Hmmm

A walk around the fringes of finance

THINGS THAT MAKE YOU GO

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Common responsibility for the European currency will also engender a common decision-making instance for the European economy. It is unthinkable to have a European central bank but not a common leadership for the European economy. If there is no counterweight to the ECB in European economy policy, then we will be left with the incomplete construction which we have today However even if the building is not finished it is still true that monetary union is part of a supranational constitution It is our task for the future to work with the appropriate means for the transfer of traditional elements of national sovereignty to the European level.
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The euro is Europes key to the 21st century. The era of solo national fiscal and economic policy is over N
German Chancellor Gerhard Schrder, December 31, 1998

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

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the affectionate nickname given to the regular in a neighbourhood bar whom everybody knows. Big Fitz doesnt ordinarily sound like the name of a boat. In the mid-1970s though, the only Big Fitz anybody spoke about in Duluth, Minnesota was the Great Lakes freighter that carried taconite from Duluth to the iron works in the then-thriving Detroit, Michigan and Toledo, Ohio. When she was launched in 1958, the SS Edmund Fitzgerald was the largest boat on the Great Lakes. 729 feet long with a 75ft beam and a 25 foot draft, she could carry 26,000 DWT in her 33 4 deep hold. Powered by a Coal fired Westinghouse Electric Corporation steam turbine 2 cylinder, she had a top speed of 14 knots and carried a crew of 29. For 17 years, the floating workhorse ploughed back and forth across Lake Superior, setting seasonal haul records six times and became a firm favourite with boatwatchers (yes, they do exist) due to her size and her record-breaking exploits. Besides her affectionate soubriquet, the SS Edmund Fitzgerald was also known as The Titanic Of The Great Lakes On November 9, 1975, Big Fitz was loaded with 26,116 tons of taconite iron ore pellets in Superior, Wisconsin and embarked on what would tragically turn out to be her final voyage - a routine crossing of Lake Superior, bound for a steel mill in Detroit, Michigan. The next day, November 10th, Big Fitz found herself caught in the midst of a massive winter storm, with 35 ft waves and hurricane force winds. Captain Ernest McSorely, a 44-year veteran, made contact with the Avafor, a nearby ship, and reported that he had encountered one of the worst seas he had ever been in. A couple of hours later, with Big Fitz roughly 17 miles from the relative safety of Whitefish Bay at the northeastern tip of Michigans Upper Peninsula, another ship made contact and was told that the Titanic of The Great Lakes was holding her own. Then something strange happened. (History Channel): ...minutes afterward, the Fitzgerald disappeared from radar screens. A subsequent investigation showed that the sinking of the Fitzgerald occurred very suddenly; no distress signal was sent and the condition of the lifeboats suggested that little or no attempt was made to abandon the ship. Subsequently, many theories on what caused the SS Edmund Fitzgerald to capsize and sink 530 feet to the lake bed almost instantly were put forward (History Channel): One possible reason for the wreck is that the Fitzgerald was carrying too much cargo. This made the ship sit low in the water and made it more vulnerable to being overwhelmed by a sudden large wave. The official report also cited the possibility that the hatches to the cargo area may have been faulty, leading to a sudden shift of the cargo that capsized the boat. Either way, it didnt matter. Big Fitz sank - quickly. So quickly in fact that nobody was saved and all 29 crew members perished in the icy waters of Lake Superior. Big Fitz had been battling the odds for several hours and things had looked bleak but she was managing to stay above water until, suddenly, without warning, she didnt.

ig Fitz sounds like the name of a Heavyweight Champ - or

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weeks anniversary of the tragic sinking of Big Fitz got me thinking about the Euro - another behemoth currently navigating some extremely choppy waters but managing to keep herself above water. Holding her own, if you will. The odds have been stacked heavily against the common currency for some time now and yet, despite a clearly unsustainable level of debt, several countries who should never have been allowed through the doors of the Eurozone, rapidly slowing growth and a group of basket-case politicians who have redefined the meaning of ineptitude, if you had shorted the Euro on January 7th of this year, you would now be staring at a loss of roughly 6% on your investment (chart, below).

his

Technocracy: A form of government

where technical experts are in control of decision making in their respective fields. Engineers, scientists, health professionals, and those who have knowledge, expertise or skills would compose the governing body. In a technocracy, decision makers would be selected based upon how knowledgeable and skillful they are in their field. Technical and leadership skills would be selected through bureaucratic processes on the basis of specialized knowledge and performance, rather than democratic election by those without such knowledge or skill deemed necessary. Some forms of technocracy are envisioned as a form of meritocracy, a system where the most qualified and those who decide the validity of qualifications are the same people. Other forms have been described as not being an oligarchic human group of controllers, but rather an administration by science without the influence of special interest groups. The term technocracy derives from the Greek words tekhne meaning skill and kratos meaning power, as in government, or rule.

To have sat and read the headlines these past 10 months and yet to be losing money on a short Euro position would have doubtless sent even the most stoic of investors in search of a stiff drink or some heavy counselling - but thats the way these things go sometimes. Things stay afloat against all the odds - until, suddenly, they dont. One cant help but think, however, that this week may well have brought us to the wall at the end of the road down which Europe has been kicking the can for quite some time now.

Euro: ytd

SOURCE: BLOOMBERG

dreou government and now the swift fall of Silvio Berlusconis administration in Italy, events in Europe picked up speed as they move rapidly towards the kind of definitive end that we have needed for some time now, but that the prevaricating of the various bureaucrats in Brussels and beyond have denied us. The smoke has pretty much cleared now and those in charge of the SS Europe are left with a stark choice - print money or allow the break-up of the Eurozone and the end of the common currency known as the Euro. At this point it really IS that simple.

