Monday, November 7, 2011

Late October Update

*Many of the charts can be clicked on to enlarge*

All the major points regarding Europe have only been amplified over the last months, and I believe we are fast approaching a real resolution the European Debt Crisis, one that will involve some sort of an actual default of debt. We now we have open discussion of countries leaving the Euro whereas in the recent past politicians didn’t want to even acknowledge that possibility.

France & German politicians continue to try to save their countries banks whose ‘assets’ are filled with the debt obligations issued by Greece, Italy, Ireland, Spain & Portugal (among others), by trying to get the market to believe that they have the situation under control with the EFSF, leveraging the EFSF, IMF support (which is back door FED support), as well as trying to convince China and other BRIC nations to buy in. –these attempts have been unsuccessful.

Note France & Germany right up there with the big PIIGS

If there is a default France & Germany will recapitalize or nationalize their countries banks, and in doing so run the risk of downgrades on their own nations credit ratings, which would translate into higher interest payments (and the negative debt spiral ala Greece). Which is why the Eurocrats got the banks to ‘voluntarily’ take a 50% hair cut on the value of their Greek Debt so as not to trigger the Greek default CDS derivatives nightmare (definition of ‘default’ courtesy of the lobby group ISDA International Swaps & Derivatives Association).

The chart below is quite a shocker, showing the amount of debt that is maturing and that needs to be rolled over over the next few years. The ECB continues to fight to keep rates low for Italy, by buying in the bond market, the chart below helps explain the reasoning, see how much larger they are than the PIGS. Too big to fail, but too big to save.

The producing, emerging countries of the world and other continue to buy gold

-The ECB president Trichet stepped down, and former Goldman Sachs Italian Draghi is president, his first stop was lowering interest rates, which supports those full of debt, and hurts savers and capital accumulation, also potentially weakening the Euro.

-Germany has ruled out letting their Gold be part of the backing for the ESFS.

-The BOJ (Bank of Japan) intervened again in the currency market to devalue the yen, estimations run up to 500 million USD. Because of the structure of the MOF (Ministry of finance) & the BOJ they are limited in the ability of them to carry out their operations.

-Many want the FED to be the lender of last resort for the European bank system, but with an election coming up they would be putting themselves in the spot light by coming to their aid as they did in 2008.

-The market has been violently trading on rumors out of Europe, and the U.S. dollar and the U.S. Treasury/Government are benefitting from all this negative press (resulting in lower interest rates), as the European inter-bank lending dries up, and people put their money at the ECB, the FED and U.S. Bond market. Right now the U.S. is the prettiest girl in the ugly contest, when Europe settles down or actually figures itself out, focus will return to the U.S. It may begin with the up-coming lack of results from the 'Super Committe' due out on November 23rd, 2011.

Deposits growing at the ECB = withdrawls from elsewhere within the bank system;

-At the same time the Chinese and others have been selling off treasuries, taking advantage of this ‘strength’ to divest some of their holdings.

The Chinese are happy to use their surplus from exports to support debt markets in Europe and/or the U.S., as the chart below shows what the status quo has been, but when those dollars/euro's don't come in en masse they cannot go back to the U.S./Europe en masse;

-U.S. savings rate continues to deceleratem, which temporarily is 'good' for the consumer based economy, sending more to producing nations;

-U.S. housing prices continue to slide, not the ATM's for expenditures as in the past;

Those on food stamps continue rise;

Presently and projected there is not much leftover for extra afer manadatory programs are paid for,

-This brings me to the Occupy WallStreet movement which continues to gain momentum, rightly upset at wall street and banks who privatized gains and socialized losses, who executives took 'golden parachute' retirement packages at the publics expense. This movement seems to be on the verge of being taken over by the powers that be; demanding more 'regulation' more 'taxes' & 'redistribution of wealth' by the government, by the same government system that enabled the bailouts, that supported those who made bad business decisions so they could stay in business because they are connected politically and economically. They should have been allowed to fail, reap what they sowed. Only with the constraint of sound, honest money would this have been possible. Obama’s administration has from the beginning been filled with those from Wall Street, the banks and the FED. Here are some interesting charts;

Obama is not the 'outsider' the bearer of 'change' that he was hoped to be;

Meanwhile the money has been, and continues to be debased

and diluted;

ontop of debasement & devaluation the amount of income has also fallen;

-The U.S. federal government is running head long into the next ‘Debt Ceiling’ and the ‘Super Committee’ doesn’t look like it is going to meet it’s low-bar target of $1.5 trillion debt reduction, and it looks like they will not even be able to delay this until after the election.

This chart shows the amount of jobs needed just to keep up with population growth

Meanwhile many stock markets have turned up, here are some charts to keep things in perspective;

-Remember countries such as Italy are super powers when it comes to their Gold holdings, and as long as money is not something tangible, can be created with a click of the mouse this cat & mouse, high stakes poker game will continue, one of the final hands that will be played is the re-monetization gold (silver) card. Until then it’s continuation with currency wars; competitive devaluations, quantitative easing etc.

-MF Global (one of the main brokerage firms and 1 of the 22 Primary dealer), has gone bankrupt because of CDS exposure, the firm (run by a former governor former Goldman Sachs man; Mr, Corzine) broke the law (or so it seems) and went into it’s supposed segregated customer accounts to cover the firms misplaced bets. The CFTC & the FBI have begun investigations. Many customers have only received 60% of their money. So we could be in for a many forced liquidations over the next week. Hopefully this will be a wake up call for those who haven’t yet withdrawn the unearned trust given to many of these institutions.

Please click here to read from a recent WSJ article from Ron Paul If that doesn't work please copy and paste the URL below in your browser;

In the meantime keep stacking gold/silver, there continues to be a transfer of purchasing power from those who haven't got it to those who do!