'The U.S. economy is in a bubble inflated by "phony money" from the Federal Reserve
and will burst within a few years, warned David Stockman, who was budget director for President Ronald Reagan.
In an essay published yesterday in the New York Times (NYT), Stockman wrote that the Fed's quantitative easing policies in the aftermath of the credit crisis have flooded stock markets with cash even while the "Main Street economy" remains weak. The combination, he wrote, is "unsustainable."
"When it bursts, there will be no new round of bailouts like the ones the banks got in 2008," wrote Stockman, a former senior managing director at Blackstone Group LP (BX) and a former Republican congressman from Michigan. "Instead, America will descend into an era of zero-sum austerity and virulent political conflict, extinguishing even today's feeble remnants of economic growth."'
'It is worth noting that George Soros has just tripled his position in Gold. Say what you want about him... he knows his currencies dead-cold is beyond question.A 75% revaluation of the price of gold would mean gold at around $2,800 per oz. Oddly that is not too far from the predictions that I have seen for gold to reach $3,000 or even $3,200 per oz. Could it go that high? Is such a 'reset' button even envisaged?
- That he has moved heavily into Gold says a lot about currencies.
...
I suggest that we may soon see a global "coordinated event" that will move the price of Gold.
- While Gold is now roughly 15% of Central Bank reserves (you know these guys, the ones printing huge amounts of paper fiat currency to try and fill the huge holes caused by our insolvent bankers ref infra), one way to increase that number is for Gold to increase in price.
- Remember what the US did in 1933? It revalued the price of Gold from $20/oz to $35/oz...a 75% revaluation for the purpose of increasing the value of its Gold reserves, AND increasing the ratio of Gold as a percentage of its reserves to currency.
Think about it.
- Could this be the secret "reset" button for a rapidly failing paper fiat system?'
"...I remember being here ten years ago, hearing the launch of the Lisbon Agenda. We were told that with the euro, by 2010 we would have full employment and indeed that Europe would be the competitive and dynamic powerhouse of the world. By any objective criteria the Euro has failed, and in fact there is a looming, impending disaster.Sounds like the truth to me, so the BBC will not show the speech.
You know, this deal makes things worse not better. A hundred billion [Euro] is put up for the Spanish banking system, and 20 per cent of that money has to come from Italy. And under the deal the Italians have to lend to the Spanish banks at 3 per cent but to get that money they have to borrow on the markets at 7 per cent. It‘s genius isn’t it. It really is brilliant.
So what we are doing with this package is we are actually driving countries like Italy towards needing to be bailed out themselves.
In addition to that, we put a further 10 per cent on Spanish national debt and I tell you, any banking analyst will tell you, 100 billion does not solve the Spanish banking problem, it would need to be more like 400 billion.
And with Greece teetering on the edge of Euro withdrawal, the real elephant in the room is that once Greece leaves, the ECB, the European Central Bank is bust. It’s gone.
It has 444 billion euros worth of exposure to the bailed-out countries and to rectify that you’ll need to have a cash call from Ireland, Spain, Portugal, Greece and Italy. You couldn’t make it up could you!
Running out of time, Farage ended with a strong warning: “It is total and utter failure. This ship, the euro Titanic has now hit the iceberg and sadly there simply aren’t enough life boats."
'‘Financial difficulties’ force Bank Network Investments SpA (BNI) to begin a Bank Of Italy authorized freeze on all customer accounts.I'm off to withdraw some money from each of my bank accounts now!
On May 31st Bank Network Investments discretely posted an announcement on their website that they would be freezing all of their customers accounts for 1 month freeze on citing financial difficulties.
The announcement was posted and the bank gave customers 7 days to act before the Bank of Italy approved freeze went into effect.
The bank’s customers are saying they were completely unaware of the notice being posted and are just now finding out about it when they go to the bank or the ATM for the first time.
The media certainly hasn’t reported on it and news of the freeze is only now starting to make its way around the internet after a complaint was posted on the popular Italian consumer rights website Adiconsum along with a photo of a shutdown ATM.