ith the long-expected demise last week of the Papan-

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The impediment to a EuroTARP or QEU program remains Germany. Thats pretty much it. Sure, the Dutch and the Finns Austria: 10-yr and even the Austrians all pay Spread To Bunds lip service to a hard line on monetary easing, but, as oneby-one the formerly strong countries get dragged into the maelstrom of the peripherals leaving a new country exposed on the outer fringes of the core, it becomes more and more obvious that somehow, some way, Germany has to find a way of justifying an action that is anathema to the citizens of Europes powerSOURCE: BLOOMBERG house economy. The blowout in the spread between Austrian and German 10yr bonds this week highlights that perfectly (chart, left). hyperinflation is still a very vivid memory for many Germans and, as Adam Fergusson explained in his seminal work When Money Dies, the reasons why Germany is so set against the idea of money-printing are clear: Over most of Germany the lead was beginning to disappear overnight from roofs. Petrol was syphoned from the tanks of motor cars. Barter was already a usual form of exchange; but now commodities such as brass and fuel were becoming the currency of ordinary purchase and payment. A cinema seat cost a lump of coal. With a bottle of paraffin one might buy a shirt; with that shirt, the potatoes needed by ones family. Herr von der Osten kept a girl friend in the provincial Capital, for whose room in 1922 he had paid half a pound of butter a month: by the summer of 1923 it was costing him a whole pound. The Middle Ages came back, Erna von Pustau said. Communities printed their own money, based on goods, on a certain amount of potatoes, or rye, for instance. Shoe factories paid their workers in bonds for shoes which they could exchange at the bakery for bread or the meat market for meat. Those with foreign currency, becoming easily the most acceptable paper medium, had the greatest scope for finding bargains. The power of the dollar, in particular, far exceeded its nominal rate of exchange. Finding himself with a single dollar bill early in 1923, von der Osten got hold of six friends and went to Berlin one evening determined to blow the lot; but early the next morning, long after dinner, and many nightclubs later, they still had change in their pockets. There were stories of Americans in the greatest difficulties in Berlin because no-one had enough marks to change a five-dollar bill: of others who ran up accounts (to be paid off later in depreciated currency) on the strength of even bigger foreign notes which, after meals or services had been obtained, could not be changed; and of foreign students who bought up whole rows of houses out of their allowances. There were stories of shoppers who found that thieves had stolen the baskets and suitcases in

eimar

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which they carried their money, leaving the money itself behind on the ground; and of life supported by selling every day or so a single tiny link from a long gold crucifix chain. There were stories (many of them, as the summer wore on and as exchange rates altered several times a day) of restaurant meals which cost more when the bills came than when they were ordered. A 5,000-mark cup of coffee would cost 8,000 marks by the time it was drunk.

Mrs. Merkel and Messrs. Schauble, Wiedmann et al have been defiant whenever the subject of money-printing has arisen. But this week, as the Eurozone threatened to spiral out of control, it became abundantly clear that the Euro has reached the point of no-return.

tories like these still live and breathe in Germany so it is no surprise that the language of
Italy: 10-yr Bond Yield

The ECB now has to either become the lender of last resort that Europe so desperately needs (and trample over Germanys sensitivities in the process), or the Euro must fall. There is no other choice. On Thursday, Italys 10-year bond yield spiked to 7.5%. Presumably the only thing that stopped it shooting higher still was aggressive buying on the part of the SMP (we shall hopefully find out on Monday when the weekly totals are updated on the ECB website), but whatever the reason for the sudden and sharp retracement to 6.5% on Friday (surely it wasnt due to the news that Massimo Monti had been touted as Prime Minister in Berlusconis stead? Surely?), you can be certain the bond market has not finished with Italy just yet. BUT..... Italy is running a primary surplus. The only thing sending her over the edge is the simple fact that the Italian government cannot borrow at low-enough rates. At 4% (where rates were a year ago), they can gradually begin to adjust their debt ratios and still finance their borrowing it will not be easy, but they, unlike their spendthrift cousins in the Aegean, have one of the highest savings rates in the OECD (although, as you can see from the chart, left, that savings rate has been eaten into rapidly over the past five years).
SOURCE: BLOOMBERG

Italy: Savings As % of GDP

But what of that other Big Fitz, the Euro?

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attempt to make a significant change to either the treaties that surround the common currency or the constituent members of the union would require a hellacious amount of maneuvering in order to pull them off and, like the notion of Greece (or any weakened EU member) ever being allowed to leave the Euro, the idea of either a fiscal union, the ECB becoming the lender of last resort or, God forbid, Germany exiting, stage left, was strictly verboten - at least until this week: (UK Daily Telegraph): German and French officials have discussed plans for a radical overhaul of the European Union that would involve setting up a more integrated and potentially smaller eurozone, EU sources say. France and Germany have had intense consultations on this issue over the last months, at all levels, a senior EU official in Brussels told Reuters, speaking on condition of anonymity because of the sensitivity of the discussions. We need to move very cautiously, but the truth is that we need to establish exactly the list of those who dont want to be part of the club and those who simply cannot be part, the official said. French President Nicolas Sarkozy gave some flavour of his thinking during an address to students in the eastern French city of Strasbourg on Tuesday, when he said a two-speed Europe - the eurozone moving ahead more rapidly than all 27 countries in the EU - was the only model for the future.

ny

Pretty conclusive. Naturally, any such plan was immediately denied by a spokesman: A French finance ministry spokesman denied there was any project in the works to reduce the currency blocs membership. There have been no conversations between French and German authorities at any level on decreasing the size of the eurozone, the spokesman said. But this time it really WAS different as the Germans, too, were talking about the possibility of exits from the Eurozone: One senior German government official said it was a case of pruning the eurozone to make it stronger. Youll still call it the euro, but it will be fewer countries, he said, without identifying those that would have to drop out. We wont be able to speak with one voice and make the tough decisions in the eurozone as it is today. You cant have one country, one vote, he said, referring to rules that have made decisionmaking complex and slow, exacerbating the crisis.

officials are now trying to find a way to make temporary money-printing palatable to the German electorate. The tabling of possible exits from the Eurozone was the first flare sent up, next was the discussion of a breakaway union featuring the strong countries, but immediately, Frau Merkel dropped the hammer with this stark warning to her constituents (delivered at just the right degree of arms length, of course):

f you listen very carefully, you can hear the subtle changes that make it pretty clear that German

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(Businessweek): Germany will resist any attempt to reduce the euro region to its strongest members to increase its stability, the parliamentary finance spokesman for Chancellor Angela Merkels Christian Democratic Union said. Such a shrinking process would be deadly for Germany because we would end up in a mini-euro zone with all the effects you can see in Switzerland, Michael Meister, who is also a CDU deputy floor leader, said today in a phone interview in Berlin. It would be a deadly development for an export country like Germany. It cant be in our interest at all and if its not in our interest, we should do everything to keep it from happening. Once more, with feeling: It would be a deadly development for an export country like Germany. It cant be in our interest at all and if its not in our interest, we should do everything to keep it from happening.
SOURCE: BLOOMBERG

There it is. That is the first step in a move to persuade the German people that a EuroTARP or some form of QEU will be manageable and will not cause the runaway inflation of which Germans are terrified. It will probably be proposed as a program designed to alleviate the pressure facing the likes of Italy, Spain and Portugal and its architects will point to the (relatively) benign US CPI numbers in the wake of repeated Quantitative Easing as testament to the fact that money printing doesnt necessarily lead to hyperinflation - although, very quietly, US CPI has almost quadrupled since the beginning of QE2 and its trajectory remains solidly bottom-left to top-right. They WONT mention the US adjusted monetary base (chart middle, left), nor will they bring up UK CPI (chart, bottom) which is moving ever faster away from its target rate of 2% - currently standing at a breathtaking 5.2% - and will assure the citizens of Germany that there will be a cap on inflation past which the ECB WILL NOT go - either that or it will be a program that will be wound back after, say, two years by which time everything will be on the mend again. Mach dir keine Sorgen. Wir haben alles unter Kontrolle.

