U.S. Debt Limit To Be Raised For 18th Time In 20 Years - Gold Vulnerable Short Term But Real Record High LikelySubmitted by GoldCore on 10/11/2013 11:05 -0500
The dangerous habit of politicians and governments continually ‘kicking the can down the road’ cannot go on indefinitely. Eventually, the ramifications of this profligacy will be clear to all.
Yet another increase in the debt ceiling and the increasingly parabolic nature of the rise in U.S. government debt will be very supportive of gold in the medium and long term.
U.S Government would rather default than lose their bullion.
As reported previously, the latest meme surrounding the D.C. impasse is that Obama is suddenly willing to compromise on a short-term, supposedly six-week funding and debt ceiling extension, on the verge of his latest talks with republicans at the White House scheduled for this morning, as previously floated by the GOP. Throw some additional headlines such as "Ryan steps up to shape a deal" (in line with what we predicted yesterday) and "The ice breaks; fiscal talks set", by The Hill, and "GOP quietly backing away from Obamacare" from Politico, and one can see why futures are in breakneck soaring mode this morning, driven as usual by the two main JPY cross (USD and AUD), the first of which is less than 100 pips now away from being Stolpered out. So will a compromise deal finally emerge 7 days ahead of the first X-Date, or will a last minute snag once again derail the (non)-negotiations? We will know quite soon.
Quick: which BRIC nation has the highest consumer loan default rate?
If you said China, India or Russia, you are wrong. Actually, if you said China you are probably right, but since absolutely all economic "data" in China is worthless, manipulated propaganda, only a retrospective post-mortem after the Chinese credit, housing, commodity, consumption bubbles have all burst will we know the answer. So excluding China, which country's consumers after a multi-year shopping spree funded entirely on credit, are suddenly suffering the epic hangover of soaring non-performing loans as they suddenly find themselves unable to even pay the interest on the debt? Just ask former billionaire Eike Batista whose OGX oil corporation is days away from filing bankruptcy. The answer, with 5.6% of all loans in default, above Russia, South Africa, Mexico, Turkey and India, is Brazil.
- Hilsenrath: Tense Negotiations Inside the Fed Produced Muddled Signals to Markets (WSJ)
- Biggest US Foreign Creditors Show Concern on Default Risk (BBG)
- Shutdown Costs at $1.6 Billion With $160 Million Each Day (BBG)
- What default? Republicans downplay impact of U.S. debt limit (Reuters)
- Top Bankers Warn on U.S. Debt Proposal (WSJ)
- India to stick with austerity despite looming election (Reuters)
- Japan's Current-Account Surplus Plunges (WSJ)
- Amazon Wins Ruling for $600 Million CIA Cloud Contract (BBG)
- German Factory Orders Unexpectedly Fall on Weak Recovery (BBG)
- Britain's Higgs, Belgium's Englert win 2013 physics Nobel prize (Reuters)
- Supreme Owner Made a Billionaire Feeding U.S. War Machine (BBG)
India's Bipolar Monetary Policy Continues: RBI Cuts Marginal Facility Rate Another 50bps To Boost LiquiditySubmitted by Tyler Durden on 10/07/2013 07:29 -0500
It was less than four weeks ago that the Reserve Bank of India, under new head Raghuram Rajan, stunned the world on September 20 when it announced that it would both hike its repo and cash reserve rates in an inflation fighting step, while lowering its marginal standing facility rate by 75 bps to 9.5% in order to boost banking sector liquidity, hence "bipolar policy" of the kind most recently seen in Europe. Moments ago, the RBI once again showed that when faced with the option of consumer pain, i.e. runaway inflation, and preserving a banking status quo, i.e. liquidity, the central bank will always choose the latter, when in a surprising move the RBI cut its Marginal Standing Facility rate by further 50 basis points, from 9.5% to 9.0%.
