Predictions for 2012

I'm predicting that at least one of these things will happen in 2012.  And I'm predicting that any one of these will tip the world economy into undeniable recession, promulgating another massive round of money printing, which will cause that value of many currencies to collapse and gold to soar.

1) A major bank failure, which because of counterparty risk, will bring down a number of banks and insurance companies in a domino effect.  The Fed and the EU will be forced to print massively in order to bailout these Too Big Too Fail Institutions.

2) Austerity programs in Europe will cause at least one EU country to break up through violent civil disobedience/war which will cause a breakup and reorganization of the EU accompanied by bank failures and massive EU currency printing - supported, of course, by Fed printing.

3) War breaks out in the middle East - in any number of places - sending the price of oil soaring - resulting in a massive slowdown of consumer activity along with massive Fed printing to support another ramp up of the military in order for the US to intervene.

4) A single rogue trader at a mid sized hedge fund will be found to have incurred a multi trillion dollar loss in the Credit Default Swap Market (or some similar derivatives market) and the counterparty fall out brings down several banks and insurance companies.  See prediction 1.

5) A series of well timed terrorist actions at malls and train stations bring consumer activity to a standstill pushing the US economy over the brink into recession, and causing the rise of local militias to patrol and bully our neighborhoods until the government declares martial law.

6) A belligerent US congress, at a loss on how to stimulate the economy, decides to try to scapegoat China, and in a fit of anger China boycotts US debt, and declares all Chinese contracts must be settled without dollars.  The US rates sky rocket, the US dollar crashes, and the Fed and the EU must print like crazy until the currencies collapse.

7) real unemployment creeps up to 25 - 30 percent of eligible workers, leading to massive civil unrest, riots, looting and martial law which causes an international loss of faith in the safe haven of the US markets and the US dollar.,

8) The Giants defensive line and running game come together at just the right moment leading them to another improbable super bowl win.

9) Dwayne Wade sprains his ankle, and Lebron James, left to pilot the Heat on his own, wilts under the pressure and the Heat lose in the first round of the playoffs  (we can dream, can't we?)

I know charts are meaningless now but...

So far over the last year the chart pattern with the most predictive power has been the Island Reversal.  What that means is you find a large sell off to new lows followed by an opening higher than the highs of the previous day and a rally from there.  Check the blue boxes.  I know I've said that charts have become meaningless in a market that is fully manipulated by the traders at the big banks.  But still.... We're getting an island reversal today.

What is hard to understand here:

A) BAD:

Federal Government Will Borrow 40 Percent of the Money It Spends Next Year, Says White House Report

By Matt Cover

August 28, 2009

According to the Obama administration's mid-session budget update, the federal government will have to borrow nearly 40 percent of its total expenditures in 2010.

B) WORSE:

How Much of Federal Spending is Borrowed for Every Dollar?

Data from the Office of Management and Budget’s FY2012 budget shows that 43 cents of every dollar spent in 2011 is borrowed. This fact alone propels our current fiscal state further along the historical trend of budgetary deficits. As the critical debate over the debt ceiling continues, the amount of spending that is borrowed should be put in proper perspective. This makes all the difference in addressing the underlying habits driving our current deficit.

C) OUT OF CONTROL: Hyperinflation Watch - December 19, 2011

More Deficits, More Debt December 19, 2011 – In the first two months of the current fiscal year that began on October 1st, the US national debt has grown $320 billion.  That is $21 billion more than the same 2-month period last year, which illustrates that the growth of the national debt continues to accelerate. The reason of course is the federal government’s huge operating deficit, which is not getting any smaller.

As further proof that the Havenstein moment is behind us, consider that 58% of the money spent by the federal government in October and November came from borrowed money ($320 billion of debt against $551 billion of expenditures).  Monetary history shows that governments are on a hyperinflationary path when crossing the 40% threshold, a level long passed by the federal government.

Gold Bull Alive and well. Technical Analysis is Dead

If there is one thing you can count on, no matter where the price of Gold goes in the short term, the Gold Bull is alive, well and thriving.

But how can that be?  Doesn't price determine the direction of a market?

Only in a Free market.  Nobody believes this is a free market.  Especially not the market makers at the Big Banks.  This is a Fee Lunch for them.  They receive untold, uncounted, unaudited TRILLIONS from the Central Banks and they use it to push around the risk markets to their heart's content.

If you don't know or understand this, then all your money will end up in their pockets.  If you can't understand this then when you, or your favorite deluded technical analyst draw their little lines on their little charts - all they will reveal is the short term trading patterns of the traders at the Big Banks.

Let's face it.  Any idiot can figure out moving averages, stochastics, flag patterns, spinning top candles, and Fibonacci retracements.   Any dull normal can plot wave patterns, breakouts, and breakdowns.

And in a free market those who can artfully interpret these patterns can make money over time, with competent risk management. 

In this market, none of these things matter.  In fact they only serve as a substitute for thought.

Thought will lead you to one conclusion.  These markets would all be dead already if not for the massive infusion of central bank money into the banks that gets gambled in the risk markets.  And when you take into account the fact that printed money = debt, you can not but conclude that the Debt Explosion is but a very temporary fix to the debt problem.

Debt destroys paper currency.  Gold is the beneficiary.  Think it through.  Throw out those chats, and think it though, before it's too late and you do something suicidal - like panic selling your gold.

The Top 1 percent are such wannabes

Nobody who's anybody cares to be in the top one percent.  Most of the top one percent are just middle class run of the mill millionaires.  They can hardly afford at table at the top restaurants or more than a hovel in the Hamptons.  The top one percent are a bunch of ordinary losers who control nothing.  It's the top one percent of the top one percent that count in this world.  There are about 1200 to 1500 billionaires in this world.  If you're not one of them, let's face it, your a loser. 

