve ratios, the total paper dollar claims to gold were much higher. For this analysis, we are going to compare the M2 money supply to the amount of U.S. Treasury-held gold. 

In 1932, the U.S. Treasury held $2.95 billion in gold, there was $5.60 billion in currency in circulation, $36 billion in M2 money supply, and $19 billion in U.S. Treasury debt. The fractional reserve of gold to the M2 money supply was 8.3%.
Despite the terrible conditions during the “Great Depression”, at least the country had two positive factors going for it: 1) A banking system backed by gold and 2) vast resources of energy, metals and minerals to tap into to pull itself out of its current market ills.
Today, the banking system is on the verge of collapse and the country has consumed its best resources which peaked 40-50 years ago. After Nixon dropped the dollar peg to gold in 1971, the world has been on a floating exchange rate fiat monetary system. The present fractional reserve banking system we have today is based on a fiat paper reserve.

This graph shows that no gold whatsoever is backing up the banking system. As the U.S. banking system stands today, its currency— the Federal Reserve Note— is backed by $15.2 trillion worth of U.S. Treasury debt. The system is even weaker when we look into the makeup of the banks’ fractional reserve ratio..."

at http://www.marketoracle.co.uk/Article32876.html

Chinese 'Gold Rush' -Year of Dragon First Week Sees Record Sales– Up 49.7%

"Gold prices fell in Asia and in Europe this morning with profit taking after last week’s 4.3% gains seems the primary reason for today’s weakness.

However, gold prices are likely to continue to be supported by the continuing Greek debt saga (and risk of contagion) and developments in the increasingly tense situation with Iran (and the risk of war).

Iran

US President Obama, signed a law on December 31st that seeks to penalize countries that import Iran's oil or transact with the Islamic Republic's Central Bank. Europe has also imposed sanctions on Iran's oil imports from July 2012. Measures also include an immediate ban of all new oil contracts with Iran and a freeze on the assets of the country's central bank within the EU, due to their nuclear program.

Gold Spot Dollar/oz – 5 Days (Bloomberg)

India has had friendly relations with Iran for years and will now find itself in a mire of political manoeuvring . It wishes to keep relations on a good footing with the US and Europe but has the dilemma of being dependent on oil from Iran and other countries.

EU
These tensions plus the decline of the dollar’s value has strengthened gold in the past month.

European leaders are meeting today in Brussels about jobs and economic growth but the Greek debt situation may again dominate.

As long as the failed panacea of recent years - to print and electronically create money and pile more debt upon already massive levels of debt – continues to be seen as the solution – gold’s foundations remain very secure.

XAU-EUR Exchange Rate – 5 Days (Bloomberg)

Only the massive writing down of and forgiveness of debt and massive deleveraging in the banking system can help ameliorate the European and global debt crisis.

China
Xinhua, the official press agency of the government of the People's Republic of China reports that a "gold rush" swept through China during the week-long Lunar New Year holiday this year, with demand for precious metals and jewelry surging since the Year of the Dragon began.

Data released by China's Beijing Municipal Commission of Commerce shows a 49.7% increase in sales volume for precious metals jewelry and bullion during the week-long holiday (over last year), which lasted from January 22 to 28 over that of last year's Spring Festival..."

at http://www.zerohedge.com/news/chinese-gold-rush-year-dragon-first-week-sees-record-sales%E2%80%93-497

Third Aircraft Carrier Group Coming To Iran

"For months now we have been following US naval developments and deployments in the Arabian Sea, which serve one purpose and one purpose only - to demonstrate US military strength in the Straits of Hormuz region and to keep Iranian 'offensive passions' subdued. Yet never has the US had a total of three aircraft carrier groups in the vicinity, always topping out at 2 in the Bahrain-based Fifth Fleet, most recently these being the CVN-70 Vinson and CVN 72 Lincoln, with a third boat present merely until a rotation in or out of the theater of operations was complete. That is about to change, and with it the prevailing price of Brent, which we are confident is about to take a new step wise price higher as the US makes it all too clear what the endgame is, because as Naval Today reports, the "US navy to deploy third carrier group to Persian Gulf", probably the CVN-77 George H.W. Bush which departed Norfolk two weeks ago according to the most recent naval update, or any other Norfolk-stationed aircraft carrier: there is a wide selection to chose from..."

at http://www.zerohedge.com/news/third-aircraft-carrier-group-coming-iran

Guest Post: Baltic Dry Index Signals Renewed Market Decline

"Much has been said about the Baltic Dry Index over the course of the last four years, especially in light of the credit crisis and the effects it has had on the frequency of global shipping. Importing and exporting has never been quite the same since 2008, and this change is made most obvious through one of the few statistical measures left in the world that is not subject to direct manipulation by international corporate interests; the BDI. Today, the BDI is on the verge of making headlines once again, being that is plummeting like a wingless 747 into the swampy mire of what I believe will soon be historical lows.

The problem with the BDI is that it is little understood and often dismissed by less thoughtful economic analysts as a “volatile index” that is too “sensitive” to be used as a realistic indicator of future trends. What these analysts consistently seem to ignore is that regardless of their narrow opinion, the BDI has been proven to lead economic derision in the market movements of the past. That is to say, the BDI has been volatile exactly BECAUSE markets have been volatile and unstable, and is a far more accurate thermometer than those that most mainstream economists currently rely on. If only they would look back at the numbers further than one year ago, they might see their own folly more clearly.

