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Wikileaks Exposes German Preparations For "A Eurozone Chapter 11"
The following cable from US ambassador to Germany Philip Murphy ("Ambassador Murphy spent 23 years at Goldman Sachs and held a variety of senior positions, including in Frankfurt, New York and Hong Kong, before becoming a Senior Director of the firm in 2003, a position he held until his retirement in 2006") "CONFIDENTIAL: 10BERLIN181" tells us all we need to know about what has been really happening behind the smooth, calm and collected German facade vis-a-vis not only Greece, but all of Europe, and what the next steps are: "A EUROZONE CHAPTER 11: DB Chief Economist Thomas Mayer told Ambassador Murphy he was pessimistic Greece would take the difficult steps needed to put its house in order. A worst case scenario, says Mayer, could be that Germany pulls out of the Eurozone altogether in 20 years time. In 1990, Germany's Constitutional Court ruled that the country could withdraw from the Euro if: 1) the currency union became an "inflationary zone," or 2) the German taxpayer became the Eurozone's "de facto bailout provider." Mayer proposes a "Chapter 11 for Eurozone countries," which would place troubled members under economic supervision until they put their house in order. Unfortunately, there is no serious discussion of this underway, he lamented." This was In February 2010. The discussion has since commenced.
Full cable, created on February 12, 2010, presented with no comments, and just the occasional highlight, as all of what Germany is really saying has already been said by us as well.
C O N F I D E N T I A L SECTION 01 OF 03 BERLIN 000181
SIPDIS
STATE FOR EEB (NELSON, HASTINGS), EEB/IFD/OMA (WHITTINGTON), DRL/ILCSR AND EUR/CE (SCHROEDER, HODGES) LABOR FOR ILAB (BRUMFIELD) TREASURY FOR SMART, ICN (NORTON), IMB AND OASIA SIPDIS
E.O. 12958: DECL: 02/12/2020
TAGS: EAID EFIN ECON PREL EUN GM GR PGOV
SUBJECT: GERMANY RELIEVED BY EU SUMMIT OUTCOME ON GREECE
Classified By: ECONOMIC COUNSELOR INGRID KOLLIST, REASONS: 1.4 (B) AND
(D)
¶1. (C) SUMMARY: Chancellor Angela Merkel's government welcomed the decision taken at the EU's February 11 informal summit in Brussels not to provide financial assistance, for the moment, to cash-strapped Greece. German officials believe a bailout is not needed at this time, and that extending a lifeline to Greece would have carried too many risks. One major fear in Germany is that "saving" Greece would lead to other needy Eurozone members expecting the same treatment. Another concern is that extending an explicit guarantee for Greece could weigh on Germany's own good standing in the markets, ultimately raising its borrowing costs. While German government officials do not totally rule out an IMF program for Greece if push came to shove, most consider this eventuality highly unlikely, especially in light of the European Central Bank's strong opposition. In fact, the German government, the ECB and private German economists are downplaying the seriousness of Greece's predicament and its potential impact on stability of the Euro. They agree, however, that the crisis could have longer-term consequences for EU institutions and how they interact with member states that stray off course. END
SUMMARY.
NOT IN THE MOOD
---------------
¶2. (C) Prior to the February 11 EU Summit in Brussels, there was much hair pulling in Berlin over the wisdom of participating in some sort of Greek rescue. No one savored the idea of explaining to German taxpayers, already concerned about Germany's record deficit, that they would be footing the bill for the irresponsible behavior of another country. A Finance Ministry official explained to us that many Germans felt disgusted by the situation in Greece: "While Germans have spent the past decade tightening their belts and improving their competitiveness, Greek civil servants still earn 14 months' salary per year." A recent editorial in the German daily Frankfurter Allgemeine Zeitung (FAZ) asked rhetorically whether Germans would need to work until age 69 just to finance early retirement for Greek workers. With important upcoming elections in the state of North Rhine-Westphalia, bailing out Greece would not be a vote winner.
OFF THE HOOK
------------
¶3. (C) The German government was, in fact, "relieved" that the European Council meeting on February 11 decided not to put concrete assistance on the table at this time. Wolfgang Merz, Director for European Financial Affairs, German Ministry of Finance, told us that while Germany stands ready to throw a lifeline if the Greek government truly runs aground, Greece currently has access to capital markets and needs no outside assistance. The key to overcoming the crisis will be the Greek government's implementation of the planned austerity measures, said Merz. Bernhard Speyer, Head of Banking, Financial Markets and Regulation at Deutsche Bank (DB) Research, agreed that the EU struck the right balance: "The decision gave reassurances that Greece would not be abandoned, but kept the pressure on the Greeks by not yet putting cash on the table."
¶4. (C) Stepping in with assistance at this point carried too many downside risks, according to Merz. Legal questions aside, a German or EU bailout of Greece might have harmed Germany's credit worthiness, thereby raising its own borrowing costs. Merz added that a bailout would certainly have set a bad precedent for other Eurozone countries, such as Spain and Portugal, experiencing similar stresses. (Merz acknowledged, however, that these two countries' problems were less acute -- a sentiment echoed by Speyer.)
¶5. (C)Still, there is some skepticism that Greece's austerity program will get the country's finances on the right track, even if fully implemented. Merz said an IMF bail out remained on the table, despite the official line that the situation in Greece could be addressed within the EU.
IMF RESCUE? RESOUNDING NO FROM ECB
----------------------------------
¶6. (C) According to Karlheinz Bischofberger, Deputy Head of the Financial Stability Department at the European Central Bank (ECB), the likelihood that the IMF will be asked to bail out Greece is "zero." Greece does not have a balance of payments crisis, so there is first and foremost no basis for the IMF to step in. Bischofberger added that apart from the damage to the ECB's reputation an IMF intervention would inflict, it was uncertain that the IMF could even succeed in doing the "political dirty work" of forcing Greece to implement a structural adjustment program. DB Research's Speyer concurred, adding that [and IMF intervention] would undermine the credibility of EU institutions to manage a crisis.