Look are Corzine.  He barely had a 100 million dollars.  What a schmuck.  He gambled all of it and another 100 million of his clients money to try to claw his way into the top one percent of the top one percent.  He lost it all.  But is was well worth the gamble.  After all he was a nobody ex-senator, ex CEO of Goldman Sachs.

A bunch of the top One Percent of the top One percent got together this weekend to put it all in perspective for us:

“Acting like everyone who’s been successful is bad and because you’re rich you’re bad, I don’t understand it,” said Jamie Dimon the JPMorgan Chase & Co. CEO. 

Home Depot Inc. co-founder Bernard Marcus said he isn’t worried that speaking out might make him a target of protesters. “Who gives a crap about some imbecile?” Marcus said. “Are you kidding me?”

Billionaire  John Allison IV shared his disdain for Section 953(b) of the Dodd-Frank Act, which requires public companies to disclose the ratio between the compensation of their CEOs and employee medians, according to Allison. The rule, still being fine-tuned by the Securities and Exchange Commission, is “incredibly wasteful” he said because it takes up time and resources.  "Instead of an attack on the 1 percent, let’s call it an attack on the very productive,” Allison said. “This attack is destructive.”

Tom Golisano, billionaire founder of payroll processer Paychex Inc. and a former New York gubernatorial candidate, said in an interview this month that while there are examples of excess, it’s “ridiculous” to blame everyone who is rich. “If I hear a politician use the term ‘paying your fair share’ one more time, I’m going to vomit,” he said.

These billionaires clearly have a point.  They're tired of being lumped in with the unproductive idiots of the top one percent.  It's time we all realize that it's the top one percent of the top one percent that is responsible for the terrific state of the world economy.

Even the main stream press now sees the danger:

Financial markets in greater danger than 2008-BoE's Fisher

LONDON | Mon Dec 19, 2011 4:46am EST

Dec 19 (Reuters) - Financial markets are facing a more dangerous situation now than during the financial crisis of 2008, Bank of England policymaker Paul Fisher was quoted as saying on Monday.
Fisher, who is the central bank's executive director of markets and sits on the Monetary Policy Committee, also said governments had fewer options to deal with the current crisis because of their stretched public finances.
"Most people in financial markets have not lived through an episode like this before," Fisher told newswire Market News in an interview.
He said that while the situation is in "some ways not as bad" in terms of market stress, it is at the same time potentially "more dangerous".
Fisher was quoted as saying that in 2008, governments had more leeway and cash available to stimulate their economies and bail out banks.
Today that "sovereign backstop is less clear", Fisher said.
"The policy out is going to be more difficult than it was in 2009, given the current position of the sovereigns."

  

Financial Turbulence

Market Chaos 'Potentially Dangerous for Humanity'

AFP

Financial markets don't function properly and endanger humanity, Woolley says.

Financial markets are inefficient and growing to the point of overwhelming the economy, according to Paul Woolley, an expert on market dysfunctionality. In an interview with SPIEGEL he explains why it's up to investors to stop dangerous trends and hold financial institutions accountable.

SPIEGEL: Mr. Woolley, you were fund manager for many years, but went on to found a research institute at the London School of Economics to study why financial markets repeatedly go haywire. Now speculators are once again betting against the euro, and share prices for big companies are falling by 20 percent in a day only to shoot back up again. What is going on?

Woolley: The developments in recent weeks have made it quite clear that the markets don't function properly. Things are spinning out of control and are potentially dangerous for society. Only a fraternity of academic high priests connected to the finance markets is still speaking of efficient markets. Still each market participant is pursuing their own selfish interests. The market isn't reaching equilibrium -- it's falling into chaos. SPIEGEL: You've compared the finance markets to a cancer. What do you mean by that?
Woolley: The finance sector can -- and is -- growing until it overwhelms the economy. In good years the US finance industry cashes in on more than 40 percent of all corporate profits. In bad years they are saved by the taxpayers. The agents are doing a devilishly good job of developing innovative, complicated new products that people can't understand. It gives them the opportunity to earn excess returns and attract the best talent. While they are acting rationally, the result is a catastrophe.

Economic predictions for 2012: PIMCO's economic forecasts for the new year

, Finance Examiner

December 22, 2011 -

As we move towards the new year and the end of a very chaotic 2011 in the markets, global economy, and in nations dealing with social unrest, it is time to look at the economic predictions for 2012.
We will continue with the predictions made by bond insurer PIMCO, and their economic forecasts for the coming year as issued on December 22th by CEO Bill Gross.

• PIMCO SEES RISK-OFF PHASE IN FIRST PART OF 2012, EL-ERIAN SAYS
• PIMCO: U.S. TO GROW BETWEEN 0% AND 1 % IN 2012
• PIMCO SEES GLOBAL ECONOMY GROWING 1.0%-1.5% IN 2012
• PIMCO SEES CHINA GROWING 7% IN 2012
• PIMCO SAYS EUROZONE ECONOMY CANNOT HANDLE SOVEREIGN AND BANKING DELEVERAGING AT THE SAME TIME
• PIMCO SAYS ECB MUST BECOME LENDER OF LAST RESORT

blather

There's a lot of blather out there these days concerning numbers, predictions, truisms.  Gold 1400.  Gold 1100.  Gold 650.  Gold 5000.  Gold 10,000.   Gold is not a safety play.  Gold is the only safe haven.  Gold is an inflation hedge.  Gold is a deflation play.  Plenty o' cash on corporate balance sheets.  Corporations are drowning in debt.  The Fed must print more.  The Fed's printing is the root cause of this mess.  We need tax cuts.  We need to raise taxes.  BLAH BLAH BLAH.

Tune it all out.  Because there are only two Major Forces at play here that dwarf everything else:

1) There is currently a massive effort to service a massive debt.  This effort involves massive printing of new debt to pay interest on old debt, and to purchase rolled over debt, and central bank purchases of bad debt (with new cash funded by new debt).  As long as the Servicing of Debt continues a major DEFLATIONARY FORCE will grip the world markets,which will gyrate wildly as banks alternately sell assets to service debt and then pour cash infusions into risk markets.