Introduced in 1985, the Baltic Dry Index first and foremost is a measure of the global shipping rates of dry bulk goods, mostly consisting of vital raw materials used in the creation of other products. However, it is also a measure of demand for said materials in comparison to previous months and years. This is where we get into the predictive nature of the BDI…

In late 1986, for instance, the BDI fell to its lowest level on record, then, began a slow crawl towards moderate recovery, just before the Black Monday crash of 1987..."



at http://www.zerohedge.com/news/guest-post-baltic-dry-index-signals-renewed-market-decline

More Pain, Less Gain: S&P/Case-Shiller Preview for November 2011

"As I demonstrated in prior posts, given their strong correlation, the home price indices provided daily by Radar Logic, averaged monthly, can effectively be used as a preview of the monthly S&P/Case-Shiller home price indices.

The current Radar Logic 25 MSA Composite data reported on residential real estate transactions (condos, multi and single family homes) that settled as late as November 25 and averaged for the month indicates that with slowing summer/fall transactions has come a notable decline of prices (the typical trend) with the national index declining 1.8% since October and falling 7.11% below the level seen in November 2010.

The Radar Logic index will likely be capturing an decline in prices from now until early 2012 as transactions continue to trend down.

Look for tomorrow's S&P/Case-Shiller home price report to reflect this declining trend though to a lesser degree due to its three month rolling-average nature with prices moderately higher..."


at http://paper-money.blogspot.com/2012/01/more-pain-less-gain-s-preview-for.html

4 WORRISOME FACTS BEHIND THE USA’S Q4 GDP

"The big US economic news last week was that the GDP growth number came in below expectations.

LA Times: The gross domestic product rose at a 2.8% annual rate in the fourth quarter as consumers bought more cars and other goods, the Commerce Department said Friday. That was below the 3% figure many analysts had projected. But it was up from a feeble 1.8% the quarter before.

However it is worth noting that the headline number does not tell the full story. Here are four facts behind this GDP miss that should be considered:
1. The nominal GDP (vs. the real GDP), which is an important indicator of corporate profit growth was up 3.2%. Many believe that we need 4.0% nominal GDP growth to maintain robust corporate profitability growth. In that sense the nominal GDP number was even more disappointing.
2. A great deal of the GDP growth came from inventory build.

LA Times: More than half resulted from businesses increasing their stockpiles of products rather than from sales of goods and services, which reflect actual demand.

This is not great, because inventory builds are less likely to be repeated soon. This bodes poorly for GDP growth in the current quarter.
3. The Q4 inflation measure used to convert the nominal GDP into the real GDP was quite benign, only 0.4%. That may explain the Fed’s complete comfort with further accommodation.
4. The biggest drag on growth was a 3.7% quarterly decline in government spending. This is clearly a sign of what is to come as the US embraces more austerity measures. Without the impact of declining government spending, the nominal GDP measure was actually 4.9% (vs. 3.2% with government spending included)."

at http://pragcap.com/4-worrisome-facts-behind-the-usas-q4-gdp

Guest Post: One Dam Metaphor For The 2012 Global Financial System

"What do you do when flood waters threaten the dam? If you're the Federal Reserve, you close the floodgates and let the water rise.

Metaphors have an uncanny ability to capture the essence of complex situations. Here is one dam metaphor that distills and explains the entire global financial system in 2012. The way to visualize the current situation is to imagine a dam holding back rising storm waters.

The dam is the regulatory system, the rule of law, trust in the transparency and fairness of the system and the machinery of perception management. All of these work to keep risk, fraud and excesses of speculation and leverage from unleashing a destructive wave of financial instability on the real economy below.

As legitimate regulation and transparency have been replaced with simulacra and manipulated data, the dam's internal strength has been seriously weakened.

Depending on how you date various rivers of financialization, water has been piling up behind the dam since either 1982, 1992 or 2000. In this metaphor, the water is comprised of multiple sources of destabilization: rising money supply, debt, speculation, leverage, fraud, shadow banking and lax regulation.

Common sense suggests that water rising to dangerous levels would trigger an official response of opening the floodgates to relieve the pressure. Unfortunately for the real economy, common sense has nothing to do with the official response of central governments and banks. Their entire raison d'etre (reason to be) is self-preservation and the preservation of the financial Elites that set the context and policy of the State and central bank..."

at http://www.zerohedge.com/news/guest-post-one-dam-metaphor-2012-global-financial-system

As Europe Goes (Deep In Recession), So Does Half The World's Trade

"Following the Fed's somewhat downbeat perspective on growth, confidence in investors' minds that the US can decouple has been temporarily jilted back to reality. It is of course no surprise and as the World Bank points out half of the world's approximately $15 trillion trade in goods and services involves Europe. So the next time some talking head uses the word decoupling (ignoring 8.5 sigma Dallas Fed prints for the statistical folly that they are), perhaps pointing them to the facts of explicit (US-Europe) and implicit (Europe-Asia-US) trade flow impact of a deepening European recession/depression will reign in their exuberance.





From The World Bank: Golden Growth

An increasingly vigorous flow of goods, services, and finance over the last five decades has fueled European growth. Europe’s economies are the most open in the world. Before the global crisis of 2008–09, half of the world’s approximately $15 trillion trade in goods and services involved Europe (figure 2). Two-thirds of it was among the 45 countries discussed in this report. Financial flows have been equally vigorous. In 2007, for example, annual FDI in Europe exceeded $1 trillion. Big and growing trade and financial links facilitated by the single market form the core of the European convergence machine."

at http://www.zerohedge.com/news/europe-goes-deep-recession-so-does-half-worlds-trade

