Weekend Update – Beware Next Week.

Baltic Dry Index. 741 -08    Brent Crude 50.17

LIR Gold Target in 2019: $30,000.  Revised due to QE programs.

"We finished the year, and we reported that we had $17 billion of cash sitting at the bank's parent company as a liquidity cushion. As the year has gone on, that liquidity cushion has been virtually unchanged."

Bear Stearns CEO Alan Schwartz. March 12, 2008. Bust March 17, 2008.

Beware next week. Not only is the ECB trapped by its own schemes into implementing insane levels of QE starting next week, reneging now would cause a Lehman like collapse in global stock markets, but the great and not so good one percent,  assemble in Davos to get tipped off as to what the central banksters have in mind for 2015. After that, those tax and work shy Greeks get to vote for a new government on Sunday the 25^th. Also its anyone’s guess just how bankrupt the oil sector has become following the 60 percent collapse in the crude oil price. While the dollar soars, much of Uncle Scam’s America is pricing itself out of the global economy. Fiat currency anarchy has broken out in the final stage of the Great Nixonian Error of Fiat Money. The ECB is about to open the final act.

"The most puzzling development in politics during the last decade is the apparent determination of Western European leaders to re-create the Soviet Union in Western Europe."

Mikhail Gorbachev.

Here Comes The Next Central Bank Fiasco: The ECB Has Made Itself Hostage To Financial Speculators

by Wolf Richter • January 16, 2015

----Since 2011, the Eurozone’s current-account surpluses with the rest of the world have risen sharply, approaching 4% of nominal GDP, despite the debt crisis and even while the euro was very strong. The November trade surplus, reported today, jumped to €20 billion, up from €16.5 billion a year ago.

And it’s precisely this environment that the ECB wants to douse with even more liquidity by buying large quantities of government bonds to force interest rates down even further and devalue the euro even more. Because now it would suddenly heal the various problems each of the 19 Eurozone countries might have.

The decision will be announced after its meeting on January 22. It’s not like the ECB hasn’t tried similar things before. It already owns a ton of Greek debt that no one else wanted. It is already buying asset-backed securities and covered bonds. It has been lending banks essentially free money that they then use to buy government bonds. These machinations have been going on for years.

But under the new deal, the ECB would balloon its balance sheet to €3.1 trillion from €2.2 trillion by buying government bonds. It’s actually the old deal, lovingly dubbed Outright Monetary Transactions, announced in 2012 after Draghi’s “whatever it takes” pledge. But OMT ran into legal hurdles that remain unresolved. The ball is currently in the European Court of Justice before it bounces back to the German Constitutional Court. At issue: national sovereignty and the treaties that formed the EU.

But the word “deflation” has been thrown around with great passion to describe what amounts to mild inflation with the first tiny dip in years into deflation due to plunging energy prices. Core inflation remains positive. It’s just that folks in the Eurozone pay less to other countries for their fuel – which acts as a stimulant to the Eurozone economy.

“The risk of deflation is just a pretext for quantitative easing, for hammering out a bailout program for southern Europe,” Hans-Werner Sinn, head of Germany’s Ifo economic institute, told Bloomberg in his politically incorrect manner. The decline in inflation is due to lower crude prices, and “there’s no need for ECB action,” he said, pooh-poohing the entire concept.

Printing money to buy government bonds increases the risks for the Eurozone’s unity since it might violate the German Constitution, Sinn said. And Germany might be constitutionally bound to leave the Eurozone. “Somebody would have to give in, and that would be the ECB,” he said. “It would have to give up on OMT voluntarily.”

But financial powerhouses in Europe and on Wall Street have been clamoring for it, especially now that the Fed has stopped handing money to them. They want more, and the ECB will have to produce it.

The Royal Bank of Scotland, for example. Rather than increasing its €2.2-trillion balance sheet to €3.1 trillion, the ECB is planning to increase it to €4.5 trillion, RBS wrote in a paper fed to the media this week. This would amount to €2.3 trillion in additional QE, more than twice the amount ECB officials have bandied about.