REPORTS OF MY DEATH ARE GREATLY EXAGGERATED
-------------------------------------------
¶7. (C) Talk of a possible break-up of the Eurozone is "absurd," according to Moritz Kraemer, Managing Director, Standard and Poor's. He noted that Eurozone membership is still seen as highly desirable, and there was absolutely no incentive to exit, despite the allure of devaluation. Any country that tried to leave the Eurozone would get hammered in the credit markets, exacerbating any underlying structural problems. S and P estimates that Greece's rating in the case of an exit would drop to "BB " or lower, i.e. below investment-grade. Even today, Greece's rating of "BBB " is higher than it was in 1997 ("BBB-") before joining the common currency. [ZH: HAHA]
¶8. (C) While the current crisis may have revealed an "Achilles heel" of the Eurozone, it may present opportunities, according to Klaus Masuch, Head of the EU Country Division, Directorat General of Economics, ECB. The crisis is a "healthy warning signal" that Eurozone members must conduct "sound national policies in line with the agreed rules." It also underlines the necessity of better integration and coordination of member state fiscal policies.
The Euro will come out of this crisis strengthened, he said.
Better and stricter early warning and surveillance systems will be in place, and the Stability and Growth Pact will ultimately be reinforced. DB Research's Speyer agreed, adding that the crisis could make EU member states proceed more cautiously with enlargement.
A EUROZONE CHAPTER 11
---------------------
¶9. (C) DB Chief Economist Thomas Mayer told Ambassador Murphy he was pessimistic Greece would take the difficult steps needed to put its house in order. A worst case scenario, says Mayer, could be that Germany pulls out of the Eurozone altogether in 20 years time. In 1990, Germany's Constitutional Court ruled that the country could withdraw from the Euro if: 1) the currency union became an "inflationary zone," or 2) the German taxpayer became the Eurozone's "de facto bailout provider." Mayer proposes a "Chapter 11 for Eurozone countries," which would place troubled members under economic supervision until they put their house in order. Unfortunately, there is no serious discussion of this underway, he lamented.
COMMENT
-------
¶10. (C) Chancellor Merkel is clearly relieved she does not, for now, have to explain to the public why the German government is running up its own deficit to bail out debt-laden Greece. Still, the German government appears prepared to step in as a last resort if needed and is cognizant that German banks (such as Hypo Real Estate and Deutsche Bank) and insurance companies (Allianz) have significant exposure to Greek sovereign debt. The crisis is also viewed -- within the German government as well as within the ECB -- as a way to exert greater influence over the public finances of profligate Eurozone members. Some Christian Social Union (CSU) politicians are even using the crisis to promote the candidacy of Bundesbank President Axel Weber as next ECB President, arguing that Weber's selection would send a signal that Eurozone stability is paramount. [ZH: Axel Weber was passed over for the post of ECB head and instead former Goldman staffer Mario Draghi was appointed] One way or another, the consequences of the Greece crisis seem likely to outlive the immediate situation. One strong possibility is that German influence over policy in the common currency area will grow.
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Depends what you are trying to achieve I suppose and a profit is a profit even if it's a penny.
Blue chips with nice dividends paid really well between the headlines in October.
No recommendation mind you. (Always check with your own advisor:)
Always DD first, just make sure you keep a SL in though as a saftey net.
It looks like its your problem because all those stupid ZH-ers are in cash for long time. Play uor game!
OMG THE FINANCIAL MARKETS ARE GOING TO CRASH AGAIN!!! Per zero hedge the markets are always one headline away from collapse
Hmmmm ..... I don't recall ZH ever saying markets are going to crash, not even close.
That's one thing I like about this site. TD's (however many there are) just report the facts pretty much, maybe with some editorial, but noting approaching "crashing markets" that I can recall.
As a matter of fact, it is one headline away from a total clapse. You'd rather be ready than supprised.
Don't worry, this will never hit the mainstream media.
And if you're not invested in PM's yet, you're a moron.
Don't be so hard on em' SD...More time to get more on the cheap....
I have this little voice in my head (well, one of them anyway) that tells me the recent CME crap is a precursor to an epic commodities beat down. I do think Europe is about to implode. What better time to throw margin/traders under the bus, collapse positions, so the big boys can back up the truck and take over huge portions of the long positions.
But I don't trade. Oh, and it started snowing here the other day ... still nice out (mid-30s) ... snow almost gone for the rain ... mountains sure were pretty with the light blanket of snow ...
Regards,
Cooter
I totally agree, i'm hoping for.
I'm not going to short it but if it goes below 26 i'm buying every slv call 40 2014 i can get my hands on.
I hope you're right cooter, starting to get worried that I should have gone all in at $1550 (Aus). I also have to worry that even if there is a beat down, the aussie dollar will nosedive at the same time, so Gold will actually go up.
The beat down, if it is really what is in the "cards", will be epic and the last chance to get physical (if dealers will sell at the new low prices). This is only driven by the need to dump shorts accumulated to date in price suppression. Smart dealers will just, um, well, you know, have inventory issues for a while.
I could be completely off base, just my "inner voice" per up thread. I prefer dollar cost averaging whilst I have the free money.
I looked at Australia when I was ready to pack-and-go. Good country over all and I think pretty solid. I also like New Zealand, perhaps more if I must confess. I do think your dollar is going to get a beating though, housing is still bubbly in your neck of the woods and international trade is about to tank as currency wars get going. But then, all currencies are going to the moon, so that makes you a hell of a trade with such commodity backing your currency!
Hope you got a safe hovel for the ride!
Regards,
Cooter
Keep listening to that particular voice. It's a winner!
After another highly anticipated weekend of headline risk, not much happened. We are likely to see a bit more "risk off" price action to open the trading week. Then we may see price action take on more risk as the week advances. Here is a look at the DX, EURUSD, GC, SI, and the SPX. http://bit.ly/tvybIw
The Germans and French banks are only part way through their asset dumping so expect bond yields to remain high for a while.
I.e. Stocks go up.
Bill Still: Still Report #30
http://www.youtube.com/watch?v=UzA0UPRz_o4
--------------
I'll be voting for Bill Still in 2012.
Didn't know he has a regular show. MoneyMasters seemed pretty good.
Note: He has announced his candidacy for the Libertarian Party nomination for Prez.
Forgot to note this is Bill Still talking about Greece and giving his guidance.