This Is Europe's Scariest Chart

"Surging Greek and Portuguese bond yields? Plunging Italian bank stocks? The projected GDP of the Eurozone? In the grand scheme of things, while certainly disturbing, none of these data points actually tell us much about the secular shift within European society, and certainly are nothing that couldn't be fixed if the ECB were to gamble with hyperinflation and print an inordinate amount of fiat units diluting the capital base even further. No: the one chart that truly captures the latent fear behind the scenes in Europe is that showing youth unemployment in the continent's troubled countries (and frankly everywhere else). Because the last thing Europe needs is a discontented, disenfranchised, and devoid of hope youth roving the streets with nothing to do, easily susceptible to extremist and xenophobic tendencies: after all, it must be "someone's" fault that there are no job opportunities for anyone. Below we present the youth (16-24) unemployment in three select European countries (and the general Eurozone as a reference point). Some may be surprised to learn that while Portugal, and Greece, are quite bad, at 30.7% and 46.6% respectively, it is Spain where the youth unemployment pain is most acute: at 51.4%, more than half of the youth eligible for work does not have a job! Because the real question is if there is no hope for tomorrow, what is the opportunity cost of doing something stupid and quite irrational today?..."



at http://www.zerohedge.com/news/europes-scariest-chart

Marc Faber : In a Bubble, the majority of people lose money, except the insiders

"Marc Faber : “With negative interest rates, your money in the bank doesn’t give you any return, and it forces people to speculate, on things like real estate, equities and government bonds,”
. “That creates bubbles. And in a bubble, the majority of people lose money, but the insiders make money.”

at http://marcfaberchannel.blogspot.com/2012/01/marc-faber-in-bubble-majority-of-people.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MarcFaberBlog+%28Marc+Faber+Blog%29

Central Bank Gold Joining the Dots

"Yes, central banks are holding more gold. But they're holding very much more wood-pulp on top...

THE GOLD PRICE on Wednesday broke up through the downtrend starting at last summer's record high. Or so a technical analyst studying the price chart would tell you.

But just as in late 2007 – from where gold began a 55% run inside 6 months – this week the price of gold bullion jumped on news that is fundamental: the price of money, specifically Dollars, the world's #1 currency for trade and central-bank reserves.

Back in 2007, the catalyst came as a baby-step rate cut of 0.25%, signaling the Fed's switch from raising to destroying the returns paid on cash savings. Now the Fed's new zero-rate promise "took gold comfortably clear of the 50, 100 and 200-day moving averages, and opened up some big targets to the upside," says one London technician. The previous ceiling of $1700 has become a support level according to bullion bank Scotia Mocatta, "with further key support at the 200-day moving average at $1645."

Whatever you make of such numbers, it's worth stepping back to see the wood for the trees. Because the trend in who's buying gold, and why, is so plain to spot that you hardly need join the dots.

Gold bullion holdings amongst the world's central banks, for instance, have risen to a 6-year high, according to data compiled by the International Monetary Fund. Emerging and developing nations have swollen their gold reserves 25% by weight since 2008. The debt-heavy West is a net seller, but only just.


"There's a perception perhaps that gold is no longer a crucial part of the financial system in the way that it was under the Gold Standard before 1970, 1971," as Marcus Grubb of the World Gold Council put it in an interview with Tekoa Da Silva this week. "But in fact that's not really true.
"Because even with the ending of the Gold Standard, gold remains as an asset held by the world's central banks...and you've seen a trend recently for gold to become more and more a part of the fabric of the financial system."

at http://www.marketoracle.co.uk/Article32852.html

U.S. Economy Q4 2011 GDP Trouble Below The Surface

"The release of Q4 2011 GDP highlighted just how close the US economy is to actual contraction as well as how vulnerable it is to the events in Europe. On the surface the 2.8% growth was a nice rebound from the 1.8% growth in Q3 2011.
But like anything if you dig beneath the headline you will see three areas of concern. Interesting that just two days before this release when asked about the recent uptick in economic activity Chairman Bernanke was less optimistic than the reporter asking the question. Apparently he was privy to the soon to be released data..."

at http://www.marketoracle.co.uk/Article32868.html

Comex Silver Futures to Bullion Leverage Reaches 6.8 to 1

"There are 49,436 contracts currently open for the next delivery month which is March 2012. Each contract represents 5,000 ounces. That is 247.18 million ounces of silver being traded for March delivery against a registered 36.56 million ounces. This is a subset of all the contracts going out over the year.
The is leverage of about 6.8 to 1. It 'works' because most contracts are speculative and settled for cash. Comex is not where one goes for the delivery of a large amount of silver.
I think that over time the US markets will become increasingly less relevant as a price-setting mechanism for a number of commodity prices including the metals.
The failure of MF Global and the blatant cheating of the customers, both before and after the fact, will accelerate the process of failure.
It really is shocking, all the more so because so few people see it and understand its significance in the coming crisis of confidence in the US markets..."

at http://www.marketoracle.co.uk/Article32872.html

Iran Sanctions Conducive to Weak Dollar and Spiralling Gold Prices

"Iran is to be punished because they supposedly want to make nuclear weapons. These sanctions are on oil and its sale to others and being shut out of the world banking system. From our viewpoint these sanctions have already been a failure. These moves by the US, UK and Europe have only served to put more downward pressure on the US dollar. The petrodollars have been on their way for sometime but actions such as these two embargos will prove to be even more disastrous for the dollar. It shows the use of dollars can be circumvented. That also means those countries that had been buying US Treasuries may start to reduce buying and other currencies and perhaps gold will be used as alternatives. That has been happening over the past few months. Obviously, America’s problems are having a cumulative effect and those dollar sales are moving to other currencies and are a reflection of a staggering world super power. America no longer deserves its dollar reserve privileges - it has squandered them away. We see, zero interest rates for three years, QE 3 on the way and the Fed lending $1 trillion, or is it a fractionalized $10 trillion. The situation is not getting better, but getting worse and that means we have a solid three years or more of climbing gold and silver prices..."

at http://www.marketoracle.co.uk/Article32870.html

STEVE ROACH: Recovery? Oh, Please. We're Screwed.

