At the precipice of disaster

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.

 

Crisis of Confidence for the Euro

As the can tumbles down the road, we are now hearing that the Euro is showing signs of some deeper issues developing. At first the Euros flowed from the troubled nations to the core now the capital flows are outward, from the Euro to outside currency havens.

 

The Euro has lost 8% against the dollar just since May. For many that might not seem too large but in the currency game this is huge! Seems that everyone is just losing hope as the European Central Bank and Germany can’t seem to come together on anything.

 

Ultimately the only weapon that they have is the printing press…buying more bonds with newly printed money to keep rates down in the ‘troubled’ nations. This in turn will eventually lead to inflation. Too much money chasing limited goods and services leads to higher prices for those same goods and services…at least that is the traditional thinking.

 

In my opinion we have not seen a ton of inflation in typical safe haven assets such as real estate due to the tremendous amount of price inflation that was artificially injected into the system via virtually unlimited cheap credit. Now we are seeing that ‘fluff’ taken out of the market entirely.

 

Given this logic then we might see a ‘bottom’ in that market and then a huge bounce. Rates will begin to rise and so will prices. We are already seeing food costs soar due to the drought and the drop in worldwide food supplies.

 

We will see if the making of the perfect storm are here and develop. The system is, in my opinion, severely stretched and it won’t take a lot to just see it disassemble. The rate and timing of this event is a moving target and when it becomes evident it may be too late for those that are not prepared!

Foreclosues, worst 5 states

We will continue to see more and more foreclosures, especially now that the government has ‘settled’ with the big banks that have abused the entire process from loan to foreclosure.

 

I am wondering what will happen to the funds awarded to the government to ‘help’ those homeowners that have been abused? I suspect that pennies on the dollar will actually end up in the hands of the abused and probably too late to matter, as the government in their efficient execution eats up all the dough and takes their sweet time in doing so.

 

The criminal activities will proceed most likely in many states. It appears to be difficult for these folks to actually follow the law while they use it to protect themselves. Way too much money involved here to not see abuses.

 

What have we come to?

 

States with the most homes in foreclosure

 

Five major U.S. banks accused of foreclosure abuses have agreed to a $26 billion settlement with the government, the largest payout from banks arising from the financial crisis. The amount, which will include aid from banks in the form of loan forgiveness and refinancing, is intended to help homeowners avoid mortgage default and foreclosure. Most economists believe this is a step in the right direction, albeit only a small one.

 

Homeowners in at least 49 states represented in the agreement will benefit, though some states have more homes in trouble than others. California, one the hardest-hit states in the foreclosure crisis, will reportedly receive mortgage relief of up to $18 billion. Based on Corelogic’s national foreclosure report, 24/7 Wall St. identified the states with the highest foreclosure rates.

 

Many of the states with the highest foreclosure rates experienced the worst of the housing crisis. However, analysis by 24/7 reveals that the primary driver of higher foreclosure rates is a lengthy foreclosure process.

 

Nearly all of the states with the highest rates also have the longest foreclosure periods. The average foreclosure process for the nation is 140 days. The average foreclosure process for the eleven states with the highest foreclosure rates is 220. As a result, many homes foreclosed in 2011 in these states were actually at the end of a process that began more than a year ago. New York, one of the states with the worst foreclosure rates, has an average processing period of 445 days.

 

The reasons why the foreclosure processing period is longer in these states is because it usually involves the court system. Judicial foreclosures are handled by the court and usual include filing motions and seeking a final judgment from a judge. Nonjudicial foreclosures, which tend to take less time to process, are governed by state law and do not require court intervention. Nine of the 11 states with the highest foreclosure rates have a judicial-only foreclosure process.

 

While some of the states with high foreclosure rates have had substantial improvements in their economies, others continue to be hit hard. In Nevada and Florida, two states with the highest foreclosure rates, homes lost roughly half of their value over the past five years — and prices are still falling. Foreclosures that began several years ago and that are still active cannot be the only reason nearly 12% of Florida’s homes with mortgages were in foreclosure last year. Home prices in the state fell nearly 50% over the past five years, unemployment remains extremely high, and 17.4% of people with mortgages in the state were 90 days or more late on their mortgage payments.

