87% Chance of Stock Market Crash By End Of Year

George Soros dumping 80% of his stock holdings might give a clue towards a stock market crash this year. The article below from Market Watch estimates a 87% probability with 10 predictions, but never underestimate Bernanke and the Fed to keep the show going. One thing is for sure its just a matter of time and will far worse than anything experience in 2008. You were warned.

In “Stocks for the Long Run,” economist Jeremy Siegel researched all the “big market moves” between 1801 and 2001. Bottom line: 75% of the time, there is no rationale for “big moves.” No one can predict them. Maybe technicians and traders can pick short-term moves the next second. Maybe tomorrow. But the long-term “big market moves?” No way.

So why predict an “87%” chance of another meltdown in 2013? Because in the real world of statistical probabilities, historical facts and expert opinions danger signals are flashing wild. In mid-2008 we summarized the predictions of 20 experts over several years. Predicted a meltdown in a few years — markets crashed two months later. Fast.

In retrospect, it was inevitable, thanks in part to the hype, arrogance and incompetence of Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson who failed to prepare America.

The warnings are again accelerating. And so is the happy talk from Wall Street casino insiders, about rallies, housing recoveries, perpetual cheap money. Don’t listen. The next crash will happen by year-end.

Yes, there’s a 13% chance the next Fed chairman will keep printing cheap money into 2014. But on New Years Eve our aging bull will be 4½ years old, well past Bill O’Neill’s “average” 3.75 years for putting this bull out to pasture.

So unless you’re shorting, all bets on Wall Street casinos for 2014 are megarisk, like 2008. Like a Stephen King horror film, you feel it coming. Could happen anytime, even tomorrow, says Siegel’s research, or the unpredictable logic in Nassim Taleb’s “Black Swan.”

Here are 10 other predictions adding credibility to a crash by the end of 2013:

1. Warren Buffett ‘guaranteed’ new bubble, new recession four years ago

Actually he saw it coming early. Shortly after the 2008 crash Warren Buffett was asked: “Do you think there will be another bubble leading to a huge recession?” Yes, “I can guarantee it.” Cycles happen.

Next question: “Why can’t we learn the lessons of the last recession? Look where greed has gotten us.” Then with the impish grin of a Zen master, Uncle Warren replied, “Greed is fun for a while. People can’t resist it.” But “however far human beings have come, we haven’t grown up emotionally at all. We remain the same.”

Yes, one of world’s richest men was personally guaranteeing another bubble, another “huge recession.” Now, four years later, that time bomb is ticking louder, closer.

2. Federal Reserve’s Council: ‘Unsustainable bubble in stocks, bonds’

The International Business Times just reported on the minutes of the Federal Reserve Board Advisory Council’s mid-May meeting. Members expressed “strong concerns over the Fed’s low-interest-rate policies and its bond-purchase program, which they say could trigger unmanageable inflation and an ‘unsustainable bubble’ in the stock and bond markets.” Some “pointed out that near-zero interest rates could not be sustained in the long run.”

Why? “A spike in inflation could force the Fed to hike interest rates, hurting business confidence and consumer spending, and prove disastrous to the U.S. economy, which is still clawing its way back from the debilitating effects of the 2008 financial crisis.”

Get it? The Fed and Wall Street insiders hear something’s dead ahead.

3. Peter Schiff is ‘doubling down’ on his ‘doomsday’ prediction

Euro Pacific Capital CEO Peter Schiff, author of “The Real Crash: America’s Coming Bankruptcy,” is “not backing away from doomsday predictions about the U.S. economy,” wrote MarketWatch’s Greg Robb last week. He sees the no-win scenario: “Either the Fed stops QE and starts selling the Treasurys and mortgage-related assets on its balance sheet, thus triggering a recession, or else faces an inevitable, even-worse, currency crisis.”

The “idea that the U.S. economy is in recovery is based entirely on rising asset prices … Asset prices are only rising because rates are low. As soon as rates go back up, asset prices will” fall.

Last year on Fox Business Schiff warned: “We’ve got a much bigger collapse coming.” Then last week: “I am 100% confident the crisis that we’re going to have will be much worse than the one we had in 2008.” His 100% beats our 87%.

4. Bill Gross: ‘Credit supernova’ turning 2013 bull into big bad bear

Yes, Gross sees a ‘credit supernova’ dead ahead. His firm has $2 trillion at risk when the Federal Reserve cheap money finally explodes in America’s face, brings down the economy, again. Gross warns: “Investment banking, which only a decade ago promoted small-business development and transition to public markets, now is dominated by leveraged speculation and the Ponzi finance.”

Bernanke’s Ponzi finance is self-destructive, lethal and massive. Endless cheap money upsets the balance between credit expansion and real economic growth, resulting in diminishing returns. Very bad news.

5. Gary Shilling predicts the ‘grand disconnect’ will trigger ‘shocker’

Yes, economist Gary Shilling predicts a “shocker” before the end of the year. Worse because investors are “paying little attention to weak and declining economies around the world, and concentrating on the flood of money being created by central banks.”

The “grand disconnect” is driving up stocks “while the zeal for yield, amidst low interest rates, benefited junk bonds and other low-quality debt.” Wall Street’s blowing a nasty new bubble, repeating the run-up to the 2008 crash.

6. ‘Kaboom ahead,’ an ‘ominous third phase’ of 2008 Meltdown

“Bond guru buying stocks. Sees ‘Kaboom’ Ahead,” shouted the Bloomberg Market headline about Jeffrey Gundlach, CEO of Doubleline Capital. Earlier he predicted the 2008 meltdown. But now he says the real damage is yet to come.

“The first phase of the coming debacle consisted of a 27-year buildup of corporate, personal and sovereign debt. That lasted until 2008.” Then cheap money “finally toppled banks and pushed the global economy into a recession, spurring governments and central banks to spend trillions of dollars to stimulate growth.” Next, an “ominous third phase,” a bigger crash, whose impact will far exceed the damage of 2008.

What’s he buying? Hard assets. Plus “sitting on cash,” waiting to scoop up more at “fire-sale” prices, “it’s worth waiting.”

7. ‘Tick, tick … boom!’ InvestmentNews sees bond crash dead ahead

A few months ago InvestmentNews front page is so powerful you can hear sirens on a flashing, warning in huge bold type: “Tick, tick … boom!” Their readers: 90,000 professional advisers who trust INews forecasts.

This was the biggest warning since 2008: “What will your clients’ portfolios look like when the bond bomb goes off?” Not “if” but “when.” Yes, they expect the bond bomb to explode soon.

Wake up, INews sees extreme dangers for millions of Americans who have “no idea what’s about to happen to them … Tick, tick … boom!”

8. Reagan’s budget director sees an ‘apocalypse … get out now’

Recently David Stockman warned of an economic “apocalypse” dead ahead, “arising from a rogue central bank that has abetted the Wall Street casino, crucified savers on a cross of zero interest rates and fueled a global commodity bubble that erodes Main Street living standards through rising food and energy prices … get out of the markets and hide out in cash.”

Stockman’s not merely warning of a crash ending the bull rally since 2009. This “grand bubble” has been building for 32 years since the Reagan revolution. He’s atoning for a generation of politicians with no moral compass: “Capitalism has morphed into a monopoly ruled by politicians who are serving a wealthy elite. Competition is a joke.”