SOURCE: ST LOUIS FED

SOURCE: BLOOMBERG

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Dont worry. Weve got it all under control. Of course, this assumes that the vagaries of a vastly expanded money supply can be controlled once released into the wild and, as Weimar Germany, the Zimbabwe of Gideon Gono, Eduardo Duhaldes Argentina and, to a lesser extent, even the America of Paul Volcker in the 1980s bear witness, once this particular beast is unleashed it can take some pretty drastic tranquilizers to get it back in the cage again. No matter for now though, as Europes problems are both immediate and pressing. The Eurocrats will eschew the potential pitfalls of runaway inflation in favour of the short-term fix of money-printing. Lots and lots of money-printing. In addition to Frau Merkels Michael Meisters dire warning, other headlines this week have been very carefully laying the groundwork for a speech I dare say well be seeing soon about how, much as it is against the original concept of the Euro, a temporary bout of Quantitative Easing is necessary to save Europe and the Euro from destruction. We will be in desperate times, will require bold action and can have confidence in the ability of Europes leaders to ensure there is no inflationary impact from any monetization. The gang is definitely all here...: (NY Times): Europes economic outlook received a fresh dose of gloom Thursday, when the European Commission warned that the Continents economies were stalled and faced the risk of a double-dip recession. The recovery in the European Union has now come to a standstill, and there is a risk of a new recession, Olli Rehn, the European commissioner for economic and monetary affairs, told reporters in Brussels. This forecast is in fact the last wake-up call, he added. (UK Daily Telegraph): Barack Obama, the US President, tonight urged Europe to provide strong assurances that countries like Italy will be able to finance their debt. We are not going to see massive growth out of Europe until the problem is resolved and that will have a dampening effect on the overall global economy. Speaking at the Asia Pacific Economic Cooperation (APEC) summit, Mr Obama said: Its not going to be addressed over night. So it is important that Europe as a whole stands behind its Eurozone members. (UK Daily Telegraph): Europe must move quickly to control its spreading debt crisis, because the volatility it is causing is the central challenge to global growth, US Treasury Secretary Timothy Geithner said. We are all directly affected by the crisis in Europe, but the economies gathered here are in a better position than most to take steps to strengthen growth in the face of these pressures from Europe. Mr Geithner added that the basic framework for the European recovery was good. But we need to see it put in place with the speed that markets require and with the force that restores confidence, he said. Theyre moving ahead. We just need to see them move a little more quickly and with a little more force behind it. (Todayonline); The global economy could suffer a lost decade unless nations act together to counter threats to growth, International Monetary Fund managing director Christine Lagarde

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warned yesterday. Speaking at a financial forum, Ms Lagarde said: There are clearly clouds on the horizon ... particularly in the advanced economies and particularly so in the European Union and the United States. Said Ms Lagarde: If we do not act, and act together, we could enter a downward spiral of uncertainty, financial instability and a collapse in global demand. Ultimately, we could face a lost decade of low growth and high unemployment. Lets see.... is that everybody pulling in the same direction? US President? Check. US Treasury Secretary? Check. EU commissioner for monetary & economic affairs? Check. Head of the IMF? Check. German and French heads of state? Check. Anybody else? (Reuters): I refuse to even speculate about so-called two-speed Europe, Czech Finance Minister Miroslav Kalousek said in response to Reuters questions on the matter. That would go against the Czech Republics interests. Czechs? Check. Hell, theyre not even IN the Eurozone yet. I guess that just leaves the big dog; China: (Brecorder): Chinese President Hu Jintao warned on Saturday that the global economy recovery was under threat and called for efforts to boost growth and liberalize trade. The global economic recovery is fraught with greater instability and uncertainty, Hu said during a speech in Honolulu ahead of a summit of Asia-Pacific leaders. Referring to Europes sovereign debt crisis, he said the world must remain committed to ensuring strong growth in order to add momentum to the economic development of the Asia-Pacific and beyond. So there we have it. A carefully crafted scenario which will give Germany the ability to stand astride the world stage by giving up its objections to money-printing (temporarily, you understand) in the interests of the global good; the all-new Committee To Save The World. Judging by the Daily Telegraph story on page 20 of this weeks Things That Make You Go Hmmm..... this cunning plan comes not a moment too soon (can you say Ponzi?): (UK Daily Telegraph): Europes 1 trillion (854bn) rescue fund has been forced to buy its own debt as outside investors become increasingly concerned about the worsening eurozone sovereign debt crisis. The European Financial Stability Facility (EFSF) last week announced it had successfully sold a 3bn 10-year bond in support of Ireland. However, The Sunday Telegraph can reveal that target was only met after the EFSF resorted to buying up several hundred million euros worth of the bonds. Sources said the EFSF had spent more than 100m buying up its own bonds to help it achieve its funding target after the banks leading the deal were only able to find about 2.7bn of outside demand for the debt. Speechless.

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we return to our own Big Fitz of the currency markets - the Euro as it struggles to stay afloat against all the odds. So far, it has been managing quite nicely, although the technical picture has been deteriorating rather dramatically (see chart, left). Once the now-inevitable European money-printing begins, its hard to make a case for a strong Euro - particularly in light of weakening economic data across the core of the region - from the French trade balance (which showed a 6.303 billion deficit in September - the sevSOURCE: BLOOMBERG enth largest single-month deficit in French history and a staggering 46% m-o-m decline), to a plunge in French exports that matched the lows seen in 2008-9, to Germanys Industrial output (which fell almost 3% in September) and Industrial Orders (which fell 3.6% m-o-m) and on to the rise in unemployment in Germany - the first such increase for 28 months. Mario Draghis rate cut is just the beginning. Interest rates in the EU are heading below 1% in a hurry if the recent data are anything to go by and, once QEU or the EuroTARP commence, Europes Big Fitz , which has stayed afloat for so long against all the odds, will likely sink - suddenly and without warning. You have been.... oh, wait...

ut before we finish for today,

of such luminaries as Jeremy Warner, Michael Pettis, the Economist and the IFR to name but a few and between them they take a pretty good stab at figuring out what the hells going on. Ted Butler takes a swing at the CME over MF Global, we find out how Iran is trying to strengthen its hand by cozying up to Greece, Matt Taibbi tells of his love for OWS and my friends Paul Brodsky and Lee Quaintence are back once again to teach people like me how to write as they take on the nipping and tucking that the financial system has undergone in the last forty years. We have charts on S&P earnings season, Italys debt and Unicreditos comparison between the US and Italy, theres a double bill of Nigel Farage, the two Jims - Rickards and Grant sit down for a cracking interview with Bloomberg TV and the wonderful Turd Ferguson talks to Chris Martenson about precious metals.... looks like I finished just in time...

odays missive is laden with about 26,000 tons of Europe Im afraid - including the thoughts

As a result of my role at Vulpes Investment Management, it falls upon me to disclose that, from time-to-time, the views I express and/or the commentary I write in the pages of Things That Make You Go Hmmm..... may reflect the positioning of one or all of the Vulpes funds - though I will not be making any specific recommendations in this publication.