The freezing of the customer’s deposits, in a nation that apparently doesn’t have a mechanism like the FDIC to insure customer deposits against losses, has sent a shockwaves of terror across Italy raising fears that other customers will lose their deposits entirely.
In turn speculation is growing that other banks in Italy and across Europe may soon suffer the same fate as Europe officials announce they are planning ATM and Bank withdrawal restrictions to deal with a Greece exits from the Euro.''
'It is a slow day in a little Greek village. The rain is beating down and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit. On this particular day a rich German tourist is driving through the village, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night. The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher. The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer. The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel. The guy at the Farmers’ Co-op takes the €100 note and runs to pay his drinks bill at the taverna. The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him “services” on credit. The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note. The hotel proprietor then places the €100 note back on the counter so the rich traveller will not suspect anything. At that moment the traveller comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money, and leaves town.
No one produced anything. No one earned anything. However, the whole village is now out of debt and looking to the future with a lot more optimism. And that, Ladies and Gentlemen, is how the bailout package works.
MY REPLY:
XXXX I edited your bailout email a little to help make it more effective to clients, please see below.
It is a slow day in a little Greek village, planet earth. The rain is beating down and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit. On this particular day a rich German tourist is driving through the village, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night. The owner thinks about maybe beating the tourist to death, but decides to give him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and shoves it in his pocket. He owes Piraeus Bank down the street €100,000 but has little intention of repaying it as his business has been contracting for several years. That bank also has claims of €10,000 on a butcher’s business, €50,000 on a pig farmer, €75,000 to a supplier of feed and fuel, but in turn owes €100,000 to EFG Bank which itself has fractionally reserved claims on a pub owner and a prostitute who bought two homes on 105% LTV among many others.
At that moment the traveller comes down the stairs, states that the rooms are not satisfactory, and asks for his €100 note back. The Greek innkeeper asks “what €100 note?” The German threatens to call the police. The innkeeper says “go ahead, ask for my brother who’s a Lieutenant down at the precinct, he’ll help you out.” The German storms out back into the night, €100 poorer. No one produced anything. No one earned anything. However, the whole village is still buried in debt and looking to the future with a lot more optimism at the thought that maybe the Germans really are that gullible.
And that, Ladies and Gentlemen, is how the bailout package works.
'Having said all that, the prospect of "haircuts", however half-hearted, now looms over eurozone sovereign bond-holders, not least fragile European banks. So Thursday's announcement also stressed that the €440bn (£386bn) euro European Financial Stability Facility would be "levered", allowing it to borrow to make it bigger. This is supposed to allow the eurocrats to raise cash without having to trouble national parliaments, given that they're likely to refuse.
The question of who will lend to the EFSF, on whose collateral, and who will ultimately repay the loans, was barely addressed last week. Such tricky questions will apparently be answered at the next European summit in December. Meanwhile, the fundamental disagreement between France and Germany regarding who should take the biggest losses – eurozone governments or private creditors – remains unresolved. Since Thursday's announcement, though, Germany's powerful constitutional court has issued an injunction requiring the country's full Parliament to approve any EFSF bond-buying.
What is needed, urgently, is a clean, transparent Greek default – allowing this flailing semi-developed economy to leave the eurozone, re-establish a weaker drachma and regain its self-respect. Portugal should leave too, its membership of the same currency bloc as Germany is as absurd, and self-defeating, as that of Greece. There would be further market turmoil, yes, but a few more months of volatility, leading to an ultimately more stable outcome, is surely better than the current situation where the entire world is living in fear of a massive "euroquake".
The eurocrats, of course, lack the guts to trim back monetary union to a more manageable size. Too much face would be lost. So "euroquake" fears, once viewed as outlandish, are gaining pace. Despite Thursday's deal, and all the reassurances of a "durable solution", the Italian government on Friday paid 6.06pc for 10-year money, up from just 5.86pc a month ago and a euro-era high. Such borrowing costs are disastrous, given that Rome must roll-over €300bn of its €1,900bn debt in 2012 alone. A default by Italy, the eurozone's third-biggest economy, and the eighth-largest on earth, would make Lehman look like a picnic.
