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Thin Ice
I’m not surprised that the halo effect of political changes in Italy and Greece had a very short half-life. Why would it? Nothing has changed.
I’m not surprised that the contagion has worked its way to France. After all, the ECB intervention policy insures that France becomes a target. “If you can't sell Italy, sell France”, is the market’s response.
But I’m absolutely blown out by the pace of things. France’s bonds are being devalued on a daily basis. Italy has been functionally shut out of the new issue market. Market liquidity has dried up. What were once routine transactions are now difficult to price. E100mm bond transactions for France and Italy were normal; today E25mm is a market amount.
What is becoming scarily clear is that there is no more announcements coming that are going to make a difference. All the news is out on expanding the EFSF. The only thing that could reverse this tide is an agreement to “federalize” the debts of Europe. This would leave Germany (massively) on the hook. There is zero chance of this happening.
The central question that the market will ask and answer in the next few weeks is whether France can withstand the onslaught. The ECB will not intervene in the French market. Will debt capital continue to move out of France? Two charts. One says France is probably okay. The other says we are headed for a hard landing.
These numbers (CIA) are a year old but they tell the story. Italy had $2.1T of public sector debt (119% of GDP) while France had only $1.8T of debt (82% of GDP). Looking at this it’s understandable why Italy is in trouble. But it does not explain why France should have a problem. This chart is the reason that there could be an issue:
On this basis France has double the debt of Italy. I call this the Money Center Bank Syndrome. The banks have debt outside their borders (they have assets too). This debt is getting sucked into the French government bond market as world investors trim exposure to the country (“If you can’t reduce exposure to the banks, sell government bonds”).
Italy and France have an average debt maturity of ~7 years. There is a total of $3T. The market value of this stock of debt has fallen by about $200b since October 1st. This is not a loss that will be recorded on anyone’s books (except the likes of MFG) but it does cause a strain on funding as the repo value has fallen.
Remember that all night conference by the EU deciders on October 26th? Central to that meeting was the commitment that the EU banks would undergo a recapitalization of E106b ($150b) by June 30 2012. The EU banks have had their assets impaired by at least that amount in just the past two months.
That all night meeting was just a joke! Anyone who trusts these people are making a mistake.
The Merkozy’s of Europe will be making “calming” statements over the next few days. We are dangerously close to a death spiral, and they know it. But they have nothing on their shelf but words. I don’t think this will prove to be enough.
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$15T for US does not include approx. $3T in Social Security & Medicare Trust Funds.
I respect BK's analysis to the extent we talk about a system on which he has become what he has become, a system that is globally prevalent but totally sick, aka the US world 'so called' market system, cestpool of ponzi. But I do question the seemingly naive treatment he makes of 'CIA' statistics....now that...is like talking like a Byzantine in the time of the Comnenos or Roman before the fall. I hope I'm wrong; I sincerely do...
It might matter in terms of who defaults and in what order, but all the debt is fraudulent, so what the fuck?
and yet, markets beging the 11 am melt up as usual. I don't know how many people understand that if the central banks want to, they can draw this thing out for years.
What the public does not understand, is that when Yields Rise, whoever has those bonds in his portfolio LOSES MONEY bigtime. Rising yields is no big deal, there's plenty of savers in the US that wish yields would rise. But explain it rather, "All those undercapitalized Eurobanks see their portfolio values shrink day by day, praying that the ECB will print money like Uncle Ben (it cannot) and come save the day!". Even Dick Bove thinks its a good thing that US banks are buying these vanishing assets from Eurobanks, sure bring everybody into the drowning pool. To think that this fatal situation can last another month or year is lunacy- another 24 hours if anybody has a spreadsheet is generous.
They will have to actually PRINT to drag this on for years - which they are unable and willing to do...yet. It's a no win situation. This is coming to a head in the next few weeks imo.
They. Will. Print.
The emerging European reality in the absence of inflationary printing is simply unthinkable. I'm sure they've been running the simulations since a year ago, they probably run them once a week now with new data, and I imagine the output of those models would likely give any one of us an instant heart attack.
Walking a tight rope now. And it's 300 years of knives if they fall.
It is the years since WWII that have been the aberration in Europe; 300 years of knives would be reversion to the norm.
