Crisis escalates as insurrection breaks German control of Europe

"The political dam has broken in Europe. German Chancellor Angela Merkel no longer has enough allies in the club of EU prime ministers to impose her hairshirt agenda. Her methodical plans are disintegrating on every front..."

at http://ausbullion.blogspot.com/2012/05/crisis-escalates-as-insurrection-breaks.html

A Crisis in Full Flight

"For a while, it looked as if the European Central Bank’s €1 trillion credit program to pump liquidity into Europe’s banking system had calmed global financial markets. But now interest rates for Italian and Spanish government bonds are on the rise again, closing in on about 6%..."


at http://www.project-syndicate.org/commentary/a-crisis-in-full-flight

Graham Summers: Spain’s Fiscal Problems Will Result in Collapse of European Union! Here’s Why

"On the surface, Spain’s debt woes have many things in common with
 those of Greece – bad age demographics and a toxic bank system - but you’ll note that, as we tackle each of these, Spain is in fact in far worse fiscal shape than Greece..."

 at http://www.munknee.com/2012/04/graham-summers-spains-fiscal-problems-will-result-in-collapse-of-european-union-heres-why/

Hopeless Situation in Spain: New Wave of Defaults as Home Prices Crash; Bad Loans Highest Since Oct '94

"Bad news upon bad news keeps piling up in Spain as the government still insists it can meet deficit targets without needing a bailout. Anyone with any common sense knows there is no can left to kick.

Reuters reports Spain banks' bad loans highest since Oct '94

• Non-performing loans rise to 8.2 pct of portfolios
• House prices fall 7.2 pct in Q1
• Defaults to keep rising on back of budget cuts

Spanish banks' bad loans rose to their highest level since Oct. 1994 in February, to 8.2 percent of their credit portfolios, Bank of Spain data showed on Wednesday, as the sector continues to battle sliding house prices and a looming recession..."

at  http://globaleconomicanalysis.blogspot.com/2012/04/hopeless-situation-in-spain-new-wave-of.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

Von Greyerz - Bank Failures, Disorder, Massive Panic & Gold

"The banking world is on the way to bankruptcy here. We’ve talked about the leverage in the banking system, but people don’t seem concerned about it. What we are going to see, one day, is when these dominos start falling, there will be panic.

Banks are supposed to come down to 20 times leverage. There is only one bank of the top twenty-five banks in the world today that is below 20 times leverage. Every other bank is above. 20 times leverage means that if they only lose 5% on their loan book, they have lost their capital.

I will bet you that virtually every bank in the world has a bad debt position which is worse than 5% of their assets. And if you look at an entity such as Deutsche Bank, do you know what their leverage is? 62 times. It means that if they have a bad debt position of 1.5%, the bank is bust. Deutsche Bank is bigger than German GDP. So, if something happens to Deutsche Bank, Germany goes under.

Credit Agricole, the largest French bank, has 63 times leverage. This is absolutely frightening. This situation is untenable. Some of these banks will not survive. Of course, central banks are aware of this, governments are aware of this, and they will print money. Will they print in time? Maybe for some banks, but some banks will not survive, I’m sure.

The two big Swiss banks combined total 7 times Swiss GDP. The banks have a leverage which is unsustainable, and in many cases are bigger than the countries themselves.

So, central banks, being aware of this, are going to keep accumulating more and more gold. And that trend will accelerate because central banks know that buying bank debt or government debt is a bad move. So, all of these dominos that will fall are going to accelerate the trend into gold.

The IMF came out with a report yesterday saying we are very near a eurozone breakup, a disorderly one. That would create panic in the market. There would be an even greater flight of deposits out of the banking system which would make the situation even worse.

The IMF is coming out with statement after statement that should frighten the world. Today they said that European Banks will have to sell roughly $3.8 trillion in assets. In reality, it could be well over $10 trillion in the next couple of years.

We are in a mess, Eric, and the IMF recognizes this. The central banks know this as well, but for right now they are trying to tell the markets, ‘We are not going to print any more money.’ They will print money. The know they will print money. 