9. Nouriel Roubini: ‘Prepare for the perfect storm’ in an unstable world

Yes, prepare, prepare, prepare. Roubini told Slate.com: Our world is a game of dominos, any one of which could put in motion a global collapse: “Sooner or later, another ugly fight” over debt, markets will “become spooked” with “a significant amount of drag … on an economy that has grown at barely a 2% rate.”

Scanning the world’s hot-button triggers in the euro zone, China, BRICs, Iran, Middle East, Pakistan, oil markets, Dr. Doom warns, the “drums of actual war will beat harder.” Any one of these trends “alone would be enough to stall the global economy and tip it into recession.”

10. Jeremy Grantham: America’s growth and prosperity ‘gone forever’

Grantham’s GMO firm manages $100 billion. He focused on Richard Gordon’s disturbing research: “Is U.S. Economic Growth Over?” Yes, says Grantham, “the U.S. GDP growth rate … is gone forever.”

For centuries before the Industrial Revolution growth was under 1%. Then the growth trend till “1980 was remarkable: 3.4% a year for a full hundred years,” driving the American dream. “But after 1980 the trend began to slip,” says Grantham,“ by over 1.5% from its peak in the 1960s and nearly 1% from the average of the last 30 years.” By 2100, America’s GDP growth will fall back to where it started before the Industrial Revolution, to an annual rate less than 1%.

Buffett guarantees … Schiff doubles down … Gross sees supernova … Shilling’s grand disconnect … Gundlach’s ominous third phase … Stockman’s apocalypse … InvestmentNews tick, tick, boom … Roubini’s perfect storm … Grantham’s growth gone forever … place your bets at Wall Street’s casinos … the risk’s only 87% … or is it 100%?

Source: MarketWatch

18 Signs That Massive Economic Problems Are Erupting All Over The Planet

With the “Hindenburg Omen” (reports to indicate a major stock market correction) triggered in the last week a lot of investors are getting a little worried. In the meantime global economic indicators continue to worsen.

The following are 18 signs that massive economic problems are erupting all over the planet…

#1 The eurozone is now in the midst of its longest recession ever.  Economic activity in the eurozone has declined for six quarters in a row.

#2 Italy’s economy has now been contracting for seven quarters in a row.

#3 Industrial production in Italy has fallen for 15 months in a row.  It has now fallen to its lowest level in about 25 years.

#4 The number of people that are considered to be “seriously deprived” in Italy has doubled over the past two years.

#5 Consumer confidence in France has just hit a new all-time low.

#6 The number of unemployed workers seeking a job in France has hit a brand new all-time record high.  Many unemployed workers in France are utterly frustrated at this point…

“I’ve sent CVs everywhere, I come to the unemployment agency every day, for 3 or 4 hours to look for work as a truck driver and there’s never anything,” said 42-year old Djamel Sami, who has been unemployed for a year, leaving a job agency in Paris.

#7 Unemployment in the eurozone as a whole has just hit a brand new all-time record high of 12.2 percent.

#8 Youth unemployment continues to soar to unprecedented heights in Europe.  The following is from an article that was recently posted on the website of the Guardian that detailed how bad things are getting in some of the worst countries…

In Greece, 62.5% of young people are out of work, in Spain it’s 56.4%, then Portugal with 42.5%, and then Italy with 40.5%.

#9 Youth unemployment is being partially blamed for the worst rioting that Sweden has seen in many years.  The following is how the Daily Mail described the riots…

Sweden is reeling after a third night of rioting in largely run-down immigrant areas of the capital Stockholm.In the last 48 hours violence has spread to at least ten suburbs with mobs of youths torching hundreds of cars and clashing with police. It is Sweden’s worst disorder in years and has shocked the country and provoked a debate on how Sweden is coping with youth unemployment and an influx of immigrants.

#10 An astounding 10 percent of all banking deposits were pulled out of banks in Cyprus during the month of April alone.

#11 Economic growth in India is the slowest that it has been in an entire decade.

#12 Suddenly Australia is experiencing some tremendous economic challenges.  The following quotes are from a recent Zero Hedge article…

-“We’re seeing a much sharper contraction in the Australian economy than we’d anticipated four or five months ago”. Coffey MD, John Douglas. The engineering group has seen its shares, which traded above $4 in 2007, hit 10c last week. -“By 10am, the Fitness First gym in the city is packed full of brokers who’ve had a gutful of sitting at their desk doing nothing – salary cuts are starting and next it will be jobs” Perth broker -“Oh mate, the funding market is dead. You are now seeing a few deeply discounted rights issues for those that are reaching desperate levels ….. liquidity has completely disappeared” Perth broker

#13 The financial system in Japan is beginning to spin wildly out of control.  The Japanese stock market has now declined about 15 percent from the peak, and many believe that the yen will continue to get weaker and that interest rates in Japan will start to rise significantly.

#14 Global cash flow is declining at a rate not seen since the last recession.  This indicates that we could be headed for a global credit crunch.

#15 Real wages continue to decline in the United States.  Even though we are being told that the U.S. is experiencing an “economy recovery”, real weekly earnings have declined from $297.79 in 2010 to $295.49 in 2011 to $294.83 in 2012.  (The preceding calculation is based on 1982-1984 dollars)

#16 Wall Street is buzzing about the fact that “the Hindenburg Omen” appeared at the end of last week.  So exactly what is “the Hindenburg Omen”?  The following are the criteria that are used to determine whether it has appeared or not…

1. The daily number of NYSE new 52 Week Highs and the daily number of new 52 Week Lows must both be greater than 2.2 percent of total NYSE issues traded that day. 2. The smaller of these numbers is greater than or equal to 69 (68.772 is 2.2% of 3126). This is not a rule but more like a checksum. This condition is a function of the 2.2% of the total issues. 3. That the NYSE 10 Week moving average is rising.4. That the McClellan Oscillator ( a market breadth indicator used to evaluate the rate of money entering or leaving the market and interpretively indicate overbought or oversold conditions of the market)is negative on that same day.5. That new 52 Week Highs cannot be more than twice the new 52 Week Lows (however it is fine for new 52 Week Lows to be more than double new 52 Week Highs). When the Hindenburg Omen makes an appearance, it supposedly means that the U.S. stock market is likely to experience a serious decline within the next 40 days.

#17 As I wrote about the other day, the SentimenTrader Smart/Dumb Money Index is now the lowest that it has been in more than two years.  That means that lots of “smart money” has been getting out of the market and lots of “dumb money” has been pouring in.

#18 Margin debt on the New York Stock Exchange has set a new all-time high.  The following is from a recent Market Oracle article…

Margin debt—that’s the amount of money borrowed to purchase stocks—on the New York Stock Exchange (NYSE) reached its all-time high in April. Margin debt on the NYSE registered at $384.3 billion as the key stock indices hit new record-highs. (Source: New York Stock Exchange web site, last accessed May 29, 2013.) The highest margin debt ever reached prior to this was in July of 2007, when it stood just above $381.0 billion. At that time, just like today, the key stock indices were near their peaks and “buy now before it’s too late” was the prominent theme of the day

Whenever margin debt spikes like this, a stock market crash almost always follows.  If you doubt this, just check out the chart in this article.