Grant

www.vulpesinvest.com
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Contents
The Euro Is Being Held Together Only By Fear France Will Be The Next To Crumble, Warns Gordon Brown Staring Into The Abyss Greece Turns To Iranian Oil As Default Fears Deter Trade EU Mulls New Sanctions Against Defiant Iran Slovenian Bond Yield Breaks 7%, First Time Since Euro Entry How I Stopped Worrying And Learned To Love The OWS Protests Banks To Dump More Italian Debt An Unmitigated Disaster Germany Must Do It, Not China Berlin Prepares for Possible Greek Exit from Euro Zone Eurozone Bail-Out Fund Has To Resort To Buying Its Own Debt Plastics Charts That Make You Go Hmmm..... Words That Make You Go Hmmm..... And Finally

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The Gonnie, Gonnie Banks

# 88 Bank Community Bank of Rockmart, Rockmart, GA Total Cost to FDIC Deposit Insurance Fund Assets ($m) 62.4 Deposits ($m) 55.9 Cost ($m) 14.5 14.5

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here has been a lot of thinking the unthinkable over the past week. If the euro is ultimately
unsustainable, why not just face up to reality and let this grand exercise in political hubris go?

Would the consequences really be quite as bad as conventional analysis makes out? These questions need deconstructing. The announcement of a referendum last week by Greek (then) prime minister George Papandreou prompted German Chancellor Angela Merkel and French premier Nicolas Sarkozy to ask in exasperation whether Greece wanted the euro or not.

... Divorce ty occurs because for the time being none of these countries actually wants to leave. Even the Greeks seem to have decided, for now, that getting out is not a solution.

Their intention was to frighten the Greeks into submission, and it worked. Papandreou is gone, and a government of national unity is being formed under the fully signed up is possible. The difficul- eurocrat Lucas Papademos. Berlin and Paris have got their way. But in threatening effective expulsion, they also broke an unspoken taboo; they admitted that countries can opt out if they want to. In so doing, they invited speculation on just such an outcome.

Since then, the waters have been further muddied by the suggestion that German and French officials are already working on plans for a two-speed Europe, involving closer union for a smaller euro core. Those unable or unwilling to meet the requirements would be thrown out. In any case, the principle has now been openly acknowledged. Divorce is possible. The difficulty occurs because for the time being none of these countries actually wants to leave. Even the Greeks seem to have decided, for now, that getting out is not a solution. The same is broadly true of Ireland, Portugal, Spain and Italy. In none of these countries is there a credible political force that advocates exit. This in itself may be symptomatic of a dangerous divorce between political elites and growing popular sentiment, but thats a story for another day. Right now, they all seem to be falling over themselves to take their medicine. Its not just the markets that demand Italy suspends the Byzantine infighting of its political system and form an unelected government of technocrats to enact the pain. There seems to be much appetite for it among Italians, too. Unfortunately, its most unlikely to result in a sustainable euro. The internal devaluation demanded of these countries is going to take years to deliver results. Thats years of austerity, and years of nil or negative growth for no certain gain in competitiveness. Europe seems to be condemning itself to a Japanese-style lost decade, and very likely something worse.
O O O

JEREMY WARNER / LINK

Mr Browns prediction came as the difference between French borrowing costs and those of Germany hit record levels. EU leaders urged France to draw up further austerity measures to meet its deficit reduction targets, amid fears the eurozones second biggest economy could crumble if Italys debt crisis spirals out of control. Mr Brown, speaking in Moscow, said: France is in danger of being picked off by the markets in the coming weeks and months.

risks becoming the next victim of the sovereign-debt crisis in the coming weeks, Gordon Brown, the former prime minister, has warned.

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He urged Nicolas Sarkozy, the French president and current G20 chairman, to draw up a global growth agreement with major powers such as China. Such a deal could help to support the EU, whose bail-out mechanisms are not big enough to prop up a major nation. Mr Browns speech echoed Olli Rehn, the EU economics commissioner. Mr Rehn urged France to take further steps to cut its public deficit to a limit of 3 per cent of gross domestic product in 2013 from an estimated 5.7 per cent this year. He said it was set to miss those targets by a wide margin. We believe that it is best that France announces, ... France is in danger of being as early as possible, the measures that are needed to keep its deficit in picked off by the markets in the line with the official targets for 2012 and 2013, he said. The spread or difference between German and French 10-year government bond rates coming weeks and months the cost of state borrowing which reflects investor confidence hit a high of 170 basis points yesterday before falling back. At the close, the interest rate or yield on a 10-year French bond was 3.46 per cent, while its German equivalent was 1.78 per cent. On Monday France announced a 65billion austerity package over five years its second in three months to retain the triple-A credit rating, which allows it to borrow at the lowest rates. The credit agency Moodys put France under observation last month and could revise its rating in January. Mr Sarkozy announced a 12 billion package in August consisting mostly of small tax rises and the abolition of tax breaks. That was to respond to it revising down its growth forecast for next year from an optimistic 1.75 per cent to 1 per cent. The European Commission yesterday scaled down its forecast for French growth to just 0.6 per cent next year as it warned that the debt crisis risked dragging the entire bloc into recession. With presidential elections in France just six months away, the unpopular Mr Sarkozy is staking his credibility on deficit reduction, as he tries to convince voters he is a safer pair of hands than his Socialist rival, Franois Hollande. This in part explains why his government dismissed the suggestion it needed more austerity measures yesterday. But a chasm appeared to be opening between Europes two big economies.
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UK DAILY TELEGRAPH / LINK

managing the currency but also acknowledging that it could no longer bear the mantle of empire. When America broke the dollars peg with gold in 1971, it ushered in a decline that continued until Paul Volcker re-established confidence in the currency in the early 1980s. As Joseph Schumpeter, the great Austrian economist, once wrote: The monetary system of a people reflects everything that the nation wants, does, suffers, is.

hen Britain abandoned the gold standard in 1931, it was not only forsaking a system for