"....ROACH: Japanese-like outcomes in the developed world, from Japan in its third lost decade to stagnation in the U.S. to recession in Europe. And I say Japanese-like because these are not temporary slowdowns. They are going to be lasting because of the damage done during these massive credit, property — and in the case of Europe — currency and interest rate bubbles for Southern European economies..."

at http://www.businessinsider.com/steve-roach-recovery-oh-please-were-completely-screwed-2012-1#ixzz1ksTiOVDj

IS GREECE LEAVING THE EUROZONE?

"Lots of rumors flying in the last 24 hours over a potential Greek exit at the end of March. This comes via Niel’s Jensen and John Mauldin:

“Greece plans an orderly exit out of the Eurozone according to two sources close to Mr. Papademos, Greek Prime Minister, who spoke on condition of anonymity earlier today.
The sources confirmed that plans are ready to return to a legacy currency given the current circumstances and that such exit would be dealt with, quote “in as orderly a fashion as possible” unquote.
The plan does not come as a surprise but the timing may be surprising to most members and investors while negotiations about a severe haircut with the IIF are still ongoing.
Last year’s announcement by Mr. Papandreou, former Prime Minister, that a referendum would be held to decide whether or not to stay in the Eurozone may have set the precedent for developing a plan that apparently will be set in motion..."

at  http://pragcap.com/is-greece-leaving-the-eurozone

Cost Of Second Greek Bailout Raised To €145 Billion

"When the first revision of the second Greek bailout to the tidy round number of €130 billion was announced, we scoffed, mockingly. Because a country which then had a 7% budget deficit, and now has a deficit that will be well in the double digits, and not to mention a banking system that is now hollow following tens of billions in deposit withdrawals as month after month the Greek bank run gets worse, would obviously need much more liquidity (but banish the thought that it is a solvency crisis...) Sure enough, earlier today Der Spiegel broke the news that the second bailout, which has yet to be re-ratified, and absent Greece meeting demands to cede fiscal sovereignty, is likely a non-starter, would be increased to €145 billion "citing an unidentified
official from the so-called troika." So whether or not this is true is irrelevant: what matters is that Spiegel released the article in the same series of posts in which it explained just why Germany has full right to demand (via European enforcement mechanisms or however) virtually anything in exchange for the ongoing endless bailout (such as: Merkel macht Wahlkampf für Sarkozy and Griechenland sträubt sich gegen EU-Aufpasser). Which means one thing only: the great propaganda spin machine is now on, and its only purpose is to provide Germany a buffer of "having done everything in its power" to prevent the now inevitable Greek default. Which, incidentally, means that a Greek default is inevitable. Because at this point once the default floodgates open, the question will be not where the bonds will trade, but just how big the impairment on the European DIP (aka Troika bailout package) will be..."

at http://www.zerohedge.com/news/cost-second-greek-bailout-raised-%E2%82%AC145-billion

Marc Faber : own some Weapons Industry Stocks as a hedge against WW3

"Marc Faber : as a hedge, I would own some weapons industry stocks.” “You can’t invest based on World War III, but the tensions are rising very rapidly and I’m very concerned about this for long-term spending. Whatever happens in the Middle East, future regimes will not be as Western-friendly as the current regimes.”

at http://marcfaberchannel.blogspot.com/2012/01/marc-faber-weapons-industry-stocks-as.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MarcFaberBlog+%28Marc+Faber+Blog%29

CFTC Gets Facts of Bullion Manipulation

"Last Thursday, the Commodity Futures Trading Commission held hearings on the possible imposition of commodity futures and options trading limits in the precious metals markets. Each of the five commissioners plus two CFTC staff members made presentations. In addition, 14 outside parties accepted invitations to make presentations.

This hearing came about in part because of long-term complaints from organizations such as the Gold Anti-Trust Action Committee and individual analysts such as Ted Butler, Reg Howe, James Turk, Frank Veneroso and Adrian Douglas that the gold and silver commodity markets have been subject to blatant extensive price suppression manipulation by the U.S. government and its trading partners.

Among the outsiders making presentations at this hearing were Bill Murphy, in his capacity as chairman of GATA, and Harvey Organ, an individual investor.

Murphy was advised to expect a strict time limit of five minutes for his presentation, even though the CFTC chairman Gary Gensler had the option to allow more time. In order to provide the maximum documentation possible into the official written record of these proceedings, Murphy raced through his 6-1/2 minute oral presentation in just five minutes. It was not a graceful presentation, but Murphy introduced a lot information into the record that the CFTC can no longer pretend not to know.

After his formal remarks, Murphy was asked by commissioner Bart Chilton if he could provide some specific instances where such manipulation had occurred. This was the opening for Murphy to introduce a bombshell.

In November 2009, Andrew Maguire, a former Goldman Sachs silver trader in that firm’s London office, had contacted the CFTC Enforcement Division to report the illegal manipulation of the silver market by traders at JPMorgan Chase. He described how the JPMorgan Chase silver traders bragged openly about their actions, including how they gave a signal to the market in advance so that other traders could make a profit during the price suppressions..."

at  http://www.numismaster.com/ta/numis/Article.jsp?ad=article&ArticleId=9921

Pentagon cuts reshape military, trim costs

"The funding request, which includes painful cuts that will be felt across the country, comes at a historic turning point for the military as it winds down 10 years of war in Afghanistan and Iraq and shifts its strategic focus to the Asia-Pacific region and the Middle East..."

at http://www.reuters.com/article/2012/01/26/us-usa-defense-budget-idUSTRE80P1SP20120126

Another Day of Surreality on Wall Street

"OK, let's try and put this into terms that a fifth-grader (or even a Wall Street MBA) might understand.