Wall Street has had a good couple of years, but it has been a “false prosperity” that has been pumped up by reckless money printing by the Federal Reserve.  Just like all of the other stock market bubbles that we have seen in recent years, this one is going to burst too.  And as Marc Faber recently pointed out, this bubble has been particularly beneficial to the wealthy…

The Fed has been flooding the system with money. The problem is the money doesn’t flow into the system evenly. It doesn’t increase economic activity and asset prices in concert. Instead, it creates dangerous excesses in countries and asset classes. Money-printing fueled the colossal stock-market bubble of 1999-2000, when the Nasdaq more than doubled, becoming disconnected from economic reality. It fueled the housing bubble, which burst in 2008, and the commodities bubble. Now money is flowing into the high-end asset market – things like stocks, bonds, art, wine, jewelry, and luxury real estate. Money-printing boosts the economy of the people closest to the money flow. But it doesn’t help the worker in Detroit, or the vast majority of the middle class. It leads to a widening wealth gap. The majority loses, and the minority wins.

The fact that the U.S. stock market has set new all-time record high after new all-time record high in recent months means very little.  At this point, the stock market has become completely divorced from economic reality.  When this current bubble bursts, the adjustment is going to be very painful.  Wall Street will likely whine and complain and ask for more bailouts, but they may find that authorities are not nearly as sympathetic this time.

Much of the rest of the world is already experiencing the next major wave of the economic collapse.  Reckless money printing by the Fed and reckless borrowing and spending by the federal government may have delayed the inevitable in the United States for a little while, but those measures have also made our long-term problems even worse.

There was one piece of advice that Ben Bernanke included in his commencement speech to students at Princeton recently that I thought was particularly ironic…

“Don’t be afraid to let the drama play out.”

Will he take his own advice when the next great financial crisis strikes the United States?

That seems very unlikely.

Unfortunately, things are not going to be so easy to fix this next time.

What happened back in 2008 was just a preview.

What is coming next is going to absolutely shock the world.

Source: theeconomiccollapseblog.com

US: Fiscal Disaster Up Ahead

Excellent video presentation from McAlvaney Wealth Management of the fiscal disaster up ahead and how to prepare for it.

Another Example Of Rigging The Stock Market

High frequency trading on steroids. Nanex spotted the trading activity when 4% of the traffic volume were for orders by a computer algorithm where none of them ended in a single trade. Quite clearly the intention was to move the market in a certain direction. It’s just another example that the whole financial system is rotten to the core.

A single mysterious computer program that placed orders — and then subsequently canceled them — made up 4 percent of all quote traffic in the U.S. stock market last week, according to the top tracker of high-frequency trading activity. The motive of the algorithm is still unclear.

The program placed orders in 25-millisecond bursts involving about 500 stocks, according to Nanex, a market data firm. The algorithm never executed a single trade, and it abruptly ended at about 10:30 a.m. ET Friday.

“Just goes to show you how just one person can have such an outsized impact on the market,” said Eric Hunsader, head of Nanex and the No. 1 detector of trading anomalies watching Wall Street today. “Exchanges are just not monitoring it.”

Hunsader’s sonar picked up that this was a single high-frequency trader after seeing the program’s pattern (200 fake quotes, then 400, then 1,000) repeated over and over. Also, it was being routed from the same place, the Nasdaq

 “My guess is that the algo was testing the market, as high-frequency frequently does,” says Jon Najarian, co-founder of TradeMonster.com. “As soon as they add bandwidth, the HFT crowd sees how quickly they can top out to create latency.” (Read More: Unclear What Caused Kraft Spike: Nanex Founder.)

Translation: The ultimate goal of many of these programs is to gum up the system so it slows down the quote feed to others and allows the computer traders (with their co-located servers at the exchanges) to gain a money-making arbitrage opportunity.

The scariest part of this single program was that its millions of quotes accounted for 10 percent of the bandwidth that is allowed for trading on any given day, according to Nanex. (The size of the bandwidth pipe is determined by a group made up of the exchanges called the Consolidated Quote System.)

Source: CNBC

Insiders Preparing For Something Big

The signs are appearing more frequently that a massive financial collapse is a very distinct possibility. One big clue is to follow what the “insiders” are doing.

 Time is running out !

If you want to figure out what is going to happen next in the financial markets, carefully watch what the insiders are doing.  Those that are “connected” have access to far better sources of information than the rest of us have, and if they hear that something big is coming up they will often make very significant moves with their money in anticipation of what is about to happen.  Right now, Wall Street insiders and central banks all around the globe are making some very unusual moves.  In fact, they appear to be rapidly preparing for something really big.  So exactly what are they up to?  In a previous article entitled “Are The Government And The Big Banks Quietly Preparing For An Imminent Financial Collapse?“, I speculated that they may be preparing for a financial meltdown of some sort.  As I noted in that article, more than 600 banking executives have resigned from their positions over the past 12 months, and I have been personally told that a substantial number of Wall Street bankers have been shopping for “prepper properties” this summer.  But now even more evidence has emerged that quiet preparations are being made for an imminent financial collapse.  That doesn’t guarantee that something will happen or won’t happen.  Like any good detective, we are gathering clues and trying to figure out what the evidence is telling us.

Why Is George Soros Selling So Much Stock And Buying So Much Gold?

I am certainly not a fan of George Soros.  He has funneled millions upon millions of dollars into organizations that are trying to take America in the exact wrong direction.

However, I do recognize that he is extremely well connected in the financial world.  Soros is almost always ahead of the curve on financial matters, and if something big is going to go down George Soros is probably going to know about it ahead of time.

That is why it is very alarming that he has dumped all of his banking stocks and that he is massively hoarding gold.  The following is from shtfplan.com….

In a harbinger of what may be coming our way in the Fall of 2012, billionaire financier George Soros has sold all of his equity positions in major financial stocks according to a 13-F report filed with the SEC for the quarter ending June 30, 2012.

Soros, who manages funds through various accounts in the US and the Cayman Islands, has reportedly unloaded over one million shares of stock in financial companies and banks that include Citigroup (420,000 shares), JP Morgan (701,400 shares) and Goldman Sachs (120,000 shares). The total value of the stock sales amounts to nearly $50 million.

What’s equally as interesting as his sale of major financials is where Soros has shifted his money. At the same time he was selling bank stocks, he was acquiring some 884,000 shares (approx. $130 million) of Gold via the SPDR Gold Trust.

Why would you dump over a million shares of stock in major banks and purchase more than 100 million dollars worth of gold?

Well, it would make perfect sense if you believed that a collapse of the financial system was about to happen.

Earlier this year, George Soros told the following to Newsweek….

“I am not here to cheer you up. The situation is about as serious and difficult as I’ve experienced in my career,” Soros tells Newsweek. “We are facing an extremely difficult time, comparable in many ways to the 1930s, the Great Depression. We are facing now a general retrenchment in the developed world, which threatens to put us in a decade of more stagnation, or worse. The best-case scenario is a deflationary environment. The worst-case scenario is a collapse of the financial system.”

It looks like he is putting his money where his mouth is.