Let all the Haters of Truth come out and Bash Julian!
ALL of you fucking scumbags who pray this system will never end..
ALL of you bottom feeders who just want to enjoy the spoils of your life long frauds committed against your fellow man!
Come and regale us with how the truth is a terrible thing and should be spun!
Tell us how B of A never got released! when Julian said "U.S. Bank" NOT! B of A!
Come and entertain us with your spin!
We do NOT!! Forget!
Expect! US!!
He said U.S. Bank?
I remember that, and then everyone ran with it that it had to be Bank of America. There were some emails...but they were not as delicious as we had hoped. But yeah, I buy that, the intial "tease" was about a US Bank.
You have a good memory....it was so long ago we last heard from Julian.
Actually it was pretty clear it was BofA, but the reason the docs never got released is because another wikileaks volunteer intentionally deleted them before leaving the organization.
In theory this was due to in-fighting within wikileaks, but there have been alternative explanations as well.
I really see WikiLeaks as an official vehicle of "government agencies" to break news and influence public opinion.
J. Assange is a ego maniac and is thus easy to influence/control. <yawn/>
I do not contest the validity of the material, I just question the "leaky-ness" of its source.
Regards,
Cooter
wiki leaks was outed as an israeli operation a long time ago. I agree some of the materials are interesting, but must be taken with a pound of salt.
Assange=Disinfo CIA
Buh-bye, Adolf....
I stopped reading after "in twenty years time"
Yeah, when I hit that point I was like ... is this content 20 years old? LOL!
Regards,
Cooter
Actually I am sure the main stream media hit this story quite a lot - DIE,DIE,DIE!
Last thing that big corporate media wants is the general idea that generally many corporations are bankrupt, especially banks.
"Whats the revinue implication of this ?"...
Having worked for a family owned company this seems to be the same dynamic that you would see there. The kids can fuck up, fuck up, and fuck up some more but the guilty daddy has to prove he still loves his little fucking losers and bail them out at every turn. Then he makes sure to always say publicly that the worthless little fuckers are "doing better" than they have. That is unitl their next major humiliation of the old man. It keeps going until the old man is dead or the kid's have bankrupted him.
I've seen this very show in more than one family. Know the script.
I read a long time ago that there is a "Chinese Proverb" that goes something along the lines of "Family wealth never spans three generations."
I probably mis-attributed the source, but I though it was very insightful, accurate or not.
Regards,
Cooter
It is a kind of stage theory:
Generation 1. Has seen hard times, works hard, saves, wants to see kids do better. Very conservative.
Generation 2. Prospers, enjoys fruits of parents saving, not as conservative, endows their own kids with lots of goodies but does not pass on much of a work ethic. May even talk of how parents were too stingy and they won't do that to their kids.
Generation 3. No work ethic, blows all the money, has no endurance or fortitude, crashes financially. Their kids have no legacy except their memories of the crash.
Generation 1. Has seen hard times, works hard, saves...
I think the only reason that the European Aristocracy got away with keeping their generational wealth was because they became and stayed inbred, thus making themselves so retarded that all they could think about was preserving their precious.
Tuche, Euro retards. Tuche.
Naw. It is calories and entertainment. Shit, Rome had that one figured out 2k years ago.
When things get interesting is when the food and fun spigot gets shut off ... you know ... like when trade collapses ...
Regards,
Cooter
That statement is really retarded. Are you retarded too or just drunk?
Look, the Rostheschildes, and other Aristocrate families, have kept their wealth and are retarded. What is wrong with me saying that?
Um, this is sort of awkward, but I almost posted the exact same thing, but thought "naw, he's just trollin".
That said, I don't think they are "in-bred" per se, at least in the literal sense. Let me put it another way. I used to tell folks (and still do although I keep my mouth shut more these days) there are two ways to be wealthy:
I never admitted the latter passes genetics and no one called me out on it. I am crazy smart because of my blood line; my mom was rearing kids and earning a masters in economics in the 60s. That is bawls right there. My old man is sharp as a tack. I had great support growing up, great role models, and enough ass kicks to make me self sufficient.
With all that said, I have no idea what its like growing up in an "old money" family, but I am sure it sucks. I am also sure if I had no soul and basic competence, growing up in said "old money" family, I would get a shot at running systems far bigger than I could create.
But I knew kids in HS that had nice mustangs. Most ended up horseshoe-ing trees.
Call me a red neck, but I think I know where this is going ... and I am in 100% agreement, mayhap for different reasons, with MLH.
Regards,
Cooter
The Rotheschildes intermarried into the 20th century.
You should watch this documentary MsC
http://en.wikipedia.org/wiki/The_One_Percent
wealthy families coached on how to maintain wealth throughout the generations...
I don't have a problem with wealth per se. It's how it's accumulated. And very few non-banking, non-oil families can maintain inter-generational wealth.
And I'll take a rich domestic manufacturer over a parasitic banker any day of the week.
Hulk, Thanks for your comments. Happy Thanks Giving . yen.
Just in case we don't speak before the end of the year.
Took a look at it. Brave of the youngster to do it. Like how their financial advisor about had a crap over what the kid was doing. "Don't kill the golden goose!"
Unless your family is a criminal bankster or Royal!!
Your the dad right?
Most of those Dads will never, ever, see that they are the Dad that did this. The fact that they can't see it, enables it.
NEW YORK (MarketWatch) — The French government will on Monday announce its latest efforts to bring its finances under control, with a new package of tax increases expected to be unveiled.
Is that for real? because Germany just announced a tax cut today.
On a historical average, German success lasts for three to four years. The Eurozone and the EU will brake up in the near future, tariff and trade barriers will be erected, and Germany's export economy will be stifled. The EU should have tightened the belt on the periphery as soon as the Euro was introduced. Now it is too late.
Break, not brake (that's a car brake).
Gave you a green anyway.
Must proof read more carefully. My bad
I hope you are correct, "it's too late."
HFT's just hit the meltup on the Greek news. Funny thing is that stupid machines hit the mega bet on the EUR and AUD on the Greeks kicking out their PM mix that with a government that will fall apart in the next few weeks or less. Timed nicely for when Italy finally says to the France and Germany, "F*ck ya...we are going back to the Lira"
Trading these damn headlines...it's outta control. Now risk off is creeping back. Sell is on.
