Quantum Pranx

ECONOMICS AND ESOTERICA FOR A NEW PARADIGM

Posts Tagged ‘currency crisis

Is Europe coming apart faster than anticipated?

leave a comment »

by Gonzalo Lira
Originally posted November 16, 2010

The sky is black with PIIGS coming home to roost: I was going to write my customary long and boring think piece— but the simmering crisis in the Eurozone just got the heat turned up: Things are boiling over there!

“Euro Dead” by Ryca

SO LET’S TAKE A BREAK FROM OUR REGULARLY SCHEDULED PROGRAMMING, and give you a run-down of this late-breaking news: The bond markets have no faith in Ireland—Greece has been shown up as having lied again about its atrocious fiscal situation—and now Portugal is teetering — in other words, the PIIGS are screwed. I would venture to guess that we are about to see this slow-boiling European crisis bubble over into a full blown meltdown over the next few days—and it’s going to get messy.

So to keep everything straight, let’s recap: The spreads on Irish sovereign debt widened, and the Germans are pressing them to accept a bailout—despite the fact that the Irish government is fully funded until the middle of 2011. But it’s not the Irish fiscal situation that the bond markets or the Germans are worried about—it’s the Irish banking sector that is freaking everyone out.

After all, the Irish government fully—and very foolishly—backed the insolvent Irish banks back in 2008. And for unexplained reasons, the Irish government is committed to honoring Irish bank bonds fully—which the country simply cannot afford. However, German banks are heavily exposed to Irish banks, which explains why Berlin is so eager to have Ireland accept a bailout.

Right now, European Union, International Monetary Fund and European Central Bank officials are meeting with Irish representatives, putting together a bail-out package. The reason the Irish are so leery, of course, is that any bail-out would be accompanied by very severe austerity measures: In other words, the Irish people would suffer the consequences of shoring up the Irish banks—which is the same as saying the Irish people would suffer austerity measures in order to keep German banks from suffering losses. Also, the EU/IMF/ECB bail-out would probably also cost the Irish their precious 12.5% corporate tax rate—a key magnet for bringing capital to the Emerald Isle.

Add to the Irish worry, Greece is once again wearing a bright red conical dunce cap: They’ve been shown up to have lied again about their fiscal situation. Three guesses what they lied about: If you guessed Greek deficit, you win—yesterday, the Greek government officially revised its deficit figures: 15.4% for 2009, and 9.4% for 2010 (as opposed to an original 7.8% projection). Odds are good that these figures will be revised—for the worse—soon enough: Nobody believes anything other than Greece is insolvent.

That’s what’s going on this morning—and as a reaction, the dollar (if you can believe it) is roaring back alive: As I write (noon EST), the Euro is at $1.3511, the Pound at $1.5870, gold down to $1,333 an ounce, silver $25.05 an ounce; the dollar is up ¥83.45.

There was no specific reason why things took a turn for the worse today—but this downturn of sentiment has been having a cascading/contagion effect through the rest of Europe:

As a result of the Irish not taking the EU bail-out, Portugal’s debt started to tumble—which has everyone worried. Portugal is looking an awful lot like Greece did five-six months ago: It’s debt spread over the German benchmark is 6.5%, and climbing. Even France’s debt yield spread widened against the German bund—it costs more to insure French debt than it costs to insure Chilean debt (I guess a good “Viva Chile!” would be in order?).

The reason the entire slate of Euro bonds are tumbling is because of Ireland—but the real worry is Spain. If Ireland and then Portugal go down the tubes, then it would only be a matter of time before Spain is next—and Spain is far larger than Greece, Ireland and Portugal combined. If Spain goes, then it’s curtains for the whole Eurozone, perhaps even for the European Union as a political entity.

Read the rest of this entry »

Bring it on, Ben!

leave a comment »

Saxo Bank joins chorus of voices calling for the end of the Federal Reserve
Originally posted by Tyler Durden, Nov 3, 2010

Following the recent surge in Fed critics, including Gross, Buffett, Grantham, and most other self-respecting economists, Saxo Bank’s John J. Hardy shares the most recent, and very scathing, critique of the Fed, which essentially calls for the end of the US central bank, saying the days of the Fed are now numbered.

SO, BEN, LET’S GET THIS THING OVER WITH AND LET’S TEST HOW THIS MARKET is positioned for what you have to say today. We’re tired of speculating and gaming what you may or may not write in today’s statement and how many billions of dollars you might conjure into existence on a monthly basis for the next year or more.