Exactly right, blu. They'll attempt to stay on that tightrope as long as possible, but will definitely choose hyperinflation over deflation in the end.
"... next few weeks" is what everyone has been saying for months now.
Years. Since 2008 in my case.
We're all correct, in everything except the timing. Getting that right is hellish difficult.
Even broken clocks are right twice a day.
Very thin market right now and easily manipulated higher or for that matter lower. When the stuff hits the fan you will know because the volume will pick up dramatically.
How so? Most are in cash and bonds or physical. So are you saying that the market will rocket to the moon when the volume picks up?
"So are you saying that the market will rocket to the moon when the volume picks up?"
I don't think that is what he is implying. Everyone has noticed that the markets float upwards on low volume, and then crash down on high volume. It's as if the few remaining retail "investors" bail in one fell swoop, and then the HFT algos slowly float the market upward on low (actual) volume until the retail "investor" is shaken out again. This is a method to troll in the momentum investor who looks at sector directions above all else. It is a slow rinse-and-repeat to keep them playing. Even the slots pay out every now and then to keep the patrons seated and sipping cheap wine or beer.
What I'm saying is there is no conviction to go higher or lower right now. I'm biased to think it will go lower though.
Agreed. It's what makes me snicker at the 10,000 call on gold or the twenty bagger silver. Ain't gonna happen.
Hey Tidefighter, please say "Hello" to King Canute for me --- he learned a thing or two about trying to hold back the tide as well (even though he, unlike you and in contrast to common misunderstanding, did not do so out of arrogance, but to demonstrate to his subjects that he was not in fact omnipotent. Now if only Bernanke and Obomba would take that lesson to heart ....)
Funny how just about EVERYTHING that has happened over the past three or four years in the financial realm was previously dismissed by mainstream center-thinkers, kneejerk pro-Establishmentarians, and disingenuous bankster shills (which one are you?) with the refrain "never gonna happen". If all the financial, monetary and political events of the past few years haven't by now taught you to never say "never", then you have nothing but my scorn and my contempt.
akak... Just a wild ass guess on my part but 'Tide Fighter' might be an Auburn fan.
Alabama = Crimson Tide (usually expressed by fans as Roll Tide)
I know of no other football rivalry between the fan base of two universities that is so bitter and mean spirited.
Never is a looonnngg time, and: ALL things MUST pass!
Courtier: Hey King, can you hold back the tide?
King: No, I Canute!
Ugh!
Crockett, you almost got a red arrow from me for that one.
:-)
That's exactly why $10,000 gold and $1,000 silver will occur. Central bankers must print, or else their central bank disappears.
The thing is, $10000 gold and $1000 silver wont make you any richer! Its a shame.
I'm talking about $10,000 gold in real terms. In nominal terms, all prices are going to infinite because the dollar will hyperinflate.
...wake me up when it happens.
Just go back to sleep and ignore the rise in gold over the past 10 years. Gold is outpacing basically every other commodity except silver for a reason. Now that the easy part of the illusion is over because rates are already at 0%, the next stage of continuously increasing QE will quickly reveal how disillusioned the entire world has been.
Agree, because paper will be just that, paper, and you will either have physical assets and buying power, or you won't. Let's see what happens when the supply lines start getting cut off to the western world.
Nope. Currency will be energy + food, not the barbarous relic. Printing is not the end game; a wide sweeping reset will occur. Au & Ag are just other metals on the 'Chart', nothing more. Want to store something of value? Try water, anything that powers you from 'A' to 'B', and what contains calories. Ever been in a combat zone and without water for three days? I have. And I would have forked over many 'Eagles' for just a gallon of water. The metals argument is silly, even childish. When it's time, frozen Snickers have more value.
In a barter economy, gold and water will both have value. It's not an either/or.
I was waiting for someone to say this! The people who are suggesting keeping a supply of metals are not suggesting that keeping a supply of practical useful supplies is a bad idea. Quite the opposite. You need both. To be without either is going to make for an unhappy camper down the road.
SofaPapa... Bingo! A store of necessities for the time when store shelves become empty. A store of water in case your local water works are not functioning. A store of energy to run your 90 mpg 110 cc motorbike plus a good bicycle with extra parts, tires, tubes. A store of PMs to make aquisitions after fiat dies and to make aquisitions of prime productive real estate, preferably commercial, to provide an income and job in the after crash economy.