2) The servicing of such massive debt is impossible.  It will end.  When it does a HYPER INFLATIONARY COLLAPSE will commence.  Currencies will collapse.   Markets will collapse.  Gold will soar.

Don't time this.  It is impossible.  It's an idiot's game.  Prepare for it.  That's all you can do.

Why you need to own and store your own bullion

Feature: Barron's

 | SATURDAY, DECEMBER 17, 2011

The Silver Rush at MF Global

By ERIN E. ARVEDLUND | 

Investors are furious that they can't get back the gold and silver they stashed with the failed brokerage.

It's one thing for $1.2 billion to vanish into thin air through a series of complex trades, the well-publicized phenomenon at bankrupt MF Global. It's something else for a bar of silver stashed in a vault to instantly shrink in size by more than 25%.
That, in essence, is what's happening to investors whose bars of silver and gold were held through accounts with MF Global.
The trustee overseeing the liquidation of the failed brokerage has proposed dumping all remaining customer assets—gold, silver, cash, options, futures and commodities—into a single pool that would pay customers only 72% of the value of their holdings. In other words, while traders already may have paid the full price for delivery of specific bars of gold or silver—and hold "warehouse receipts" to prove it—they'll have to forfeit 28% of the value.

AND GET THIS: Of the 28% haircut, attorney and liquidation trustee James Giddens has frozen all asset classes, meaning that traders have sat helplessly as silver prices have dropped 31% since late August, and gold has fallen 16%. To boot, the traders are still being assessed fees for storage of the commodities.

In other words,  MF Global is charging customers rent on the gold and silver they've stolen from them.  That's brilliant.  The Fed should declare that MF Global is now a bank and then award them a huge bonus for creative theft. 

DON'T THINK FOR A SECOND THAT M.F. GLOBAL IS ANY DIFFERENT FROM M. LYNCH,  G. SACHS, or N.Y. FED.

15 Brilliant Insights From Hedge Fund Superstar Kyle Bass

 

14/16

   

KYLE BASS: On why he owns so much gold...

Image: Brian Giesen

"My opinion is very simple as a fiduciary... to the extent that you own gold and you are going to own it a long time --it's not a trade. It costs us about 90 basis points a year to roll it through financial futures contracts," he said.
"And then we went and looked at the COMEX.  The COMEX at the time they had about $80 billion in open interest between futures and futures options. In the warehouse they had $2.7 billion of deliverables. So $80 billion in open interest -- $2.7 billion in deliverables. We’re gonna own it a long time. You're on the board, as a fiduciary, what do you do? That’s an easy one. You go get it. So you go take a billion of $2.7 billion and you let them worry about the rest."
"When I talked to the head of deliveries at COMEX NYMEX, I was like, 'What if 4% of the people want deliveries?' He said, 'Oh Kyle, that never happens. We rarely ever get a 1% delivery.' And I asked, 'Well what if it does happen?' And he said,'Price will solve everything' And I said, 'Thanks, give me the gold.'"

Read more: http://www.businessinsider.com/americatalyst-kyle-bass-2011-12#on-why-he-owns-so-much-gold-14#ixzz1gtFXEX9v

Why a monetary collapse is certain

A new paper making the rounds of hedge funds originated by a partner at Easton Point Capital that makes the most brilliant, concise argument as to why the advanced economies are on the verge of collapse; why the collapse is inevitable; and why only gold will protect your wealth during this collapse.

I will summarize in a simplistic way the thrust of this argument:

1) Money is an attribute, not a thing.  The major attributes of Money are as follows:
 First, it is Liquid.  Second, it has a constant store of value.  Third it is portable and divisible so that it can be used by all for all types and quantities of transactions.  This idea is not different from the attributes of money as devised by Aristotle.

2) Gold has always been used as money as it is the only thing that has all these attributes.

3) Paper is portable and divisible.  But it does not have a constant store of value.  And it is only liquid insofar as it is readily convertible into gold - or by Government Decree at the point of a gun (and this is tough to enforce once psychology dictates paper is worthless.)

4) When the US Central Bank was created, 70 percent of its assets were in gold, 30 percent in short term commercial paper, used to purchase commodities that were readily convertible into gold.

5) These assets, called reserves, were mandated.

6)  Now the US Central Bank has its assets at .3 (Yes three tenths of one percent) in Gold and 99 percent in a combination of long term government obligations and complex Mortgage instruments that are convertible into Nothing.  In other words they are completely ILLIQUID - thus they lack the major attribute of MONEY.

7) In other words the US CENTRAL BANK'S balance sheet if filled up with crap that is not Money.  If and When they must convert it, it will be revealed that they are entirely BANKRUPT.

8) Entirely?  No not entirely.  The .3 percent of gold they carry as reserves will comprise the extent of their wealth.  This gold will be revalued and a new Currency will be issued in proportion to the gold.

9) The value of gold will then be somehwere between $10,000 and $30,000 an ounce, (depending on how much real wealth is destroyed in the collapse.)

10) Why then is the dollar rising right now and gold falling?

11) Because of the extraordinary amount of dollar denominated debt that must be serviced (temporarily until it is defaulted upon) by selling everything to buy more dollars.

Think about this.

Quick! Panic!

Bloomberg proclaimed yesterday that according to trading genius Dennis Gartman the Gold Bull is Dead!  Gartman is a momentum trader who up until last year has done fairly well over the many years he's been trading.  This year his fund is down about 25%.  It's hard to know exactly because as his fund became decimated he stopped printing the wretched figures.  At the time he was down about 20 percent.  Gold was at about 1800 and he was loading up.  When gold dropped to 1650 he bailed out.


Meanwhile another trading legend: Richard Russel, who is a fundamental trader, though he also uses charts, has published 12 rules for survival in this environment.  Here are rules 4-6.  

I wholeheartedly agree with them:

 4 — Have faith in your gold. As confidence in the whole monetary system slowly fades, the desire for gold will heighten.