 

24/7 Wall St. reviewed housing data provided by Corelogic to rank the states that had the highest percentage of homes with mortgages that were in foreclosure in 2011. Corelogic’s report also provided the percentage of homeowners that were delinquent on their mortgages for 90 days or more last year. In order to highlight the conditions of these state economies and housing markets, we included unemployment rates from the Bureau of Labor Statistics and home price changes from Fiserv-Case Shiller.

 

Check out the five states with the most homes in foreclosure:

 

5. New York

2011 foreclosure rate: 4.6%

December, 2011 unemployment: 8% (23rd highest)

Home price change (2006Q3-2011Q3): -13.6% (23rd largest decline)

Processing period: 445 days

 

New York’s processing period for foreclosures is 445 days — by far the longest among all states. This could explain why the state has such a high foreclosure rate for mortgaged homes. And although New York’s housing prices didn’t decline as much as in other states, the 13.6% decline since the third quarter of 2006 is still quite large. Moreover, home prices are forecast to decrease among the most in the country over the next year and drop nearly 6% by the third quarter of 2012.

 

4. Nevada

2011 foreclosure rate: 5.3%

December, 2011 unemployment: 12.6% (the highest)

Home price change (2006Q3-2011Q3): -59.3% (the largest decline)

Processing period: 116 days

 

For Nevada, things aren’t going well. Its already dismal economy and housing situation are still getting worse. Nevada didn’t experience a glut of foreclosures last year because the state has a particularly lengthy foreclosure process. Between the third quarter of 2006 and the third quarter of 2011, the median home value in the state tumbled by nearly 60%. By the third quarter of this year, Fiserv-Case Shiller projects home prices will fall an additional 13.9% — by far the worst drop in the country. Nevada has the worst unemployment rate in the country, at 12.6%, and 13.4% of mortgage owners were delinquent on payments for 90 days or more last year.

 

3. Illinois

2011 foreclosure rate: 5.4%

December, 2011 unemployment: 9.8% (7th highest)

Home price change (2006Q3-2011Q3): -29% (7th largest decline)

Processing period: 300 days

 

Home prices in Illinois have dropped 29% from the third quarter of 2006 — one of the largest declines in the country. It also takes 300 days to process foreclosures in the state. And Illinois residents are not lining up to pay off their mortgages either. The state’s 90+ day delinquency rate for mortgage payments is 9.2%, the fourth highest in the country.

 

2. New Jersey

2011 foreclosure rate: 6.4%

December, 2011 unemployment: 9% (13th highest)

Home price change (2006Q3-2011Q3): -22.6% (14th largest decline)

Processing period: 270 days

 

New Jersey has one of the longest foreclosure processing periods in the country at 270 days. The state also has a 90+ day delinquency rate of 10.6%, which is the third highest rate in the country. On top of this, the state’s housing market is not expected to rebound for some time. In fact, home prices are forecast to decrease an additional 3.9% by the third quarter of 2012.

 

1. Florida

2011 foreclosure rate: 11.9%

December, 2011 unemployment: 9.9% (6th highest)

Home price change (2006Q3-2011Q3): -49% (3rd largest decline)

Processing period: 135 days

Florida’s 2011 foreclosure rate for mortgaged homes is not only the highest in the country, but it is almost twice that of New Jersey — the state with the second-highest rate. As with many other states on this list, Florida has a very long foreclosure processing period of 135 days. There is more to the state’s high foreclosure rate than just that, however. Home prices dropped 49% since the third quarter of 2006, which is the third-largest drop in the country. The state’s unemployment rate of 9.9% is among the highest as well. Finally, the state’s mortgage payment delinquency rate is 17.4% — the nation’s absolute highest

 

There is some good news though. Several cities in Florida including Miami have seen a bounce in home prices over the last year. Several other cities in the worst hit states have also recovered in home prices somewhat. I hope for the best here.

Scary Facts about the U.S. Debt

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.

Super Pacs…what an abomination!

Thanks to the Supreme Court decision allowing unlimited amounts of money for political campaigns, the Super Pac and another from of corruption was born. I can’t tell you how embarrassed and ashamed I am of this particular development in our development as a nation.

 

The proof is as they say in the pudding. Have you seen these hit pieces on TV? While there maybe some kernel of truth in each one the way in which they are used is just embarrasing. Why can’t politicians and the people rely on factual information and not just sound bytes, especially those funded by a small group of people that have highly specific special interests!