In the same way, the crisis that has engulfed the European Union (EU) is about much more than the euro. As government bonds, share prices and banks swoon and global recession knocks on the door, the first fear is of financial and economic collapse. But to understand what is happening to the currency you also need to look at what is happening to Europe. The euro will not be safe until Europe answers some fundamental questions that it has run away from for many years. At their root is how its nations should respond to a world that is rapidly chang-

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ing around them. What will it do as globalisation strips the West of the monopoly over the technologies that have made it rich, and an ageing Europe starts to look increasingly like the western peninsula of a resurgent Asia? Some Europeans would like to put up carefully designed fences around the EUs still vast and wealthy market. Others, including a growing number of populist politicians, want to turn their nations inward and shut out not just the world but also the elites project of European integration. And a fewfrom among those same elites, mostlyargue that the only means of paying for Europes distinctive way of life is not to evade globalisation but to embrace it wholeheartedly. This is not some abstract philosophical choice. It is a fierce struggle for Europes future, being waged in Athens as George Papandreou loses power to a temporary government of national unity, in derelict factories in France and Belgium and in the wasted lives of millions of unemployed young Spaniards. This struggle will set the limits on Europes welfare state. It will determine how the unbalanced partnership between Germany and France, and an increasingly detached Britain, will shape the EU. It will define the high politics of Brussels and the low politics of European populism. And it will decide the fate of the device that Schumpeter would see as the embodiment of all this: the euro.
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THE ECONOMIST / LINK

Traders said Greece has turned to Iran as the supplier of last resort despite rising pressure from Washington and Brussels to stifle trade as part of a campaign against Tehrans nuclear program. The near paralysis of oil dealings with Greece, which has four refineries, shows how trade in Europe could stall due to a breakdown in trust caused by the euro zone debt crisis, which is threatening to spread to further countries. Companies like us cannot deal with them. There is too much risk. Maybe independent traders are more geared up for that, said a trader with a major international oil company. Our finance department just refuses to deal with them. Not that they didnt pay. It is just a precaution, said a trader with a major trading house. We couldnt find any bank willing to finance us. No bank wants to finance a deal for them. We missed some good opportunities there, said a third trader. More than two dozen European traders contacted by Reuters at oil majors and trading houses said the lack of bank financing has forced Greece to stop purchasing crude from Russia, Azerbaijan and Kazakhstan in recent months.

is relying on Iran for most of its oil as traders pull the plug on supplies and banks refuse to provide financing for fear that Athens will default on its debt.

reece

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Greece, with no domestic production, relies on oil imports and in 2010 imported 46 percent of its crude from Russia and 16 percent from Iran. Saudi Arabia and Kazakhstan provided 10 percent each, Libya 9 percent and Iraq 7 percent, according to data from the European Union. They are really making no secret when you speak to them and say they are surviving on Iranian stuff because others will simply not sell to them in the current environment, one trader in the Mediterranean said.
O O O

REUTERS / LINK

he European Union may approve fresh sanctions against Iran within weeks, after a U.N. agency said Tehran had worked to design nuclear bombs, EU diplomats said Thursday.

Iran denies trying to build atom bombs and its Supreme Leader Ayatollah Ali Khamenei said any U.S. or Israeli attack on its nuclear sites would be met with iron fists. The United States and Israel have refused to rule out any option to prevent Iran from acquiring a nuclear arsenal.

... The United States and Israel have refused to rule out any option to prevent Iran from acquiring a nuclear arsenal.

Diplomats in Brussels said preliminary discussions among EU capitals on new measures had begun and plans may be ready for EU foreign ministers in Brussels to approve on December 1. Experts are discussing a number of options on the table but it is difficult to foresee the outcome of the debate, one EU diplomat said. Another said he expected a formal decision to be reached on December 1.

Iran already faces a wide range of U.N. sanctions, as well as some imposed unilaterally by the United States and the EU. New EU sanctions would be a significant part of Western efforts to ratchet up pressure on Tehran after the U.N. nuclear watchdogs report this week that laid bare a trove of intelligence suggesting Iran is seeking nuclear weapons. The White House said Thursday the report by the International Atomic Energy Agency (IAEA) was very alarming and it would continue to push Tehran to change its behavior. Western governments would prefer further Security Council measures against Tehran. But Russia and China, both permanent Security Council members with veto power, are opposed and on Thursday said new sanctions would not work. Tehran, which says its nuclear program is for producing electricity and other peaceful purposes, said Wednesday it remains ready for negotiations with world powers on the issue. Western diplomats say only sanctions against Irans energy sector could exert serious pressure on Tehran, but such steps would also hurt a global economy hit by Europes debt crisis.
O O O

REUTERS / LINK

10-year government bonds slid for a fourth day, with the yield topping 7 percent for the first time since the nation adopted the euro in 2007, as the debt crisis in Europe roils markets.

lovenias

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The yield rose to 7.14 percent at 1:05 p.m. in Ljubljana, according to Bloomberg data. The spread, or the difference investors demand to hold the securities instead of similar- maturity German debt, also advanced to a euro-era record of 545 basis points. A basis point is a hundredth of a percentage point. Slovenia, which holds early elections next month, was cut by Standard & Poors, Moodys Investors Service and Fitch Ratings on the governments collapse, the poor economic outlook and a weak banking industry. The former Yugoslav republic is also a victim of its proximity to Italy, which is struggling to fend off an investor crisis of confidence. The worry is that turmoil in Italy will last for some time, pushing Slovenian bond yields even higher, Michal Dybula, an economist at BNP Paribas in Warsaw, Poland, said in a phone interview yesterday. However, even if they breach the 7 percent mark that would not be the same evil as in Italy. Slovenias five-year credit-default swaps rose 47 basis points to a record 395 basis points...
O O O

BUSINESSWEEK / LINK

have a confession to make. At first, I misunderstood Occupy Wall Street.

The first few times I went down to Zuccotti Park, I came away with mixed feelings. I loved the energy and was amazed by the obvious organic appeal of the movement, the way it was growing on its own. But my initial impression was that it would not be taken very seriously by the Citibanks and Goldman Sachs of the world. You could put 50,000 angry protesters on Wall Street, 100,000 even, and Lloyd Blankfein is probably not going to break a sweat. He knows hes not going to wake up tomorrow and see Cornel West or Richard Trumka running the Federal Reserve. He knows modern finance is a giant mechanical parasite that only an expert surgeon can remove. Yell and scream all you want, but he and his fellow financial Frankensteins are the only ones who know how to turn the machine off.