5 — Remember, there’s often a large correction prior to the final speculative gold run.

6 — This time there may not be a “final gold rise,” because large interests may just decide never to sell their gold. They’ll keep their gold as a symbol of “eternal wealth” that can’t be destroyed of go bankrupt.

Look, gold may fall to 1400.  So what?  It's a trading blip for those holding bullion.  DO NOT SELL YOUR BULLION.   When gold hit 1000 it backed off to 650.  Everyone said the gold bull is dead.  Within a year it went back to 1400.  

Now it backing from 1900 to maybe 1500.  


But remember this:  THESE ARE NOT FREE MARKETS.  THESE ARE NOT MARKETS.  THESE ARE MANAGED CASINOS DESIGNED TO STEAL YOUR TRADING MONEY.
And those managing the Casino (the banks) know this.  As you panic and sell, they're there buying.  So don't be a sucker.  Don't trade.  Buy bullion, and hold it.


Because over time PRIMARY TRENDS WILL OVERWHELM the CASINO.  And over time the primary trend is paper down - real assets up. 

Be Careful

John Le Carre's new spy thriller "Our Kind of Traitor" is about how the international banking cartel - in league with an international criminal money laundering ring - now controls the British government, as they pay off and own several high ranking members of parliament who control the banking committees to insure that laws, oversight, and investigations all favor the nefarious activities of the banks.

In this novel these activities include murdering those who would expose some the criminal links and activities.

Far fetched entertainment, right?  Le Carre, though widely celebrated for creating realist based fiction, is still a novelist.  He tells stories for a living.  Leaving the murder aside for a second, (Michael Corleone: who's being naive, Kay?),  let's look at the what's going on right this second - here - and in Europe.

The world's central banks (the Fed and the ECB in collusion with China) are in the process of engineering another massive multi-trillion dollar bailout of the largest too big too fail multi national banks.  That money, as it is funneled to the banks - from your and my pockets - is immediately gambled in the Risk Markets.

What's more, everybody involved in the markets - from governments to hedge funds, to brokerage firms to anyone with their money in stocks and bonds is rooting for the bailout to be as large and as swift as possible.  No matter the lip service they may pay to "free markets."  Because they know that when the bailouts stop - everything collapses.

Meanwhile, nobody is allowed to monitor, oversee, or god-forbid audit these activities.  Is it so far fetched to believe that vast criminal enterprise involving all sorts of extortion, fraud, money-laundering, arms dealing and drug money is involved in the banking web?  Is it so far fetched as to believe that those who get in the way are summarily dispatched?

Look at MF Global where a billion dollars of little guy gambling and hedging money (farmers, grain sellers, small time investors) was stolen so that John Corzine could bet huge on sovereign debt.  Nobody knows where that money is?  Are you kidding?  Nobody knows how that money got stolen out of those accounts?  Nobody is even willing to admit it was stolen?  It's just some sort of clerical errror?  A billion dollar oops?

But one day not too far off little guys with all their money in pension funds, and brokerage accounts will wake up and that money will be gone.  Devaluations will take most of it.  Clerical Errors will take the rest.

Far fetched alarmist blogging right?  Anything to get a rise out of people.  Yeah, sure.  But just in case there's a shred of truth there, get yourself a little bullion.  It will be the only thing to survive the clerical errors and the devaluations.

How to buy rare coins: RULE 1

The first rule to understanding how to buy rare coins is this:

1) Know some history.  If you don't know any history this is not the market for you.  Buy diamonds.  Buy vintage cars.  Whatever. 

2) Now, if you know some history you probably have a favorite era.  Start there.  Every era has coins and medals that reflect the history of the era.  That commemorate important personages and events.  That were executed by great artists of the era.

3)Research these coins and medals that reflect the history of your favorite era.  How many of a type exist?  In what condition?  Executed by which artists?  Larger gold coins and medals are generally worth more than smaller gold coins and medals.  But rarity and historical importance also play a major role in determining value.

4)You many find yourself drawn to a particular era, or a particular personage, yet you know just a little.  Study up.  Learn a whole lot more.  When you know more than most people you have a natural advantage in determining what has intrinsic historical value and what doesn't.

5) Ignore the market place.  Don't chase fads.  If you happen to realize that Napoleon Bonaparte was a fascinating and important historical character for a host of reasons, yet a gold medal commemorating his coronation is selling for one millionth of the price of a silk screen of Marilyn Monroe: a mediocre entertainment figure who is well regarded now, 50 years after her death, but who in all likelihood will be entirely forgotten in 200 years, use some imagination and project forward to  a time where those values will cross.

6) LETS SAY YOU KNOW SOME ANCIENT HISTORY: This lets you in to a much bigger, yet far more rarefied club for purchasing coins.  From ancient Greece through the Byzantine era you have about 2000 years from which to choose historically significant objects.  And there are precious few humans who have any knowledge at all of this 2000 year period.

7)  It's good to have an overview.  And it's even better to specialize withing this overview.  You might know everything about Alexander the Great.  Or Julius Caesar.  Or Ptolemy.  Or Seleukos.  Or Croesos.  Or Diodotos.  Or Justinian.  Or Irene.  Or Athens, or the Phoenicians, or Byzantium.  Etc.  If you qualify in this way, this is a tremendous area of opportunity for the investor.  Because you will be able to recognize and appreciate exactly why the object of your fascination will always and forever have intrinsic value.

8) Because all that has been preserved and recorded and commented upon thus far, after a thousand or two thousand years, has already proven its value to all those who have striven and labored to preserve it over all this time.

9) If your particular interest is out of fashion right now, all the better.  It will be cheaper to buy.  And everything of historical value comes back into fashion in time.

Greek Gold: Bull Market of the Decade

The Winter Auction season for ancient gold: Greek, Roman, Byzantine is upon us.  Go to Sixbid.com to see the lineup.  As always the winter auctions bring out the finest, rarest, most sought after of Ancient Coins.  Coins of spectacular beauty, rarity, and historical importance.

