While I might disagree with Richard on the exact levels and timing of the ‘downturn’ I really can’t disagree with his end game scenario. If you haven’t been paying attention to the world finance game, it might be time to start! The powers that be are running hard and are trying to throttle Greece. I hope that Greece begins to print their own money and begins to bring some honesty back to their monetary policy! Click here to read Richard Russell’s article.
I haven’t been posting too much over the past several months as things in our country continue to deteriorate at the usual pace, fast and un challenged!
The economy is fragile and the ‘medicine’ that Ben Bernanke is giving the ‘system’ will soon become the poison–it is inevitable. This is not just me spouting off at the mouth but several very good economists with pretty darn good track records as well.
Take a look at this article, read it and weep for what once was and what is coming soon.
Major Bank, Economists Agree: Market Collapse Will Strike in 2013
Wednesday, 09 Jan 2013 10:22 AM
By Christian Hill
According to a major bank, a pair of noted economists, and one controversial billionaire, 2013 will be a “year of terrible reckoning” for the stock market.
JPMorgan just released its outlook for the first quarter. Surprisingly, this regularly bullish company has reversed course and revealed an ominous chart that every investor needs to be alerted to.
As you can clearly see, stocks have retraced the pattern from the last two big market rallies (averaging over 100%), and now face a massive decline in 2013 (of over 50%).
JPMorgan isn’t alone in its stark predictions.
Economist and NYU professor Nouriel Roubini has said in recent interviews that there is a chance that an economic “perfect storm” will devastate global markets in 2013. He points to a worsening eurozone crisis, a hard landing for the Chinese economy, and a war in the Middle East that could push oil prices above $200 a barrel.
Agreeing with Roubini’s worrisome outlook is billionaire Jim Rogers. In a recent interview with Yahoo Finance, Rogers says regarding 2013, “You should be very worried, and you should prepare yourself.”
Rogers referenced a little-known economic cycle that proves the United States experiences a slowdown every four to six years (and 2013 marks four years since our last slowdown).
Perhaps most alarming of all are the predictions made by economist Robert Wiedemer.
In a recent interview for his New York Times best-seller Aftershock, Wiedemer says, “The data is clear, 50% unemployment, a 90% stock market drop, and 100% annual inflation . . . starting in 2013.”
Editor’s Note: Watch the disturbing interview with Wiedemer. click here to view
Now before you dismiss Wiedemer’s claims as impossible or unrealistic, consider that he and his team of economists correctly foresaw the real estate collapse in 2006, the stock market crash of 2008, and the federal debt bubble plaguing America now.
And bear in mind, Sam Stovall of Standard & Poor’s has stated that Wiedemer “makes a compelling argument for a chilling conclusion,” and MarketWatch’s Paul Farrell called Wiedemer’s work “your bible.”
When the interview host questioned Wiedemer’s latest data, the author unapologetically displayed shocking charts backing up his allegations, and then ended his argument with, “You see, the medicine will become the poison.”
The interview has become a wake-up call for those unprepared (or unwilling) to acknowledge an ugly truth: The country’s financial “rescue” devised in Washington has failed miserably.
Wiedemer says blame lies squarely on those whose job it was to avoid the exact situation we find ourselves in, including current Federal Reserve Chairman Ben Bernanke and former Chairman Alan Greenspan, tasked with preventing financial meltdowns and keeping the nation’s economy strong through monetary and credit policies.
Shocking Footage: See the eerie chart that exposes the ‘unthinkable.’
At one point, Wiedemer even calls out Bernanke, saying that his “money from heaven will be the path to hell.”
But it’s not just the grim predictions that are causing the sensation; rather, it’s the comprehensive blueprint for economic survival that’s really commanding global attention.
Now viewed over 50 million times, the interview offers realistic, step-by-step solutions that the average hard-working American can easily follow.
The overwhelming amount of feedback to publicize the interview, initially screened for a private audience, came with consequences as various online networks repeatedly shut it down and affiliates refused to house the content.
Bernanke and Greenspan were not about to support Wiedemer publicly, nor were the mainstream media.
“People were sitting up and taking notice, and they begged us to make the interview public so they could easily share it,” said Newsmax Financial Publisher Aaron DeHoog, “but unfortunately, it kept getting pulled.”
“Our real concern,” DeHoog added, “is what if only half of Wiedemer’s predictions come true?
“That’s a scary thought for sure. But we want the average American to be prepared, and that is why we will continue to push this video to as many outlets as we can. We want the word to spread.”
I urge you to take the necessary precautions as things could get rather weird in the coming days and months ahead! No one knows the exact moment, but many will point back in time and pick some arbitrary event that ’caused it all’. Ben Bernanke will most likely avoid ridicule. Many have been, are and will be responsible for our economy and none will be made responsible.