Perhaps even more disturbing is what he believes is coming after the financial collapse….

As anger rises, riots on the streets of American cities are inevitable. “Yes, yes, yes,” he says, almost gleefully. The response to the unrest could be more damaging than the violence itself. “It will be an excuse for cracking down and using strong-arm tactics to maintain law and order, which, carried to an extreme, could bring about a repressive political system, a society where individual liberty is much more constrained, which would be a break with the tradition of the United States.”

That doesn’t sound good.

George Soros has told us what he believes is going to happen, and now he is making moves with his money that indicate that he is convinced that it is actually about to start happening.

But he is not the only one that has been busy accumulating gold.

Billionaire John Paulson (the one that made 20 billion dollars on the subprime mortgage meltdown) has been buying gold like crazy and his company now “has 44 percent of its $24 billion fund exposed to bullion.“

So why are Soros and Paulson buying up so much gold?

Central Banks Are Also Hoarding Gold

According to the World Gold Council, the amount of gold bought by the central banks of the world absolutely soared during the second quarter of 2012.  The 157.5 metric tons of gold bought by the central banks of the world last quarter was an increase of 62.9 percent from the first quarter of 2012 and a 137.9 percent increase from the second quarter of 2011.

Prior to 2009, the central banks of the world had been net sellers of gold for about two decades.  But now that has totally changed, and last quarter central banks stocked up on gold in quantities that we have not seen before….

At 157.5 metric tons, gold buying among central banks came in at its highest quarterly level since the sector became a net buyer of the precious metal in the second quarter of 2009, data in the organization’s quarterly Gold Demand Trends report show.

So why have the central banks of the world become such gold bugs?

Is there something they aren’t telling us?

Rampant Insider Selling

Wall Street insiders have been dumping a whole lot of stock this year.

In my previous article, I linked to a CNN article from back in April….

First quarter earnings have been decent, if not spectacular. And many corporate executives are issuing cautiously optimistic guidance for the rest of the year.

But while insiders’ lips are saying one thing, their wallets are saying another. The level of insider selling among S&P 500 (SPX) companies is the highest in nearly 10 years. That is not good.

A lot of insiders appear to be getting out at the top of the market while the getting is still good.

Other insiders appear to be bailing out before the bottom falls out from beneath them.

Just check out what has been happening to Facebook stock.  It hit another new record low on Thursday as insiders dumped stock.  The following is from a CNN article….

Facebook’s life as a public company has been a nightmare from day one, and the pain continued on Thursday as some company insiders got their first chance to dump shares.

Facebook stock hit a new intra-day low of $19.69 Thursday morning, and ended the day 6.3% lower at $19.87.

Sadly, Facebook has now lost close to half of its value since the IPO.

Will Facebook end up being the poster child for the irrational stock market bubble that we have seen over the past couple of years?

Overall, retail investors have been very busy pulling money out of stocks in recent weeks.

The following are the net inflows to equity funds over the past five weeks (in millions of dollars) according to ICI….

7/11/2012: -537

7/18/2012: 637

7/25/2012: -2,999

8/1/2012: -6,866

8/8/2012: -3,684

According to the figures above, more than 10 billion dollars has been pulled out of equity funds over the past two weeks alone.

So does this mean anything?

Maybe.

Maybe not.

But it is very interesting and it bears watching.

Why Does The U.S. Government Need So Much Ammunition?

In my previous article, I also noted that the U.S. government appears to be very rapidly making preparations for something really big.

This week, it was revealed that the Social Security Administration plans to buy 174,000 hollow point bullets which will be delivered to 41 different locations all over America.

Now why in the world does the Social Security Administration need 174,000 bullets?

And why do they need hollow point bullets?  Those bullets are designed to cause as much damage to internal organs as possible.

But of course this is only the latest in a series of very large purchases of ammunition by U.S. government agencies.  The following is from a recent article by Paul Joseph Watson….

Back in March, Homeland Security purchased 450 million rounds of .40-caliber hollow point bullets that are designed to expand upon entry and cause maximum organ damage, prompting questions as to why the DHS needed such a large amount of powerful bullets merely for training purposes.

This was followed by another DHS solicitation asking for a further 750 million rounds of assorted bullets, including 357 mag rounds that are able to penetrate walls.

Now why in the world would the government need over a billion rounds of ammunition?

If it was the U.S. military I could understand this.  You can burn through a whole lot of ammunition fighting wars.

But this makes no sense – unless they believe that big trouble is coming.

Personally, I wouldn’t blame them for getting prepared.  Our economy continues to fall apart and there are signs of social decay everywhere around us.

The American people are more frustrated and more angry than at any other time in modern history.  This upcoming election is only going to cause Americans to become even more angry and even more divided.

All it would take is just the right “spark” to cause this country to erupt.

It could be the upcoming election.

It could be the collapse of the financial system.

Or it might be something else.

But the conditions are definitely there for it to happen.

Unfortunately, the American public is never told to prepare because authorities never want “to panic” the general population.

We are always the last to know, and that stinks.

So don’t wait for someone to come on the television and announce that a crisis is happening.

If you wait that long, it will be too late.

Instead, open up your eyes and think for yourself.

We all need to work hard to get prepared for the coming crisis while we still can.

As you can see, Wall Street insiders, the U.S. government and the central banks of the world are busy getting prepared.

Don’t put your head in the sand.

The warning signs are there and time is running out.

Source: http://theeconomiccollapseblog.com

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Euro Doomsday Preppers

Report from RT of preparations of eurozone citizens for impending monetary collapse.

Economic Collapse For Dummies

Highly recommend viewing.

China To Be Major Gold Trade Center

It should come as no surprise that China, the world’s largest gold producer and buyer should want to become a major gold trading center. The Wall Street Journal has reported such plans after being briefed by an insider.

China has proposed to broaden trading of precious metals in its local market in order to help China become a “major gold trading centre” (see News).

The Wall Street Journal was briefed about China’s plans by “a person involved with the matter.” The paper reports that “the move could increase liquidity and help Beijing gain stronger pricing power for key commodities like gold”.

China is the largest consumer and now the largest producer of gold in the world and has aspirations to become a major gold trading center on a par with London and New York. China is also the fifth largest holder of gold reserves in the world after the U.S., Germany, France, Italy (see table).

Clearly they have ambitions far beyond a major Gold trading center but as a worlds reserve currency, possibly even THE worlds reserve currency.

Chinese officials have spoken of China’s aspirations to have gold reserves as large as the U.S. in order to help position the yuan or renminbi as a global reserve currency. Indeed, it would be only natural for China to aspire to have their currency become the global reserve currency in the long term.

In the longer term, being a major gold trading center would make China a more powerful financial and economic player and indeed could allow them to influence commodity and other important market prices. Indeed, Reuters reported that becoming a major gold trading center “would boost the country’s clout in setting global prices”.

The journal reports that “Beijing’s tight grip on commodities trading and rigid capital controls are among the obstacles in the way.”

The move is also part of the broader financial reforms that Beijing has launched in recent weeks, loosening some of the restrictions on securities investment and allowing banks to price loans at cheaper rates than in the past, that seek to grant market forces a bigger role in both the economy and the capital market.