Why do otherwise intelligent posters find PMs and storage of necessities incompatible? I have been following my plan for decades and can honestly say that if no crash occurs I will not be financially burdened but if a crash does occur I will be about as well prepared as one can be.
It seems to me that there are two lines of thought at work here. One group thinks it is enough to have lots of guns and ammo so that they can 'take what they want'. The second group believes, as I do, that it is better to be prepared for most eventuallities... and if the 'take what I want' group show up in this neck of the woods it will be their last raiding party. My neighbors and I don't dwell on this subject but we do know what is coming and we are as prepared as possible.
BTW, we are not hoarders because our state pleads with all residents to be prepared for hurricanes. Be a good boy/girl scout and be prepared.
Ben, hello Ben, is that you?????/
Hey fucknut, energy and food ARE physical assets. Troll harder.
Arguing that energy and food makes a good currency is silly and childish. I'm not saying that storing food and energy is a bad idea..it's a good idea because along with hyperinflation will come an end to normal goods distribution. But when fiat disappears, all of the goods and resources will still exist, but something else other than fiat will be used to purchase the good of the world and the only things that make sense that will be used as money is gold and silver because of the high amount of value PMs store (imagine how much food or oil it would take to store $1,000,000 and compare that to how much space it would take to store $1,000,000 in PMs), PMs don't go bad over time like food, and the supply of PMs is limited by scarcity, whereas food and oil is much more abundant.
Basically, both you and AKAK believe gold will be the store of value, in terms of being easily compressed into a small box and it lasts longer than food? Really? Do both of you EVER consider being without food and water? Oh, you think gold will buy you waht you need. .gov says it won't happen. They can trade energy and future, real or options, to whomever they want [you won't]. There are so many ways to make gold worthless. A ham sandwich always has value, if you are hungry.
The way our luck runs we'll probably wish we had converted every dollar we had in 2011 to the
Zimbabwe Dollar. (Or kept it in the Rhodesian Rand!)
"A ham sandwich always has value, if you are hungry"
- Yes, but a ham sandwich does not STORE value when you are NOT hungry...
mises.org would do you a lot of good, methinks.
Excellent point, which I neglected to mention above. +1 for you, RR.
But, as we are conversing with just another dyed-in-the-wool Establishment supporter and brainwashed sheeperson, your insight is most likely lost on them anyway.
Also, the 'authorities' can take your stored food, or steal your land. It's harder to find your gold. And gold is one of the few things you can eat (in small pieces) that has the same value when you shit it out as it did when you ate it.
Coincidence of needs. You have all those ounces of gold because you were smarter than the rest, you saw the end of fiat and you plowed everything you could into hoarding it, giving up every luxury, every other opportunity in the process, and because you bought at $300, and more at $500, and again at $900 you think you were then and are now proven right. I say if you bought at $300, $500, $900, or even $1,500 then you were a smart SPECULATOR, you were right. You made lots of dollars. But 99% of the people did not ever have the option of such investment or speculation, they were doing all they could to pay the rent and eat, if you own an ounce of gold you are the one percent, that makes you a reviled target. How does it feel?
But, again in economics when money dies and we go back to barter, even temporarily, your gold will not be worth $50,000 an ounce or $12 per ounce because remember the dollar died. An ounce of gold will be worth what the market will bear as a barter tool just like a pound of aluminum, 15 cabbages, a used Jag, or a house that needs work but sits on good land. In the early stages your gold will not be tradable because either it will be too high for anyone to deal with you, or it will be too low for you to agree to let go of it. One thing is certain, more than 310,000,000 Americans can't have their work and assets and economy determined by your whims about what your gold may be worth. At most 10% of us have any gold holdings outside of crown and bridgework, and of those 10% have significant holdings, maybe 3 million people have more than ten ounces.
So, 307,000,000 Americans will suddenly keen to be your slaves because you 3 million have a few ounces of gold? You really seem to smugly relish the wealth and your ability to flip the bird to more than 99% of the country because you think you were smarter than we were?
If all three million of you got together in one place and built a wall do you think you would last long against 307,000,000 who have not got gold? Do you think everything will be as it always was but that the crown of greatness and squidness will just pass on to you because you were somehow smarter than all the rest?