1. If the economy is recovering -- or even close to doing so -- why is the Federal Reserve maintaining that short-term interest rates will remain "exceptionally low" until late-2014 -- that is, below the levels that prevailed at the beginning (or even the middle) of every single recovery in the post-war era, as well as below their multi-decade median of five percent?
   
   
2. Why are investors piling into stocks and growing increasingly bullish at a time when the Fed has essentially confirmed that their optimistic assumptions about the economy are not in synch with reality?
3. If, as Federal Reserve Chairman Bernanke says, there is still "enormous" negative equity in U.S. housing and, as U.S. Treasury Secretary Geithner says, "housing finance is still a mess," why did homebuilding stocks today rally more than twice as much as the overall market, and why have they gained nearly 90 percent since October?
4. And finally, if one assumes that today's developments will somehow help the economy to get back on its feet (an extremely dubious assumption in light of the experience of the past several years), why did stocks and bonds (with yields already approaching multi-year lows) end higher on the session?

Another day of surreality on Wall Street."

at http://www.financialarmageddon.com/2012/01/another-day-of-surreality-on-wall-street.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+financialarmageddon+%28Financial+Armageddon%29

Fitch Joins E.U. Downgrade Waves (EWK, IRE, EIRL, IRL, EWI, TI, EWP, STD)

"Fitch has joined in on the European sovereign credit rating downgrades. First it was S&P, but we might argue that this should have mostly been factored in already. Is it a secret that the economies in Europe have been slowing and have more exposure these days? Fitch is cutting six Eurozone sovereign ratings (on Rating Watch Negative since 16 December 2011) as follows (with ETFs and major ADRs indicated):
Belgium LT IDR downgraded to ‘AA’ from ‘AA+’; Negative Outlook; ST IDR affirmed at ‘F1+’: iShares MSCI Belgium Index Fund (NYSE: EWK) is still up 0.4% at $11.33; 52-week range $10.23 to $15.65..."

at http://247wallst.com/2012/01/27/fitch-joins-e-u-downgrade-waves-ewk-ire-eirl-irl-ewi-ti-ewp-std/#ixzz1kgkEfwSU

U.S. GDP: not a recession, but still not very encouraging

"...A key reason to be concerned about continuing below-average GDP growth is Okun's Law, which originally held that to get the unemployment rate to decline by 1 percentage point, we'd need a year of GDP growth 3% above average. Okun based that estimate on data for the U.S. economy prior to 1960, but it has held up pretty well in the half century since then, with 2.5% above-average GDP growth a better summary of the requirement based on the full sample of data now available. Using data from 1949:Q1 to 2011:Q4, here's a quarterly regression of the year-over year change in the unemployment rate on the year-over-year percent change in real GDP (Newey-West standard errors with 8 lags in parentheses):
Vertical axis: change in unemployment rate between last month of the quarter and value for same month in the preceding year. Horizontal axis: 100 times the change in the natural logarithm between U.S. real GDP in a given quarter and the value for the same quarter of the previous year. Line plots regression equation above. at http://www.econbrowser.com/archives/2012/01/us_gdp_not_a_re.html

CHART OF THE DAY: 'Core Economic Growth Slowed Sharply In Q4'

"In regards to this morning's mediocre GDP report, Nomura cuts right to the chase in a note titled 'Core Economic Growth Slowed Sharply' in Q4.

Here's their commentary:

Inventory building contributed 1.9 percentage points (pp) to growth in Q4 2011 after subtracting 1.4pp in Q3. The measure of final sales, which is a “core” view of the economy that removes the effect of inventories, grew at an annual rate of just 0.8% in Q4 compared with 3.2% in Q3. Under this perspective, the US economy slowed sharply in the final quarter of the year. The choppiness in quarterly growth in the back half of 2011 is partially due to the rebound following the dampening effect on economic growth stemming from the Japan earthquake and tsunami that hit on 11 March. The second half rebound was front-loaded into Q3. The same pattern can be seen when looking at the industrial production data, which also tracks the broad economy. In Q3, industrial production rebounded to an annual growth rate of 6.3% (following 0.6% in Q2) followed by slower growth of 3.1% in Q4. To smooth the effect of the rebound from temporary factors, economic growth in H2 2011 advanced at an average annual rate of 2.2% compared with 0.8% in H1.

And here's the chart that demonstrates the point. The gray line is what Nomura calls 'core'."

at http://www.businessinsider.com/chart-of-the-day-core-economic-growth-slowed-sharply-in-q4-2012-1?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+clusterstock+%28ClusterStock%29#ixzz1kgiYRz2v

THE FED IS WORRIED – YOU SHOULD BE TOO

"The Fed is worried, and you should be too. That is the major take-away from yesterday’s FOMC statement, combined with its release of updated projections and Bernanke’s press conference. Despite the market’s cheering of the promise of a near-zero fed funds rate until late 2014 and the prospect of QE3, the Fed is fighting a lonely battle against severe economic headwinds—-and they know it. In answering a reporter’s question, Bernanke made it crystal-clear that he does not believe that the recently optimistic economic releases are sustainable. He has good reason to think so.
The FOMC reduced its current central tendency 2012 GDP growth projection from 2.5%- 2.9% to 2.2%-2.7% and its 2013 number from 3.0%-3.5% to 2.8%-3.2%. The previous projections were made in November. Although they reduced their unemployment projection slightly, they are still projecting unemployment rates as high as 8.2% to 8.5% for 2012 and 7.4% to 8.1% in 2013..."

at http://pragcap.com/the-fed-is-worried-you-should-be-too

Greek Debt Solution Likely to Trigger Credit Default Swaps

"European finance ministers and politicians have come to the conclusion that a deal, even one involving a credit event, is better than no deal at all. Thus it is increasingly likely the Greek Debt Wrangle will trigger credit default swaps.