The demise of our global economy is not an event that will go in a straight line to the bottom. It will be up and down with lots of posturing on behalf of the ‘leaders’ of the ‘developed’ countries.
Today is yet another example of this political posturing as the European Central Banker came out and said he would do whatever necessary to preserve the Euro and the EC! Pray tell what that would be sir!
The only weapon that these guys have is the ability to print money into infinity. As we all know, infinite money chasing limited supply of products, goods and services means prices will eventually rise to the point where these prices can change on an daily if not hourly basis. Hyper inflation this is called. Something that we in this country have never witnessed.
We will see in the coming days more of the same as Greece exits the Euro and the EC, yields will go higher on the sovereign debts of the EC members that are in the most trouble which will result in the European Central Bank to print more money to buy their bonds to try and lower yields. At some point this type of strategy will simply cease to function as needed and collapse will follow, but not in a straight line.
Be very careful if you are in the markets now. I personally am and have been out for quite some time…Closed my account at PFG just in time! Stick to food, water, shelter, gold and silver if I were you…And pray for better days to come!
As if the European issues weren’t bad enough…Moodys is set to downgrade the Spanish bonds to junk status. This after downgrading all the Spanish banks by several notches. I suspect that this will not end well as Germany, the ‘giver’ of cash becomes more and more reluctant to dish it out to everyone that comes begging.
We still wait to see how all this will affect Italy and France while poor Portugal remains in the dumpster. All the ‘southern’ european countries are in big trouble, led of course by Greece!
Just wait there will be more news coming. Consider what might happen if there is some major catastrophe to add to the woes!
Spain Poised for Downgrade to Junk as Default Swaps Near Records
Spain is poised for a downgrade to junk by Moody’s Investors Service, according to investors who sent the cost of default insurance for the nation’s biggest banks and companies close to record highs.
Enlarge image Spain Poised for a Cut to Junk as Default Swaps Near Records (
Credit-default swaps on Banco Santander SA (SAN), the country’s biggest bank, jumped 23 percent this quarter to 454 basis points, compared with an all-time high of 474 in November. Banco Bilbao Vizcaya Argentaria SA (BBVA) rose 26 percent to 477, approaching May’s record 516, while phone company Telefonica SA (TEF) surged 70 percent to a record 540 basis points.
Moody’s downgraded 28 Spanish banks yesterday including a two-step cut for Banco Santander and a three-level reduction for BBVA, a week after it lowered Spain’s rating to Baa3, on the cusp of junk. The country remains on review for another cut by New York-based Moody’s after it sought a 100 billion-euro ($125 billion) international bailout for its banks and on speculation losses from its real estate industry will worsen.
“There’s more to come if Moody’s downgrades the sovereign as we expect in the next few weeks,” said Suki Mann, a credit analyst at Societe Generale SA in London. “A one-notch move to Ba1 will likely see all the country’s banking system in junk territory, with the possible exception of Santander.”
Spanish bank bonds are the worst performing among European financial companies this month, losing 0.75 percent on average, according to Bank of America Merrill Lynch’s Euro Corporates Banking index of 742 securities. Debt tracked by the gauge returned 0.53 percent overall, with Italian bank bonds earning 0.27 percent and German securities making 0.19 percent.
Santander’s credit-default swaps declined two basis points to 451 basis points today, and BBVA’s fell three basis points to 478 basis points.
Bond spreads are widening, signaling potentially higher borrowing cost for the country’s largest lenders. Santander’s 1 billion euros of 4 percent notes due 2017 are quoted at 559 basis points above the safest government bonds compared with a 553 basis-point spread yesterday, according to Bloomberg Bond Trader bid prices. BBVA’s 500 million euros of 4.875 percent bonds due 2016 are quoted at 578 basis points from 567 basis points yesterday.
The yield premium on Spanish bank bonds jumped to 648 basis points, or 6.48 percentage points, relative to German government debt, from 433 basis points at the end of the March, the Bank of America Merrill Lynch data show. That compares with 291 basis points on average for debt tracked by the bank bond index.
Moody’s cut at least a dozen Spanish lenders to junk status, and in all cases the ratings remained under review for further downgrades, the ratings company said yesterday in a statement. Junk debt is graded below Baa3 by Moody’s and BBB- by Standard & Poor’s and Fitch Ratings.
The latest downgrades reflect the government’s reduced creditworthiness, which lessens its ability to support the lenders, as well as Moody’s expectation that losses linked to commercial property will keep rising, according to yesterday’s statement.
“We suspect that the sovereign will itself require a bailout, not just the Spanish banks,” said Olly Burrows, a London-based credit analyst at Rabobank International.