And as has been the case for the last ten years, this year's auctions will bring prices vastly higher than last year's auctions.

Now, you can use a host of metrics to judge the overall strength of the gold market.  Many people love ratios, such as silver/gold, dow/gold, oil/gold, cot data, open interest, bullion banks vs speculators.  All these have a place and can be useful, insofar as reversion to the mean analysis can be useful in the very short run.

But for my money, the Greek Gold Coin market serves as the best leading indicator for the Gold Bullion market.  Why?

Because the same buyers who have been ahead of the curve all along by protecting their assets from the inevitable debasement and destruction of paper by buying bullion, have been protecting their assets in the same fashion by buying Greek Gold coins.

But why a leading indicator?

Because every reason to buy bullion, is valid but intensified in the Greek Gold Market.

1) Intrinsic value.  Gold has always been money: Greek gold is the first money.  But Greek gold also has intrinsic value as a store of History, and as a work of art.  Much ancient history is only history because it is corroborated by Greek Gold coins.  And the greatest artists of the classical era were invited to the couts of Tyrants to design the coinage.

2) Portability.  A great deal of wealth can be stored in a small amount of bullion.  Far more wealth can be stored in a high end greek gold coin.  In fact some coins of about 8 grams of gold can be worth a million dollars.

3) Liquidity.  The bullion market trades 24 hours a day in every financial center of the world: Europe, Asia, Middle East, Africa, the US.  Geek gold is collected and dealt in every major financial center of the world.  Europe, Asia, Middle East, the US.  I don't know about Africa.

4) Rarity.  All the gold ever minted can be stored inside a small swimming pool.  But high end Greek gold coins of individual types can be counted on your fingers.  And even the most common types number in the low hundreds.

5) Privacy.  The governments of the world can try but it is very difficult for them to track and quantify personal private gold ownership.  There is not yet a government official in the world tracking the Greek gold market.

For all these reasons, the fantastic market in Greek gold continues to be a fantastic leading indicator of the bullion market.  And I can tell you the the Greek gold market has been and continues to be the world's greatest bull market.

Bloomberg gets some dirt on the Fed:

Through a freedom of information request by Bloomberg News, the public now has access to over 29,000 pages of Fed documents and 21,000 additional Fed transactions that were deliberately hidden, and for good reason. 
These documents show how top government officials willfully concealed from Congress and the public the true extent of the 2008-'09 bailouts that enriched the few and enhanced the interests of giant Wall Streets firms. Here’s what we now know:

• The secret Wall Street bailouts totaled $7.77 trillion, 10 times more than the $700 billion Troubled Asset Relief Program (TARP) passed by Congress in 2008. 

• Knowledge of the secret bailout funds was not shared with Congress even while it was drafting and debating legislation to break up the big banks.

• The secret funding, provided at below-market rates, gave Wall Street banks an additional $13 billion in profits. (That’s enough money to hire more than 325,000 entry level teachers.)

• The secret loans financed bank mergers so that the largest banks could grow even larger. The money also allowed banks to step up their lobbying efforts. 

• While Henry Paulson (Bush’s Secretary of the Treasury) was informing Congress and the public that only minor reforms were needed to protect Fannie and Freddie from collapse, he met secretly with leading Wall Street hedge fund managers -- among them his former colleagues at Goldman Sachs -- to alert them that he was about to nationalize the giant mortgage companies – a move that would eradicate nearly all the stock value of the companies. This information was enormously valuable because it allowed these hedge funds to short Fannie and Freddie and thereby make a fortune.
•  
•  For every $100 in bailout funds handed over to healthy banks, the American taxpayer received just $78 worth of assets, according to a report by the Congressional Oversight Panel (COP) chaired by Elizabeth Warren. The exchange rate for struggling banks was $44 for every 100 taxpayer dollars. All in, COP reported, Treasury paid $254 billion, for assets worth just $176 billion — a stealth bailout of $78 billion to the financial sector never approved by Congress, including a cool $2.5 billion for Paulson’s cronies at Goldman.
  
  
  

Q:ECB BACKSTOP RUMOR FUELS MARKET

BLOOMBERG LIE OF THE DAY: 

U.S. Stock-Index Futures Extend Gains After Suprising Drop in Jobless Rate 

By Jeff Sutherland - Dec 2, 2011 8:33 AM 

 

The futures actually dropped after another anemic jobs report.  The futures were up 160 going into the report because of a new rumor that the ECB (European Central Bank) is going to inject cash into the IMF, which is viewed as a first step to a global bailout of European Debt. 

Everything in the markets right now is a function of bailout money proffered, or bailout money denied.  Nothing else matters.  Because the pros all know that not a single economy on the face of the earth is growing.  Not one.  Not even China.

 

The only thing keeping this all afloat is freshly printed money being injected into a moribund global banking system.

 

Gee, who could have predicted that?

 

Quote of the day: “Owners of capital will stimulate the working class to buy more and more expensive goods, houses and technology, pushing them to take on more and more expensive debt, until their debt becomes unbearable. The unpaid debt will lead to the bankruptcy of all banks, which will have to be nationalised, and the State will have to take the road which will eventually lead to communism.”  Karl Marx 

 

All right, maybe the conclusion is a bit of a leap, but the analysis is spot on.

 

 

 

Loans - what loans?

So what really happened yesterday in this coordinated  move between 6 major central banks?

To most of us it seems the message was clear: The central banks will supply liquidity to all troubled banks.  They do this by printing money (debasing all the money you and I have), and just giving it to the banks.  But our understanding is so primitive.  Let's hear a more sophisticated explanation from the excellent Dennis Gartman, whose letter is a fountain of information:

"Regarding the “swap lines” that the Fed acted upon
yesterday, they simply supply dollars to the markets
overseas at a cheaper rate than might have been
available previous. Basically, the Fed lends dollars to
foreign central banks in return for their local currencies
for a specific period, and one might think of them as
“repo” operations for central banks. The Fed is not
actually lending money to the banks of other nations
directly, but is doing so circuitously by making liquidity en
masse to the other central banks who then lend that
money to their local banks. As a result, risk to the Fed is
almost nonexistent."