Opposition to payouts on Greek credit-default swaps from European Union policy makers is softening as disputes over a voluntary debt exchange threaten to push the nation into default.

Any agreement between the Greek government and the Washington-based Institute of International Finance on debt writedowns will only bind 50 percent of investors in the 206 billion euros ($270 billion) of notes being negotiated, Barclays Capital estimates. Hedge funds may resist a deal, seeking to get paid in full or compensated from insurance contracts..."

at  http://globaleconomicanalysis.blogspot.com/2012/01/greek-debt-solution-likely-to-trigger.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

Portugal 10-Year Government Bond Yield at Record High

"With an involuntary Greek debt restructuring in the works (see Greek Debt Solution Likely to Trigger Credit Default Swaps) it's time to focus on the next involuntary debt restructuring..."

Portugal 10-Year Government Bond Yield


at http://globaleconomicanalysis.blogspot.com/2012/01/portugal-10-year-government-bond-yield.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

GDP on Recession Track; Real GDP +2.8%, Misses Estimates; Inventory Replenishment Accounts for 1.9 Percentage Points; Five-Year Treasury Yield Hits Record Low

"The headline real GDP number of 2.8% does not sound too bad until you dig beneath the surface. A full 1.9 percentages points of that 2.8% was inventory replenishment. Real GDP vs. a year ago is +1.6% and that is on a recession track as well.

Five-Year Treasury Yield Hits Record Low

Bloomberg reports Treasury Five-Year Yield Declines to Record Low as GDP Misses Forecast

Treasury five-year note yields fell to a third consecutive record low after slower-than-forecast U.S. growth added to speculation the Federal Reserve will expand asset purchases to spur economic growth..."

at  http://globaleconomicanalysis.blogspot.com/2012/01/gdp-on-recession-track-real-gdp-28.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

Iran Turns Embargo Tables: To Pass Law Halting All Crude Exports To Europe

"In what is likely a long overdue move, Iran has finally decided to give Europe a harsh lesson in game theory. Instead of letting Euro-area politicians score brownie points at its expense by threatening to halt imports and cut off the Iranian economy, the Iranian government will instead propose a bill calling for an immediate halt to oil deliveries to Europe. The move, with most reports citing the Iranian news agency Mehr, has come about in response to the EU agreement to impose sanctions against Iran, which were announced earlier this week. And why not? After all if Europe is indeed serious, sooner or later Iran will be cut off but in the meantime experience significant policy uncertainty, which is precisely what the flipflops on the ground need. The one thing that Europe, however is forgetting, is that all that whopping 0.8 Mb/d in imports will simply find a new buyer.Quickly..."



at http://www.zerohedge.com/news/iran-turns-embargo-table-pass-law-halting-all-crude-exports-europe

If The Economy Is Improving….

"Everywhere you turn these days, someone is proclaiming that the economy is improving. Barack Obama is endlessly touting the "improvement" in the economy, the mainstream media is constantly talking about "the economic recovery" and an increasing number of Americans seem to be buying into this line of thinking. A new NBC/Wall Street Journal poll found that 37 percent of Americans believe that the economy will improve over the next year, while only 17 percent of Americans believe that it will get worse. But is the economy actually improving? Not really. At the moment things are relatively stable. Some economic statistics are improving slightly and some continue to get even worse. However, it is very important to keep in mind that one of the biggest reasons why things have stabilized is because the federal government is pumping more than a trillion dollars a year into the economy that it does not have. The Obama administration is engaging in a debt binge unlike anything America has ever seen before, and yet many economic indicators are still in decline. So what is going to happen when the federal government stops injecting gigantic waves of borrowed money into the economy? That is a frightening thing to think about. The best efforts of our "leaders" in Washington D.C. are not accomplishing a whole lot. The Federal Reserve has pushed interest rates as low as they can go and the federal government is spending unprecedented amounts of money. But even with the federal government and the Federal Reserve pushing the accelerator all the way to the floor, the economy is still not improving much at all. Millions upon millions of Americans out there are anticipating some sort of a "great economic recovery", and they are going to be bitterly disappointed..."

at http://theeconomiccollapseblog.com/archives/if-the-economy-is-improving

Zero Interest Rates & The pumping of cash into the system creates BUBBLES

"Marc Faber : “continuous government interventions in the free markets through mostly monetary and fiscal policies have actually, instead of smoothing out the business cycle, led to more economic and total financial volatility, and have numerous unintended and unfavorable consequences."“When you drop the dollar bills into the system you don’t know where they go, and this time around they went to the housing market. The destructive nature of dropping dollar bills is you create bubbles in one sector of the economy.”

at http://marcfaberchannel.blogspot.com/2012/01/zero-interest-rates-pumping-of-cash.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MarcFaberBlog+%28Marc+Faber+Blog%29