... Occupy Wall Street was always about something much bigger than a movement against big banks and modern finance. Its about providing a forum for people to show how tired they are not just of Wall Street, but everything

Thats what I was thinking during the first few weeks of the protests. But Im beginning to see another angle. Occupy Wall Street was always about something much bigger than a movement against big banks and modern finance. Its about providing a forum for people to show how tired they are not just of Wall Street, but everything. This is a visceral, impassioned, deep-seated rejection of the entire direction of our society, a refusal to take even one more step forward into the shallow commercial abyss of phoniness, short-term calculation, withered idealism and intellectual bankruptcy that American mass society has become. If there is such a thing as going on strike from ones own culture, this is it. And by being so broad in scope and so elemental in its motivation, its flown over the heads of many on both the right and the left. The right-wing media wasted no time in cannon-blasting the movement with its usual idiotic clichs, casting Occupy Wall Street as a bunch of dirty hippies who should get a job and stop chewing up Mike Bloombergs police overtime budget with their urban sleepovers. Just like they did a half-century ago, when the debate over the Vietnam War somehow stopped being about why we were brutally murdering millions of innocent Indochinese civilians and instead became a referendum on bralessness and long hair and flower-child rhetoric, the depraved flacks of the right-wing media have breezily blown off a generation of fraud and corruption and market-perverting bailouts, making the whole debate about the protesters themselves their hygiene, their envy of the rich, their hypocrisy. The protesters, chirped Supreme Reichskank Ann Coulter, needed three things: showers, jobs and a point. Her colleague Charles Krauthammer went so far as to label the protesters hypocrites for having

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iPhones. OWS, he said, is Starbucks-sipping, Levis-clad, iPhone-clutching protesters [denouncing] corporate America even as they weep for Steve Jobs, corporate titan, billionaire eight times over. Apparently, because Goldman and Citibank are corporations, no protester can ever consume a corporate product not jeans, not cellphones and definitely not coffee if he also wants to complain about tax money going to pay off some billionaire bankers bets against his own crappy mortgages.
O O O

MATT TAIBBI / LINK

debt, as they seek to pre-empt a worsening of the regions debt crisis and avoid crippling writedowns a move that could scupper the European Central Banks efforts to bring down soaring yields. Still reeling from heavy losses on money they lent to Greece, lenders are keen not to make the same mistake twice.Then, under the pressure of governments and a hope that credit default swaps would protect them against heavy losses, they held on until it was too late to sell. With the ECB providing a bid for Italian bonds that might not otherwise exist, board members at some of Europes largest bank say now is the time to accelerate disposals. Many are also reversing longstanding policies of buying into new Italian bond issues, denying Rome an important base of support.

uropean banks are planning to dump more of the 300bn they own in Italian government

... Its when everyone is expecting it rather than wait around for a default

Our traditional buying days are no longer, said one board member at a European bank, one of Italys 10 biggest creditors, who added that the bank has also sold off previous bond purchases. Unless there is more certainty on Italians changing direction, it will be very better to take the losses now tough for them to find buyers. Its better to take the losses now when everyone is expecting it rather than wait around for a default

Banks are important creditors to Rome, having bought about 40% of the 22bn Italy issued in euro-denominated syndicated bonds since 2009. According to the European Banking Authority, the regions biggest 90 banks held 326bn of Italian debt at the end of last year. Many banks have since reduced their holdings, although the EBA numbers released in July are the most up-to-date cross-industry figures on nominal holdings. Italys debt load totals around 1.7trn, with more than 300bn due to mature next year alone. Youre better off doing it now rather than waiting, said one investment banker who is currently working on plans for bank clients to further sell down their Italian bond holdings. Its better to take the losses now when everyone is expecting it rather than wait around for a default.
O O O

IFR / LINK

they occur. I think we are at one of those times with the bankruptcy of MF Global. Theres no question that the news and overall circumstances of the demise of the large commodities brokerage is widely known, but the significance of the event is not yet fully understood. While I would classify the event as an unmitigated disaster on many levels, I have hope that it might result in some long-overdue and necessary changes in the commodities regulatory structure.

ftentimes, the significance of truly historic events is not fully appreciated at the time

The disaster is that for the first time in modern financial history, the main guarantee of the clearinghouse system has completely failed its most important constituent the customer base. The underly-

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ing promise to every participant in the futures market is that your money and open positions are safe from theft and default. This is the very glue that holds the future market together, namely, that all market participants can depend upon strict regulation and oversight to safeguard against fraud and theft. Thats what has made the US organized futures exchange system the envy of the world. Until now. For more than a week, almost all of the 50,000 commodity customers of MF Global are in limbo as to the access and status of their funds on deposit and open positions. This is unprecedented and beyond bad. For these 50,000 customers, its the equivalent of discovering your bank just went out of business and there is no assurance all your funds will be returned. (In the interest of full disclosure, my background is in futures, having started as a commodity ... Let me cut to the chase here and pinpoint broker at Merrill Lynch some 40 years ago. But I have not traded futures for years and am no way personally involved the real problem the CME Group in the MF Global mess; Im strictly an outside observer and independent analyst). Let me cut to the chase here and pinpoint the real problem the CME Group. I know I have continuously criticized the CME, even calling it a criminal enterprise on many occasions, but in truth I may have understated the case. Yes, I would agree that the immediate cause of the MF Global bankruptcy was MF Global itself; but what turned it into a disaster of unprecedented proportions was the CME Group. The CME Group was the front line regulator for MFG, responsible for auditing and insuring the safety of customer funds and for guaranteeing those funds in a worst case scenario. The CME failed at every turn. Not only did its auditing fail miserably, the CME failed to step up to the plate to safeguard customer funds after it was discovered that $600 million was missing. This is like a case of paying premiums for years on an insurance policy only to be denied coverage when presenting a claim for the first time. I know that the federal commodity regulator, the CFTC, has been negligent in the case of MF Global as well, but that does not mitigate the CMEs failures.
O O O

TED BUTLER / LINK

short-term fixes at the expense of medium-term solutions. Since they are unlikely to be in office to benefit from the medium-term improvement, they discount its effect at much higher rates than they discount short-term policies. The result is that the crisis gets worse, not better. This seems to be what is happening in Europe. In order to postpone the crisis, perhaps because of upcoming elections in a number of important countries, European leaders are choosing quick fixes at the expense of long-term European growth, and of course this will simply increase the probability and cost of a crisis. Europe is capital-rich and in fact is a net exporter of capital. The reason peripheral European governments cannot get financing is not because there is a lack of capital or liquidity but simply because their solvency is questioned by investors, and correctly so in my opinion. They dont need Chinese capital. They need someone foolish enough to lend money to countries that probably wont repay. If European leaders hope that China will lend large amounts of money directly to those borrowers, I say good luck to them but they shouldnt expect too much. Why should China lend to someone who wont repay? But if Europe is asking China to lend into a fund that is effectively guaranteed by Germany, then there shouldnt be much Chinese reluctance. In that case however I would have to wonder why Europe needs help from foreigners. Germany has little difficulty in borrowing on its own. But the main issue is the sheer silliness of Europes asking for foreign money. Any net increase in

s political horizons get shorter (in a crisis, governments tend to be unstable), leaders choose