Really?  Loans with non-existent risk?  (You mean that selling dollars at 80 cents is not really a 20 percent loan, because there's no risk because will get the 20 percent back when we trade currencies back?)  

And these Loans/not-really-loans are made from a Bank, the Fed, that according to Jim Grant is now leveraged at 100-1?  In other words, if just one penny out of every dollar is not paid back, the Fed is bankrupt.  Still, there is no risk at all?  Gee.  How does that work again?  


And even if it can work in theory - I don't understand how - but even so, how do we know if the loans -(not really loans) are ever paid back at all since we can't audit the Fed or any of the other Central Banks.


I guess we just have to take their word for it!  Well, that's good enough for me.  Huge loans from Banks with no reserves the are basically risk free, so there's no need for anybody to monitor or audit them.


Awesome.  So what are we all so worried about again?

MORE QE? NO WAY! WAY!

U.S. stocks rally on global moves

By Kate Gibson, MarketWatch

NEW YORK (MarketWatch) — U.S. stocks rallied Wednesday after the Federal Reserve and five other central banks together moved to ease the flow of funds to banks hit by Europe’s debt crisis, and China cut the level of cash that banks have to set aside as reserves.

“The coordinated action by the global central banks is welcome news. [It] appeared to be a surprise jolt designed to lift investor confidence in euro-zone financial institutions as well as provide much needed liquidity to banks feeling a liquidity squeeze,” Fred Dickson, chief investment strategist at Davidson Cos., wrote in emailed commentary. 

NOW, many analysts will wonder why another massive bailout for the banks is good for the markets.  Think of it this way:  The bailout money is Iced Tea.  The banks are the world's financial bladder.  The markets are the toilet of the financial system.  Where else is all that Iced Tea going to go?

Now, you can stock up on Iced Tea if you want.  Me, I'm buying gold.

QE3 AND QECB JUST HAPPENED WHILE YOU SLEPT LAST NIGHT

U.S. stock futures rise as ECB buys bonds

By Kate Gibson and Nick Godt, MarketWatch

NEW YORK (MarketWatch) — U.S. stock futures climbed Friday, with Wall Street readying for an opening bounce following two days of losses, as investors scrutinized Italian and Spanish bond yields after the European Central Bank reportedly bought the debt of both nations. 

The central bank purchased Spanish and Italian debt in an effort to cap yields, at least three people with knowledge of the trades told Reuters.

On a related note, European officials could start discussions with the International Monetary Fund on a means for the European Central Bank to lend to the International Monetary Fund in the event of sovereign rescues in the region, Dow Jones Newswires reported.

Dealers See Fed Buying $545 Billion Mortgage Bonds in QE3

Daniel Kruger and Cordell Eddings, ©2011 Bloomberg News

Monday, November 28, 2011

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/11/28/bloomberg_articlesLVD52507SXKX.DTL#ixzz1f0frV8gQ

QE3 AND QECB ARE HERE!  AND THE MARKETS LOVE IT.  FUTURES UP 300, GOLD UP 40.  WHY?  BECAUSE QE IS FREE MONEY FOR THE BANKS - AND LOTS OF IT.  AND ALL THAT MONEY GETS GAMBLED IN THE MARKETS.  THE BANKS THAT WIN GET HUGE BONUSES.  THE BANKS THAT LOSE GET BAILED OUT WITH MORE OF YOUR TAX MONEY.  REJOICE.  QE LIVES!!!!!

Central Banks Ease Most Since 2009

By Scott Lanman - Nov 28, 2011 7:18 AM ET

 

The European Central Bank, seen here, extended liquidity support for banks into 2011 on Sept. 2. Photographer: Hannelore Foerster/Bloomberg

Mario Draghi, president of the European Central Bank (ECB), is seeking to limit contagion in the 17-nation euro zone as Greece’s economic meltdown worsens. Photographer: Hannelore Foerster/Bloomberg

Central banks across five continents are undertaking the broadest reduction in borrowing costs since 2009 to avert a global economic slump stemming from Europe’s sovereign-debt turmoil.
The U.S., the U.K. and nine other nations, along with the European Central Bank, have bolstered monetary stimulus in the past three months. Six more countries, including Mexico and Sweden, probably will cut benchmark interest rates by the end of March, JPMorgan Chase & Co. forecasts.

What's Wrong? Fundamentally - what's wrong?

Society is a very complex system.

Complex systems require exponentially more energy to function, the more complex they become.
(for example: the human brain uses 75,000 times as much energy as the Sun - relative to mass.)

In their most efficient (ie: Simplest) form - governments can organize society so that energy use becomes more efficient - thus energy output in the form of productivity and rents are greater than the sum of the inputs -as measured by potential energy: Money.

In their most efficient (ie Simplest) form the creation and distribution of money through the Government/Banking System can facilitate the output of money in the form of productivity and rents.

As government become increasingly complex, as the banking system becomes increasingly more complex, as society itself becomes increasingly more complex, it reaches an INFLECTION POINT by which it requires more energy (Read Money) to sustain it than it is capable of outputting.

At this point the society - like any inefficient organism - begins to DIE.

At this point the ELITES: Those closest to the Money Producing Mechanism (Politicians and Bankers) become more concerned with the shrinking pie than the welfare of the society.

They begin to act like parasites- accumulating wealth through non-productive means: government patronage and postmodern finance: Leverage, exotic unregulated derivatives, off balance sheet accounting vehicles, cleverly disguised fraudulent gambling instruments.

These do not cause the death of society, but they greatly hasten the moment of collapse.

Where are we on the Efficiency curve?

