Gold To Be Remonetized

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Interesting interview with John Butler over the future and eventual re-monetization of Gold. Butler claims there is a massive financial earthquake to come with paper currencies are repudiated. 2008 was only a fore-shock.

The German Bundesbank under the Constitution can go to court if it feels the German currency (i.e euro) is under threat from the ECB. In that case the markets would immediately react negatively and the “shit would hit the fan”. In other words, the future of the euro may well be in the German Bundesbank’s hands.

German Growth Rate For 2013 Drops Massively

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The Bundesbank massively cut its growth forecasts for 2013 for the German economy from previous estimate of 1.6% down to 0.4%. Such a huge drop in growth forecast shows even the mighty German economy which has benefited from a weak euro is now feeling the pressure. Its the last thing Merkel needs as she faces an election next year with a weakened economy and a growing bill for bailing out the rest of Europe. Couple that with the TARGET2 imbalance and a strong possibility of Italy or Spain needing a bailout, she could be facing an angry electorate.

germanThe German economy could slam into reverse this winter as the crisis in the eurozone intensifies, the country’s central bank warned yesterday.

The Bundesbank slashed its growth forecasts in an abrupt reversal for Europe’s powerhouse economy. It now expects Germany to grow by 0.7 per cent this year and just 0.4 per cent next year.

It was previously expecting growth of 1 per cent in 2012 and 1.6 per cent in 2013.

But the Bundesbank added that there was a risk of recession – defined as two quarters of contraction in a row – this winter. ‘There are indications that economic activity may fall in the final quarter of 2012 and the first quarter of 2013,’ it said. Germany has been the key driver of an otherwise moribund eurozone.

Experts warned the country’s slump is ‘a big reality check’ and casts doubt over the future of the single currency. Any setback in the eurozone, Britain’s major trading partner, raises the risk of a new recession here. The Bundesbank blamed the crisis crippling the eurozone for the downturn amid signs that German patience with struggling economies such as Greece and Spain is wearing thin. ‘Germany cannot prosper alone,’ it said. ‘It has a particular interest in the welfare of its partners.’

The gloomy analysis came a day after the European Central Bank warned that the 17-nation eurozone will remain mired in recession until late next year. ECB president Mario Draghi said a ‘gradual recovery’ will not start until ‘later in 2013’ as the region lurches from one crisis to the next. The eurozone sank back into recession over the summer as the malaise in peripheral states spread to Germany and France.

The German government put on a brave face in response to the Bundesbank forecast. A spokesman for Chancellor Angela Merkel said: ‘The government is cautiously optimistic that we’ll keep growing.’

Source: Daily Mail



Spain To Request Bailout On Sept 13-14

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As ZeroHedge have put it, Goldman Sachs were on the button when it came to Draghi’s announcement yesterday regarding the new Outright Monetary Transactions (OMT) program. Since Goldman Sachs practically runs the ECB, their latest prediction is for Spain to request a bailout from the ESFS by Sept 13-14.

Yesterday, when Bloomberg leaked every single detail of today’s ECB announcement, which thus means today’s conference was not a surprise at all, yet the market sure would like to make itself believe it was, we noted that everything that was leaked, and today confirmed, came from a Goldman memorandum issued hours before. Simply said everything that happens at the ECB gets its marching orders somewhere within the tentacular empire headquartered at 200 West. Which is why when it comes to the definitive summary of what “happened” today, we go to the firm that pre-ordained today’s events weeks ago. Goldman Sachs.Perhaps the most important part is this: “September 13-14: Spain to make formal request for EFSF support at the Eurogroup meeting. With a large (and uncovered) redemption looming at the end of October (and under pressure from other Euro area governments), we expect Spain to move towards seeking support.” In other words, Rajoy has one more week before he is sacked and the Spanish festivities begin.

Looking ahead over the coming months are the predictions:

Looking forward, we expect the following time-line in our base case:

  • September 12: German constitutional court gives its blessing to the ESM. Although we expect some procedural riders to be attached to the decision, this would allow German ratification to be completed and the ESM to be established in relatively short order.
  • September 13-14: Spain to make formal request for EFSF support at the Eurogroup meeting. With a large (and uncovered) redemption looming at the end of October (and under pressure from other Euro area governments), we expect Spain to move towards seeking support.
  • Second half of September: Conditionality required by EFSF will have to be accepted by the Spanish authorities, presumably requiring a parliamentary vote. In parallel, approval of other Euro area countries for the provision of EFSF support will need to be obtained: in some countries (notably Germany), this will also require parliamentary approval.
  • By end-September / early October: Memorandum of Understanding (MoU) codifying conditionality is signed, formalising the availability of EFSF support for Spain. At this point, the necessary conditions established by Mr. Draghi for ECB purchases of sovereign debt will have been met, well ahead of the large Spanish bond redemption.