What is a lot more reasonable is this, they will not even attack you because your gold will not be relevant. And if it did have any relevance it would be in that the government can confiscate it for next to nothing in order to back it's new Amero or what ever. You think you have power over the rest of civilization because you have gold, oh so rare, historically money when all else failed. But power will lay not with the very few that have an ounce or two of gold, it will rest in the hands of the many that must support life. In a barter world, or any situation where fiat defaults you think you will be king shit, but in fact neither gold or barter will rule the day, it will collapse but we will be forced into a new legal tender.
Gold is never going to be the base of our economy. How do you divide a 15 trillion dollar economy by the amount of gold on the market? Two bucks an atom?
Gold is pretty and rare, but anybody that thinks it will ever be the basis for a modern technological industrial society has got complete shit for brains.
Exactly why I hoard 9mm cases, powder, bullets primers and equipment to make them. Copper Jacketed lead will be the new gold for awhile.
Good luck to you in your petulant arrogance --- from all appearances, you are going to need it.
Yes, ignore several thousand years of monetary history at your peril. But oh yeah, "this time it's different", "we are too advanced today for that 'barbarous relic' ", etc. etc. etc. Some people, nay, most people, never learn from history --- their loss.
I think you missed my point, or maybe I did not make it clear enough Akak, monetary history shows a world where PM's worked well for a long time as money, unit of account, store of value, and medium of exchange, but that world also had fewer than a billion people and was neither industrial or urban. When the population went over about one billion and industrialization, urbanization came along PM's had to be phased out as money because there simply was not enough of it and it was far too poorly distributed to serve as a medium of exchange which could accommodate all the new trade. Hence legal tender fiats. These do have inherent flaws since people with power just cannot seem to avoid the temptation to counterfeit and steal fiat, they might be good stewards of our money for a while but the temptation is always there and sooner or later they always give in.
That does not mean we can ever go back to PM's as money, though they can be used for limited exchanges and even as backing for paper money, but one of the main problems is that using PM's as backing is always a deflationary situation. Gold and silver are static in quantity, or to be exact they do rise in quantity very slowly and very predictably as they are mined and brought into the daylight. But the quantity of other things we produce like food and buildings, or ships, even spacecraft, everything generated by the economy rises at a much quicker pace than PM's, therefore the value of PM's has to rise to cover all the new things we build and value. Since the quantity of the PM's can't increase net as fast as other production what exists has to equate to the total value of the economy, and because the quantity can't rise per se the relative value of the rest of the productive economy has to fall. Deflation.
Let's say we use window glass as an example, this year there are 6 ounces of gold in your little economy and that represents production of 100 sheets of window glass. Next year there will be 6.25 ounces of gold because you find a little in the creek every week, but there are now 200 sheets of window glass to be represented by the gold. You doubled glass production but cannot double gold to represent it and keep prices stable, so that glass has to be worth 200/6.25 rather than the previous year of 100/6. The resulting price is one ounce buys 32 sheets glass where last year it only bought 16.6. Deflation, and that is really simplistic as an example I admit, but I want to be clear.
The result of this economy being backed by nothing other than PM's would be manifold, hyper over concentration of wealth, chronic endemic deflation which discourages production and encourages depression, total lack of credit because when you risk in the new economy you risk not credit but real tangible assets, so seriously? Will you lend out all your stock of gold and silver to a guy who says he has a great idea? Real tangible stores of value like PM's deeply discourage risk taking, no risk no return, simple as that.
PM's work in that past world, they cannot work in a modern industrial urbanized society and there just are about 6 billion too many of us to go back to that rural agrarian feudal state where PM's did work. If you say you have faith that PM's will be able to back the economy as "money" with all three conditions money must meet then you are betting on a global humanitarian disaster where more than 80% of the population dies off. I have no problem with that if this is what you think will happen, but if that is your belief will you state it as such? It is possible I suppose, just not very likely, but you never know.
Wow. What depth of ignorance and misinformation.
I did not miss your points (such as they were/are), I merely found them utterly misinformed, nonsensical, illogical and lacking in any historical validity or proof.