Bring it on: let’s watch another wave of monetary policy history crash over us as you pull out the hammer and close your lips around another batch of coffin nails – ready to grasp the first nail to drive into the soon sealed coffin of Keynesian economics and then another in the coffin of fractional reserve banking and perhaps another into the coffin of fiat currencies.

Oh, it’s all the same coffin? Fine – it will go quicker that way. Just remember to save a few nails for the millions of coffins of pensions and savings: for all of the responsible people who didn’t join in on the credit bonanza of the last few decades and spent their lives scrimping and saving. Let’s devalue their savings and nuke the US currency rather than go the quicker and more just road of default, shall we?

Extend and pretend is the Fed’s motto, after all. Just watch out for those new crazies on the Hill that are starting to bang on the doors of the Eccles building. Will they break in and cart you off before you’ve finished your final magnum opus – the end of the US dollar and the US economy?

Bring it on, Ben: take us that much nearer to the denouement of 100 years of US Federal Reserve. There won’t be a second hundred years. The final countdown starts now.

Amen

The Loss of Trust and the Great Unraveling to come

leave a comment »

by Charles Hugh Smith
Originally posted October 18, 2010
oftwominds.com

THE POLITICAL CLASS AND STANDARD ISSUE PUNDITRY (SIP) DON’T “GET IT”: Americans have completely lost faith in their Financial Elites and government, for abundantly obvious reasons.

Anyone who believes the foreclosure crisis can be contained is deluded, because the real issue in play is the citizens’ trust in their government’s ability to govern the nation’s Financial Elites according to the rule of law. Clearly, our government has failed its citizens – utterly, completely, totally, at every level of governance (Federal, State, local) and at every level of oversight and regulation.

The bitter truth is that the nation’s Financial Power Elites are not constrained by rule of law, and as a result of this revelation Americans’ trust in their government and political class has been shattered.

Despite raising their voices 600 to 1 against the TARP and related bailouts of the nation’s Financial Power Elites (who stripmined the nation’s wealth from their investment banking and mortgage banking fortresses) in 2008, the government shoved trillions of dollars of bailouts and guarantees into private hands with pathetically little control in return.

In their rage at this abject, cowardly surrender of their government to the Financial Elites, the American people tossed the craven bankers-lapdogs Republicans out and replaced them with an untested young president who talked the talk and old-line Democrats.

All of whom proceeded to attach the same leash to their necks and become craven lapdogs of the Financial Elites. Less than two years after the inevitable meltdown of the Power Elites’ stripmining operation and its unprecedented rescue by the Federal government, the Financial Power Elites are once again caught flouting the laws of land as if the U.S. were a “banana republic” in which laws are “only for the little people.”

Read the rest of this entry »

The Economics of the World Apartments

leave a comment »

 

by Gregory Wyche
Originally posted Oct 26 2010
perfectpitch-media.com

Why pretending to have money is a bad idea…

IMAGINE AN APARTMENT BUILDING REPRESENTING THE WORLD, and imagine different countries residing in the building, each within their own apartment. Each of the tenants in the building own and produce various things. Imagine then, a long time ago the tenants began trading with each other to obtain things they didn’t have. A few of the tenants were lucky enough to have gold mines. It turned out gold was something everyone in the building liked. As time went by each apartment ended up owning some gold as they traded goods with the tenants that had mines. Gold was rare, ever- lasting and considered beautiful. It was worn by both men and women and used to symbolize intimate relationships.

An agreement was made that rather than having to exchange one good for another (which was cumbersome and inefficient) the building would use gold for medium of trade. This caused gold to become currency. Some apartments had used salt as currency as it was once very rare. Later salt was discovered almost everywhere which caused it to lose its rarity (and so devalued) and it was no longer suitable as currency.

Thousands of years went by and some of the tenants decided to use paper notes that would represent the gold they owned. Soon each tenant used their home printers to make notes and paper money was born. This made trade easier since gold was heavy and hard to carry from one floor to next; after all, the building had not yet installed elevators. The ability to exchange paper money for gold created trust between neighbors and trade increased. After a while the tenants of the world apartments enjoyed a wide variety of goods they purchased from each other with notes back by gold.

From time to time tenants disagreed with each other. If the disagreements were serious games (war) were played to resolve them. The winning apartment received a prize from the looser. Games were expensive to play so many tenants began to avoid them. In the 1960’s two tenants (USSR and USA) played a very expensive game in Southeast Asia’s apartment. The game dragged on and in 1971 some tenants worried about the value of the US money.