To contact the reporter on this story: Esteban Duarte in Madrid at firstname.lastname@example.org
Now we have the beginnings of the ‘Perfect Storm’ economically speaking if you ask me. What can you do to Prepare for the ‘new’ economy that might unfold?
With Greece wanting out of the EC and further economic woes hitting all the ‘PIGGS’, some are reporting that the Euro has collapsed, at least unofficially.
A bit of background: MSM has reported that there have been huge capital outflows from Greece, in the billions per day and now Spain. It isn’t like this is just falling from the sky unannounced. Remember Ireland, Italy and Portugal all have been in the news with bailouts of some sort over the past year or two. The press has played this well, sort of like the frog in water who slowly dies as the water begins to heat up and boil.
Now it appears we might have hit critical mass with the problems in the EC. The Bailouts will continue to happen as we see more and more capital outflows, they will continue to get larger and larger as the liquidity issues mount. Much like the U.S. the ‘quantative easing(printing money) will be to infinity.
Which brings me to the point of this piece, as more money is printed and less and less economic activity there to back it up we will begin to see inflation hit the goods and services that we use on a daily basis. Moreover, the typical assets like real estate will most likely not enjoy such price inflation as no one will have the buying power to afford such purchases and without buyers prices will not rise as will prices in basic commodities, such as food and gas.
The governments are trying to fill the financial hole created by the banks and their insane lending and ‘betting'(read derivative) practices which have still not come to full force. We have been given a small insight into the destructive power of these instruments in the recent JP Morgan debacle, losing 2 billion in one 3 month period. There are trillion upon trillions of these dangerous bets floating around the world. When the music stops, we will all pay!
How can you prepare for this catastrophe should it come to pass (again many are saying that it is coming to pass right now!)?
I for one own some gold and silver, probably not enough but some. Many survivalists disagree with this strategy saying you can’t eat or drink the metals. I agree there but also see them as a short term solution to the things that I might need but haven’t seen that need yet. I do own quite a bit of storable foods, all organic, non-GMO foods that are high in nutrition. I urge everyone to educate themselves on the value of nutrition versus calories. Both are necessary but good nutrition is critical. Water is another necessity and I am fortunate enough to live very close to a river and own a gravity filter system to clean it up.
I hope everyone is somewhat prepared, if not physically mentally for what appears to be coming over the horizon. Stay Strong!
As I have said many times in the past, Iceland stands out among all countries as the model for dealing with an economic/debt/housing crisis. At the very core it appears that their government, after a few crucial changes at the top, moved on behalf of their citizens and not with their core banks.
They nationalized them, a necessary step to rid the system of the wolves that were ready to eat their own children if necessary to make money, and then forgive a ton of debt of the citizens, especially those that had mortgages on homes that were out of balance with prices.
The results are a growing economy, 10 times the growth of the EU, and in general a satisfied populace, they know that they have the power to change the system now and will not forget it soon. Something that should have come out of the Occupy Wall Street movement.
Why Greece doesn’t do something similar, something that would fit into their particular situation is beyond me. Seems as if their government is all about becoming better serfs to the system and dragging all their citizens along with them.
Icelandic Anger Brings Debt Forgiveness
By Omar R. Valdimarsson – Feb 19, 2012 5:01 PM MT
Icelanders who pelted parliament with rocks in 2009 demanding their leaders and bankers answer for the country’s economic and financial collapse are reaping the benefits of their anger.
Since the end of 2008, the island’s banks have forgiven loans equivalent to 13 percent of gross domestic product, easing the debt burdens of more than a quarter of the population, according to a report published this month by the Icelandic Financial Services Association.
“You could safely say that Iceland holds the world record in household debt relief,” said Lars Christensen, chief emerging markets economist at Danske Bank A/S in Copenhagen. “Iceland followed the textbook example of what is required in a crisis. Any economist would agree with that.”
The island’s steps to resurrect itself since 2008, when its banks defaulted on $85 billion, are proving effective. Iceland’s economy will this year outgrow the euro area and the developed world on average, the Organization for Economic Cooperation and Development estimates. It costs about the same to insure against an Icelandic default as it does to guard against a credit event in Belgium. Most polls now show Icelanders don’t want to join the European Union, where the debt crisis is in its third year.
The island’s households were helped by an agreement between the government and the banks, which are still partly controlled by the state, to forgive debt exceeding 110 percent of home values. On top of that, a Supreme Court ruling in June 2010 found loans indexed to foreign currencies were illegal, meaning households no longer need to cover krona losses.
“The lesson to be learned from Iceland’s crisis is that if other countries think it’s necessary to write down debts, they should look at how successful the 110 percent agreement was here,” said Thorolfur Matthiasson, an economics professor at the University of Iceland in Reykjavik, in an interview. “It’s the broadest agreement that’s been undertaken.”