Germany has to grow some balls and end this BS. Take the pain Europe!
Man, I wish i could buy stock in Occupy Wall Street!
You could probably get odds of some sort in Vegas.
If you won the bet what would you get paid in?
weed?
better weed than dollars. the valuations are ok for this market:)
There's too much focus on Europe. Even if resolved, China is nearing recession and the U.S. is in a deep recession (disguised by inflated corporate earnings).
There, fixed it
China CPI/Inflation due out in a few hrs from now. They have fudged everything to date, trying to run that Goldilocks illusion. I think China is currently amidst a stagflation collapse pointing to a complete economic collapse.
Everybody knows how this ends, and it is not "Happily ever after". After the roman empire fell, the dark ages lasted about 600 years. Now that we have the internet, I am thinking this mess can be resolved (by itself) in about 6 years (+/- 600 years).
Well.....the Roman Empire was a physical collapse, they survived several economic collapses. We are not the verge of Dark Ages unless of course men cower in fear of evil showing no courage thus allowing dark forces to take over.
Stand up for your rights and liberty (Ron Paul, end-the-fed, Gold standard, refuse all paper debts, etc) and things will be fine.
If we run out of oil before we can get other viable alternatives on line, then we have literal dark ages cueing up for the future. When munis cut services, things like city street lights go (we have a town in Michigan that has done just that).
I pay for my own street light. It's not like it can only be done with stolen money.
Hmm... never thought of that. I kind of do the same thing (light the heck out of my place for my and my neighbors security). When we do this together, we are not as easy a target for those who would wish to do us ill. We have never talked about it, we just do it.
Goes to show how we are conditioned to not see options.
Note that I did not set this up myself, rather the streetlight was set up and ready to go when I bought the property. I can shut off the breaker that runs it if I wanted to. But I don't, because it provides some security. It sure makes it easy for my dogs to see when someone is walking by (sometimes to my chagrin).
A person must learn and incorporate the non-agression principle into their thinking in order to both notice and understand the nature of the false choices we are presented with every day.
A more simple life?
Not all bad, you can see the stars...
I think we are actually IN the Dark Ages right now....expnential numbers of ignorant, brainwashed sheeple brought to us by government schools and the Tavistock Institute!
The dark forces are already HERE....foreign forces being trained by OUR military to do the martial law job US forces won't want to do.
Could someone please (Anonymous or Wikileaks) hack into all the Diebold machines and just MAKE Ron Paul win? Because the American sheeple are too stupid to see a true patriot and solution-man when they see him!
Yeah, but things were pretty sweet in the Byzantine Empire that replaced the Roman Empire. The just got rid of all the worthless shit. Rocked on for a good 1000 years.
Regards,
Cooter
Yeah, the Greeks don't want no freaks. Unless she is freaky in bed. Just sayin'
Question now is does the ecb print? As past point of doing what they should have done a year ago. Haircut Greece and accelerate structural reforms. Too late.
Question now is does the ecb print? As past point of doing what they should have done a year ago. Haircut Greece and accelerate structural reforms. Too late.
I don't believe this memo. I don't doubt that Wikileaks released this or that this was sent to Wikileaks. It seems like a false leak.
This is not fundamentally a bail out of Greece as much as it's a bailout of those holding onto Greek government-issued debt. There continues to be this deliberate misinterpretation and it's being superimposed into a discussion of "austerity" imposed by the core on the periphery states. But it's not that Germany or the EFSF are going to give the Greek government money. They're going to purchase their bonds on the secondary market and the ECB will continue to purchase their bonds on the primary market. And this can go on until some smart European leader figures out that they have a unlimited credit card printing money to buy their bonds. Just like in the US, the sucker is the one who tightens their belt, saves for the future, doesn't leverage themselves up to their eyeballs, and naively believes that there's some limit to the extent a central bank can continue to engage in this activity.
In other words, there is no sovereign debt crisis. This is just the calm before a currency crisis.
Well said.
Regards,
Cooter
Why pay your own bills if someone else will do it. Problem is, no one else is able to do it anymore. They might give you a "promise to pay", but they'll never be able to pay. Knock it down, absorb your losses, revalue to whatever is appropriate, and move on. It's the cheapest and least painful way.
"I'll gladly pay your on Tuesday for a hamburger today!"
They must be channeling Whimpy over there across the pond!
Who knew that cartoons could hold such astute economic theory which is everso pratical in the real world?
Greece is a bunch of deadbeats. Poor Germany has to take the flak for it too - and why would you publish this cable? Whose side are you on? People who guch with delight over this make me sick. There is nothing delightful about it. Poor Germany. I hope Europe takes a big huge shit on Greece and any other deadbeats who have ripped it off.
Tyler is a journalist. He isn't on a side. He reports facts/cables/etc.
Tyler,
I cannot find the date that Wickileaks released this cable in your article, and I am most curious what date that might have been. If it was this weekend, it is interesting because, for me, it diminshes my interest in MFGlobal/Jefferies/Margin mess which I was really caught up in---now, it seems like some conspiracy nut's dream.
Even a four year old could connect these dots and make believe quite credibily that it is all part of the 'great game'. I'm just tired of the cheap theater that reality has become-----not so interesting om
Im assuming this was part of "cablegate"
http://www.wikileaks.org/cablegate.html
This is a reply to myself, oldman
I rewrote my comment above after some thought about what I really wanted to ask:
Tyler,
This is shown by Wickileaks to have been released on 2011/8/30, but was it part of a dump and, perhaps, not found and released at this most convenient time? I cannot find this info at Wickileaks.
If it was this weekend, it is interesting because, for me, it diminshes my interest in MFGlobal/Jefferies/Margin mess which I was really caught up in---now, it seems like some conspiracy nut's dream. If it was released earlier but not seen by the public, why is it being emphasized in the midst of so much more timely news?
And why have you written so well about the past when the future is now? You certainly far too bright to have been duped as easily as this oldman is. This implies nothing against the Tylers' integrity or intention---you guys are great, so this is not a critical comment from one who is mostly in awe of what you put out on ZH.