Regardless of any legal challenges or opposition in Germany, “Large scale QE is coming imminently, on 22 January,” RBS said. “Waiting until March – something we have been asked many times – is just not feasible….”

The message: QE would cause bonds, stocks, and other assets to inflate further. So buy, buy, buy.

Now Natixis, the asset management and investment banking division of Groupe BPCE, the second largest bank in France – an institution that last July finally discovered the “Redistributive Effects” of QE – jumped into the debate.

QE would lead to “absurd financial asset prices,” its report said. Risk premiums would get squeezed further, interest rates would dive deeper into the negative. But the expectations of QE have already been baked into asset prices since markets “have been convinced since the summer of 2014” that “normal” QE would arrive by 2015. Hence, the devaluation of the euro, the plunge in long-term interest rates, and the evaporation of risk premiums.

This expectation by the markets, propagated by the big players, most recently by RBS, acts like a gun to the ECB’s head:

If the ECB announces today that it will not implement quantitative easing, Eurozone financial markets would collapse: rise in interest rates, fall in the stock market, and widening of credit spreads.

Accordingly, the ECB cannot refrain from implementing quantitative easing, since it definitely does not want financial markets to collapse.

But this situation could last: quantitative easing may be ineffective; the financial markets would then expect larger-scale quantitative easing (€1.5 trillion to €2.0 trillion), which would force the ECB to implement it.

The ECB is therefore a prisoner of financial markets’ expectations.

Instead of stimulating the economy, QE would boil down to a “disguised form” of monetization of government debt “to improve governments’ fiscal solvency.” And since interest paid by the government to the central bank is paid back to the government, it is “equivalent to a cancellation of the public debt bought by the central bank.”

QE would create “major tensions” with Germany. And it would “undoubtedly” drive some Eurozone countries “to take advantage of the monetization of their public debt to avoid reducing their fiscal deficits.”

More

http://davidstockmanscontracorner.com/here-comes-the-next-central-bank-fiasco-the-ecb-has-made-itself-hostage-to-financial-speculators/?utm_source=wysija&utm_medium=email&utm_campaign=Mailing+List+Mid+Day+Friday

"Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood. For these few gold has been the asset of last resort."

Antony C. Sutton

At the Comex silver depositories Friday final figures were: Registered 66.31 Moz, Eligible 108.12 Moz, Total 174.43 Moz.   

Crooks and Scoundrels Corner

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

And in the wealth and job destroying EUSSR, home of the whopper and great lie. Things have turned “serious.”

"When it becomes serious, you have to lie"

Jean-Claude Juncker. Failed Luxembourg Prime Minister and ex-president of the Euro Group of Finance Ministers. Confessed liar. EC President.

Sir Humphrey: Minister, Britain has had the same foreign policy objective for at least the last five hundred years: to create a disunited Europe. In that cause we have fought with the Dutch against the Spanish with the Germans against the French, with the French and Italians against the German, and with the French against the Germans and Italians. Divide and rule, you see. Why should we change now, when it's worked so well?

Hacker: That's all ancient history, surely?

Sir Humphrey: Yes, and current policy. We 'had' to break the whole thing [the EEC] up, so we had to get inside. We tried to break it up from the outside, but that wouldn't work. Now that we're inside we can make a complete pig's breakfast of the whole thing: set the Germans against the French, the French against the Italians, the Italians against the Dutch. The Foreign Office is terribly pleased; it's just like old times.

Hacker: But surely we're all committed to the European ideal?

Sir Humphrey: [chuckles] Really, Minister.

Hacker: If not, why are we pushing for an increase in the membership?

Sir Humphrey: Well, for the same reason. It's just like the United Nations, in fact; the more members it has, the more arguments it can stir up, the more futile and impotent it becomes.

Hacker: What appalling cynicism.

Sir Humphrey: Yes... We call it diplomacy, Minister.

Yes Minister.

The monthly Coppock Indicators finished December.

DJIA: +138 Up. NASDAQ: +247 Down. SP500: +198 Down.