Wednesday, 3 November 2010

Wrack and Ruin.

Baltic Dry Index. 2600 -48
LIR Gold Target by 2019: $3,000.

"Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium."

Murray N. Rothbard

Today we all try to make sense of how America voted, and wait for news from the Fed on how Helicopter Ben intends to lead us all into the promised land of low unemployment, high interest rates and rising wages and profits. Though it’s not their responsibility, they would probably like to add a US balanced budget too, although that in America is the responsibility of the politicians elected yesterday. With that election well covered in mainstream media today, by more pundits having fun like a barrel of monkeys, this monkey will leave that barrel alone today.

In widely leaked hints, the Fed is expected to announce later today that it’s starting another round of quantitative easing, with the market having priced in a minimum of 500 billion, although 1 trillion is the preferred size of QE2. If following yesterday’s election result, they get cold feet and put off QE2 the rest of the week will be a massive scramble to get money out of stocks and back into bonds again. Not that QE2 of 1 trillion is expected by the marketers to be enough. The chief economist over at Ebenezer Squid’s church, reckons that the Fed needs to do 4 trillion in QE2, QE3, and QE4, if it’s to achieve its stated aim for the US economy. Other economists think the real figure is 4.5 trillion over three years. With guesswork numbers like these in the trillions, a great commodities inflation boom will continue on its way. Stay long precious metals and be ready for 100 dollar plus oil again.

While the world waits for the Fed today, the soon to be austerity wracked Britons await the Bank of England’s ruinous QE2 announcement on Thursday, all part of the competitive currency devaluation wars now underway. In our world of the failing fiat dollar reserve standard, the austerity wrack and QE2 ruin are the only large policy tools left in the central banksters attempt at resurrecting casino capitalism. Below, Merrill Lynch, now under the new ownership of the dubious Bank of America, a bank busy using robosigners to file false mortgage foreclosure affidavits in US courts, warns its clients to get out of UK gilts. Good advice, I think, as it all likely goes terribly wrong in 2011. After the twin “B”s, Blair and Brown got into near bankruptcy, Britain moved on to the triple “C”s, Cameron and Clegg and coalition. 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

Bond bubble burst will gut gilt investors, warns Merrill Lynch

Last updated: November 2nd, 2010

Never mind what the Bank of England monetary policy committee says about interest rates on Thursday. One of the biggest wealth managers in the world is discretely warning its income-seeking clients to beware of bonds issued by the British Government; generally known as ‘gilts’.

Merrill Lynch Wealth Management fears that despite the apparent security of gilts, a combination of rising inflation – already underway – higher interest rates and the cessation of quantitative easing – both widely anticipated – could create a “perfect storm” for investors who buy these bonds at current market prices.

So buyers of gilts could suffer loss of capital when the bond bubble bursts and falling income as inflation erodes the real value or purchasing power of the coupon or fixed income they receive.

Simon Miles, Head of Merrill Lynch Portfolio Managers, told me: “Those thinking of applying their hard-earned, taxed savings to UK government bonds or gilts would do well to ponder where we are before reaching into their pocket.

“Gilts yield just over 3 per cent, at best. Consumer price inflation is 3.1 per cent, expected to rise to 3.4 per cent next year. So gilts are not keeping pace with inflation. The UK government needs to issue more bonds to finance its deficit. So supply will increase.

“The steroid effect of ‘quantitative easing’ – whereby the government buys back its own bonds, cannot go on forever.  At that point, demand will fall.

“Interest rates in the UK have never been lower in the Bank of England’s 316 year history.  It is more likely they will rise from here, than fall.  If interest rates rise, the bond you own goes down in value.


Staying with Europe for now, today’s Journal covers Ireland vying with Greece to be the first EU country to default, sorry “restructure”. Will the ECB ride in with German cash to the rescue? Even if it did will it do more that delay the inevitable? Sooner or later, it seems to me, Europe’s PIIGS are likely to bring the big Euro experiment to an untimely end. It says a lot about our fiat currency demise when the most stable large currency now seems to be the Rouble.

"When paper money systems begin to crack at the seams, the run to gold could be explosive."

Harry Browne

NOVEMBER 3, 2010

Borrowing Costs Rise for Weak In Europe

Borrowing costs of weaker European countries are again on the rise amid a steady stream of bad news.

Several factors are contributing to the misery of bond markets in countries on the geographic edge of the 16-nation euro bloc. Ireland's bank bailout is getting ever more costly, and it now looks like taxpayers may have to take control of another large bank. Officials in heavily indebted Greece are talking more openly about potential debt restructuring. And, in Portugal, political opponents have had a tough time hammering out a convincing budget compromise.

As well, the European Central Bank, which helped stem a deepening crisis in May by agreeing to buy debt of European nations, has been absent from the market for three weeks. While the ECB has rarely bought in large sizes since June, its presence in the market was considered an important support.

The struggles of the peripheral nations contrasts with recovery in some of Europe's larger economies. Germany has reported a string of strong economic figures and its stock market closed Tuesday at its highest point in more than 28 months.

Outside the euro zone, the U.K. recently reported stronger-than-expected preliminary third-quarter growth figures. The euro is trading at its highest level against the U.S. dollar in nearly three weeks, suggesting many investors are optimistic about the region's stability. The euro fell sharply against the dollar when the sovereign-debt crisis flared this spring.

Investors intensified their focus on the economic fringe of the euro zone in part after European Union leaders late last week debated a permanent post-2013 emergency bailout system that could force government bondholders to take losses in future Greek-style rescues.