Even a four year old could connect these dots and make believe quite credibily that it is all part of the 'great game'. I'm just tired of the cheap theater that reality has become-----not so interesting om
Actually, the more I think about it the more I realize that I should have stayed in the forest---this stuff breaks my brain at times
http://wikileaks.org/cable/2010/02/10BERLIN181.html#
CPL,
Thanks, but this shows a release date of 8/30/2011 and yet I have never seen it until today. My question, more precisely written is :
When did this cable first come out in public as it is presented here, today on ZH? I cannot find any indication of this.
If it came out earlier, why is it only appearing here and today, when all eyes are upon the 'Asian Markets opening in a short while?
If this is the first release as an item of its own, why today-----I have a suspicion of too many coincidences at such a propitious moment.
Perhaps, I am too focused on the market opening after two days of 'endtime' news-----it could be of no importance because it certainly is not news, but rather, only evidence of what has been surmised by so many bright dudes, a confirmation of the obvious, so to speak.
Thanks for your response---much appreciated om
Very bullish for the world stock markets.
great article!
I am pretty sure Europe came up with the EFSF just to have BRICs buy more Euro debt. And it ain't going to fly when China needs a bailout of their own.
So then came Plan B, even before Plan A (EFSF) was shown the door. Angie wanted more IMF contribution, Obama has been told by his handlers that he can't raise the debt ceiling past 105% debt/gdp, and so the world is in a pickle jar.
I just wonder how much longer the Power Hungry can keep up the facade. All Central Banks have had rates near 0% for years now, the private debt is astronomical (which means those unemployed have been bankrupted in the millions upon millions), and there is no growth with oil production falling.
Pretty much, the game is over, and everyone knows it. How much longer will we pretend, though?
Too much information. My bullshit filter keeps alarming, telling me that everyone says gold is not money, but just tradition, but every time I see some country in trouble, the resolution always involves transfering, or at least pledging, their gold. Probably just a coincidence, right?
I don't care what the price is, gold is always at the bottom of everything, and that's why I am stacking gold, because, sooner or later, gold will be worth what TPTB obviously think it is worth.
GOLD. Sorry, just wanted to shout it out, GOLD!!!!!!!!!!!!!!!!!!!!!!!!!
Why gold and not Oil or Natural Gas?
Half-life
Can you elaborate?
The half-life of precious metal makes it storable forever. It loses none of its intrinsic value, ever. Thus completing its definition as- MONIE.
What is golds intrinsic value? It holds hardly any utility other than it's never been worth $0 and it can't be printed (it can be mined)
But the same holds true for oil. Oil has never been worth $0 and it can't be printed...the one important difference being is that oil reserves around the world are in DECLINE, meaning that the growing population going forward is going to have to make due with less oil. Seeing as oil is the single most versatile commodity (it is used in almost everything) you are facing increased demand vs. declining supply.
I can live without gold. I would struggle living without oil (or any of it's petroleum based derivatives)
The world pop just hit 7 billion.
I agree about oil, but what are you going to trade it for? Dollars? Euros? The Euro is doomed (everyone knows that) and the Dollar is Bernanke's play toy. Bernanke, and all economists, want the value of goods lower so to increase prices, to increase growth. So at the end of the day, will oil trade for Fiat? No. It will trade for a real good. It will trade for real money.
One of my all time favorite happenings is getting a Neo-Classical economist to talk about money. They will talk about island economies, and how far we have come from barter eonomies, because we have money. Then, we ask, what is money? We are given a definition....but...but somehow all of these samrt Ivy League types forgot something. Money is said to be a "Store of Value". But Fiat? Fiat stores no value! "Yes it does", they say, "It is an agreed upon medium of exchange."
But that is one of the other definitions of money, a definition seperate all together! Money must be a store of value and an agreed upon medium of exchange. So once again, Fiat does not store value.
So, Bob, what is intrinsic? Isn't everything subjective? I don't need tickets to a Brittney Spears concert, but if you gave them to me I could sell them on ebay and make some cash. Barter/Trade. This is how it all works.
Look, you don't have to use gold. You can trade a horse for two sheep. But when you need two sheep and the guy with sheep doesn't need a horse, what will you do? Most people, through the ages, have agreed to trade goods, and services, for precious metal. It is a fact, Bob.
Gold......
It lasts forever. Therefore, it is a store of value.
It has units of measure (ie one troy ounce/one tonne/etc) and tt is fungable.
It is a medium of exchange, just like anything is (it just happens that it is easy to trade because a small amount is hard to find and it is portable).
And, finally, it is a standard of deferred payment, thus why every single Central Bank has it on their books, trades with it, and accepts it as collateral for loans.
I don't entirely disagree with you, nor do I entirely agree. However, I wanted to touch on the last sentance you wrote
Do not all central banks hold dollars on their books? Are dollars not accepted as collateral for loans?
I've recently been juggling a new causality dilemma (chicken before egg/egg before chicken) involving the military vs. currency. Is a currency strong because of it's military, or is a military strong because of it's currency? The reason I bring this up is because the US has the strongest military in the world and everytime there is a crisis where do people flock? The dollar. But why do people flock to the dollar when US finance is not off par from the EZ? Could it be that at the end of the day the guy with the bigger gun is the one whose side you want to be on?
Dollars are currencie- currencie is not monie. Currencie can trade for goods, but it still does not store wealth on a long enough time line to be monie. Currencie can devalue, monie cannot. Currencie fits 3 of 4 definitions of monie.
And I like your last point. Good debate to wrestle with.
Gold can devalue just like any other currency/money.
It simply comes down to faith. At the end of the day it is the collective psyche of the masses that is the final arbiter of what has value and to what degree. That's what makes investing/trading so hard, it's almost like quantum mechanics.
It's a very good conversation indeed.
It comes down to supply/demand.
Gold- decreasing supply/increasing demand.
Fiat- increasing supply/decreasing demand.
Why increasing demand?
...loss of faith somewhere else?