It seems to me we have reached the stage of Elite Money Leeching from the dying system.

A pretty advanced state.

At this point there are only three choices.  A) Collapse and Die.  B)Conquer and steal resources.  C) Simplify both the Government and the Banking System.

To simplify the government you'd have to cut the Federal government in half, close down the army, and return administrative duties to the States.  Anything less, is a waste of time.  And you'd have to regulate the issuance of money.  The only way to do this is to tie it to a Convertible Gold Standard.  Any fiat system of money creation will be abused.

Or we can always implode and die.  It happens all the time, throughout history.  Then we rebuild - probably using a greatly simplified government and a money system tied to gold.

(this is basic Complexity Theory as developed by Joseph Tainter and explicated by James Rickards in "Currency Wars.")

Pop Quiz of the Day: What does this all have to do with US?

Portugal hit by downgrade to junk status, strike

France Erupts as 1M Protest: Protests over plan to raise retirement age continued to rock the country

Analysts: Egyptian civil unrest to escalate despite military's efforts

Libya, Jordan And Yemen Hit By Renewed Unrest

Italy Borrowing Costs Almost Double at Auction as Euro Tumbles

Spain Economy Stalls in Third Quarter, Adding to Government’s Difficulties

Hungary Credit Rating Cut to Junk at Moody’s

Greece anti-austerity protesters join annual rally

Ireland demands debt relief, warns on EU treaties

Europe's plans for treaty changes to enforce fiscal discipline in the eurozone may fall foul of popular anger in Ireland unless the EU creditor states agree to share more of the pain.

Mr Noonan said Ireland's public mood has turned very sour. Photo: AP

By Ambrose Evans-Pritchard, in Dublin

7:53PM GMT 23 Nov 2011

The Irish government has suddenly complicated the picture by requesting debt relief from as a reward for upholding the integrity of the EU financial system after the Lehman crisis, though there is no explicit linkage between the two issues.

"We carried an undue burden for protecting the European banking system from contagion," said finance minister Michael Noonan.

How did we get here?

 

STUPID POINTLESS WARS 

Happy Thanksgiving

When will the ECB backstop this mess?

"Disastrous" bond sale shakes confidence in Germany:

The Bundesbank was forced to retain almost half of a sale of 6 billion euros due to a shortage of bids by investors.

Fortunately, that could never happen here in the good old USA.  Why not?  Because the Fed would buy all the rest of the bonds.

 But wait.  Isn't that like the Fed borrowing money from the Fed?  Yes, it's exactly like that.

It's like you needing money and your wife printing the money, loaning it to you, then you turn around and issue a bond to pay your wife back - and your wife buys the bond.

 Too bad they won't do that in Europe.  Yet.  They better do it soon, though, or the world economy will collapse.  Unfortunately it's the only solution the markets will tolerate.

• Exclusive: Reuters Insider Euro Zone CDS hits record highs

(Reuters) - A "disastrous" German bond sale on Wednesday sparked fears that Europe's debt crisis was even beginning to threaten Berlin, with the leaders of the euro zone's two strongest economies still firmly at odds over a longer-term structural solution.
Financial markets were also unnerved by newspaper reports that Belgium may be pressing France for an expansion of a 90 billion euro ($120 billion) bailout of failed bank Dexia.
On top of this, a special report by Fitch Ratings suggested France had limited room left to absorb shocks to its finances like a new downturn in growth or support for banks without endangering its cherished AAA credit status.
After one of the least successful debt sales by Europe's powerhouse economy since the launch of the single currency, the euro fell and European shares sank to 7-week lows.

MF GLOBAL STEALS 1.2 BILLION - NOBODY INDICTED

MF Global trustee doubles estimates of shortfall

By Nick Brown and David Sheppard

NEW YORK | Tue Nov 22, 2011 5:59am EST

(Reuters) - The shortfall of commodity customer funds at MF Global Holdings Ltd (MFGLQ.PK) may be around $1.2 billion, about double initial estimates from regulators, the trustee liquidating the company said on Monday.
The news was a blow to customers still hoping to get more of their cash out of frozen broker accounts and raised new questions about why the authorities managed to locate only about 60 percent of the segregated customer funds three weeks after the parent firm's October 31 bankruptcy.
"I'm flabbergasted," said Tom Ward, a retired Chicago Board of Trade member whose two sons cleared their futures trades through MF Global and have been blocked from accessing their money. "The bottom line is, there's going to be a haircut involved. It's devastating, what this has done to the industry."
Monday's announcement was trustee James Giddens' first public statement on the size of the shortfall, which regulators initially said was about $600 million.

With the failed Super Committee and the European Debt Implosion this story is being glossed over.  What is means is this: your broker, your bank, may be using your money to gamble in the markets.  If they lose, your money may be gone.  How will you know?

Commodity Brokerage Firm Closes, Says Markets Not Safe

November 19th, 2011
in econ_news

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Econintersect:  The following is the introduction to a letter sent by a real CEO of a real brokerage firm specializing in agricultural commodities.

“Dear Clients, Industry Colleagues and Friends of Barnhardt Capital Management,

It is with regret and unflinching moral certainty that I announce that Barnhardt Capital Management has ceased operations. After six years of operating as an independent introducing brokerage, and eight years of employment as a broker before that, I found myself, this morning, for the first time since I was 20 years old, watching the futures and options markets open not as a participant, but as a mere spectator.

The reason for my decision to pull the plug was excruciatingly simple: I could no longer tell my clients that their monies and positions were safe in the futures and options markets – because they are not. And this goes not just for my clients, but for every futures and options account in the United States.

Who's to blame?

 Europe is coming apart at the seems.  No, actually, from the center.

The banking crisis that began in 2008 with a mass of bad mortgage debt was momentarily assuaged by many trillions of taxpayer dollars administered to Fannie and Freddie, AIG, Goldman Sachs, and a host of other banks, as the Fed took many more trillions of bad debt onto its own balance sheet.