The Germans, along with France, back that approach, but there is no agreement yet on a plan that would replace the current €750 billion ($1.04 trillion) government bailout fund, the mandate for which expires in 2013.

The EU debate, along with the more local problems in Ireland, Greece and Portugal, have pushed euro-zone borrowing costs sharply higher in the past week. According to data provider Markit, the cost to insure $10 million in Irish government debt for five years has risen to a record $525,000 a year, up $27,000 on Tuesday alone. Greek insurance is $851,000. Portugal is at $403,000 and Spain is at $227,000. Those costs also rose Tuesday.

We end today’s shortened update with the latest twist in fraudclosuregate and ground zero in Florida. It looks like all the robosigned false affidavits and supporting fraudulent documentation might have breached the Florida state constitution, as well as the law of fraud. Bank of America, JP Morgan, Citi and all the others look like they’ll be getting some very unpleasant days in the Florida courts. From the wording of the ACLU appeal below, the ACLU must feel that the banks also had a racial motive. Does anyone know how to spell RICO? How long before serial fraud on Florida’s courts shows up.

Action Alert – ACLU Needs YOUR Help RE: Constitutional Deficiencies in Florida’s Rocket Docket Foreclosure Courts

Posted by Foreclosure Fraud on October 20, 2010

Special Request from the ACLU American Civil Liberties Union.

Dear Floridians,

As part of our investigation into reported constitutional deficiencies in Florida’s rocket docket foreclosure courts, the ACLU today filed open records requests with all twenty of Florida’s circuit courts, as well as with the Office of State Courts Administration.  Our press release is available here.  While we are hopeful that the requests will generate some concrete information, we are certain that those of you who have been in these courtrooms, experiencing these proceedings, are an even more important resource for us to draw upon as we think through our strategy for responding.

To that end, we urge you to reach out to us and let us know which specific procedural deficiencies you see, whether those are about judges failing to abide by the Florida rules of civil procedure (for example, failing to require that complaints be verified or that supporting documents be attached to affidavits), difficulties with docketing and notice, court reporters prevented from transcribing proceedings, courtrooms closed to the public, or other violations.  We are particularly interested in Duval, Hillsborough, Lee, Palm Beach, Broward, and Dade Counties and eager to see transcripts or other court papers documenting the deficiencies you report.

Please forward any relevant information to, or give me a call: 212.549.2588.  And thank you for all the work that you do.


Rachel Goodman

ACLU Racial Justice Program

"The first requisite of a sound monetary system is that it put the least possible power over the quantity or quality of money in the hands of the politicians."

Henry Hazlitt

At the Comex silver depositories Tuesday, final figures were: Registered 51.46 Moz, Eligible 59.26 Moz, Total 110.72 Moz.


Crooks and Scoundrels Corner.

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

Today, the ever excellent ZeroHedge website has a most relevant article on where we are all headed with fiat currency. Below a small segment of an article I would encourage all to read. To me at least, 2011 is looking more and more as the year where it all goes wrong for the world’s fiat currencies.

"It is the greenback which is unstable, and not the bullion."

Dr. Franz Pick

Of (Economic) Myths And (Central Banking) Heretics

-------When, not if, the Fed and Mr Bernanke do announce their second program of US government debt monetisation, they will have admitted in public that the first (March to October 2009) program has failed them. Further, they will have confirmed for a second time in about a year and a half that the ultimate job of all central banks is to act as a “lender of last resort” to the governments which control them. Third, they will have demonstrated for all that have eyes to see that the “full faith and credit” of government which is the only underpinning for modern fiat money is an illusion. It is no more credible in the light of FACTS than contentions that the earth is flat, that the universe is fixed in place or that “creation” took place well over a million years after the first recognised human beings walked the earth.

Modern governments and their central banks cling to the tenets of orthodoxy in the economic and financial realm with fanatical zeal. They have no choice, their power depends upon them. The situation has now reached a level where the US political and financial establishment have decided that to retain power they have no choice but to risk losing it altogether. The surest evidence of this is Mr Bernanke’s stated intention to encourage “inflationary expectations” amongst the American people.


Nov. 3, 2010, 12:01 a.m. EDT

Everything you need to know about QE2

Commentary: Financial pros weigh another historic stimulus

NEW YORK (MarketWatch) — With market expectations universally pricing in some degree of quantitative easing by the Federal Reserve when they meet this week, the only remaining question is: How much?

-----Minyanville has covered all this and more. Here’s a guide through the coming week’s much anticipated events.

QE2 May Not Prevent a Rout in U.S. Bond Markets: The only potential for upside for U.S. Treasury bonds would come from a substantial US and/or European equity market correction. By James Kostohryz

Pimco’s Bill Gross Endorses Fed’s QE “Ponzi Scheme”: Bill Gross supports Ben Bernanke’s decision because supposedly it’s all the Fed chairman can do — but why does the Fed have to do anything at all? By Mike Mish Shedlock

Video: A Look at the Strength of Corporate Bonds, and How to Play QE2: Todd Harrison on what’s in store this week for the market. By Todd Harrison


"Until government administrators can so identify the interests of government with those of the people and refrain from defrauding the masses through the device of currency depreciation for the sake of remaining in office, the wiser ones will prefer to keep as much of their wealth in the most stable and marketable forms possible - forms which only the precious metals provide."

Elgin Groseclose

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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