I wouldn't agree with decreasing supply...
http://www.forbes.com/sites/kitconews/2011/11/02/global-output-from-gold-mines-in-upswing-although-some-constraints-persist/
i guess the weekend is over :( well, it was a nice 24 hours
from that link (page 2):
That's one analyst. You have to look at what the companies are saying
http://www.businessweek.com/news/2011-11-03/randgold-sees-2012-gold-production-rising-as-much-as-22-.html
http://www.marketwatch.com/story/gran-colombia-gold-announces-production-update-and-confirms-reduction-in-production-costs-2011-11-06-20000
http://www.proactiveinvestors.com/companies/news/19777/argonaut-gold-posts-33-increase-in-q3-gold-production-19777.html
Mining production is up across the board.
But overall production peaked a decade ago. Nothing falls down in a straight line.
Same with oil
Thus why Fiat is totally fucked. Fiat has both oil and gold pressuring the shit out of it. It's a squeeze play.
Very enjoyable thread guys. Perhaps this is what Zerohedge is best used for - friendly debate
1st isn't all that incredible. one company, rangold, 'forecasts' an africa site ramping up 5% in coming years.
2nd, one colombian company reduced costs of production from near-par spot price to 1100$/oz. no mention how they did that, but again, the 'improvement' is projected figures.
3rd is also an isolated case, in mexico, where costs are even lower to produce - imagine that. at least this link actually reported an actual improvement.
nice try with 'across the board'.
lol...google "gold production" hit the news tab.
This is moot.
Someone spent $150 million putting troops on the ground to protect a new gold mine - one that the Chinese were run out of by militant indigenous people in 2006.
Only after tensions eased for a second time did Allied agree to purchase the mine, spending $150 million to bring it back into service.
http://www.reuters.com/article/2011/04/29/us-solomon-islands-mining-idUS...
If you're pimping your site, and professing to be an expert, at least provide some background.
obviously, the MIC has contention in the balance of global power.
and also obviously, this comes at a large price. the US could not sustain this massive military without the massive debt they are running. like the global economic cabal, it is completely unsustainable.
and like the global economy, all must reset before it can be fixed.
we reached the point of no return quite some time ago.
What is golds intrinsic value?
Gold has no intrinsic value. And neither does anything else.
Gold's value is determined by what people believe it's worth, or people's confidence in it.
Same for paper currency. It's worth what people believe it's worth.
Gold has no intrinsic value. But people have believed in gold's value for 5,000+ years, all of recorded history pretty much.
Gold isn't money. The founders said gold (and silver) shall be used as money in America.
So in that sense Bernanke is right. He believes gold isn't money. It isn't.
NOTHING is money by nature. People must collectively decide what they will USE AS MONEY in trade and payment of debts.
In America we use federal reserve notes. They're just pieces of paper with fancy printing. But Americans at large believe they have value, so they do. Because that's all it is anyway, just people's belief, confidence.
I believe the eventual collapse of the US dollar won't come from hyperinflation. I believe it will be sudden complete loss of confidence, like when the US dollar loses world reserve currency status.
And it likely won't start here in America. It's likely to start outside America. Other nations suddenly losing confidence in the dollar.
-Karl Marx
I believe the eventual collapse of the US dollar won't come from hyperinflation. I believe it will be sudden complete loss of confidence, like when the US dollar loses world reserve currency status.
Loss of confidence causes hyperinflation as money velocity takes off -- no one holds dollars--no confidence, no store of value.
Oil and natural gas both lack value density, and neither are durable. Further, their use as money would withdraw supply from the market, creating pain in the economy of real goods. Gold does not have that problem (though silver does now, a fact which contributes to its price volatility). Never mind that they are difficult to store, due to the fact that neither is in the solid phase.
Oil isn't durable? What are our roads made out of? This is besides the point...
I wasn't suggesting an alternate to money backed by gold, I was merely suggesting that as an investment (long-term) oil is where it's at. With the global population growing and nuclear energy in decline NatGas seems like a great investment as well.
However, if you wanted to talk about money I think that the idea of having a gold (or silver) standard is antiquated at best. I think a much more viable and lasting alternative would be having a basket of commodities backing a currency. Think of an SDR but instead of currencies it's a variety of commodites; gold, oil, copper, etc
You are going to trade in asphalt?
Oh, I see, you are talking about investments? Fair enough....
The SDR is (suppossedly) backed by gold. And really, all Fiat/Debt is backed by gold, thus why Central Banks have gold reserves and use them as loans on leverage to each other- to prop up the ponzi.
You see, the Fiat Ponzi is a catch phrase. The real truth is the Central Banks are running a Gold Ponzi, but that takes a lot of time to explain.
And the free market will dictate trade if we let it, but first we have to let it and stop using this insane Fiat Ponzi.
Antiquated at best, yet still a tradition.
goldvault.pdf (application/pdf Object)
Poorly portable money has been used in the past in an attempt to limit wealth accumulation, most notably among Spartan citizens, who were allowed to keep nothing but iron as money.
It didn't work, of course.
As to your idea, who exactly controls these "baskets"? What happens when these people are corrupt, as humans are?
Gold is stable enough for money. Its supply increases at a limited rate that is naturally slowed or increased as the value of money falls or rises. Best of all, when held as specie, or notes tradable for specie at a wide variety of banks that are not tied together by any common organization like the FDIC or a central bank (ie no single source of systemic failure), it can not be corrupted, or its value manipulated, save that it can be driven UP by people contributing more to the real economy than they consume from it. You can't spend more gold than you have--not in a market driven by free market regulation.
Gold backed money is susceptible to the same corrupt tendancies. We had a gold standard...what happened to that? poof, it's gone.
The fact is, whatever the next "alternative" currency is will be subject to the same corrupt, malevolent, and greedy entity that controls it. The only way to avoid this dilemma is by dissolving governments and reverting back to barter-for-trade.
I think it would be harder to manipulate if there was a broad basket of commodities backing a currency vs. just one. If anything it would at least make the manipulation more transparent.
Gold has traded freely for most of history. Yes, the Fed has bastardized it for awhile. Rome did for some time, too (but it was the Roman Treasurie's manipulation of gold that was Rome's downfall). But if we got rid of Corporate Banking Houses, and Corporate Central Banks, we would have a truely free market system.