 

Do you really think that these special interest groups that form a Super Pac aren’t expecting some sort of remuneration, perhaps not in cash but the currency of the realm…POWER and the ability to make more cash?

 

The next time you see a Super Pac sponsored commmercial ask yourself, what does this group of people expect to gain by the election of the individual that they support?

 

That these hit pieces have some influence is equally emabarrasing as they reflect upon the intelligence of those thuss influenced. If they weren’t working they would stop this travesty!

 

All parties are to blame, especially the Supreme Court of our country! When will we come to our senses?

 

 

 

 

Gold & Silver continue to climb

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.

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 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; jim@jimwyckoff.com

 

I am always on the look out for dips in prices to buy more Gold and Silver…Silver especially!

Spain, a replay of U.S. financial disaster

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

Q

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.

Previous Efforts

 

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.

Bond Sale

 

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 erossthomas@bloomberg.net

 

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!

Germany continues to play chicken with Euro

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

 

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.

‘Damaging’ Solution

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.

Draghi Signals

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.

‘More Strictly’

“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.”

No Bazooka

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 aczuczka@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

 

Buckle up, it promises to be a bumpy ride from here on out! Buy some gold or silver and especially food just in case!

Central Banks Commit More Dollars

Coordinated Central Bank efforts worldwide will literally flood the world in dollars

France – Next victim?

In my opinion, France will soon become the next victim of the sovereign debt fall out amongst the EU countries. Let’s fact it, there is a HUGE crisis of confidence and trust in the financial system worldwide. While the leaders are focused on the numbers, mostly from the worst possible perspective-at least in my opinion, the people are seething.

 

How can anyone in their right mind think that these illustrious leaders are going to get it right this time after multiple failures starting with the Lehman debacle to the recent MF Global catastrophe and, last but certainly not least, the European Sovereign debt debacle? Of course, to be fair it all really started with very loose regulations coming from decades of official deregulation of financial industries and the advice given to our leaders by none other than the people most responsible for creating this mess!!!!

 

Realize that the sovereign debt is just the tip of the iceberg, and it is melting down pretty quickly at this point. No matter the words you hear, because the news is tightly controlled and ‘they’ don’t want you to hear the truth of it, this entire financial system is in meltdown.

 

The most immediate problem, not the only one by a long shot, is that all the holders of this toxic sovereign debt which would include just about every large and medium sized bank in the world have to write down a ton of this debt. With that write down the banks have less capital and to maintain the required capital to loan ration they must either raise more capital-hardly likely right now given the economic/political disarray in the U.S. and Europe-sell assets and reduce their loan exposure and/or borrow from the Central Banksters.

 

As I see it, they are borrowing from the Central Bank, which just creates money out of thin air, to shore up their capital which is in itself not a long term strategy but only a very quick and short term fix and selling assets to raise liquidity while at the same time reducing their loans portfolios-which of course will put the respective economies into a recession…Does all this sound familiar?

 

We have been replaying this scenario from coast to coast and continent to continent for the past 3 years, over and over again with much the same results-slowing economies, rising unemployment, more real estate woes as foreclosures rise and values fall which leads to further deterioration of existing loan portfolios (did anyone catch that Fannie Mae and Freddie Mac require more billions to cover losses last quarter?) and the need to raise even more capital.

 

Of course as the economies slow down companies-large and small- have a harder time servicing their debts and have to layoff more people in the face of declining sales. You get the idea of how vicious this cycle is? I think we will continue to see this scenario play out except now we have entire governments/countries falling under the sheer weight of debts they cannot possibly repay!

 

I have very little faith, as do most people now, that our illustrious leaders can pull yet another rabbit out of the hat! We are seeing the beginnings of a ‘bank run’ on the European banks as the larger money market funds pull out of the larger European banks (Deutche Bank lost over 6 billion in one single day last week from this reaction by just one money fund). In my opinion it is just a matter of time before the people start to ask for their cash!

 

Once the people lose faith then to see what might happen rewind to the Argentinian crisis of the last decade! Perhaps a look at the first Great Depression from a historical perspective would be in order as well!

 

I hope I am wrong about the outcome here as it will make things so difficult that we cannot imagine. Not only that but very few have the grit and determination to weather such a storm! Chaos could ensue and that folks is not a pretty thing.

 

The good news, from the ashes comes the Phoenix…the people will get another chance at this and I hope that they will be much better informed of the possibilities than most are now!

 

Stay tuned….

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