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foreign capital inflows to Europe must be matched by a deterioration in Europes trade balance. This will probably occur through a strengthening of the euro against the dollar. And given weak domestic European demand, this means that either Europeans will buy from foreign manufacturers what they would have bought from European manufacturers, or it means Europe will export less. Europe, in other words, is trading medium-term growth and employment for short-term financing for borrowers that should not be increasing their debt levels. This is absurd. Europe needs growth, not capital, and importing capital means exporting demand, which is now the worlds most valuable resource. Increasing unemployment cannot possibly be the solution for Europe especially when Spain just announced yesterday that unemployment was up to 21.5%. But I guess postponing the crisis is more important than medium-term growth if you are looking to get reelected in the next year or so.
O O O

MICHAEL PETTIS / LINK

exit of Greece from the euro zone. Under a worst-worst-case scenario, the country could descend into a vicious circle of misery that could last decades. The German government is preparing for Greeces possible exit from the euro zone in the event that the countrys new government decides not to continue with the previously agreed austerity programs. Experts at the German Finance Ministry have been simulating a variety of scenarios based on different assumptions, SPIEGEL has learned.

he German government has been simulating a range of scenarios to prepare for a possible

...In addition, the government experts also looked at a so-called worst-worst-case scenario. In this model, Greeces new currency would dramatically devalue against the euro. That would have the positive effect of making the countrys exports cheaper, but the negative effects would outweigh the benefits.

A so-called baseline scenario is based on the expectation that the situation does not get too bad. Under this scenario, Greeces exit from the monetary union could even contribute to the strengthening of the euro zone in the long term, following an initial period of turbulence. The thinking goes that the currency union could be more stable without its weakest member.

Admittedly, peripheral euro-zone members like Spain and Italy would still face challenges, but the assumption is that they would be better able to tackle their problems without the additional burden of the Greek crisis. According to the assessment of German government experts, these countries may currently be struggling to get access to money, but unlike Greece they are not close to insolvency. Under the Finance Ministry experts worst-case scenario, developments in the euro zone would be less favorable. In this case, Italy and Spain would find themselves in the crosshairs of the global financial markets, and their borrowing costs would rise. In this simulation, the European backstop fund, the European Financial Stability Facility (EFSF) would be forced to supply those countries with fresh money. For this to succeed, the experts argue, the EFSF should be expanded as quickly as possible so that it has an effective lending capacity of 1 trillion ($1.4 trillion). In addition, the government experts also looked at a so-called worst-worst-case scenario. In this model, Greeces new currency would dramatically devalue against the euro. That would have the positive effect of making the countrys exports cheaper, but the negative effects would outweigh the benefits. The countrys national debt would rise despite a haircut, because Greeces debts would still be denominated in euros. The countrys credit rating would be immediately downgraded again, and Greek companies would struggle to get access to money because the countrys banks would also be cut off

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from international capital markets. Many firms would go bankrupt because their debts would also be denominated in euros, with the result that many more workers would lose their jobs. Domestic consumption would collapse, aggravating the downturn. The country could take decades to free itself from this vicious circle, and other nations might also be drawn into the vortex. The German government experts do not, however, consider this scenario to be the most likely one.
O O O

DER SPIEGEL / LINK

The European Financial Stability Facility (EFSF) last week announced it had successfully sold a 3bn 10-year bond in support of Ireland. However, The Sunday Telegraph can reveal that target was only met after the EFSF resorted to buying up several hundred million euros worth of the bonds.

1 trillion (854bn) rescue fund has been forced to buy its own debt as outside investors become increasingly concerned about the worsening eurozone sovereign debt crisis.

uropes

... Sources said the EFSF had spent more than 100m buying up its own bonds to help it achieve its funding target after the banks leading the deal were only able to find about 2.7bn of outside demand for the debt.

Sources said the EFSF had spent more than 100m buying up its own bonds to help it achieve its funding target after the banks leading the deal were only able to find about 2.7bn of outside demand for the debt. The revelation will be seen as a major failure and a worrying sign of future buyers strike after EFSF officials and their bankers had spent recent weeks travelling the world attempting to persuade key investors, including Chinas national wealth fund and Japanese government funds, to buy its bonds.

Chinese and Japanese money was crucial to last years first bond sales by the EFSF, but they have since been dismayed by the eurozones failure to resolve the worsening debt crisis and alarmed at how fund has morphed from being a rescue facility for European banks into a potentially 1 trillion leveraged first-loss insurer for eurozone governments. Other European Union funds are also understood to have supported the EFSFs bond sale. The failure of the EFSF will increase pressure on the European Central Bank to effectively become the lender of last resort for the eurozone, a move it has strongly resisted. At a private breakfast organised by PI Capital last week, Mark Hoban, the Treasury minister, said: What it doesnt do is provide the next stage of the solution, which is how do you stop this from happening again? he said. The move, by the European Investment Bank, will cause more disquiet among non-eurozone EU members who have become concerned about their growing exposure to the cost of rescuing the currency bloc.
O O O

UK DAILY TELEGRAPH / LINK

current global system of money and credit is indeed a fiat system, as hard money advocates derisively claim, yet not as well known is that: 1) governments have let their banking systems enjoy control over their currencies and, 2) fiat control over currencies gives fiat control over

