Wednesday, 17 November 2010

24 Hours To Save The Euro.

Baltic Dry Index. 2219 -42
LIR Gold Target by 2019: $30,000. Revised.

"The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register."

Hans F. Sennholz

Day two of Europe’s bureaucratic approach to save the Euro. This being the cutting edge Europe of the 21st century, and the biggest crisis since the Bilderberger Euro project to create the United States of Europe began, the first thing to do was to form a gigantic grand committee to deal with the problem. In addition to the 27 finance ministers, two EU Presidents, some related EU commissioners and a gazillion special advisors and banking lobbyists, the Grand Committee even gets advice from US Treasury Secretary Geithner. Get Greenspan’s phone number ASAP. Below, the state of play as we enter day two.

Euros anyone? Stay long precious metals.

"As fewer and fewer people have confidence in paper as a store of value, the price of gold will continue to rise."

Jerome F. Smith

NOVEMBER 17, 2010

Sweeping Irish Aid Package in Works

BRUSSELS—Senior European officials laid the groundwork for a bailout of Ireland that could reach €100 billion ($136 billion), saying experts would travel this week to Dublin to examine the country's finances amid alarm about the dire straits of the Irish banking system.

Several euro-zone countries urged Ireland to adopt an aid package, according to people familiar with the matter, and some pressed for the package to include direct loans from the U.K. alongside assistance from Europe and the International Monetary Fund. Britain is in the European Union but not the euro zone.

But at a finance ministers' meeting here, Ireland's Brian Lenihan repeated that his country wasn't ready to seek help despite a huge budget deficit and sky-high interest rates on its government debt. He said "urgent talks" were necessary to calm "serious market disturbances" that "jeopardize not only Ireland, they threaten the euro zone."

-----EU President Herman Van Rompuy on Tuesday cast the Irish crisis as a decisive moment for Europe and its common currency. "We all have to work together in order to survive with the euro zone, because if we don't survive with the euro zone, we will not survive with the European Union," he said.

-----U.S. Treasury Secretary Timothy Geithner said Europe learned painful lessons from its slow response to the crisis that convulsed Greece earlier this year.

"The lessons of that experience…is you want to do this quickly and decisively and not wait," he said, though he declined to offer specific views about Ireland's predicament.

The EU can't provide help unless Ireland asks for it, and negotiations looked set to continue into a second day of meetings Wednesday. Among the sticking points: Ireland is reluctant to surrender its own economic planning to the IMF, while several countries are making strict IMF oversight a condition of their help.

Nov. 17, 2010, 12:01 a.m. EST

Why Ireland’s troubles matter to you

Commentary: Europe’s survival now in hands of Merkel

CHADDS FORD, Pa. (MarketWatch) — Reading the headlines out of Europe, all I could think of was this passage that I wrote back in February 2009.

“Several months ago, I was asked why, with the exception of Northern Rock, there have been no bank runs. In response, I offered: ‘If governments learned anything from the Great Depression it was how to manage troubled banks. But I also suggested that governments around the globe, by stepping in so aggressively [with guarantees], may inspire not bank runs, but country runs. In our one-click world, money can move not just out of banking institutions but out of entire nations. We have already seen at least one example of this — Iceland’.”

To these eyes, Ireland now resembles a country run where the market’s confidence in a sovereign guarantor’s willingness and ability to step in has been broken. Not only are direct sovereign creditors concerned, but so too are the indirect creditors — in Ireland’s case the “guaranteed” deposit and non-deposit creditors of its largest banks.

----Here is where it all gets very interesting. Press reports say that in order to prevent country runs from spreading to Portugal, Spain and other periphery countries, the European Central Bank is pressuring Ireland to turn to the European Financial Stability Facility, or EFSF, for funding for its banks.

As I’ve offered before, the EFSF is essentially a structured investment vehicle, backed by European countries, but whose AAA credit rating is dependent on the ability and unwavering willingness of Germany, France and the Netherlands to back the program. See related column

How long these three countries will continue to back the EFSF is anyone’s guess, but please appreciate that their commitments are still unfunded. German Chancellor Angela Merkel is already on record stating that once the EFSF expires in 2013, the next program will include “burden sharing” by private investors so that German taxpayers do not bear the burden of loss alone.

To me, neither factor instills confidence in Germany’s long-term “willingness,” vis-à-vis the EFSF. I think that at some point, like Ireland, Germany too may play Sophie’s Choice, trading “willingness” for others to preserve “ability” for itself.