The IMF, by making these statements, is saying central banks are going to have to print money, just to sustain the financial system. Improvements in the economy are unthinkable, things are going to get a lot worse.”

at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/4/18_Von_Greyerz_-_Bank_Failures,_Disorder,_Massive_Panic_%26_Gold.html

IS SPAIN GOES, WE ALL GO….

"Spain is once again rattling the markets…Just click here to see how often it happens. And the market is right to be concerned. If anything the market is not concerned enough because we think Spain‘s situation is far worse than they’re letting on. The numbers do not add up and analysts are starting to realise it...
And no Spain is not Greece, Spain is too big to fail. The IBEX is in full crash mode, and yet once again, Europe is shooting itself in the foot. We had respite after rumours came around that the ECB would renew its bond buying program but then of course….“ECB’s Knot Says ‘Very Far’ From Resuming Govt Bonds Buying”
The result is that THERE IS NO MORE CORE EUROPE, IT IS ZE GERMANS AND THE OTHERS…The chart below shows how in this latest episode of stress, the market is treating French, Italian and Spanish bond spreads equally….The Italians being the outperformer and we think it is right..."



at http://pragcap.com/is-spain-goes-we-all-go

EXPECT MORE BAILOUTS & SELF IMPOSED DEPRESSION AS THE EURO CRISIS CONTINUES…

"You’ve probably seen the math by now….There is just no way Italy is going to grow their way out of what some are (incorrectly) calling a debt crisis. And the other peripheral countries are in similar positions. These two headlines from Reuters pretty much sum up the situation in Italy:

“Italy to raise 2012 debt/GDP target to 123.4pct from 119.5pct, hikes 2013 to 121.6pct from 116.1 pct
Italy CUTS 2012 GDP forecast to -1.2pct from -0.4pct, raises 2013 to +0.5pct from +0.3pct”

And we should expect that 2013 forecast to get slashed when they try to balance the budget and growth continues to sink just like we’ve seen in Greece.
So the story has become simple. As long as the ECB is willing to write the check then they can hold the line. The big risk now are civil unrest leading to political upheaval and potential defections/defaults. How long can these countries impose depression on their citizens before they finally realize that this currency system is simply not working? The core must either move more quickly towards unification and a true resolution of the currency crisis or risk increasing turmoil and eventual combustion…"

at http://pragcap.com/expect-more-bailouts-self-imposed-depression-as-the-euro-crisis-continues

Why Has the American Economic System Failed, and What Are We Going To Do About It?

"Joe Stiglitz made an aside about half way through his talk about mercantilism at INET Berlin this month that is worth noting. I like the way he frames the problems and his fresh look on the situation but do not favor many of his suggested cures, especially the notion of something that sounds dangerously like central planning by a financial elite. I think that is something that needs much more work, but that is a discussion too often impeded by denial, misdirection, and diversion.

Although he initially addresses his talk to America, he goes on to include other countries, especially Germany. I would add the UK, among others including China, which is a disaster in the making.

I start the tape of his talk at 13:25, so you can hear the basic question and the simple truth that so many have overlooked. The American economic system has failed the public, and that failure has its roots in the 1990's, accelerating at the turn of the century into the financial collapse. It is a story of deceit, corruption, and betrayal..."

at http://jessescrossroadscafe.blogspot.com/2012/04/why-has-american-economic-system-failed.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+JessesCafeAmericain+%28Jesse%27s+Caf%C3%A9+Am%C3%A9ricain%29

SOROS: “THE EURO HAS BROKEN DOWN”

"George Soros presented at the INET conference this weekend and offered some very good comments on Europe. Among the important points he makes:

• The Euro is a broken currency system in its current construct.
• The peripheral nations have been rendered to 3rd world status.
• The Euro users are essentially indebted in a foreign currency.
• The political dynamic is going to destroy the Euro
• The European union is at risk of dissolution.
• The Euro doesn’t have to collapse.
• Europe needs to come together and take extraordinary actions to resolve the crisis..."

at  http://pragcap.com/soros-the-euro-has-broken-down

Tony Robbins, Ron Paul And Ben Bernanke All Agree: The National Debt Crisis Could Destroy America