Without the relief, homeowners would have buckled under the weight of their loans after the ratio of debt to incomes surged to 240 percent in 2008, Matthiasson said.
Iceland’s $13 billion economy, which shrank 6.7 percent in 2009, grew 2.9 percent last year and will expand 2.4 percent this year and next, the Paris-based OECD estimates. The euro area will grow 0.2 percent this year and the OECD area will expand 1.6 percent, according to November estimates.
Housing, measured as a subcomponent in the consumer price index, is now only about 3 percent below values in September 2008, just before the collapse. Fitch Ratings last week raised Iceland to investment grade, with a stable outlook, and said the island’s “unorthodox crisis policy response has succeeded.”
People Vs Markets
Iceland’s approach to dealing with the meltdown has put the needs of its population ahead of the markets at every turn.
Once it became clear back in October 2008 that the island’s banks were beyond saving, the government stepped in, ring-fenced the domestic accounts, and left international creditors in the lurch. The central bank imposed capital controls to halt the ensuing sell-off of the krona and new state-controlled banks were created from the remnants of the lenders that failed.
Activists say the banks should go even further in their debt relief. Andrea J. Olafsdottir, chairman of the Icelandic Homes Coalition, said she doubts the numbers provided by the banks are reliable.
“There are indications that some of the financial institutions in question haven’t lost a penny with the measures that they’ve undertaken,” she said.
According to Kristjan Kristjansson, a spokesman for Landsbankinn hf, the amount written off by the banks is probably larger than the 196.4 billion kronur ($1.6 billion) that the Financial Services Association estimates, since that figure only includes debt relief required by the courts or the government.
“There are still a lot of people facing difficulties; at the same time there are a lot of people doing fine,” Kristjansson said. “It’s nearly impossible to say when enough is enough; alongside every measure that is taken, there are fresh demands for further action.”
As a precursor to the global Occupy Wall Street movement and austerity protests across Europe, Icelanders took to the streets after the economic collapse in 2008. Protests escalated in early 2009, forcing police to use teargas to disperse crowds throwing rocks at parliament and the offices of then Prime Minister Geir Haarde. Parliament is still deciding whether to press ahead with an indictment that was brought against him in September 2009 for his role in the crisis.
A new coalition, led by Social Democrat Prime Minister Johanna Sigurdardottir, was voted into office in early 2009. The authorities are now investigating most of the main protagonists of the banking meltdown.
Iceland’s special prosecutor has said it may indict as many as 90 people, while more than 200, including the former chief executives at the three biggest banks, face criminal charges.
Larus Welding, the former CEO of Glitnir Bank hf, once Iceland’s second biggest, was indicted in December for granting illegal loans and is now waiting to stand trial. The former CEO of Landsbanki Islands hf, Sigurjon Arnason, has endured stints of solitary confinement as his criminal investigation continues.
That compares with the U.S., where no top bank executives have faced criminal prosecution for their roles in the subprime mortgage meltdown. The Securities and Exchange Commission said last year it had sanctioned 39 senior officers for conduct related to the housing market meltdown.
The U.S. subprime crisis sent home prices plunging 33 percent from a 2006 peak. While households there don’t face the same degree of debt relief as that pushed through in Iceland, President Barack Obama this month proposed plans to expand loan modifications, including some principal reductions.
According to Christensen at Danske Bank, “the bottom line is that if households are insolvent, then the banks just have to go along with it, regardless of the interests of the banks.”
To contact the reporter on this story: Omar R. Valdimarsson in Reykjavik email@example.com.
I applaud the citizens of Iceland. They have shown the world what can be done when the people come together. Of course, they have the advantage of a relatively homogenous population that can agree on a single basic goal, criminal activity should never be rewarded and the good of the people trumps the ‘good’ of the corporate banksters.
The article below list some of the scary facts about the U.S. debt. I would also like to point out the scariest fact of all, that we have politicians up the the District of Criminals that are supposed to represent ‘We The People’ yet they continue to shirk their duties to this country and it’s peoples by spending more than they take in.
Part of the responsibility for this scandalous affair lies directly with us, the people of this country that continue to take all the BS these guys hand out with little to no voice about how bad this really is…You might say well we can always throw the bums out if they don’t do as they say. Great in theory yet these rascals continue to behave poorly and pass laws that are quite frankly treasonous.
Read and weep!
As President Obama unveiled the 2013 fiscal year budget, the nation’s financial situation came back into sharp focus. Experts say partisan gridlock in Washington means the budget will probably go nowhere.
Considering this is an election year, however, expect politicians to harp on facts, figures and terms that most Americans weren’t taught in high school. To help out, it’s time to dredge up lots of scary facts to make you pay attention.