For a short period of time that would certainly be true. Don't forget one of the catalysts of the American Revolution was...central banks. All of our founding fathers were vehemently opposed to central banking, but as all things, overtime, the system ends up corrupting itself. The depths of greed are intertwined within the human condition and overtime are simply inescapable.
Don't fall into the trap of thinking that the only way to become dirty is to clean oneself. It requires constant effort and vigilence to remain clean, just as it does to remain free. Gold as currency and money is freedom. One must understand that the only way to destroy that freedom is first to move to paper representation of gold, then to suspend redeemability for specie. Just because these things tend to happen does not mean we should not use gold as money, just as the fact that that which is clean is vulnerable to become dirty does not mean one should refrain from washing oneself. Without gold, those things happen much more quickly, and are not nearly so easy to see.
So if we had a cut-n-dry clean gold standard we would have a monetary standard that would last for a generation?
We would have no problems with deflation, or inflation?
It would make everyone equal?
What do you expect from a gold backed currency?
The purpose of money is NOT to make everyone equal. The purpose of money is to ensure that all participants in the economy are able to participate in a fair manner. That is, they can give to the economy by providing physical labor (muscular action), capital investment (machinery), or mental labor (personal direction of muscular action, including notes on how to produce and improve capital systems). In return, they must either receive an immediate disbursement of goods they desire (barter) or they must receive a placeholder of some sort (money).
Barter is clearly not a good system, because no-one can simply provide each and every good that is desired by another (short of the invention of a Star Trek style replicator), money is needed. Now, there if the money used is honest, then the person supplying the economy with the fruits of their labors is guaranteed a fair future disbursement of goods based on the amount of money they have. The problem comes if the money used can be arbitrarily modified in purchasing power by some authority.
If the purchasing power is constantly decreasing, as ours is, then people are discouraged from supplying their labor liberally, and are instead encouraged to take delivery of what they are due from society immediately. This is destructive, because consumption reduces the resources available for production of capital, ie labor saving devices, meaning the amount of work required to create a given unit of consumption, rather than decreasing, stays the same or INCREASES. Even worse, when an entire class of those dependent on the stream of newly created currency grows and gains the ability to access society's capital via direct receipt of "money" from the printing authority, they actively destroy capital. Such a system can exist for some time in a formerly free market, as the destruction of capital is a long and slow process, but it will happen eventually, as we have seen (witness the flight of the manufacturing base from the USA).
On the other hand, with a gold backed currency, the only "freeloaders" (prospectors) must actually do backbreaking labor extracting gold from the ground. This places a natural limit on their numbers. However, those who save with gold are able to access a greater amount of goods in the future simply by spending it, due to the "deflationary" force of capital investment. By encouraging savings and discouraging immediate consumption, creation of goods becomes easier, thanks to investment in capital (labor saving devices). Indeed, capital makes things which were previously impossible, possible, like spaceflight, computers, etc, while also making things which were previously difficult, easy, much the way the bicycle made it possible to move from point A to point B many times faster than walking, with no additional marginal input.
Also note that the gold standard has lasted uninterrupted for literally thousands of years in many civilizations (such as Rome and Byzantium) while no paper currency has lasted for more than a century in all of history. The longest lasting was the "flying money" under the Great Khan of China, the repeated collapse of which undermined his power and contributed (I would say caused) the downfall of that dynasty. This is mentioned in the wiki here: http://en.wikipedia.org/wiki/Economic_history_of_China_(pre-1911)#Yuan (Mongol) Dynasty (1271–1368 CE)
The link might not take you to the section, just scroll down until you see it. They suffered three bouts of hyperinflation in less than 100 years (note the the Yuan dynasty did not start using paper money until after the death of Ghengis, so the actual lifetime was something like 70 years, rather than 98). This is as opposed to the long and glorious rule of Byzantium: http://en.wikipedia.org/wiki/Byzantine_economy which lasted more than 1000 years under a gold standard, with only a couple of periods of debasement (which were ended either with monetary reform back to a pure gold standard, or the collapse of the empire).
You're good at avoiding questions. That was a nice missive.
What do you expect from a gold backed currency was the question that I asked...like if it were to be implemented tomorrow.
What do I expect? The same thing I expect from fiat currency. The same thing that it has always given throughout history. The US can be Yuan China, or it can be Byzantium. The currency it chooses will decide its fate.
Gold was never intentionally devalued at 2% per annum; it was cut, trimmed, holes punched in it, but the poiunt is that everyone could see those devaluations were only theft. Fiat currency which I prefer because of its convenience has little of the transparency of gold or silver---I went to sleep in the forest for ten years only to return to the US in 2001 to find prices doubled during a time of 'low to no inflation'. I was shocked and could not get out of here fast enough.
This discussion is not very interesting to an oldman, but I did want to make this simple observation thanks om
Well if you bought Gold in the late 70's and slept in the forrest for 20 years you might be perturbed to learn that gold had fallen quite significantly when you came back to civilization
This excercise is fruitless.
This can happen to ANY investment, if you cherry pick dates and don't follow secular trends. If you invested in stocks ten years ago and slept in the forest until today, you would be most disappointed.
Really?
If I bought aapl 10 years ago I would be frowning?
I wasn't smart enough but had I bought aapl stock ten years ago would I have been better off than if I had bought gold ten years ago, assuming I used the same amount of capital?
Simple yes, or no, would do.
Depends on who your broker was. If it was MF Global, I think you would be frowning quite hard right now. In a few months, we will likely say the same for the majority of US brokers.
Ten years ago, one might have seen the endgame, and started buying gold and silver (really, anyone who knew economics could see the endgame in 1971). Today, they would be smiling, because, though they didn't make as much on paper as they might have by having Marty McFly deliver a cheat sheet of stock prices from 2011, they know at least they have no counterparty risk.
Gold backed money is susceptible to the same corrupt tendancies.
Yes, and that's why a gold-backed currency is meaningless. It allows bankers to lie about how much gold they have in reserve. It allows bankers to continue printing currency way beyond the gold they have in reserve.
The only thing that works is a gold-redeemable currency, where the exchange rate is printed on the currency, so many ounces at such and such purity. Then the currency becomes a claim check on that much gold (or silver).