The eurozone must be consolidated. World leaders should similarly force European banks to disclose their losses, we all take the hit and then we move on. Instead, we are served-up, in ever more complex variants, the same "extend and pretend" non-solutions. It gives me no pleasure to write this, but I give this deal two weeks. '
'- The '70's: Gold rose 2300% in the nine years from 1971 to 1980. Sure it is "up" 500% since 2000, but as the song lyrics go "you ain't seen nuthin' yet."More at Theo Spark from Rico.
In 1972 it rose 49.7%, in 1973 +73.5%, 1974 +60.1%, and 1979 +140%.
- COT [*1]: The LARGE Commercial "shorts" are violently cutting their positions, absolutely slashing them in Gold & Silver. The 'futures market' data is reading it's most bullish since 2003. (Eight years ago Silver was $4.40/oz., it's over $30 at present). The big boys see what's ahead and are trying to shake the leaves from the tree (flush the weak hands and the retail investors) so they can scoop up more Gold & Silver while covering their 'shorts' at a lower cost.
- PHYSICAL: If you want to get 'physical' precious metals instead of 'paper' you'll have to pay a premium. The paper ETF's GLD and SLV hold no physical, and their trading at 'discounts' should be a clue to investors that they don't have much or any physical to back the paper they have sold. In contrast, Eric Sprott's ETV's (Silver) PSLV and (Gold) PHYS trade for premiums of 20.81% to NAV [*2] for Silver PSLV, and 3.15% to NAV for PHYS (close 19 Oct 11) because they are fully backed by physical inventory. If you can find some physical to hold yourself the premiums get even higher, but it might be a good time to think of yourself as your own Central Bank while the Bureaurats in Europe and at the FED talk themselvs to death while doing nothing tangible to solve the problem.'
'There was a time, 40 years ago, when the most obvious source of council revenue was the rates, topped up by grants from central government – in return for which we could expect all the services that councils provided. But, largely below the radar, councils have discovered all sorts of ways in which they can take money off us, by levying charges, fees and penalties – some of which are actually illegal – for countless things that used to be free, or at least very much cheaper.
We have become familiar, for instance, with the practice whereby we must now pay for planning applications, anything from £150 for a garden shed to £250,000 for a large housing estate. We all know about the cost of parking fees and penalties, which earn councils £2 billion a year. And businesses must now pay billions to have their waste collected.
What most of us are less familiar with is the proliferation of new licensing charges for everything from pet shops to car boot sales, from riding establishments to “sex establishments” (up to £9,935, plus a yearly renewal fee of £5,000). Pubs that used to pay a yearly £10 to the local magistrates for their licence must now pay up to £1,905 to the council (plus £23.50 to notify the town hall if the landlord dies). Big pop festivals must pay £64,000 for a licence, even before they pay hundreds of thousands more to hire the police to provide security.
In 2007, the Lyons report on local government found that more than a quarter of councils were already earning more from such charges than they were from council tax. This has now risen to the point where “sales, fees, charges” and “other income” now yield some £25 billion a year, much the same as council tax.'
'There is not a single, public Christian church left in Afghanistan, according to the U.S. State Department.Anything on the BBC about this?
This reflects the state of religious freedom in that country ten years after the United States first invaded it and overthrew its Islamist Taliban regime.
In the intervening decade, U.S. taxpayers have spent $440 billion to support Afghanistan's new government and more than 1,700 U.S. military personnel have died serving in that country.
The last public Christian church in Afghanistan was razed in March 2010, according to the State Department's latest International Religious Freedom Report. The report, which was released last month and covers the period of July 1, 2010 through December 31, 2010, also states that “there were no Christian schools in the country.”'
'At least 200 potential terrorists are actively planning suicide attacks while living freely in Britain, intelligence chiefs have warned ministers.Oh marvelous and these people are left free to plot the deats of hundreds of Britains because ... How mnay more innocent people have to die before the fanatics are locked up or...?
A senior intelligence source has revealed that the figure is a "conservative" estimate of the threat facing the country from UK-based Islamist suicide bombers.
The would-be killers are among 2,000 extremists who the security services have said are based in Britain and actively planning terrorist activity of some kind. '
'Facebook has admitted that it has been watching the web pages its members visit – even when they have logged out.Facebook, like Google before them, are saying it was a mistake...