We aren’t there yet, and hopefully won’t get there. But where we swapped a bank run for the potential of a country run, it looks like we are going to swap a country run for the potential of a community run/euro collapse. Rather than dispersing risk, it is being aggregated and as a result the outcome is becoming more and more binary with bigger and more far-reaching consequences — economic, political and social.

NOVEMBER 17, 2010

Banks' Exposure Stirs EU Contagion Worries

LONDON—One reason why Ireland's problems could ripple throughout Europe is that banks across the continent are holding huge quantities of loans, bonds and other debt issued by Irish companies, individuals and national and local governments.

All told, European banks were sitting on more than $650 billion of exposure to Ireland as of March 31, according to the Bank for International Settlements.

The U.K. banks are the international lenders with the most at stake. As of March 31, the latest data available, the banks had exposure of about $222 billion to a variety of Irish institutions, according to BIS. That's about one-fourth of the world's exposure to Ireland. About $42 billion of the U.K. banks' exposure is in the form of lending to Ireland's battered banking sector.

German banks aren't far behind the U.K. They had a total of almost $206 billion in exposure to Ireland, according to the BIS, including $46 billion of exposure to the country's banks.

Among U.K. banks with exposure to Ireland,

Royal Bank of Scotland PLC is at the head of the pack, largely through its retail and commercial Irish unit Ulster Bank, but also due to investment-banking holdings of government debt. According to analysts and people close to the bank, RBS' total exposures to Ireland stand at £54.4 billion, with £53.3 of retail and commercial exposure, a third of which is residential mortgages.

The bank also has about £1 billion in exposures to Irish sovereign and other debt in its investment-banking trading book.

In better European news, the Lords of the Universe in Brussels have been blocked from passing their “budget”. Not that it really matters, the auditors can’t make heads nor tails of the EU’s accounts and haven’t signed off on them for decades. Time to send in the Greek accountants.

"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people."

F.A. von Hayek

Internal Power Struggle Torpedoes EU Budget Talks


The European Union has been left without a budget for 2011 after talks between member states and the European Parliament collapsed. The stalemate is a victory for countries like Britain that do not want to give more power to the parliament.

European Union talks are famous for ending in last-minute breakthroughs during marathon negotiating sessions. But for once, late-night talks ended in deadlock as the EU failed to meet a deadline of midnight on Monday to reach an agreement over the bloc's budget for 2011.

The breakdown in talks between representatives of the EU's 27 member states and the European Parliament means the EU is left for the time being without a budget for 2011. The whole budgetary procedure will have to start again from the beginning -- a process that could take months.

"This is an unfortunate failure," said Alain Lamassoure, the chairman of the European Parliament's budget committee and the body's lead negotiator in the talks, in remarks to the German news agency DPA. "But there are still a few weeks until the end of the year."

-----The breakdown in talks came despite agreement on the actual figures for the 2011 budget. Both sides agreed that EU spending could only increase by a maximum of 2.9 percent, to a total of €126.5 billion ($172 billion). The parliament had dropped an earlier demand for a 5.9 percent increase in 2011 in response to pressure from national governments, who face budget cuts at home. The lion's share of the budget is spent on agricultural subsidies and to support disadvantaged regions of the EU.

Britain and the Netherlands led a group of countries that took a hard-line stance on the budget negotiations. Keen to be seen as cutting back on EU spending in the light of far-reaching domestic austerity measures, British Prime Minister David Cameron had called for a limited increase or even a freeze in the EU's budget in 2011. Cameron is likely to see Monday's breakdown in talks as a victory.

The two countries are among a number of member states that want to limit the parliament's power in setting budgetary policy, preferring to keep such powers for national governments. The group sees the parliament's demands as an attempt to secure more power for itself.,1518,729393,00.html#ref=nlint

“Well, fancy giving money to the Government! Might as well have put it down the drain.”

A.P. Herbert. Misleading Cases.

At the Comex silver depositories Tuesday, final figures were: Registered 50.28 Moz, Eligible 57.69 Moz, Total 107.97 Moz.


Crooks and Scoundrels Corner.

The bent, the seriously bent, and the totally doubled over.

No crooks today. I’ travelling in pursuit of fame and fortune.

“A patriot must always be ready to defend his country against his government.”

Edward Abbey.

The monthly Coppock Indicators finished October:

DJIA: +204 Down. NASDAQ: +289 Down. SP500: +196 Down.

The bull market (or bear market rally) that commenced on Nasdaq on 30/4/09 at 1717 has ended. (30/5/09 SP 500 at 919, 30/5/09 DJIA 8500.) While the indicators can flip flop at market turns, this action is rare on the slow monthly indicators. October is the fifth down month in a row.

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