Like every other brainwashed Keynesian and defender of the corrupt status-quo, you not only implicitly but explicitly believe that somehow, in the last 100 years, the world has undergone some kind of profound, transformative financial and monetary phase-change that precludes the pivotal role of gold in backing and supporting the monetary system ---- I would claim, without hesitation, that it has not. Throughout your central-bankster-loving harangue, you continue to make wild claims and accusations with NO basis in fact whatsoever, merely blind assertions that "everything is different now", and that therefore, magically and mysteriously, based SOLELY on your faith in fiat currency, gold could no longer be the foundation of any modern monetary system. Prove it.
Your arguments display a fundamental ignorance of monetary and financial history. The world of 1900 was in most regards no less commercially or financially complex than is today's, and in fact global trade and global financial interdependence was, proportionately, just as important as it is today. Indeed, some economists have made the claim that the world was MORE globalized, financially and monetarily, than it is today. And with a vast industrial infrastructure already in place at that time, somehow gold lubricated and backstopped the financial and monetary world singularly well, that is until the massive statist debacle of World War I, and the raging desire of almost all the combatants therein to depreciate their currencies to pay for their war expenses.
You also betray your Bernankean cluelessness when you mindlessly rail against that supposedly supreme evil, deflation. But the fact is that a REAL, long-term, gentle deflation, such as was experienced between the 1870s and 1900s, is actually economically (as well as socially) healthy and beneficial --- it encourages savings, thrift, and long-term investing, just as the real evil of inflation (currency depreciation) encourages consumption, rampant speculation and short-term thinking in general. Which is worse: to have one's savings GAIN in value over time, or to have them fall? I know which one I would pick!
Your last two paragraphs, in particular, demonstrate a blind and unsupported faith in the gigantically corrupt and unsustainable financial and monetary status-quo, with yet more blind assertions that "this time it's different", and that somehow EVERYTHING has changed in the last 100 years of central-bankster dominance --- but you are utterly wrong. Can't you see that those specious assertions, not to mention every pro-Establishment talking point you spout, is EXACTLY what the Powers-that-be, and the parasitical central-bankster criminals, WANT you to believe? They of course hate the monetary discipline imposed by gold, so they will do, and have done, everything within their power to malign, discredit and attack gold and its proponents --- and you have clearly swallowed their disinformation and lies hook, line and sinker. You should study far more (or any) monetary history before you come back here and embarrass yourself again so completely as you just did.
in the last 100 years, the world has undergone some kind of profound, transformative financial and monetary phase-change that precludes the pivotal role of gold in backing and supporting the monetary system --
We have, we more than quintupled the population while increasing gold stocks by no more than 20% of the total mined through history. It cannot be made to serve the three fundmental properties of money, the end.
Your "facts", once again, are nothing of the sort. Why do you even bother trying to make authoritative claims when you are clearly SO profoundly ignorant of this subject? Really, I am embarrassed for you.
If you had bothered to even cursorily examine the statistics, accumulated world gold production has MORE than quintupled since 1900 --- in fact, there is slightly more gold, per-capita, today than there was in that year (your 20% figure is idiotically incorrect). And even if there were not, that would have little to no bearing on the situation anyway --- as von Mises and Rothbard rightly point out, it is not the quantity of money that determines the health of an economy, it is its quality --- with gold being the very highest quality money the world has ever seen (along with, perhaps, silver as well).
Please, try to learn a little bit about the things that you are trying to argue before making more of a fool of yourself. The end.
The envy & jealousy reveals alot.
Because we have said for all these years (and given others time for it to sink in) that G&S equal freedom, equality and opportunity for all individuals over the litany of statist lies, deciet and intimidation, we should now forgo our preparations, our independence, in fact betray our very souls, to those who promote the vicious cycles of the states robber baron class and the majority who supports it.
Look at what they have become...the very thing they so often rail against.
WOW you really can't get the point, can you?
Let's really dumb this down for you and try again, using your ham sandwich example.
So there's a guy who has a ham sandwich. You are hungry and want the sandwich. You have fuel and water to trade for the sandwich, but the guy doesn't need fuel or water. What happens? You starve. But a guy comes along with some silver coins and can trade for the sanwich, because the sandwich guy knows he can trade the silver for something he DOES need. He trusts the silver because you can't just print more and more of it.
Lesson over, You owe me one ounce of gold. I know you won't mind parting with it since it is worthless! LOL FTW