In its latest privacy blunder, the social networking site was forced to confirm that it has been constantly tracking its 750million users, even when they are using other sites.'
'How silly of me not to realise we could simply create £75 billion to sort out our problems. Now we are told we can, maybe we should ask what we should do with the new money?I could not put it better myself, so I haven't.
It seems such a pity just to go on buying government bonds with it. After all, taxpayers have £199 billion of them in the Bank already. They are not a lot of fun, and do not seem to do a lot of good. Once you have got some, having more does not add a lot.
We could, for example, give every man, woman and child in the country £1250 each to spend as they like. They could use it to pay off the credit card debt, or meet the tax bills on their petrol. It would help with the Council Tax and the VAT. As the main problem over the last year has been the drop in consumer spending, this would offer a way of boosting it. Funny how the authorities never want the punters to have any of the new money.
Or we could use the £75 billion to recapitalise the state owned banks. They could write off their losses for that, and have a load of new capital to lend. That too could do a lot to promote recovery.
We could decide to spend it on a big capital programme. It would buy plenty of roads, railway capacity, energy supply and broadband access. We could all be given free shares in the projects and companies established with the money.
Or the government could just use the money to pay its bills direct, instead of going through the mechanics of buying in old government loans, and then issuing new ones to pay for the excess of spending over income.
Come to think of it, why don’t we always pay for public expenditure like that? Why do we go through the painful process of demanding tax revenue from people, when you could just print some more tenners? Is there a snag the MPC haven’t spotted yet? Why pause at £275 billion?
The Bank will have a nice tidy income from the gilts it buys in. The government could simply cancel all the bonds the Bank owns, to get its interest bill down. Come to think of it, why stop at just £275 billion for doing that? The more you buy in and cancel , the less interest you have to pay.That would monetise the lot, and should prevent the deflation the Bank must fear.
Why do so many spoil sports and jeremiahs write in to this site to say this is a bad idea? Does the Bank think there are any limits to electronic money?
We are owed a proper explanation from the Bank of why they think printing money when inflation is already 5.2% is a good idea. Just telling us yet again that inflation will fall and that we are in the midst of the worst crisis ever is not a sufficient argument for actions that savers will fear.
Maybe the Bank does worry that the banking problems remain acute. If so, the right approach is to seek actions to create strong banks out of the weak banks that currently spook the system. We need honest money.
In the UK there is no substitute for sorting out RBS.'
'The French and German leaders have called for "true economic governance" for the eurozone in response to the euro debt crisis.
Speaking at a joint news conference, German Chancellor Angela Merkel and French President Nicolas Sarkozy urged much closer economic and fiscal policy in the eurozone.That's the EU in a nutshell: the answer to every problem is 'ever closer union' and EU-wide taxation.
Ms Merkel said that further integration would be a "step-by-step" process.
They also advocated a tax on financial transactions to raise more revenues.'
'The only reason we are still able to roll over our sovereign liabilities is because, for the most part, the true extent of the fiscal risks we face hasn't yet been priced in to yields on global markets. What's happening on the eurozone's periphery, even if the current crisis is averted, is just the beginning.'There's plenty more in Liam's Telegraph article but I warn you it is not a cheerful read.
'In my view, a sudden and massive re-pricing of Western sovereign risk will happen much sooner than is widely expected. For now, global investors are in denial, assessing that default risks in many of the big emerging markets are much greater than in the West.Who is Liam Halligan. He is chief economist at Prosperity Capital Management. Greece, Ireland, now Italy the EuroZone is not in a good state and most people are in denial.What should we do, how do we survive the coming financial apocalypse? I don't think any but the super-rich can or will.
This is nonsense – particularly when you consider that the governments of the "advanced" countries are tacitly reliant on debasing and depreciating their currencies in order to lower their liabilities, so imposing on their creditors a form of "soft default".
At some point soon, and it brings me no pleasure to write this, private sector Western investors, together with our emerging market creditors, will drastically cut their exposure to Western sovereign debt. This will come as a rude awakening to the US and the big European sovereigns, who for years now have abused their "risk-free" status.'