"Is there one thing that Tony Robbins, Ron Paul and Ben Bernanke can all agree on? Yes, there actually is. Recently they have all come forward with warnings that the national debt crisis could destroy America if something is not done. Unfortunately, our politicians continue to spend us into oblivion as if there will never be any consequences. When Barack Obama took office, the U.S. national debt was 10.6 trillion dollars. Today, it is 15.6 trillion dollars and it is rising at the rate of about 150 million dollars an hour. During the Obama administration so far, the U.S. government has accumulated more debt than it did from 1776 to 1995. The United States now has a debt to GDP ratio of over 100 percent, and another credit rating agency downgraded U.S. debt earlier this month. Any talk of a positive economic future is utter nonsense as long as we are bleeding red ink as a nation far faster than we ever have before. It is absolutely immoral to wreck the financial future of our children and our grandchildren and to leave them with a bill for the greatest mountain of debt in the history of the world, but that is exactly what we are doing. Unless our current debt-based financial system is thrown out, there are only two ways that this game is going to play out. One would involve absolutely bitter austerity and deflation unlike anything ever seen before, and the other would involve nightmarish hyperinflation. Either path would be hellish beyond what most Americans could possibly imagine..."

at http://theeconomiccollapseblog.com/archives/tony-robbins-ron-paul-and-ben-bernanke-all-agree-the-national-debt-crisis-could-destroy-america

Municipal Bankruptcy Crisis in U.S. to Have Dire National Consequences! Here’s Why – and How

"The plight of municipalities in the U.S., and their struggles under the weight of enormous pension budget deficits, are reaching the critical phase [with] many municipalities [now]contemplating bankruptcy. [That, in turn, is causing]… municipalities [to eliminate jobs (150,000 - 175,000 in 2012) providing significant headwinds to jobs growth nationally [which, in turn, will adversely affect] economic growth…[causing even] more municipalities to declare bankruptcy and [their] states, in turn, run to the Federal government for help..."

at http://www.munknee.com/2012/04/municipal-bankruptcy-crisis-in-u-s-to-have-dire-national-consequences-heres-why-and-how/

Soros On Europe: Iceberg Dead Ahead

"George Soros has been a busy man the last few days. Appearing at the INET Conference a number of times and penning detailed articles for the FT (and here at Project Syndicate) describing the terrible situation in which Europe finds itself - and furthermore offering a potential solution. Critically, he opines, the European crisis is complex since it is a vicious circle of competing crises: sovereign debt, balance of payments, banking, competitiveness, and structurally defective non-optimal currency union. The fact is 'we are very far from equilibrium...of the Maastricht criteria' with his very clear insight that the massive gap, or cognitive dissonance, between the 'official authorities' hope and the outside world who see how abnormal the situation is, is troublesome at best. Analogizing the periphery countries as third-world countries that are heavily indebted in a foreign currency (that they cannot print), his initial conclusion ends with the blunt statement that "the euro has really broken down" and the ensuing discussion of just what this means from both an economic and socially devastating perspective: the destruction of the common market and the European Union and how this will end in acrimonious recriminations with worse conflicts between European states than before..."

at http://www.zerohedge.com/news/soros-europe-iceberg-dead-ahead

George Soros: Eurozone Crisis Has Entered “A Less Volatile but Potentially More Lethal Phase”

"As the next INET conference begins in Germany, one topic of conversation is sure to be George Soros’s piece discussing the Eurozone crisis. He points out that the Eurozone has been quietly restructuring its financial arrangements along national lines, ending an era of co-mingled assets and liabilities across national borders. This is something I hadn’t realized, but it presents, as he shows, other dangers.

At the onset of the crisis, the eurozone’s breakup was inconceivable: the assets and liabilities denominated in the common currency were so intermingled that a breakup would cause an uncontrollable meltdown. But, as the crisis has progressed, the eurozone financial system has been progressively reoriented along national lines.

This trend has gathered momentum in recent months. The LTRO enabled Spanish and Italian banks to engage in very profitable and low-risk arbitrage in their own countries’ bonds. And the preferential treatment received by the ECB on its Greek bonds will discourage other investors from holding sovereign debt. If this continues for a few more years, a eurozone breakup would become possible without a meltdown – the omelet could be unscrambled – but it would leave the creditor countries’ central banks holding large, difficult-to-enforce claims against the debtor countries’ central banks.