The moved proposed by market officials would expand trading of precious metals from designated exchanges to the country’s vast interbank market, according to the person involved. The Shanghai Gold Exchange has released draft rules for such interbank precious metals trading, which will include spot, forward and swap contracts for the commodities, said the person.

Current limitations.

At the moment, producers, consumers and investors can trade only spot and futures contracts in gold and silver on the Shanghai Gold Exchange and the Shanghai Futures Exchange, respectively.

Due to limited membership on the two exchanges, many investors, including banks, aren’t able to directly trade the precious metals on the exchanges.

The draft rules were jointly developed by the Shanghai Gold Exchange, which is the world’s biggest marketplace for spot gold trading, and the China Foreign Exchange Trading System, a central bank subsidiary that oversees onshore currency trading.

Plans are afoot to get around this and expand gold trading.

According to the draft rules, the authorities are aiming to launch the interbank trading on Aug. 31, starting with gold contracts, said the person.

That would make gold the first commodity to trade on the interbank market.

The authorities will introduce a “market maker” system for the planned precious metals trading—the first time the system will be used to trade a commodity on the interbank market—with transactions done on an over-the-counter basis as compared to the exchange-based pricing mechanism.

Market makers are firms that stand ready to buy and sell a product at a publicly quoted price to facilitate trade.

An over-the-counter market would allow investors, in this case banks, to trade in large quantities that far exceed the Shanghai Gold Exchange’s current trading volumes, analysts said.

According to the draft rules, banks are allowed to use the new precious metals contracts in the interbank market for proprietary trading only.

The Shanghai Gold Exchange is inviting banks, mostly members of the exchange, to submit applications to take part in the trading, said the person, who expects most major and midsize banks to participate.

The move to let banks become market makers also shows the authorities’ desire to give such better-established and more sophisticated institutions more power in setting prices for major commodities, a common practice in developed markets, said Jiang Shu, senior precious metals analyst at Industrial Bank Co.

Current restrictions and capital controls remain an obstacle to China becoming major gold trading center and to the renminbi becoming an accepted global reserve currency.

The move by China to expand precious metals trading to their glowingly important and vast interbank market is important and another step towards China becoming an economic power on the world stage and one that will rival European nations and the U.S.

Source: Goldcore

Death March To New Financial System

ZeroHedge wrote a piece on the latest Thunder Road Report regarding our march towards the new financial system. After all, the signs are there as outlined below.

the two remaining “sacred cows” preserving the US dollar as the world’s reserve currency are:

1. The belief that the Chinese will continue to buy US Treasuries; and
2. The US dollar will maintain its monopoly on world trade.

Regarding number one, the Chinese have been sellers since the end of July 2011 (note the date). With regard to number two, have you noticed how China has set up currency swaps with nearly all of its trading partners? Have you noticed how Iran has been excluded from the SWIFT system and has begun selling oil to some countries in currencies other than dollars?

China has been preparing for dollar devaluation for nearly a year now, but hardly anybody has noticed. While everybody frets about the Euro, the dismantling of the US dollar’s reserve currency status is occurring within plain sight. I think a deal was done between the US and China in late Summer or early Autumn of last year. Have you also noticed how Ben Bernanke has used just about every unconventional method of monetary policy he’d discussed in his earlier writings on preventing deflation…bar one big one? Dollar devaluation. Let me repeat that, dollar devaluation.

We are heading into a truly mega-financial crisis. This is (another) classic “I hope I’m wrong, but…” report. I think the crisis is going to result in the transition to a new financial system as the current one implodes. Best guess is that it will be either happening, or perfectly obvious that it’s going to happen, within 6-12 months, i.e. within our investing time horizon.

This report connects a lot of dots and analyses each one of them. The dots include:

Dot – Loss of US AAA credit rating in August 2011
Dot – China lashes out at US “addiction to debt”
Dot – Peak in Chinese holdings of US Treasuries
Dot – China starts selling US Treasuries
Dot – Surge in the gold price in August 2011 followed by steep decline
Dot – Lock down of the gold price (using “paper gold”) ever since
Dot – Movement of large quantities of physical gold from London to Asia (notably China)
Dot – Collapse of MF Global
Dot – Radio silence on China being a currency manipulator
Dot – Exter’s Pyramid playing out in front of our eyes
Dot – Iran excluded from SWIFT system
Dot – BRICS countries signed the Master Agreement on Extending Credit Facility in Local Currency and the Multilateral Letter of Credit Confirmation Facility Agreement
Dot – US granted China a 6-month extension on sanctions for buying Iranian oil (India already had one)
Dot – Revisiting Bernanke’s old speeches on deflation
Dot – Operation Twist
Dot – Comments by World Bank President, Robert Zoellick
Dot – BIS proposal to upgrade gold to a zero risk weighted asset in line with sovereign debt as part of Basel III
Dot – Comments by Robert Rubin (“consigliere” to the elite)
Dot – Recent meeting between Kissinger and Wen Jiabao
Dot – Why debt deflation now would paradoxically precipitate hyper-inflation
Dot – Demise of the middle class (theme)
Dot – Putting all of the above in the context of the fourth (and ongoing) price upwave of the last 1,000 years
Dot – How each of the three earlier price upwaves came to an end.

Source: ZeroHedge

Eurozone Spirals Faster Down the Plughole

The EU summit last friday was the last great hope, but really we only got agreement in principle from EU leaders who are used to doling out soundbites. More questions came out of this summit than answers.One thing is for sure, nothing has been resolved and we are traveling faster now down the plughole.

So lets take a look at some of the shit-fests up ahead starting with Greece,

There is Greece, inexorably tottering towards its exit from the Eurozone. Once again, the despised Troika inspectors have arrived in Athens. Based on their findings, they’ll decide if Greece should get the next tranche of the bailout billions—default and/or conversion to the drachma being the alternatives.

Horst Reichenbach, the German head of the Troika inspectors, took one look at the numbers, and while he didn’t end up in the hospital nauseated and with knots in his gut—the fate that had befallen Finance Minister Vassilis Rapanos a couple of days after being appointed—he did see that Greeks have stopped paying their bills.

Which is logical. They’re hanging on to their euros under mattresses or in foreign accounts, assuming that they will soon be able to pay their bills with devalued drachmas. The deal of a lifetime. At least €6.5 billion is past due, owed to Greek industry, Reichenbach said. Everyone is doing it. Hospitals stopped paying for medication, individuals stopped paying for electricity, the government stopped paying for construction work.

“The patience of the public has been exhausted,” said Robert Fico, Prime Minister of Eurozone member Slovakia. His country would no longer be willing to help if recipients didn’t implement sufficient reforms. And the number of bailout candidates continues to grow: in addition to the five that have already requested aid—Greece, Portugal, Ireland, Spain, and Cyprus—Slovenia is now discussing it. And Italy is at the brink. Seven. Out of seventeen.

..and where is the money to come from?

They’re all going to get bailed out by the temporary EFSF, which has a limit of €250 billion, and later by the permanent ESM, which has a limit of €700 billion. Of course, there is the old ESM that doesn’t exist yet, the one that was passed Friday by the German parliament after it had already been obviated by the new ESM that emerged from the EU summit, the one that everyone interpreted differently, the one that has run into a wall of opposition in Northern Europe. And it doesn’t exist either.