- A U.S. Default Seen as Catastrophe Dwarfing Lehman’s Fall (BBG)
- Software, Design Defects Cripple Health-Care Website (WSJ)
- Gunmen kill 5 Egyptian soldiers near Suez Canal, 2 people die in blast (Reuters); Egypt death toll rises to 53, streets now calm (Reuters)
- Three retailers sell Apple iPhone 5C for $50 or less (Sun Sentinel)
- New American Economy Leaves Behind World Consumer (BBG)
- Dow's Exiles Often Have Last Laugh (WSJ)
- Macy's Puts China Online-Expansion Effort on Hold Amid Economic Slowdown (WSJ)
- Gold Befuddles Bernanke as Central Banks’ Losses at $545 Billion (BBG) - just ask the BIS gold selling team: they are unbefuffdled
- Markit Group Said to Avoid U.S. Antitrust Claims as EU Proceeds (BBG) - being owned by the banks has benefits
- Paulson leads charge into Greek banks (FT) - and scene for the Greek banking sector
Overnight trading over the past week has been a bipolar affair based on algo sentiment about what is coming out of D.C. But which the last session was optimistic for some inexplicable reason that a deal on both the government shutdown and the debt ceiling out of DC was imminent, today any optimism is gone in the aftermath of the latest comments by Boehner on ABC, in which he implied that a US default is not unavoidable and that it would be used as more political capital, as it would be once again blamed on Obama for not resuming negotiations. As a result both global equities and US futures are down sharpy in overnight trading. And since the government shutdown, better known as a retroactively paid vacation, for everyone but the Pentagon (whose 400,000 workers have been recalled from furlough) continues it means zero government economic statistics in today's session with the only macro data being the Fed-sourced consumer credit report at 3 pm. This week also marks the unofficial start of the Q3 reporting season in the US with Alcoa doing the usual opening honous after the US closing bell tomorrow. JPMorgan’s and Wells Fargo’s results on Friday are the other main ones to watch to see just how much in reserves are released to pretend that banks are still making money. As usual, expect disinformation leaks that send the market sharply higher throughout the day, which however will only make the final outcome that much more painful, because as during every US government crisis in the past, stocks have to plunge so they can soar again.
We identify the six investment themes that look likely to generate alpha over the coming decade.
One of the biggest laughs of the conference came when Smith presented the slide, ‘Emperor … With No Clothes’ which compared how the value of the Roman denarius, silver coin and the U.S. paper dollar have fared during periods of currency debasement.
The chart shows the silver denarius since Nero and the dollar since Nixon and looked at the level of debasement during the reign of each Roman Emperor and the term of each Presidency.
The US Federal Reserve’s recent surprise announcement that it would maintain the current pace of its monetary stimulus reflects the ongoing debate about the desirability of cooperation among central banks. Discussion of central-bank cooperation has often centered on a single historical case, in which cooperation initially seemed promising, but turned out to be catastrophic. We are thus left with a paradox: While crises increase demand for central-bank cooperation to deliver the global public good of financial stability, they also dramatically increase the costs of cooperation, especially the fiscal costs associated with stability-enhancing interventions. As a result, in the wake of a crisis, the world often becomes disenchanted with the role of central banks – and central-bank cooperation is, yet again, associated with disaster.
What would you say to working in either Switzerland or Yemen? The choice wouldn’t take too long to ponder over I guess when it comes to providing a healthy environment in which factors that would lead to long-term economic success that might be taken into consideration.
Crashing luxury sales in China is a hard-to-swallow concept for the industry.
$1,050/oz was identified as the likely level of support if gold weakens again in the short term - especially if gold falls below support at $1,200/oz. This was a possible scenario outlined in the closing session chaired by Dr Brian Lucey of Trinity College Dublin.
An inept Indian government is attempting to use the age old tactic of scapegoating in order to deflect attention away from its widespread policy failures. In the case of India, the target is gold. It’s a logical target for any crony Indian bureaucrat or Central Banker to go after. Wealth confiscation is a tried and true method historically used by corrupt elites to stay in power, and there is plenty of gold floating around the subcontinent. Easy pickings... or so they thought. It appears some of the temples are now drawing a line in the sand, and are in fact refusing to provide details about their holdings...