The big problem, Soros says, is Germany. The Bundesbank doesn’t want to be left with credit losses or the remote possibility of inflation, so it is seeking to reduce aggregate demand in Germany..."

at http://www.nakedcapitalism.com/2012/04/george-soros-eurozone-crisis-has-entered-a-less-volatile-but-potentially-more-lethal-phase.html

Chris Martenson: "Are We Heading For Another 2008?"

"We all know that central banks and governments have been actively intervening in markets since the 2007 subprime mortgage meltdown destabilized the leveraged-debt-dependent global economy. We also know that unprecedented intervention is now the de facto institutionalized policy of central banks and governments. In some cases, the financial authorities have explicitly stated their intention to “stabilize markets” (translation: reinflate credit-driven speculative bubbles) by whatever means are necessary, while in others the interventions are performed by proxies so the policy remains implicit. All through the waning months of 2007 and the first two quarters of 2008, the market gyrated as the Federal Reserve and other central banks issued reassurances that the subprime mortgage meltdown was “contained” and posed no threat to the global economy. The equity market turned to its standard-issue reassurance: “Don’t fight the Fed,” a maxim that elevated the Federal Reserve’s power to goose markets to godlike status. But alas, the global financial meltdown of late 2008 showed that hubris should not be confused with godlike power. Despite the “impossibility” of the market disobeying the Fed’s commands (“Away with thee, oh tides, for we are the Federal Reserve!”) and the “sure-fire” cycle of stocks always rising in an election year, global markets imploded as the usual bag of central bank and Sovereign State tricks failed in spectacular fashion..."

at http://www.zerohedge.com/news/chris-martenson-are-we-heading-another-2008

US Budget Deficit Widens To $198.2 Billion In March

"The U.S. budget deficit widened by 5.3 percent to hit $198.2 billion.
That is wider than analysts expected. Those surveyed by Bloomberg believed the deficit would grow to 196.0 billion from $188.2 billion in February.
Nonetheless, this one number is unlikely to affect investor perceptions of government spending materially..."

at  http://www.businessinsider.com/us-budget-deficit-widens-to-1928-billion-in-march-2012-4?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+clusterstock+%28ClusterStock%29#ixzz1rlQ49342

MARC FABER: This Is Just The Beginning

"Stocks are off of their highs.
Marc Faber, publisher of the Gloom Boom & Doom Report, thinks they'll go down a lot more before they start heading up again.
In an interview with CNBC this past weekend, Faber said that last Friday's disappointing jobs report only affirms his opinion that the U.S. economy remains anemic.
And he thinks stocks are headed for a correction or even a bear market, which translates to a sell-off of at least 10 to 20 percent..."

at http://www.businessinsider.com/marc-faber-correction-bear-market-2012-4#ixzz1rZZRx54N

The Impossibility of Defense Cuts

"Apparently the thing we need to keep ourselves safe is a fast, lightweight ship that can sweep mines, launch helicopters, fight submarines, and perform other assorted duties—but can’t withstand heavy combat. I don’t claim to know if we really need the Littoral Combat Ship to ensure our national security. According to an article in the Times, John McCain—the Republican Party’s last presidential nominees and one of the Navy’s more famous veterans—is critical, although other Republicans and the administration are in favor of it.
I do know that the Littoral Combat Ship is a classic example of why it’s so hard to reduce budget deficits. You have local politicians who want the jobs. You have a large group of representatives who are reflexively pro-military and will vote for anything the Pentagon wants, and even things the Pentagon doesn’t want. (You have Mitt Romney, who bemoans the fact that the Navy has only 285 ships, the fewest since 1917. Would he rather have the Royal Navy of 1812, which had 1,000 ships, or our navy, with eleven aircraft carrier groups—while no other country has more than one?) You have a procurement and development process that stretches on for years so that even when a weapons system turns out to be a dud, it has to be kept alive because it’s too big to fail—there is no other alternative. Both the Center for American Progress and the Project on Governmental Oversight have recommended cutbacks in the Littoral program. Yet there is no practical way to check its momentum.
An even better example is the V-22 Osprey vertical-takeoff plane, which the Times profiled late last year. Even renowned insider Dick Cheney opposed the Osprey when he was secretary of defense, to no avail. Not only CAP and the Project on Governmental Oversight called for Osprey cutbacks, but so did Simpson-Bowles and the arch-conservative (and generally principled) Senator Tom Coburn. In short, just about anyone who cares about the budget wants to cut back on the Osprey. Will it happen? Well, the Paul Ryan budget reverses the automatic defense spending cuts, so we know what he thinks about it. And I’m sure the Osprey has plenty of fans in the administration and the Democratic caucus as well.
In the end, defense spending plays out the same way as Social Security. If you want to reduce government spending, you obviously have to reduce defense spending: it’s basically the second biggest part of the budget after Social Security. But it’s almost impossible to cut any actual defense spending. Apparently politicians don’t realize that a whole is equal to the sum of its parts. Or they do realize it, and they hope that we don’t..."