he

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commerce. Therefore, all public and private commercial entities must bear the risks assumed by their banking systems, which is particularly odd because both private banks and central banks are for-profit entities in the private sector. There is no such thing as a private commercial exchange that our banking systems do not influence. Consider that credit created by banking systems flows through to capital-building enterprises, wages, earnings and thus savings. A portion of this credit finds its way into investment (as equity), and a portion finds its way back to the banking system (M1 and M2). Thus, the balances most economists and financiers refer to as savings and retained earnings, entries that all of us generally think of as wealth, are in reality unreserved bank system credit. All economic actors are borrowing their money from the banking system, in effect, financing their lifestyles. We find ourselves discussing money again when we intended to discretely identify the true financial system. This is because not only are stocks and bonds financial assets, the very money in which they are denominated is too. It is borrowed, as we discussed above. ... Greece could pay back its debts to We, as economic participants, use banking system-manufactured European banks tomorrow by selling electronic credits as our medium of exchange in commercial transChina a few shipping ports or tonnes actions, to pay our taxes and, for many, to save (store our wealth). When banking systems can no longer find outlets (consumption, of gold in exchange for Euros. Will it? capital expenditures, home borrowing, financial asset speculation, Nah, it knows the Euros it owes the etc.) for the explicit credit they create, the financial system begins banks are baseless, as do the banks, as to de-leverage. This includes most of what today is perceived as our money. How can our money de-leverage? It does so in purdo the Chinese. chasing power terms (or else, via bank runs!). What we are seeing today is economic cheerleaders trying to get M2 savers to leverage their cash further (as a theoretical example, putting down a big chunk of the $9.6 trillion as down payments for home purchases and using the rest as the basis for increasing consumer borrowing). Think of the economic stimulus this would engender. Now think of what would actually be occurring. Money that is already mostly credit would be going to create explicit credit, half of which we would call home equity. The attendant rise in home values and consumption would then create more jobs and wages and income and consumption (and more electronic credits). Leveraging would start anew. This exponential leveraging does not describe a preposterous theoretical future -- it precisely describes our most recent past. The amount of debt in an economy theoretically does not matter. Why? Because people and businesses may owe any amount to each other and if they cant find the money then they can repay their debts with assets. However, in modern societies creditors are not kings and cannot take too much property in lieu of money. You may pay back the mortgage on your home by sending your bank the keys, but everyone on your block or town cannot. Why? Because in the absence of subsequent base money stock growth, the banks would have no one to whom to sell the houses then, right? There would be no money left. Greece could pay back its debts to European banks tomorrow by selling China a few shipping ports or tonnes of gold in exchange for Euros. Will it? Nah, it knows the Euros it owes the banks are baseless, as do the banks, as do the Chinese. In the end, what matters is that banks are repaid in nominal currency so that the fiction is perpetuated. Banking systems manufacture credit, call it money, and control the global monetary system.
O O O

BRODSKY & QUAINTANCE / LINK

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Or USA - Where Would You Put Your Money? While at a glance this may seem like a straightforward question with a simple and obvious answer, troubled Italian bank UniCredit has released a ponderous article comparing and contrasting the two heavily indebted, politically challenged, and growth-retarded nations. Comparing debt-to-GDP ratios and trajectories, GDP growth, and unemployment (as well as funding needs), the answer actually becomes a little less obvious and boils down to the central bank (as does every trading decision in the world currently).

taly

Obviously Italian interest rates are being driven by the systemic concerns in the Eurozone. What UCG considers - is the spread differential justified by fundamentals? As the super-committee grapples with the reality of the budget and Berlusconis new boy faces austerity, IMF estimate for gross debt-to-GDP actually converge by 2016: After discussing unemployment outlooks and growth, they find that indeed, the fundamentals (from an economic outlook) favor the US over Italy but their view is that the markets perception of the difference is misplaced. Because at the end of the day investors are not concerned about GDP growth rates themselves, but about the implications of the economic performance for the health of the public finances. And while stronger growth rates undoubtedly help, they are no guarantee for lowering the debt. That is unequivocally shown by the latest IMF projections. While the fund expects the US to grow faster than Italy, it at the same time projects much higher deficits for the US. In five years time, the US is even likely to have a larger debt-to-GDP ratio, but right now the Italian government has to pay seven times as much for a 5-year bond than the US Treasury. How comes? ...seemingly all boils down to the second explanation, which is of course the behavior of the central banks. While both the Federal Reserve and the ECB have been buying government bonds in recent months, it is obvious that the ECB has been much more reluctant to do so. In the (currently unlikely) event that the US Treasury will have problems to rollover maturing debt in the market at reasonable rates, it is probable that the Federal Reserve would step in again and buy even more government bonds. In combination with the direct demand effect, that implicit insurance puts downward pressure on Treasury yields, as investors are demanding only a very low risk premium. The situation in Europe is very different, and we simply do not know how many more government bonds the ECB is willing to buy. The reasoning behind the ECBs more cautious attitude has repeatedly been articulated loud and clear: While additional bond purchases could help in the short-term, they might come at long-term costs, such as high inflation rates or a less stable EUR.
O O O

ZEROHEDGE / LINK

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CLICK TO ENLARGE

SOURCE: BIANCO RESEARCH

arry Ritholtz brings us this summary of earnings season in the S&P500 courtesy of Jim Bianco

CLICK TO ENLARGE

SOURCE: BIANCO RESEARCH

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o far, so good. 2012? Problems...

CLICK TO ENLARGE

SOURCE: DER SPIEGEL

Bertelsmann Foundations study of child poverty amongst the worlds developed nations makes for sobering reading. You can read the full report here

he

SOURCE: BERTELSMANN

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But theres one thing this irreverent, acerbically goofball forecaster is stonecold serious about: the need to build personal exposure to the precious metals. For him, its a straightforward mathematical certainty that the global economy must collapse under the weight of the excessive (and exponentially compounding) credit amassed over the past several decades. The debt is simply too large to be serviced. As a growing number of analysts are predicting, Turd sees the replacement of the worlds current monetary regimes as the endgame to this story. And he believes we are watching that endgame unfold in real-time now. In this interview with Chris [Martenson], Turd discusses his reasons why gold and silver offer the best prospect for preserving wealth through the coming devaluation of world currencies, despite his strong conviction that the markets for these metals are heavily price-manipulated.

urd Ferguson is a funny guy.

CLICK TO LISTEN

double bill of Nigel Farage today. Right: Nigel smacks down the Eurocrats in Brussels. Left: Nigel discusses the whereabouts of Europes gold, the global economy and the six week D-Day facing Europe.

CLICK TO LISTEN

CLICK TO WATCH

Rickards & Jim Grant - two of the smartest Jims around - discuss Federal Reserve monetary policy and the possible impact on the U.S. economy, the gold standard and Rickards new book: Currency Wars: The Making of the Next Global Crisis.

im

CLICK TO WATCH

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and finally
God of our fathers, known of old Lord of our far-flung battle line Beneath whose awful hand we hold Dominion over palm and pine Lord God of Hosts, be with us yet, Lest we forgetlest we forget! The tumult and the shouting dies The Captains and the Kings depart Still stands Thine ancient sacrifice, An humble and a contrite heart. Lord God of Hosts, be with us yet, Lest we forgetlest we forget! Far-called our navies melt away On dune and headland sinks the fire Lo, all our pomp of yesterday Is one with Nineveh and Tyre! Judge of the Nations, spare us yet, Lest we forgetlest we forget! If, drunk with sight of power, we loose Wild tongues that have not Thee in awe Such boastings as the Gentiles use, Or lesser breeds without the Law Lord God of Hosts, be with us yet, Lest we forgetlest we forget! For heathen heart that puts her trust In reeking tube and iron shard All valiant dust that builds on dust, And guarding calls not Thee to guard. For frantic boast and foolish word, Thy Mercy on Thy People, Lord! Rudyard Kipling, Recessional
PHOTO: GRANT WILLIAMS

Hmmm
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