Why Europe’s crisis can’t be averted

"...Politically, we still seem to be very far away from a fiscal solution to Europe’s problems, and the baseline scenario has to be that we’re not going to get one — ever. The result is likely to be a series of countries exiting the euro, and/or the “East Germanification” of much of Europe’s periphery: flows of money and human capital away from countries like Greece and Portugal, and towards the more prosperous countries with healthy economies and substantial trade surpluses. Essentially, those countries would become holiday resorts for the north, with all the real economic activity being concentrated in more prosperous nations. If you’re a smart young Spaniard, it’s much more attractive to seek your fortune in the UK than it is to take your chances in a deflating country with a stratospheric youth-unemployment rate.
Certainly there seems to be no belief at all, even among the well-intentioned technocrats at Davos, that coordinated international action will or should solve this particular crisis. And the inevitable conclusion is that the crisis is not going to be averted: it’s only going to get worse. It’s a very scary prospect — but one which it’s very important for global elites to come to terms with. And that’s exactly what they’re doing in Davos this week."

at http://blogs.reuters.com/felix-salmon/2012/01/26/why-europes-crisis-cant-be-averted/

Two foreign banks sue Morgan Stanley over $1.2 billion in RMBS

"Two international banks are suing Morgan Stanley (MS: 18.30 +0.94%) for misrepresenting the underlying collateral on $1.2 billion in residential mortgage-backed securities.

Belgium bank Dexia filed one of the suits in New York state court, claiming Morgan Stanley sold the bank $680 million in RMBS while representing the bonds as deserving of AAA status.

While most of the bonds initially had AAA ratings, they are now well below investment grade with the majority rated C, Ca, CCC, Caa3 and C. The Belgium lender claims Morgan Stanley knew the ratings assigned to those transactions were not correct because "those ratings were bought and paid for, and were supported by false information regarding the originators' underwriting guidelines that Morgan Stanley provided."

Bayerische Landesbank, a publicly regulated German bank, filed an identical suit Thursday, claiming Morgan Stanley misrepresented the quality of collateral supporting RMBS acquired by the lender..."

at http://www.housingwire.com/2012/01/26/two-foreign-banks-sue-morgan-stanley-over-1-2-billion-in-rmbs?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+housingwire%2FuOVI+%28HousingWire%29

European Manufacturing Feeling the Downturn

"Marketwatch details:

Industrial orders in the 17-nation euro zone fell 1.3% in November after a 1.5% rise in October, the European Union statistics agency Eurostat reported Tuesday. Compared to November 2010, orders fell 2.7%, the agency said. Economists had forecast a 2.3% monthly decline and a 2.8% year-on-year fall.

Since the European crisis re-emerged in mid-summer, the European core has seen a rather sharp drop off in new industrial orders, while Emerging Europe (and the UK / Ireland) have shown strength (note that Greece didn't release data for November, but was down 5% from July through October)..."

 

at http://econompicdata.blogspot.com/2012/01/european-manufacturing-feeling-downturn.html

2011: Record Low New Home Sales and 'Distressing Gap'

"2011 was the worst year for new home sales since the Census Bureau started tracking sales in 1963. The three worst years were 2011, 2010, and 2009 - and 2008 is also on the worst ten list. Although sales will probably increase in 2012, this year will probably be high in the list too.

Ten Worst Years for New Home Sales since 1963
Year	Sales (000s)
2011	302
2010	323
2009	375
1982	412
1981	436
1969	448
1966	461
1970	485
2008	485
1967	487

The following graph shows existing home sales (left axis) and new home sales (right axis) through December. This graph starts in 1994, but the relationship has been fairly steady back to the '60s..."

at  http://www.calculatedriskblog.com/2012/01/2011-record-low-new-home-sales-and.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+CalculatedRisk+%28Calculated+Risk%29

Steen Jakobsen on Maximum Intervention "Now is the Time You Need Metals – Particularly Gold and Gold Stocks"; Fool in the Shower

"...My good colleague Peter Garnry kindly provided me with this chart(which is now part of Stress Indicators) on key central bank’ balance sheet in percentage of their countries GDP. Simple stuff, scary stuff:




Note how Europe or rather ECB in the space of six month have done more expansion than the FED has done in three years in terms of printing money(relative to GDP) – again – buy some paper producers! The world could run out of paper to print those debasing currencies on pretty soon!

Now is the time where you need your metals – particularly gold and gold stocks. The above issues shows you clearly and forcefully that we have moved from a ‘Maximum Intervention’ period into a ‘Maximum printing’ phase – this will give the policy makers a false sense of “improvement” and hope for a turning point not dissimilar to the comments seen exactly one year ago in Davos..."

at http://globaleconomicanalysis.blogspot.com/2012/01/steen-jakobsen-on-maximum-intervention.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

Update: America Has A $16.4 Trillion Debt Ceiling In 52-44 Senate Vote

"Update: the Senate has failed to reject a bid to stop the debt ceiling hike with a simple 52 vote majority all of it along party lines. The US now has $16.4 trillion in debt capacity as of Friday. Since roughly $100 billion was plundered from Pension Funds in the past month, The US will have about $15.4 trillion in debt with the Monday DTS. The question then is how long will the $1 trillion in debt capacity last: at $125 billion/month it won't be enough to carry the US past the election without another massive debt ceiling spectacle.

While Congress recently voted down the increase in the US debt ceiling, that vote was largely irrelevant. And all that matters is how the Senate will vote. Watch it live in progress below. It is virtually unlikely that the process of debt ceiling increase will be overturned so within minutes the US should have a brand spaking new debt ceiling of $16.4 trillion..."

at http://www.zerohedge.com/news/senate-vote-progress-increase-us-debt-ceiling-12-trillion

Marc Faber on the derivatives bubble

"Marc Faber was asked about the risk of seeing another flash crash in the market : " Well I do not think it is regulated , my concern is no so much about the stock market going down one day by 500 points , the real crash would be like on October 1987 when the market dropped by 21 percent in one day , my concern is more , we have essentially an economic system where the financial sector has grown disproportionally large than the real economy so in other words the economy may be a square mile and on top of that you pile up derivatives and all kind of instruments that are thousands of square miles and one day this whole derivatives bubble will burst..."

at http://marcfaberchannel.blogspot.com/2012/01/marc-faber-one-day-this-whole.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MarcFaberBlog+%28Marc+Faber+Blog%29

Quadrillion? Quintillion?