The ESM has not come into existence yet and so many either oppose its creation or its purpose.

Finland and the Netherlands quickly expressed their opposition to an essential feature of the new ESM—buying sovereign bonds to force down yields and make borrowing cheaper. They could torpedo it; decisions must be made unanimously. But there would be a way around: if the ECB and the EU Commission decide that this is an emergency, only 85% of the votes, as determined by capital contributions, would be required. But no one can override Germany which contributed 27% of the capital.

And there was a veritable tsunami of actions at the German Constitutional Court. They came from all sides: from the left, from conservative Peter Gauweiler (CSU), and from the association More Democracy, which was joined by 12,000 citizens and by the Association of Tax Payers. They want a rush decision to stop President Joachim Gauck from signing the ESM and fiscal union laws until the court hands down its final decision.

According to the plaintiffs, the Bundestag, in passing the ESM, gave up its parliamentary “budget autonomy”—its rights to create and control the national budget. These rights would be transferred to organizations that were not democratically legitimized, thereby limiting the rights of voters to participate democratically in budget decisions. The fiscal union pact similarly violates German democratic fundamentals, they claim.

However, Justice Minister Sabine Leutheusser-Schnarrenberger, believed that the court wouldn’t stop the ESM and the fiscal union pact. In prior challenges, the justices reigned in certain planks of the law, she said, “but fundamentally they had no problem with the aid measures.”

Merkel is under pressure back home.

And Chancellor Angela Merkel caught a broadside from her coalition partner. Horst Seehofer, chairman of the conservative CSU, lashed out at her concessions and threatened to let the coalition government collapse if further concessions were made. “My greatest fear is that the financial markets ask: can Germany support all that?” He was worried that the markets would attack Germany and put it in the same spot as Spain. He wouldn’t tolerate the transfer of any additional power to the “European monster state” and promisedhe’d turn the next elections into an election on Europe. “We will put this question to the people,” he said, which so far, amazingly, no one has done in Germany.

The onslaught of criticism put Merkel on the defensive about the summit decisions. The fundamental principles of German policies had been confirmed in Brussels, said Merkel’s spokesman Steffen Seibert, and the assertion that money would flow freely and without conditions was “completely wrong.”

Its going to be a long summer.

Source: testosteronepit.com

Devalue the Euro?

The fallout from the EU summit will be evident in the coming weeks but with solutions agreed only in principle this still leaves the eurozone in a vulnerable state. The article from ZeroHedge teases out the possibilities but the logical conclusion is for the euro to be devalued.

First of all the EU is limited to act when the market turns nasty on the euro crisis.

If I’m right, after a few weeks things turn south again in the capital markets. Then what?

– More LTRO. No – there is no more collateral. All of the swill loans have already been hocked.

– Cut ECB % rate. Doesn’t matter. It won’t change conditions in Italian or Spanish funding markets one bit.

– A spending plan of <1% of GDP. That won’t put a dent in the recession that is building.

– Brussels buys more sovereign bonds to avoid a catastrophe of Italian 10-year exceeding 7% (capitulation).Sorry. There are “wise men” in Germany who will simply not allow this to happen in the scale that is required.

– The ECB goes Defcon 1 and launches a E2T QE program. No – same answer as above.

– Merkel does a 180 and embraces Euro bonds. No chance in hell.

–The US or China are going to start buying EU bonds? Lunacy – not happening.

-The IMF will come to the rescue? No way – the IMF does not have the resources to solve anyone’s problems.

There only possible solutions would be along the FX route, i.e.

1) Peripheral countries re-establish their legacy currencies. Spain will reintroduce the Peseta, Italy will bring back the Lira etc.

2) The Euro is split in two. There would be a Northern and a Southern Euro.

3) Germany leaves the Euro and re-establishes the Deutche Mark.

Although, the best solution of all is to devalue the euro.

These are possible outcomes. But I consider them to be unlikely. Too much effort has been taken to create and preserve the Euro for the deciders to throw in the towel anytime soon.

There is one currency option left. Devalue the Euro by 20++%.

This would make a difference. It would go a long way towards stabilizing the real economies of Europe. It would create inflation, something that is sorely needed to devalue the real size of Europe’s debts. Germany would agree to this as it preserves their export-competitive position within the EU, and improves it outside of the EU. The technocrats in Brussels would love it; it’s the only thing left that would preserve the monetary union.

Is this feasible? I say it is. It has happened twice before in history. In 1985 the world got the Plaza Accord that devalued the dollar and in 1987 we got the LouvreAccord that revalued the dollar. In both cases, the global central banks (CBs) and acted together.

With Plaza Accord, the CBs made a joint announcement on a Sunday evening that they would be selling the dollar against major currencies until such time as a meaningful devaluation had been achieved. It worked.

Would the US, China and Japan go for this?

The USA and China would absolutely hate to see a devaluation of the Euro. It would hurt their respective economies. But the deciders in China and Washington also know that a complete breakdown of the EU economy would lead to a global depression.

The timing of something like this is critical. Would Obama instruct the Treasury Department to intervene in the currency markets (via the Federal Reserve)? He would, if it happened in the next few months. The consequences would not be felt, in a meaningful way, by US exporters until after the November election. Obama also understands that if the EU goes belly up before the election, his chance of winning goes down. If the EU tanks, so will the S&P.

China and Japan would have some say in this in order for it to be successful. The CB interventions would have to be coordinated. If the UK and US go along with it, then Japan will be forced to join in.

China is a wild card. If China participated, it would be devaluing its own Euro reserves. It would cost China a few hundred billion dollars. But it would cost China far more if the EU went into the crapper for the next five years.

Source: ZeroHedge

What Happens When Fiat Currency Dies?

Nice article on ZeroHedge explaining the steps of a fiat currency dying.Funny ting is, the pattern has remained the same for the last 4000 years. Why would it be any different this time?

 

This is today’s reality. It can happen here, it probably will happen here. And frankly, it’s all unfolding almost exactly as it has so many times before throughout history:

1. A nation rises to greatness and becomes wealthy based on sound principles and the hard work of initial generations.

2. Eventually, being wealthy becomes the natural expectation… an entitlement, rather than a goal to work hard for and achieve.

3. A nation begins living beyond its means to maintain the high life without the hard work, leveraging its credibility to trade tomorrow’s production for today’s consumption.

4. Living beyond its means eventually becomes unsustainable. Government begins to slowly, then staggeringly, devalue its currency.

5. The market (i.e. people) finally wake up to the fraud being perpetrated.

6. Financial repression usually follows– high taxes which steal from the productive, negative real interest rates which steal from the savers, etc.

7. Capital flight comes next. People take their money and run.

8. Governments implement capital controls, border controls, price and wage controls, and anything else they can do to maintain the status quo. People find out who the police are really there to protect and serve.

9. Capitulation (default) is the endgame; the system resets itself and begins anew.

This is nothing new. From the 3rd Dynasty of Ur (2000 BC) to Medieval Venice to the familiar stories of Rome and the Ottoman Empire, the world is full of monuments to the past greatness of failed civilizations.