Before we get going, a quick primer on the number TRILLION:
$1 trillion = $1,000 billion or $1,000,000,000,000 (that’s 12 zeros)
How hard is it to spend a trillion dollars? If you spent one dollar every second, you would have spent a million dollars in 12 days. At that same rate, it would take you 32 years to spend a billion dollars. But it would take you more than 31,000 years to spend a trillion dollars.
And now, some scary facts about the debt and the deficit — some basics:
Deficit = money government takes in — money government spends
2012 US deficit = $1.33 trillion
2013 Proposed budget deficit = $901 billion
National debt = Total amount borrowed over time to fund the annual deficit
Current national debt = $15.3 trillion (or $49,030 per every man, woman and child in the US or $135,773 per taxpayer)
[Also see: Who Benefits From the Safety Net]
OK, let’s get started!
1. The U.S. national debt on Jan. 1, 1791, was just $75 million dollars. Today, the U.S. national debt rises by that amount about once an hour.
2. Our nation began its existence in debt after borrowing money to finance the Revolutionary War. President Andrew Jackson nearly eliminated the debt, calling it a “national curse.” Jackson railed against borrowing, spending and even banks, for that matter, and he tried to eliminate all federal debt. By Jan. 1, 1835, under Jackson, the debt was just $33,733.
3. When World War II ended, the debt equaled 122 percent of GDP (GDP is a measure of the entire economy). In the 1950s and 1960s, the economy grew at an average rate of 4.3 percent a year and the debt gradually declined to 38 percent of GDP in 1970. This year, the Office of Budget and Management expects that the debt will equal nearly 100 percent of GDP.
4. Since 1938, the national debt has increased at an average annual rate of 8.5 percent. The only exceptions to the constant annual increase over the last 62 years were during the administrations of Clinton and Johnson. (Note that this is the rate of growth; the national debt still existed under both presidents.) During the Clinton presidency, debt growth was almost zero. Johnson averaged 3 percent growth of debt for the six years he served (1963-69).
5. When Ronald Reagan took office, the U.S. national debt was just under $1 trillion. When he left office, it was $2.6 trillion. During the eight Regan years, the US moved from being the world’s largest international creditor to the largest debtor nation.
6. The U.S. national debt has more than doubled since the year 2000.
Under President Bush: At the end of calendar year 2000, the debt stood at $5.629 trillion. Eight years later, the federal debt stood at $9.986 trillion.
Under President Obama: The debt started at $9.986 trillion and escalated to $15.3 trillion, a 53 percent increase over three years.
7. FY 2013 budget projects a deficit of $901 billion in 2013, representing 5.5 percent of GDP, down from a deficit of $1.33 trillion in FY 2012, which was the fourth consecutive year of more than $1 trillion dollar deficits.
8. The U.S. national debt rises at an average of approximately $3.8 billion per day.
9. The US government now borrows approximately $5 billion every business day.
[Also see: States with the most homes in foreclosure]
10. A trillion $10 bills, if they were taped end to end, would wrap around the globe more than 380 times. That amount of money would still not be enough to pay off the U.S. national debt.
11. The debt ceiling is the maximum amount of debt that Congress allows for the government. The current debt ceiling is $16.394 trillion effective Jan. 30, 2012.
12. The U.S. government has to borrow 43 cents of every dollar that it currently spends, four times the rate in 1980.
You can track the national debt on a daily basis here.
And some people wonder why so many people continue to prepare for the worst possible scenario. Is it any wonder after reading the above? I for one continue to prepare for a total economic meltdown.
When you see the world printing more and more paper money you always find more and more people fleeing to hard assets like Gold and Silver. Real estate, thanks to the rascals on Wall Street, is no longer an option as prices continue to fall amid the overhang in supply and foreclosures.
Gold and Silver are set to really get going this year as the printing presses work over time putting more ‘liquidity’ in the system…If it weren’t for the real estate crisis you would see inflation in the broader measures. Already you are seeing some price inflation in food.
P.M. Kitco Metals Roundup: Comex Gold Ends Firmer, At 2-Month High; Bulls Have Technical Power
2 February 2012, 2:04 p.m.
By Jim Wyckoff
Of Kitco News
Kitco News) – Comex April gold futures prices ended the U.S. day session higher and near the daily high as bargain hunters stepped in to buy the early dip in prices. Prices hit a fresh two-month high today and bulls continue to build upon their upside near-term technical momentum. April gold last traded up $9.10 at $1,758.60 an ounce. Spot gold was last quoted up $12.80 an ounce at $1,756.25. March Comex silver last traded up $0.348 at $34.155 an ounce.