That's what US currency started out as. Paper claim checks on such and such amount of gold (or silver) at such and such purity. It naturally prevented bankers from printing more currency than gold they have in reserve and can deliver on demand.
No it wasn't foolproof. I'm sure bankers (or treasury) printed more currency than gold they had in reserve. But not a lot more. Certainly not like the Fed prints currency and gives it away these days.
What is a US dollar worth today? Nobody really knows. Because it's not redeemable for anything.
I think paper currency used to just be a claim on different commodities at different times. I read somewhere that land backed currencies in the old days. If gold and silver become the standard again copper will surely be along for the ride.
The assignat was supposedly backed by land. But it wasn't really, so there was hyperinflation.
All 3 are good investments in my opinion. I think oil and natgas are going up significantly, and will trend up for the next several years. I like HGT myself, which is a natgas royatly ETF that pays around 7%. If the stock doubles, then your dividend essentially doubles to 14% of your original investment.
I think royalty plays are the way to invest in natgas. As for oil, I'm not sure. I don't like the majors because they appreciate slowly. There are probably some royalty etfs in oil that I'm not aware of. But oil should go to the moon over the next 5-7 years.
So with energy you should get a nice return. However, you will expose yourself to Market Risk (the markets freeze up and stop trading) and Political Risk (oil and natgas could get taxed to death).
That brings us back to gold. With gold you don't have any counter party risk. If you hold it you own it. Nothing else could be more liquid. If you need to eat, you convert it into the local currency.
Anyone who bad mouths gold and does not own any is taking a big risk. The odds are in gold's favor. For thousands of years it has been a currency and it will likely remain one during our lifetime.
What does the US military the give fighter pilots to carry into battle? A gold coin. Pretty interesting if you asked me. If that is not a validation of gold's value as a global currency, I don't know what does.
So, why gold and not oil and natgas, it has less risk (as described above) and if you diversify into some stocks, more upside. If you want to bet against a collapse of the global economy then I think oil and natgas are great hedges. If the economy does not collapse then oil and natgas are going up that much faster.
www.goldsilverdata.com
Well, I just hope that whoever ends up winning this "what is money" debate is nice to the tens of millions of little people.
They have no gold. And they have precious little fiat to boot. So to the many people here who say tptb are going to collapse everything with their fiat, therefor they hoard gold, silver, bullets and who knows what else, keep this in mind:
After the collapse, YOU are the new ptb. So if your "gold is money" side wins, be nice. There are tens of millions in the US alone who will be looking at you as the new boss, wondering if you're the same as the old boss. Or worse.
Wait a F'n minute! Buried in the article is the sentence, "No one savored the idea of explaining to German taxpayers, already concerned about GERMANY'S RECORD DEFICIT, that they would be footing the bill for the irresponsible behavior of another country." Germany's record deficit! What the hell?! Oh, yeah, 'tank goodness 'dem 'der Germans have been behavin' responsible like, not like, "the irresponsible behavior of another country." Apparently, in order to be economically successful within contemporary economies, it is necessary to run up a "record deficit." If so, has anybody thought the contemporary model of an economy is totally f----ed up? Necessarily, it is an unsustainable model, unless you assume Rudolf Clausiusis wrong, and energy does not decline to entropy. Then, and only then, can sales continually rise ahead of interest on growing debt. Why growing debt? Because, since economic powerhouse Germany has a record deficit, being an economic powerhouse requires huge borrowing to sustain being an economic powerhouse. If Clausius is right, along with environmental economists, what is occurring in the EU is to be expected, an instance of inevitable economic decline.
Explaining How just Announced ECB Market Rescue Pledged 133% of German GDP to Cover Europe's Bad Debt:
http://www.zerohedge.com/news/explaining-how-just-announced-ecb-market-rescue-pledged-133-german-gdp-cover-all-europes-bad-de
Fatal Flaw- Europe's Second Bazooka Bailout; 82 million Soon to be Very Angry Germans:
http://www.zerohedge.com/article/fatal-flaw-europes-second-bazooka-bailout-82-million-soon-be-very-angry-germans
The latest email sent to me from MF Global.
Not even an apology or thank you for your business. It's like "Fuck you, this time we lost but we'll get you next time douche".
http://oi40.tinypic.com/20716yv.jpg
No lube.
Dunno. Seems to me like there is nothing to say that would not be something that would piss you off. Might as well be matter of fact. "Sorry" is a lie, they are not sorry, just sorry to be caught. "Thank you" cools out the mark temproarily, but you usually do that before you get away with their money, to help ease the get away. Not after you are caught.
You have every right to be hopping pissed. A confession is the only thing that would make you happy, and a plan for getting things back in order. This note is an attempt at the second part.
I hope you are not so pissed you make decisions out of anger that hurt you. I have been known to do that more than once myself is why I say it.
Too bad, Carlyle,
Best of luck to you om
so a downside scenario was discussed in February 2010. mmmm. ok. people were short the euro in summer 2010. it was meant to trade through parity. here we are at 1.40. and level of speculative short interest is at multi year highs. last week was a terrible weak and equities, euro hardly got hit hard. what does that tell you? if that's what the currency market does on bad news. i.e greek govt failing and italian bond yields going to 6.4%. what's it going to do on a piece of good news? come on, you all been in this game long enough to be able to read positioning.
So, the german gouvernment has a funny plan or two, oh, who would have expected such inconceivability from a gouvernment?
And what else is news in that boring Cable? WikiLeaks really seems to have had it's time.
That sounds more like a plan than an opinion!
"Gosh, they won't let us be debt slaves anymore." [Fake dramatic swoon, as if fainting].
Here's one thing I don't get about people.
When an earthquake, hurricane, tsunami or whatever other disaster rolls into town and wreaks havock, we assess the unstable structures and demolish them with cold acceptance.
When a financial disaster happens within a system that is entirely imaginary, we spend countless manhours attempting to save it and the imaginary constructs within it.
It would make sense to treat the disasters the same. To coldly demolish the institutions who fail basic structural tests and rebuild anew.
Who's"we"... answer that and answer your own question.
People profiting from a ponzi scheme will try to keep that ponzi scheme going as long as possible, even through a financial collapse that should bring it down.