"Zero Hedge reports,

Yesterday the Japanese Finance Ministry made a whopper of an announcement: in the year ending March 2013, total Japanese debt will surpass one quadrillion yen, or ¥1,086,000,000,000,000. This is roughly in line with the Zero Hedge expectations that by this March total Japanese debt would surpass one quadrillion yen.

It’s hard to imagine…16 digits…and then it’s on to quintillion?

So prepare to add quadrillion to the vernacular. At this exponential rate of increase quintillion will appear some time in 2015 and so on. Yet the scariest conclusion is that as Bloomberg economist Joseph Brusuelas points out, America is not only next, it already is Japan.

How can this not end badly?"

at   http://blog.mises.org/20752/quadrillion-quintillion/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MisesBlog+%28Mises+Economics+Blog%29

Bill Gross' Explains The FOMC Decision: "QE 2.5 Today, QE 3, 4, 5 … Lie Ahead"

"Pimco just saved you lots of garbage sellside "research" "analysis" on the topic."



at http://www.zerohedge.com/news/bill-gross-explains-fomc-decision-qe-25-today-qe-3-4-5-%E2%80%A6-lie-ahead

Never Ending Quantitative Easing

"It's becoming obvious now. Even as the U.S. economy shows some signs of growth, some call for further quantitative easing. In the U.K., it only takes some slight weakness in GDP numbers for the calls of more QE to intensify.

In Europe, at the same time that Germany opposes straight QE, the ECB starts up a program that for all purposes is QE. I'm talking about the fabled LTRO.

Not long ago you could reliably bet against the U.S. dollar (UDN) as it seemed the worst QE offender, but then the British pound (FXB) got in the dilution game too, and now not even the euro (FXE) is free from it.

Where does it end? The answer seems to be "it doesn't." There's quantitative easing as far as the eye can see, and this quantitative easing, while making it possible to run huge budget deficits for a long time, also totally impedes any kind of economic restructuring that would make it unnecessary..."

at http://seekingalpha.com/article/322036-never-ending-quantitative-easing?source=feed

Greece: What happens if bondholders hold out?

"What happens if Greece puts forward an exchange offer which is acceptable to the Troika (the EU, ECB, and IMF), but unacceptable to bondholders — and only say half of them accept? In that event, there wouldn’t be nearly enough acceptances to be able to bail in the holdouts — and as a result, Greece would be paying out on its new bonds and would be forced to default on the old bonds which weren’t tendered.
Narrowly speaking, this would be good for Greece’s fiscal situation. After all, if it’s only making coupon payments on half of its private-sector debt, that saves it a substantial interest expense. But there’s no sense in which Greece actually wants this outcome — for two reasons.
Firstly, even if the ECB encouraged Greece to offer bondholders a very low coupon, it also doesn’t want Greece to be in indefinite default. Some kind of technical default which lasts for a couple of weeks, before the new bonds are accepted? That’s fine. But a protracted legal fight with bondholders trying to attach Greek assets around the world, and waving Greek obligations which are going unpaid? The ECB certainly doesn’t want that. It might be accepting just about anything as collateral these days, but even the ECB might well draw the line at lending against securities issued by a government which is clearly not paying a huge chunk of its debt..."

at http://blogs.reuters.com/felix-salmon/2012/01/25/greece-what-happens-if-bondholders-hold-out/

Fear in Davos

"It’s highly unscientific and anecdotal, but the winner by far of the most-talked-about-person-in-Davos award, at least when it comes to people in my earshot, is George Soros.
Soros is out of the investing game, living now as a full-time philanthropist and sage, while still keeping an eye on the fund company which bears his name and which provides him with a ten-digit income each year. Because he doesn’t have a financial book to talk, because he’s happy being brutally honest, and because he’s giving voice to the plutocrats’ darkest fears, Soros seems to encapsulate Davos 2012 like no one else.

Sitting in his 33rd-floor corner office high above Seventh Avenue in New York, preparing for his trip to Davos, he is more concerned with surviving than staying rich. “At times like these, survival is the most important thing,” he says, peering through his owlish glasses and brushing wisps of gray hair off his forehead. He doesn’t just mean it’s time to protect your assets. He means it’s time to stave off disaster. As he sees it, the world faces one of the most dangerous periods of modern history—a period of “evil.” Europe is confronting a descent into chaos and conflict. In America he predicts riots on the streets that will lead to a brutal clampdown that will dramatically curtail civil liberties. The global economic system could even collapse altogether..."

at  http://blogs.reuters.com/felix-salmon/2012/01/25/fear-in-davos/

Fed Now Keeping Near-Zero Rates Through Late-2014… QE4?

"This was definitely going to be a different sort of FOMC day with the way that the new communications are going to show more of the inner-thinking of the Federal Reserve on rates and monetary policy. What was of no surprise is that the FOMC decided to keep rates on Fed Funds flat at 0.00% to 0.25%.
What was new and unexpected was the comments on how long exceptionally low interest rates will remain in place. Rather than through mid-2013, the FOMC now has language that will accommodate that near-zero rate stance at least through late 2014. If that is not a dovish Fed, there never has been one.
Everyone has been wondering if quantitative easing would expand via QE3 (or QE2.5)… Let’s just be honest. This is more like QE4..."


at http://247wallst.com/2012/01/25/fed-now-keeping-near-zero-rates-through-late-2014-qe4/#ixzz1kVJKc3kq