Unfortunately, we're only just finding out now (we - the unsuspecting public - many other knew) that the crisis was far worse than we imagined.  Many trillions more of this bad debt were marketed to Europe by Goldman Sachs et al and then resold between the European sovereign banks.  On top of that, Goldman Sachs et al were busy helping insolvent European governments hide their debt in off-balance sheet swaps so that they could gain entry into the EEC.

Yes, this is a European "Sovereign Debt" crisis.  But so much of that debt is mixed in with bad mortgage debt that is still intertwined with the Fed and the US Banking system that a collapse of the Euro will undoubtedly bring down much of the US banking system.

And China depends on the US and Europe for about 60 percent of its GDP.

So there's a huge impetus for both the Fed and China to step in here along with the EEC and backstop all this - again with taxpayer money.  (Or by printing money - which amounts to the same thing.)

 So who's to blame?

The Republicans would have us believe that there's plenty of blame to go around.  Starting with those poor folk who lied on their mortgage applications, and the corrupt politicians that supported Fannie and Freddie.  Yeah, sure.  Lying is wrong.  And Fannie and Freddie are grossly incompetent and corrupt.

But that's not what brought down the world banking system.

The OWS crowd blames corporate greed, the banks, income inequality, political corruption, and the general unfairness of life.  All that may be true too.  But we need to understand what's happened here.

Until 1970 all debt in the world could be settled with a demand for gold in payment for that debt,  This limited the amount of debt that could be created.  When Nixon closed the gold window for US debt, the world banking system was cut loose from any sort of responsibility to tether debt creation to hard assets.  What has resulted is in inconceivable tsunami of debt.

The big Wall Street Banks like Goldman Sachs are filled with very smart guys.  They spend their time thinking up ways to create garbage debt and sell it to everyone else.  That's all they do.  Because it's vastly profitable and unregulated.  Because they can.  Even the vast majority of "Mortgage Debt" have NO UNDERLYING MORTGAGES.  That's why they can't be unwound.

There is no solution but to tie money - and debt - back to a hard asset.  Back to gold. If it is settled in gold it limits the creation of debt to the amount of gold.  And it measures the debt by the price of gold.

LAND OF MAKE BELIEVE VS HERE

In the Land of Make Believe (the land of Supply Side Nonsense) you can Grow your way out of a Debt Crisis.  We all just roll up our sleeves, get government off our backs and put our noses to the grindstone, LOWER TAXES,  and pull together, and by golly dig ourselves out of this ditch!

HERE:  “No amount of synthesized growth can evaporate global debt. Trying to sell creditors, debtors and taxpayers on the idea that it can be done is a futile and dangerous proposition. Time is not a variable. There is debt that is owed and only money or assets-in-kind can satisfy it.”


– Paul Brodsky / Lee Quanitance

In the Land of Make Believe: The prudent combination of Debt Restructuring and Austerity Programs can give economies "breathing room" to start to grow their way back to prosperity.

HERE: "Those in charge of the SS Europe are left with a stark choice – print money or allow the break-up of the Eurozone and the end of the common currency known as the Euro. At this point it really IS that simple.”

--Grant Williams

In the Land of Make Believe: Central Banks are the cornerstones of stability, guiding our economies through wise and deliberate policies.

HERE:"The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution....Bankers are more dangerous than standing armies......(and) if the American people allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and CORPORATIONS that will grow up around them will deprive the People of all their property until their children will wake up homeless on the continent their Fathers conquered."

        --Thomas Jefferson -

In the Land of Make Believe: Karl Marx was an evil Jew who hated Freedom and Democracy and advocated for the Tyranny of the State .

HERE: Karl Marx was a philosopher who said this: "Owners of capital will stimulate the working class to buy more and more expensive goods, houses and technology, pushing them to take on more and more expensive debt, until their debt becomes unbearable. The unpaid debt will lead to the bankruptcy of all banks, which will have to be nationalised, and the State will have to take the road which will eventually lead to communism.”


In the Land of Make Believe: We have a free market facilitated by a Free Market Banking System
.
HERE: Marx got it wrong: The Banks have indeed become bankrupt, but instead of being Nationalized, they've been subsumed by the Central Banks, which they in turn own.  Get your head around that one.

A MAKE BELIEVE FUTURE

In the Land of Make Believe we love our kids.  There's nothing we wouldn't do for our kids.  Our children are the Future.  We buy them all the sugar snacks they can shove down their hungry gullets.  We devote entire industries to amusing them: movies, television, video games.  And we do it all with money we've borrowed - from them.  Well, not really from them.  Most of them are fat diabetic TV addicted morons (just kidding!).  But from their future earnings.

 The same way the Banks are stealing from all of our Futures by printing and distributing money to themselves, we're stealing from our kid's futures by printing money to distribute massive medical benefits to ourselves, and borrowing every last cent we can get our fat fingers on in order to live in houses that are too grand and drive cars that are too big.

All the borrowing creates an massive Demand Imbalance that forces prices up, just as all the money printing creates a massive supply imbalance that forces prices up.  And like every Ponzi Scheme all of us Old Maddofs do fine, while our precious kids, for whom we'd do anything,  are left to hang themselves from a beam in the living room, while their kids sleep in their cradles in the next room.

The young and the broke: 37 percent of young households hold zero or a negative net worth. The median net worth of those 35 and younger is $3,600.

And the really sad part is the best hope Our Precious Children have to better themselves is education, the cost of which is becoming so prohibitive that the average student comes out of undergraduate college with $26,000 of debt - and just barely able to read and write.  And Meanwhile you have a Republican field of candidates for President just falling over themselves to brag about how they'd destroy what's left of the educational system in this country.

Thank Gold for all TV Shows,  Movies and Video Games, so that our Precious Kids, for whom we'd do anything (except stop spending on ourselves) so that those precious tykes will have something to do while they live on our couch after graduating with all that Debt.

nto the overall systemic pilfering of the middle class.