Read the rest of this entry »

Trigger Points, Black Swans, and other unpleasant realities

leave a comment »

by Giordano Bruno
Originally posted October 27, 2010

Neithercorp Press

AN AVALANCHE IS NOT AN “EVENT”, IT IS AN EPIC; A SERIES OF SMALLER EVENTS DRIFTING AND COMPACTING ONE AFTER ANOTHER until the contained potential energy reaches an apex, a point at which it can no longer be managed or inhibited. A single tremor, an inopportune echo, an unexpected shift in the winds, and the entire icy edifice, the product of countless layered storms, is sent crashing down the valley like a great and terrible hand.

In this way, avalanches in nature are quite similar to avalanches in economies; both events accumulate over the long span of seasons, and finally end in the bewildering flash of a single moment.

The problem that most people have today is being unable to tell the difference between a smaller storm in our economy, and an avalanche. Very few Americans have ever personally witnessed a financial collapse, and so, when confronted with an initiating event, like the stock market plunge of 2008, they have no point of reference with which to compare the experience. They misinterpret the crash as a finale. Untouched, they breathe a sigh of relief, unaware that this is merely the beginning of something much more complex and threatening.

So, without personal experience on our side to help us recognize a trigger point incident; the catalyst that brings down our meticulously constructed house of cards, how will we stand watch? Will we miss the danger parading right in front of our faces? Will we be caught completely off-guard?

The key in avoiding such a scenario is in identifying the primary pillars of our particular financial system, and tracking them carefully. Once we are able to cut through the haze of distractions and minor events promoted mostly by the mainstream media, and focus on that which is truly important, our ability to foresee danger greatly increases. But what are the crucial mainstays of our economy, and what kind of disastrous occurrence could possibly bring them tumbling down?

Mortgage Crisis Redux

The health of property markets is a vital indicator of the stability of almost any country, but most especially in the United States. The reason why the bust in mortgage values is so dangerous to our particular economy is because Americans allowed themselves to become completely dependent on debt in order to sustain their consumption. We have been surviving on mortgage loans and Visa cards for nearly two decades! The fantastical boost in stocks and retail during the late 90’s and early 2000’s was an illusion built on artificially low interest rates and easy credit. Of course, it doesn’t help that corporate interests outsourced most of our industrial foundation to the third world leaving us with an emaciated jobs market utterly reliant on the service sector. Many people were given few options besides taking loan after loan using homes they couldn’t afford in the first place as collateral.

Regardless, without the support of solid industry and innovation in a system to supply employment opportunities and create true wealth (not debt), we have only “derivatives” and toxic securities, worthless bits of paper representing liabilities that will never be repaid. Now that these contracts are known to be worthless, there is only one thing left to prop up the economy; fiat printing of the U.S. dollar.

Back in 2008, I called the bailout of Fannie Mae and Freddie Mac a “black hole” of debt which would siphon the last remaining vestiges of wealth from the American taxpayer, and this is exactly what has happened. Every quarter, MSM analysts claim the housing market has “bottomed” and is ready for a rebound, yet, every quarter the mortgage crisis gets just a little bit worse. It is now projected that Fannie and Freddie could end up costing taxpayers over $1 Trillion:

Read the rest of this entry »

Imminent Big Bank Death Spiral

leave a comment »

by Jim Willie CB
Posted originally October 28, 2010
www.GoldenJackass.com

Use the above link to subscribe to the paid research reports, which include coverage of critically important factors at work during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.

––––––––––––––––––––––––––––––––––––––––––––––––––––

THE MORTGAGE AND FORECLOSURE SCANDAL RUNS SO DEEP THAT ORDINARY OBSERVERS can only conclude the US financial foundation is laced with a cancer detectable by ordinary people. The metastasis is visible from the distribution of mortgage bonds into the commercial paper market, money market funds, the bank balance sheets, pension funds under management, foreign central banks, and countless financial funds across the globe.

Some primary features of the cancerous tissue material are allegations of mortgage bond fraud, major securities violations, absent linkage to property title, income tax evasion, forged foreclosure documents, duplicate property linkage to single mortgage bonds, NINJA (no income, no job or assets) loans to unqualified buyers, and more. In fact, more is revealed it seeems each passing week toward additional facie to high level and systemic fraud. The world is watching. The growing international reaction will be amplified demand for Gold, from impressions that the USDollar & USEconomy have RICO racketeering components extending to Wall Street banks and Fannie Mae mortgage repositories.

