On that note, I fully believe the EU in its current form is in its final chapters. Whether it’s through Spain imploding or Germany ultimately pulling out of the Euro, we’ve now reached the point of no return: the problems facing the EU (Spain and Italy) are too large to be bailed out. There simply aren’t any funds or entities large enough to handle these issues.
While gold demand from the western investors and store of wealth buyers has fallen in recent months, central bank demand continues to be very robust and this is providing strong support to gold above the $1,600/oz level. IMF data released overnight shows that Mexico added 16.8 metric tons of gold valued at about $906.4 million to its reserves in March. Russia continued to diversify its foreign exchange reserves and increased its gold reserves by about 16.5 tons according to a statement by its central bank on April 20. Other creditor nations with large foreign exchange reserves and exposure to the dollar and the euro including Turkey and Kazakhstan also increased their holdings of gold according to the International Monetary Fund data.Mexico raised its reserves to 122.6 tons last month when gold averaged $1,676.67 an ounce.Turkey added 11.5 tons, Kazakhstan 4.3 tons, Ukraine 1.2 tons, Tajikistan 0.4 ton, and Belarus 0.1 tonnes, according to the IMF. Ukraine, Czech Republic and Belarus also had modest increases in their gold reserves. Central banks are expanding reserves due to concerns about the dollar, euro, sterling and all fiat currencies.
This spells MAJOR trouble for Spain and the rest of the EU. Unlike Greece, (which has its own elections, which could go very wrong for the EU, on May 6th by the way), Spain is too big to bail out. Indeed, the Spanish banking system is a toxic sewer of bad mortgage debt: over half of all mortgages were generated and owned by the unregulated cajas. If you're unfamiliar with the caja banking system, let me give you a little background...
All you need to read and some more.
- A Forecast of What the Fed Will Do: Stand Pat (Hilsenrath) - they finally realized that they have to leak the opposite...
- Draghi's ECB Rejects Geithner-IMF Push for More Crisis-Fighting (Bloomberg)
- Wal-Mart's Mexico probe could lead to departures at the top (Reuters)
- The Sadly Unpalatable Solution for the Eurozone (FT)
- US Regulators Look to Ease Swaps Rules (FT)
- Yuan, Interest Rate Reform to be Gradual: China Central Bank Chief (Reuters)
- Run, Don't Walk (Hussman)
- Hollande Steals Poll March on Sarkozy (FT)
8 pm has just passed in France, and all the polls are now closed, which means official preliminary data is now allowed - the first results from IPSOS are in, and are as follows:
- Francois Hollande: 28.4% - with victory virtually assured in the runoff round on May 6, it is now Hollande's election to lose. Could he? Yes - read here how Sarkozy can still catch up per DB.
- Nicholas Sarkozy: 25.5% - make the runoff round
- Marine Le Pen: 20.0% - extreme right: much better than expected as nationalism is back with a bang.
- Jean-Luc Melenchon: 11.7% - extreme left: best communist showing since 1981 yet weaker than expected.
- Francois Bayrou: 8.5%
- Eva Joly: 2.0%
Update: according to Belgian Le Soir, first exit polls show that Hollande is not surprisingly ahead, with 27% of the vote, 25.5% for Sarkozy, 16% for Marine Le Pen, and 13% for Jean-Luc Melenchon. More or less just as expected, and setting the stage for the runoff round which will be Hollande's to lose. French speakers demanding a minute by minute liveblog, can find a great one over at Le Figaro, and an English-one can be found at France24.com
As of 8 am CET, polls are open in the first round of the French presidential elections where voters are expected to trim the playing field of ten to just two candidates, incumbent Nicholas Sarkozy and his socialist challenger Francois Hollande, who will then face off in a May 6 runoff, where as of now Hollande is expected to have a comfortable lead and take over the presidency as the disgruntled French take their revenge for an economy that is contracting, an unemployment rate that keeps rising (see enclosed) despite promises to the contrary, and as their to "express a distaste for a president who has come to be seen as flashy following his highly publicized marriage to supermodel Carla Bruni early in his term, occasional rude outbursts in public and his chumminess with rich executives.....France is struggling with feeble economic growth, a gaping trade deficit, 10 percent unemployment and strained public finances that prompted ratings agency Standard & Poor's to cut the country's triple-A credit rating in January." In a major shift for the country, Hollande would become France's first left-wing president since Francois Mitterand, who beat incumbent Valery Giscard-d'Estaing in 1981. As Reuters reports, "Hollande, 57, promises less drastic spending cuts than Sarkozy and wants higher taxes on the wealthy to fund state-aided job creation, in particular a 75 percent upper tax rate on income above 1 million euros ($1.32 million)." The Buffett Rule may have failed in the US but La Loi de Buffett is alive and well in soon to be uber-socialist France. Yet it is not so much Hollande's domestic policies, as his international ones, especially vis-a-vis the European Fiscal Treaty, Germany, and most importantly the ECB, that roiled markets last week, causing French CDS to spike to the widest since January. In other news, goodbye Merkozy, hello Horkel as the power center shifts yet again to a new source of uncertainty and potential contagion.
Don't let the door hit you on the way out.
Germany’s campaign for austerity in the EU is about to lose its biggest ally. How exactly this will play out is unclear, but it will not be conducive to the Euro lasting in its current form much longer: aside from the fact that the EU banking system is on the verge of collapse and Spain (a country too large to bailout) has now stepped to the center stage of the EU crisis, Germany is finding itself increasingly alone in its moves to rein in the ECB’s monetary profligacy.
Oops, Hollande, likely winner in the French election, saw the 5% spread that banks get from the ECB....
Investing in an uncompetitive company in the ugly EU auto market to bail out its own failing subsidiary.