Source: ZeroHedge

Commerzbank for Bailout

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A number of sources today have reported that Commerzbank is on the verge of asking the German Government for a bailout as it struggles to raise funds to cover the losses on loans it has. According to Sky News

“Intense talks” have been going on for several days, according to sources who spoke to the news agency Reuters.

Several people familiar with the matter told the agency that the aim was to reach an agreement in principle by the Christmas holidays.

Commerzbank told Sky News it does not comment on market rumour and speculation.

Last week, the bank said it needed to raise an extra 5.3 billion euros by June 2012 to cope with a potential default of European government debt under new rules laid down by the European Banking Authority.

t has until January to explain how it will raise the money.

The bank, which has 14 million customers, is trying to raise the extra funds from private investors and has said it could also sell off parts of its business, cut costs or reinvest its profits to shore up its reserves.

Commerzbank’s chief financial officer Eric Strutz said: “We are aware of our responsibility for the supply of credit to the German economy and we will continue to stand by our customers.

“We stand by our intention not to make use of additional public funds,” he said.

Banking and Finance reporter at the Wall Street Journal, David Enrich, told Sky News he was not confident the money could be found through the usual channels.

He said: “The (German) Government already owns about 25% of Commerzbank…they have other options other than going to the Government.

“They can sell assets, they can try and get money from private investors…the Government is likely to come back in and act as a fallback option.”

Shares in Commerzbank have fallen by 74% in value this year.

Fallen how much ? 😉

Also further news from ZeroHedge on the matter.

Germany struggles to sell its bonds

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Today Germany struggled to sell its bonds. The German 10-year bund yield rose sharply from 1.92% to over 2.06% as it failed to get bids on 35% of its bunds. As reported in GoldCore

This is one of Germany’s worst auctions since the launch of the Euro with the Bundesbank having to pick up nearly 40% of the 6 billion euros on offer.

The German auction in turn led to further weakness in European equity markets. Asian equity indices followed US equities lower after news of a new US bank stress test and then the poor Chinese manufacturing data.

The bond auction in Germany is a disaster. If Germany has to buy its own bonds, it is frightening to think how other European nations, including France, will fare at bond auctions in the coming weeks.

Reuters went on to report that German Bunds performed worse than US T-Notes or UK Glits. Now we know things are bad 😉

If the crisis spirals out of control, some fear that it could reach a magnitude that would hit Germany as well by sending it into a deep recession. On the other hand, any solution to the crisis is likely to involve a higher fiscal bill for Germany.

“It is a complete and utter disaster,” said Marc Ostwald, strategist at Monument Securities in London. “If Germany can only manage a 0.65 cover in actual terms for what is going to be their next benchmark then what hope for everybody else?”

“It really tells you that the Bund yields are at the completely wrong level … never mind that they are a safe haven. There’s certainly a partial element of ‘they (investors)would rather not have euros’ in there.”

Bund futures were last down half-a-point on the day at 136.75. Ten-year yields were 5.8 basis points higher at 1.969 percent, yielding more than U.S. T-notes for the first time since early October.

UK Gilts were also outperforming Bunds with yield premium for holding 10-year British bonds narrowing to its tightest since August at 15 bps.

On an earlier post we reported by Asia beginning to sell off German Bunds.

Germanys war on the pound, You’ll join euro sooner than you think

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An article in the Daily Mail claims that German finance minister Wolfgang Schauble has suggested that the UK would have to join the euro.

Germany last night declared that Britain would be forced to scrap the pound and join the euro – as David Cameron returned home empty-handed from crisis talks in Berlin.

In a highly-provocative intervention, German finance minister Wolfgang Schauble suggested the UK’s struggling economy meant the pound was doomed, and urged the Prime Minister to back Europe’s ailing single currency.

Mr Schauble said the euro would emerge stronger from the current crisis – leaving Britain on the sidelines unless it signed up. He said Britain would be forced to join ‘faster than some people on the British island think’ – despite a pledge by Mr Cameron never to do so.


But Jean-Claude Juncker, head of the powerful Euro Group of eurozone finance ministers, said Britain was in no position to comment on the crisis as its deficit was twice the European average.

Mr Schauble’s comments came as Mr Cameron arrived to a hostile reception in Berlin for talks on the eurozone crisis with German Chancellor Angela Merkel. Senior members of Mrs Merkel’s ruling coalition voiced their irritation at London’s ‘lecturing’ over the crisis.

Leading German magazine  Der Spiegel ran a prominent feature describing Britain as the ‘dis- eased empire’.

Berlin has drawn up secret plans designed to bypass the threat of a British referendum on treaty reforms.

A leaked German memo stated: ‘Limiting the effect of the treaty changes to the eurozone states would make ratification easier, which would nevertheless be required by all EU member states (thereby less referenda could be necessary, which could also affect the UK).’ The memo will add to fears that Germany wants to use the eurozone crisis to create a European ‘super state’ with its own tax and spend policies.
Mrs Merkel is determined to establish a new European Monetary Fund with powers to intervene directly in the economies of member states.

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