Gold and silver both started their rallies right around the time of Thursday morning’s testimony by Fed Chairman Bernanke to the U.S. House of Representatives. While Bernanke said nothing really new or surprising, he reiterated the U.S.’s path to better economic times remains a tough one. It’s likely that gold rallied in part due to Bernanke’s general reaffirmation of last week’s FOMC statement that pledged continued low interest rates well into 2013 and hinted more quantitative easing could be forthcoming—which was bullish for the precious metals.
The U.S. dollar index was slightly higher Thursday on a short-covering bounce following recent selling pressure. The dollar index bears still have some downside near-term technical momentum. Crude oil prices traded sharply lower Thursday and hit a fresh six-week low of $95.44 a barrel. Crude oil bulls are fading and that did somewhat limit the upside for gold and silver Thursday. Crude oil and the U.S. dollar index will remain the two key “outside markets” that will have a daily influence on gold and silver price moves.
There were a few fresh developments coming out of the European Union debt crisis Thursday. A Spanish bond auction saw mixed results but with lower yields fetched.
A debt- restructuring deal between the Greek government and the private sector has still not been reached, but an agreement is closer, reports said. The EU debt crisis appears to have stabilized for the moment. But if recent history plays out again, the EU debt crisis will be back on the front burner of the market place.
The London P.M. gold fixing was $1,751.00 versus the previous P.M. fixing of $1,740.00.
Technically, April gold futures prices closed nearer the session high Thursday and hit a fresh two-month high. Gold managed gains despite bearish “outside markets” that saw a firmer U.S. dollar index and sharply lower crude oil prices. Yet, gold rallied anyway on its technical strength. Gold bulls have the solid overall near-term technical advantage and still have upside near-term technical momentum on their side. A steep five-week-old uptrend is in place on the daily bar chart. Bulls’ next upside technical breakout objective is to produce a close above solid technical resistance at the December high of $1,769.70. Bears’ next near-term downside price objective is closing prices below chart trend-line and psychological support at $1,700.00. First resistance is seen at Thursday’s high of $1,763.80 and then at $1,769.70. First support is seen at $1,750.00 and then at Thursday’s low of $1,743.30. Wyckoff’s Market Rating: 8.0.
March silver futures prices closed nearer the session high Thursday and hit a fresh 2.5-month high. Silver also scored gains despite bearish “outside markets” that saw a firmer U.S. dollar index and sharply lower crude oil prices—showing its near-term technical strength. Silver bulls have the solid overall near-term technical advantage. A five-week-old uptrend is in place on the daily bar chart. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at the October high of $35.68 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at this week’s low of $32.93. First resistance is seen at Thursday’s high of $34.35 and then at $35.00. Next support is seen at $34.00 and then at Thursday’s low of $33.455. Wyckoff’s Market Rating: 7.0.
March N.Y. copper closed down 535 points 378.85 cents Thursday. Prices closed nearer the session low. The key “outside markets” were in a bearish posture for copper Thursday, as the U.S. dollar index was firmer and crude oil prices were sharply lower. Copper bulls still have the near-term technical advantage. Prices are in a six-week-old uptrend on the daily bar chart. Copper bulls’ next upside breakout objective is pushing and closing prices above major psychological resistance at 400.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 367.50 cents. First resistance is seen at 380.00 cents and then at 385.00 cents. First support is seen at this week’s low of 376.30 cents and then at 375.00 cents. Wyckoff’s Market Rating: 6.0.
Follow me on Twitter! If you want daily, or nightly, up-to-the-second market analysis on gold and silver price action, then follow me on Twitter. It’s free, too. My account is @jimwyckoff .
By Jim Wyckoff contributing to Kitco News; firstname.lastname@example.org
I am always on the look out for dips in prices to buy more Gold and Silver…Silver especially!
Reading about the steps taken to ‘remedy’ the economic/finanical disaster in Spain (all of Europe looks pretty much the same) is like looking at 2008/2009 here in the U.S. all over again!
Merging banks, huge write downs on real estate etc. My issue is why did it take so long to hit Europe? Did they think they were immune to financial mismangement?
Spain to Unveil Bank Overhaul to Clean Up Real Estate
By Emma Ross-Thomas – Feb 2, 2012 5:51 AM MT
Spain is set to announce today its plan to shepherd struggling banks into mergers and make the industry set aside 50 billion euros ($66 billion) for real- estate assets left over from the bubble that burst in 2008.
The government will issue debt and inject the funds into banks via contingent convertible bonds, or CoCos, which convert into equity if capital ratios fall below a certain level, a person familiar with the process said yesterday. It will only support banks that merge and those lenders will also have more time to apply new provisioning rules, the person said.
Economy Minister Luis de Guindos speaks to reporters at 5:30 p.m. in Madrid today and the plan is due to be approved by the Cabinet tomorrow. The ministry gave no more details in an e- mailed statement.