We’re seeing the same pattern unfolding now. And sure, anything’s possible. Maybe the skies open up and the unicorns come out to play and the whole world manages to fix itself without skipping a beat.

But let’s live in reality: there are consequences when nations go bankrupt. And nearly every western nation on the planet is insolvent. That is a fact.

Certainly, the lies from our political leaders are entertaining. But how many more revolutions, riots, defaults, bank runs, stimulus packages, nationalizations, tax increases, pension grabs, etc. will it take to acknowledge what’s happening?

Can anyone afford to keep ignoring reality? Can you?

Euro Crisis – Technical analysis

Eurozone, forget the analysis, its a no brainer 😉

Brutal austerity + toxic levels of government debt + rising bond yields + a lack of confidence in the financial system + banks that are massively overleveraged + a massive credit crunch

=

A financial implosion of historic proportions.

!

source: Activist Post

Bank Holidays In France?

Previously I spoke of bank restrictions in Italy in accessing your cash, now in France a similar story is now appearing. As reported by Max Keiser.com(from a reader) , that Banque Postal has stopped bank wires and cash transactions on Friday. It is interesting to see if this continues this week or will we be seeing more excuses here on in from banks for stopping customers from accessing their accounts.

Max

Banque Postal is in in very bad position (Dexia accounts)
i received this and this friday and saturday

The mail says that my reader went to the bank in the morning and asked 250 euros
the lady answered “i am sorry, i just have 180 euros”…
The guy understood that his account had only 180 euros so he asked again : – )
she explained that she only had 500 euros to open her desk and 180 left !!!
The reader made 3 Banks Postale before getting his money.

The picture below (taken by an another reader on friday in Maison-Alfort, parisian suburb)
shows another Banque Postale saying that there will be no cash transaction on friday
from 8h to 14h30 !

Other friends are reporting to me that (whatever bank) they are not able to do wires
due to “computer technical problems blabla”) !

something big and dangerous is going on here in France with Bank Postale one
of the most important banks of the country.

Deutsche Bank Calls For Big Bang Solution From ECB

At this stage very few people have any faith in the EUSSR sorting out the crisis in the eurozone. After agreeing a bank bailout for Spain, there has been a series of downgrades from Spain itself to Dutch banks etc. Coupled with the outcome of the Greece elections the markets are beginning the to see the naked emperor. Just look at Spain and Italy’s bond yields this week.

Deutsche Bank’s is not satisfied with the situation in Spain and have no faith in the recapitalization of its banks. It sees the only solution at this stage as a controlled market crash with a large role to be played by the ECB.

we were somewhat disturbed to read Gilles Moec’s summary this morning, which points out the patently obvious: “Spain recapitalization: it’s not working.” Whether it is that Europe’s brightest minds forgot about the threat of subordination (promptly reminded by Zero Hedge hours after the formal announcement), and that the scars of the Greek cramdown are still fresh in the private sector’s mind, it does not matter: as DB says: “Unfortunately, the market reaction was clearly negative, with Spanish 10 year rate brushing past 7% for the first time since 1996. Two main elements probably explain the market reaction: first, the increase in public debt triggered by the recapitalization whose cost will stay on the sovereign’s balance sheet under the current rules); second the seniority attached to ESM loans, if this scheme is used as the final channel for the EU loan instead of the EFSF.”

Yes, it is “unfortunate” that Spain’s bailout plan was poorly planned, organized and executed. It is not unfortunate that some are still left who can do simple math and call out Europe’s failed plans. Which brings us to the present, where we find that even Deutsche Bank has given up hope for interim solutions, having realized that the market will no longer accept transitory, feeble arrangements. Instead DB is now formally calling for a big bang resolution, one coming from the ECB. Here is the punchline: “ECB has room for manoeuvre, but needs political cover for a ‘big’ policy” or said otherwise, “A shock is required to get a liquidity response.” In other words: Europe’s only real hope for even a stop gap solution… is a wholesale market crash, not surprisingly the very same conclusion that Citi reached on May 19 when they warned that only Crossover (XO) at 1000 bps or wider could push Europe into acting…

So in the case of a market crash, the ECB will loan directly to the banks via vLTRO.

It is possible in the context of more disorderly market scenarios that the ECB pre-empts the BLS to reengage the vLTRO policy which has, in Draghi’s view, already ‘broadly’ worked in similar market conditions.

 

Source: ZeroHedge

 

Spanish Bailout Opens Can Of Worms

It was a long time coming but many independent economists and analysts were vindicating in their analysis of Spain. The bank bailout details have yet to be fleshed out but Bloomberg reports that the bailout Spain is looking for is €100 billion which is a staggering 10% of GDP. This is to be injected into the FROB, or the Fund for Orderly Bank Restructuring. There have even been reports of up to €250 billion is needed to shore up the banks.

Spain asked euro region governments for a bailout worth as much as 100 billion euros ($125 billion) to rescue its banking system as the country became the biggest euro economy so far to seek international aid.

Spain’s true debt/GDP is 134% already as reported by Mark Grant. This will surely overload Spain’s economy.

Already Ireland is demanding the exact same deal. After accepting their original bailout deal in return for extreme austerity, it looks as if Spain is to escape that part. What a can of worms Germany has just opened as surely the Greeks will also demand similar treatment.

Ireland wants to renegotiate its rescue plan to benefit from the same treatment as Spain, which looks set to win a bailout for its banks without any broader economic reforms in return, European sources said on Saturday.

“Ireland raised two issues: one is the need to ensure parity of the deal with Spain retroactively on its bailout from EFSF,” one European government source told AFP, referring to the temporary rescue fund, the European Financial Stability Facility.

Another European government source confirmed the information.

Ireland secured an 85-billion-euro ($112 billion) rescue deal from the European Union and the International Monetary Fund in November 2010, but only after agreeing to draconian austerity measures.

Unlike Ireland, Spain’s economy minister said a deal on financing for the country’s troubled banks would not impose any conditions on the wider economy.

Where is the money to come from. The Germans have had problems ratifying the ESM, and the ESFS is looking a little bare.

The problem with this is that the ESM has yet to be ratified by Germany, whose parliament said previously it is sternly against allowing the ESM to fund a direct bank bailout, something which just happened. Thus, the successful German ESM ratification vote, whenever it comes, and which previously was taken for granted, now appears to be far more questionable.

Which leaves the EFSF. The problem with the EFSF is that there is about €200 billion in dry powder. And this includes the Spanish quota of €93 billion, which we can only assume is now officially scrapped.

As the economic hitmen make their way across the eurozone, its only a matter of time before Italy is next. Where then, does the money come from to bail them out as over €500 billion is already commited to the other PIIGS.

And ironically, what just happened, is that the Eurozone, with the tacit agreement of Germany, essentially gave insolvent banks a green light to short themselves into a full bailout.

How long until Italian banks get the hint, and proceed to short each other, or themselves, either with shares of stock or , better yet, through CDS which unlike in the sovereign case, can be held without an offsetting cash basis position. In other words: is it time for the Italian bank suicide trade?

Because only when they are on the verge of nationalization, will Italian banks be rescued. And remember: he who defects (or in this case drops the fastest), first, reaps the biggest benefits of the resultant action.