at http://baselinescenario.com/2012/04/06/impossibility-of-defense-cuts/

Tedbits: 2012 Outlook, Part 2 - Bombs, er...Bonds; Currencies and Gold

"The UNFOLDING destruction of the developed world’s economies and financial/currency systems continues apace. Public servants are trying to defy Mother Nature with the stroke of a pen; she will not yield to this. Radical Marxist POLITICAL solutions to practical problems are at the end of their collective ropes (double entendre intended). You CANNOT store wealth in paper, PERIOD. Those who do will get what they deserve: NOTHING. It has been and will be printed endlessly from this point forward as Socialist government policies have destroyed wealth creation and substituted Ponzi asset-backed economies in their place. Now those economic models have reached their COLLECTIVE endpoints.
Economies based on models of consuming wealth rather than producing wealth are DOOMED, and this is the definition of the developed world. Switching back to the wealth-production model used prior to 1971 in the developed world will be painful as our leaders have FORGOTTEN what wealth-creating policies to implement and how to do so.

The financial systems of the world sit on TOXIC paper (government bonds and currencies) and they call them assets and reserves – they are NOT, THEY ARE LIABILITIES! To see the enormity of government debt in the biggest economies in the world look at this graphic from www.demonocracy.info :"
 

at http://www.zerohedge.com/contributed/2012-14-08/tedbits-2012-outlook-part-2-bombs-erbonds-currencies-and-gold

51 Months After The Start Of The Recession, Here Is The Report Card

"Recovery? What Recovery? 4 years after central banks have progressively injected over $7 trillion in liquidity into the global markets (and thus, by Fed logic, the economy), and who knows how many trillion in fiscal aid has been misallocated, to halt the Second Great Depression which officially started in December 2007, the US "recovery" is the weakest in modern US history! How many more trillions will have to be printed (and monetized) before the central planners realize that fighting mean reversion by using debt to defeat recore debt, just doesnt't work? Our guess - lots.

Incidentally, the US has now generated 3 million jobs since the trough of the recession in September 2010, until which point it had previously lost 8 million. Unfortunately, since the real labor force has grown by 4.6 million over the same period, or at the conventionally accepeted 90,000 labor pool entrants per month for 51 months, despite what the BLS may say, because America is after all growing, this means that the Obama administration has created a negative 1.6 million jobs net of demographics, which in turn have cost the US a modest $5.1 trillion in new debt, or an even modest $3.1 million in debt for every job lost..."

Chart 1 - the current "recovery" in the context of all previous ones:





Chart 2 - Min, Max and Average... and now



at http://www.zerohedge.com/news/51-months-after-start-recession-here-report-card

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Embry: Gartman Inept, CNBC Wrong, Gold Demand off the Hook

"With tremendous volatility in gold and silver, and oil holding well above the $103 level, King World News interviewed John Embry, Chief Investment Strategist of the $10 billion strong Sprott Asset Management. Embry told KWN that bullion dealers are telling him phones are ring off the hook and demand is incredible..."

at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/4/6_Embry__Gartman_Inept,_CNBC_Wrong,_Gold_Demand_off_the_Hook.html

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