Prime Minister Mariano Rajoy, in power since December, has pledged a “true restructuring” of the industry at no cost to the taxpayer four years after the decade-long property boom collapsed. Lenders have about 176 billion euros of what the Bank of Spain terms “troubled” assets linked to real estate on their books, including land and unfinished apartments, and have provisioned about a third of that.
“They don’t want it to cost the taxpayer anything, they don’t want to use EU bailout funds and they need it to be credible for the market, and those three conditions are apparently incompatible,” Fernando Fernandez, a professor at IE business school in Madrid and a former International Monetary Fund economist, said in a telephone interview.
The former Socialist government’s first initiative to help banks was to create the FROB bailout fund in 2009, which spent about 10 billion euros buying preference shares in lenders it encouraged to merge. In a second phase, the government bought ordinary shares in struggling lenders last year and in October, in a bid to shield the budget from further strain, it decreed that any losses generated by the overhaul would be absorbed by the industry.
Rajoy, who leads the pro-business People’s Party, had considered creating a so-called bad bank to buy toxic real- estate assets from lenders, two people familiar with the situation said in November. A bad bank may have clashed with Rajoy’s election pledge not to spend taxpayers’ money cleaning up lenders. Rajoy and Guindos have also ruled out using the euro region’s bailout funds to finance the overhaul.
Spain, which pays about less than 4 percent to borrow for five years, will issue debt to fund its purchase of the CoCos, which will yield 8 percent, said the person, who declined to be identified because the plan isn’t yet public. The Treasury sold five-year bonds today at 3.455 percent, down from 4.021 percent last month, as the European Central Bank’s policy of extending longer-term loans to banks bolstered demand for sovereign debt.
The plan to be unveiled today won’t have any impact on the budget deficit, the person familiar with the process said yesterday. Still, the CoCos may end up being converted into equity, Fernandez said, as the IMF forecasts Spain’s economy will shrink for the next two years, adding to pressure on banks.
“Barring positive surprises on economic growth, it’s probable the CoCos will end up being converted into shares and so we would be just postponing the cost to the taxpayer,” said Fernandez, who used to be chief economist at Banco Santander SA.
De Guindos said on Jan. 27 that banks were themselves capable of funding the 50 billion euros of additional provisions he wants them to make for real-estate. Provisioning efforts will be “especially dedicated” to foreclosed assets, particularly “land and other kinds of property,” he said in an interview in Davos, Switzerland, last week. Lenders the government thinks aren’t viable in the medium term will have to merge, he said.
To contact the reporter on this story: Emma Ross-Thomas in Madrid at email@example.com
The liklihood of a strong economic rebound worldwide is not a very high probablility in my mind, regardless of our stock market having the best January in many years etc…Economic outlook is still very bleak in my mind!
As I have been saying, this game is far from over! Merkel is not buckling under to ‘outside’ pressure and will take this game to the very end! I don’t think the latest Central Bank Actions will do much for the overall health of the financial system, there nor here, in the medium to long haul…
Merkel Shuns ECB Role in Favor of Budget Limits
By Tony Czuczka – Dec 1, 2011 10:19 AM MT
German Chancellor Angela Merkel is set to snub investor pleas to back an expanded European Central Bank role in solving the debt crisis, as she pushes her demand for tighter economic ties in Europe as the only way forward.
In the days before a speech to German lawmakers tomorrow outlining her stance for a Dec. 9 European summit, Merkel has repeated her push to rework European Union rules to lock in budget monitoring and enforcement and seal off the ECB from political pressure. That risks a showdown with fellow EU leaders and extends her conflict with financial markets looking for immediate measures to end the contagion.
“The market is questioning Merkel’s tough approach,” Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London, said by phone today. Investors want “clarity on what the framework will look like and what the financial bridge will look like” to fund euro-area governments and banks that need aid while fiscal ties are negotiated.
Merkel’s refusal to deploy the ECB is a rebuff to President Barack Obama after he exhorted Europe’s leaders to take more action to combat the crisis. The chancellor is loath to agree to follow the Federal Reserve and the Bank of England in policies she views as akin to fighting debt with more debt. Enlisting the ECB in battling the crisis would violate the central bank’s independence and set it on a course of action that might not work, destroying its credibility.
The ECB is independent and must choose its own method of ensuring the euro’s stability “without being praised or criticized” and states must protect that independence by improving their finances, the Westdeutsche Zeitung quoted Merkel as saying in an interview released today. The government sees joint euro bonds as “the wrong remedy in this phase of European development and even damaging,” she told the newspaper.
Underscoring the focus on debt cutting, Germany will propose that each euro country set up a national debt-reduction fund as one way to boost market confidence, Finance Minister Wolfgang Schaeuble said in Berlin today. Each country could pay into the fund every year until its debt level returns to the euro-area limit of 60 percent of gross domestic product, he told reporters.