Finally for any Spanish readers, check out what Mariano Rajoy said on May 28( a few weeks ago) : “No va a haber ningún rescate de la banca española“, “There will be no rescue of Spanish banks”. WHAT A LIAR. Comes with video footage so you can see how he looks when he lies(for future reference).

 

 

 

Previous Related Stories:

Spain Heading For Full Collapse Of Economy (ZeroHedge)

Gonzala Lira – Spain Needs To Exit Euro And Devalue

Gonzalo Lira Believes Spain Will Exit The Euro

Spain Final Nail In euro Coffin

Spains Debt/GDP At 134%

Spain’s Woes Caused By Euro

Source: France24, Bloomberg, Zerohedge, neuvatribuna.es

Russia’s Rush To Swiss Franc

It’s hard to see how any currency is doing badly against the euro lately but the Russian ruble is certainly one. There are a few signs of problems in Russia to come but most notably has been the recent rush to convert the ruble to swiss francs.

 during April the Russian currency lost out substantially to a euro in crisis. (The following month, it lost 14% against the Dollar.) Bruce also spoke with a Swiss banker who told him that, despite the massive flight to Switzerland for money saftey in recent weeks, the biggest inflow came from Russia. The Gnome told him the reason: “It’s politics and economics together. People are afraid” he said – and that’s my view too: Putin’s power base is nowhere near as stable as many in the West think, and in a depression – when people don’t want to buy much energy – Russia has to be one place that will catch a serious case of pneumonia.

The Slog’s view of Russia’s economic future is not good and it looks as if the smart money is to convert your rubles now.

Russia is in a similar position to Australia: it exports very little in the way of added-value manufacture, and is hugely overdependent on global economic growth needing raw materials and energy. My information is that foreign investors, senior businessmen and well-placed people in the regime are gloomy. I think the oil price decline will continue, and so Moscow will be forced into a huge budget deficit: caused by lower tax intake from slowed economic growth…plus a whole shedload of money required to defend the Ruble’s credibility.

The big question in all of this, is what is Europe’s exposure to Russia?

Not many ‘experts’ talk about the EU’s banking exposure to Russian debt, probably because they don’t grasp just how corrupt and unreliable most of the borrowers are. My hunch is that they’re about to find out.

Source: The Slog

George Soros Issues 3 month Warning For Europe

After Robert Zoellick issued his warning, George Soros had to get in on the act. His full speech can be found on his website but ZeroHedge did a great analysis of it.

although Soros said

Germany and its central bank are unlikely to lead the way out of the euro zone debt crisis within three months time, after which it will be too late, U.S. billionaire George Soros said on Saturday.

….

Soros said he expected Greek elections in June to produce a government willing to stick by the current bailout agreements, but which would find it impossible to do so.

ZH replied with

We disagree: the next Greek elections will be merely a rerun of the first – lots of sound and fury, signifying no government, as the country becomes the next Belgium (as we noted here before the outcome of the first election was even known), ends up an anarchy state, without a government, as what little money the Treasury has goes to pay English-law bondholders, until finally there is nothing left. But that is neither here nor there, because at this point it is not about Greece any more:

But both Soros and ZH  agree on 3 months timeline.

Click for full ZeroHedge article.

Global Trade Figures Slowing Down

This week is certainly a week for a raft of economic data to be released indicating the health of the Global economy and whether we can expect an improvement or not. ZeroHedge  recently reported on a lot of negative headlines regarding global trade and with Spain’s dismal bond auction after LTRO’s have stopped doesn’t bode well. Does this point to a global collapse or more aggressive money printing to come? Recent history has always shown us that ultimately CTRL+P is the CB’s only weapon and that can’t end well.

The weakness in the markets started late last night when Australia posted a surprising second consecutive deficit of $480MM on expectations of a $1.1 billion surplus (with the previous deficit revised even higher). This is obviously quite troubling because as we pointed out 3 weeks ago when recounting the biggest Chinese trade deficit since 1989 we asked readers to “observe the following sequence of very recent headlines: “Japan trade deficit hits record“, “Australia Records First Trade Deficit in 11 Months on 8% Plunge in Exports“, “Brazil Posts First Monthly Trade Deficit in 12 Months ” then of course this: “[US] Trade deficit hits 3-year record imbalance“, and finally, as of late last night, we get the following stunning headline: “China Has Biggest Trade Shortfall Since 1989 on Europe Turmoil.” So who is exporting? Nobody knows, but everyone knows why the Aussie dollar plunged on the headline. The shock sent reverberations across Asian markets, which then spilled over into Europe. Things in Europe went from bad to worse, after Germany reported its February factory orders rose a modest 0.3% on expectations of a solid 1.5% rebound from the -1.8% drop in January. But the straw on the camel’s back was Spain trying to raise €3.5 billion in bonds outside of the LTRO’s maturity, where the results confirmed that it will be a long, hard summer for the Iberian country, which not only raised far less, or €2.6 billion, but the internals were quite atrocious, blowing up the entire Spanish bond curve, and sending Spanish CDS to the widest in over half a year.

France Has Lost Its AAA Status

Finally its happened. France has lost its AAA status as S&P has followed through with its threat and downgraded them to AA+. It was announced to the nation on tv by French Finance Minister Francois Baroin. Rumours flooded the markets that Frances neighbours were also in danger of being downgraded shortly. S&P had warned in December that 15 eurozone countries were at risk.

Borrowing costs for the French government rose before the announcement. The yield on France’s 10-year government bond rose to 3.1 percent from 3 percent earlier. That is still less than the 3.36 percent rate on the same bond last week and far below the 6.6 percent that Italy has to pay to borrow money from bond investors for 10 years.

Germany, the strongest economy in Europe, pays a yield of just 1.76 percent. The United States 10-year Treasury note paid 1.85 percent Friday, down 0.08 percentage points – a sign that investors were seeking safety in U.S. debt.

The French government appeared to make a point of announcing the downgrade on its own terms, not S&P’s. France-2 television announced 10 minutes before its evening news program that Baroin would appear.

The finance minister said the downgrade was “bad news” but not “a catastrophe.”

“You have to be relative, you have keep your cool,” he said on France-2 television. “It’s necessary not to frighten the French people about it.”

On the positive side bond auctions this week for Spain and Italy had gone well as Ireland announced today that it hoped to return to the bond market later this year.

Earlier Friday, Italy had capped a strong week for government debt auctions, seeing its borrowing costs drop for a second day in a row as it successfully raised as much as euro4.75 billion ($6.05 billion).

Spain and Italy completed successful bond auctions on Thursday, and European Central Bank president Mario Draghi noted “tentative signs of stabilization” in the region’s economy.

…..

At Friday’s Italian auction, investors demanded an interest rate of 4.83 percent to lend Italy three-year money, down from an average rate of 5.62 percent in the previous auction and far lower than the 7.89 percent in November, when the country’s financial crisis was most acute.

While Italy paid a slightly higher rate for bonds maturing in 2018, which were also sold in Friday’s auction, demand was between 1.2 percent and 2.2 percent higher than what was on offer.

The results were not as strong as those of bond auctions the previous day, when Italy raised euro12 billion and demand was strong for a sale of Spanish debt.

Source: Associated Press