The centerpiece question, when allegation of the US bond fraud is coupled with European sovereign debt distress, comes down to WHAT IS MONEY? The answer is Gold and Silver and not much of anything else. Other assets like crude oil or farmland are effective hedges against tainted money, but when they contain debt tethers, they too are vulnerable. Huge flows of funds are fleeing traditional asset groups. Some mistakenly still believe the USTreasurys to be a safe haven. A shock of cold water comes to them when that bubble goes into reverse perhaps several months later after reaching 2% yields. The big magnificent epiphany in the last couple years has been that a house is not a hard asset, but rather a debt instrument extension. Important questions have arisen as to what assets are free from counter-party debt risk. The grand demands for physical gold prove that the futures gold contracts are not money either, but tainted Wall Street and London securities contracts that keep the system going.

The big banks have been called too big to fail. They are too big to plow under without removal from power of the bankers themselves. They are too big to permit their balance sheets to be liquidated without a US banking system seizure together, and a 30% to 50% additional housing market price decline. They are too big to send into receivership without igniting a credit derivative sequence of explosions. They are too big to block the widespread illicit practices and enforcement of law of regulations. However, a wondrous spectacle has begun to shine light:

The mortgage & foreclosure scandal could turn out to be the big US Bank tombstone epitaph, as bank revenues from mortgages slide, as home owners tend to refuse on mortgage payments, as court cases unfold in full view, as class action lawsuits provide evidence on racketeering at a systemic level, as MERS and REMICs are isolated by the courts for further investigation. Time will tell. Time will reveal extraordinary efforts by the USCongress to pass additional laws that grease the bank pathways, past and present. Remember back in July 2007 when Bernanke claimed this was just a subprime mortgage problem. The Jackass called it an absolute bond contagion from its origin, which it surely turned out to be.

THE GIGANTIC ACHILLES HEEL EXPOSED

Two critical elements have been identified. The MERS electronic title registry system was designed to facilitate recording of property titles as associated mortgage bonds traded freely and changed ownership hands. Unfortunately, the title database has no legal standing, as declared by several state courts, including some supreme courts. Banks or financial firms holding the mortgage notes cannot team with the title database and force eviction during the home foreclosure process. That is the first gaping flaw.

Read the rest of this entry »

War has broken out and your savings are at stake

leave a comment »

by Graham Summers
Phoenix Capital Research
Posted originally September 30, 2010

THE FIRST AND MOST IMMEDIATE ITEM WE NEED TO NOTE IS THE BANK OF JAPAN’S (BoJ) CURRENCY INTERVENTION. Prior to this, all currency interventions were generally indirect (the Fed’s QE program) or not generally promoted (the Swiss banks numerous attempts to buy Euros and suppress the Franc). In contrast, the BoJ’s move was not only sudden, it was promoted.

Japan’s government sold yen, pushing the dollar up sharply. “It was Japan’s first foreign exchange market intervention in more than six years,” Finance Minister Yoshihiko Noda said. “The ministry would take decisive steps, including intervention if needed. The intervention was aimed at curbing excessive fluctuations in the foreign exchange market.”

Moreover, Japan stated it would:
1) Intervene more in the future if needed
2) Use the funds from the intervention to provide liquidity to the stock markets

The move, while hinted at previously, was a bit “out of left field” (the BoJ had not intervened since 2004). The Japanese Yen is one of the primary carry trade currencies to borrow in (the US Dollar being the other). So Japan’s move was largely seen to be “pro-risk” resulting in the Nikkei spiking. However, it marks a major turning point in the financial crisis. Going forward, the key issue for the financial markets will be currency interventions. Japan’s move can, in a sense, be seen as an open declaration of war between the BoJ, the Federal Reserve, and other Central Bankers.

Indeed, we can’t leave the European Central Banks out of this. Indeed, the most noted currency intervention prior came from the Swiss Nation Bank which bought Euros by the billions in an attempt to keep the Swiss France/ Euro trade low. And Germany and other European countries want the Euro low to boost their exports.

In plain terms, the currency war has officially begun. Since Japan’s announcement, numerous other countries have begun intervening in the currency markets including Brazil, Colombia, Peru, Russia, South Korea, Serbia, Romania, and Thailand.

In plain terms, WWIII is already being staged in the currency markets. Predicting exactly how this will all play out is impossible, but the clear result is that market volatility will be increasing and we are absolutely guaranteed heading for a Crash.

Read the rest of this entry »