Merkel’s drive to pursue economic and political convergence may still not be the final word. “You can’t put the cart before the horse,” she said in a Nov. 23 speech to parliament.
ECB President Mario Draghi signaled today that the central bank could do more to fight the crisis in return for fiscal union, one day after the ECB joined the Fed and four other central banks to lower financing costs for banks. Michael Meister, the parliamentary finance spokesman for Merkel’s party, has said that greater integration is a precondition for any German rethink of its opposition to “joint liability.”
“If the euro zone succeeds in agreeing on more political integration with clear consequences for breaching fiscal and economic rules, the German government should eventually give up its resistance to euro bonds,” Carsten Brzeski, an economist at ING Group in Brussels, said in a commentary for Bloomberg Brief.
Throughout the market turbulence and conflict with allies, Merkel hasn’t budged, saying that euro bonds aren’t the answer for now. Her refusal to sanction using the ECB clashes with French President Nicolas Sarkozy’s government, while her focus on changing Europe’s rules irks countries such as the U.K. and Ireland, where voters twice rejected EU treaties in referendums.
“Not everyone is enthusiastic about treaty change because that requires a difficult process of consensus in individual governments, parliaments and populations for some,” Merkel told reporters on Nov. 29. “Still, I believe that those who give us money for government bonds in Europe expect that we have to ensure enforcement of the Stability and Growth Pact more strictly than in the past.”
Germany is seeking changes to the EU’s rulebook to allow closer monitoring of euro countries’ budgets, with sanctions against persistent offenders and potential veto power over national spending plans wielded by the EU Commission, the EU’s Brussels-based executive. EU President Herman van Rompuy is due to present proposals for treaty change at the Dec. 9 summit.
Merkel, who has signaled she doesn’t want financial markets or even her own economic advisers imposing solutions for the debt crisis, is sticking to the crisis-fighting arsenal built up since Greece, the euro area’s most indebted country, was bailed out in May 2010. Six months later, as Ireland prepared to join Greece in requesting a bailout, Merkel said policy makers have to assert “primacy” over the markets in “a kind of battle.”
Germany and Europe don’t have “unlimited financial strength” to counter the crisis, Merkel’s chief spokesman, Steffen Seibert, told reporters Nov. 28. That’s “why the German government reacts so skeptically to the many calls for Europe to finally free up the really big, final financial reserves, which the Anglo-Saxon world likes to call showing the bazooka.”
In the latest bid to tame the crisis, European finance ministers said yesterday they would seek a greater role for the International Monetary Fund alongside their own bailout fund, the European Financial Stability Facility.
Schaeuble said the IMF option, along with the EFSF’s ability to buy sovereign bonds and guarantee as much as 30 percent of bond issues by troubled governments, guarantees that all euro-area members will meet their financing needs well beyond the first quarter of 2012.
‘Game of Chicken’
The EFSF looks like “yesterday’s story” as German policy makers play a “huge game of chicken” over future economic and monetary union to achieve their budget-tightening aims, said Jim O’Neill, chairman of Goldman Sachs Asset Management.
“How close to the edge do you want to take this?” O’Neill said yesterday in a Bloomberg Television interview with Francine Lacqua. “It needs Germany and the ECB to decide whether they want EMU to exist or not, because that’s how it’s going.”
Merkel and Sarkozy, at a Nov. 24 meeting in Strasbourg with Italian Prime Minister Mario Monti, agreed to stop discussing the ECB’s role in the debt crisis. Three days later, French Budget Minister Valerie Pecresse, who is also the government’s spokeswoman, suggested that more help from the ECB may be forthcoming if euro states implement tougher budget rules.
“A new fiscal compact” is “definitely the most important element to start restoring credibility,” Draghi told European lawmakers in Brussels today. “Other elements might follow, but the sequencing matters.”
Merkel’s insistence on debt and deficit reduction is yielding results. Crisis-driven government changes in Italy and Spain ushered in leaders who pledge budget cuts, while EU states including France agreed to look at locking debt reduction into its constitution. Forecast growth in Germany, Europe’s biggest economy, of 2.9 percent compares with a euro-region average of 1.6 percent this year, according to the Paris-based Organization for Economic Cooperation and Development.
Merkel’s refusal to put more German wealth on the line to save the euro area “is not a categorical rejection,” said Brzeski of ING Group. “It is all about the sequence of events and decisions.”
To contact the reporter on this story: Tony Czuczka in Berlin at firstname.lastname@example.org
To contact the editor responsible for this story: James Hertling at email@example.com
Buckle up, it promises to be a bumpy ride from here on out! Buy some gold or silver and especially food just in case!