Gold Primed to be ‘Mania Asset’

Photo: EDDIE MULHOLLAND

• Gold briefly went above US$1000/ounce yesterday. More investors are piling in. We will see gold test the previous high of US$1035/ounce very soon.
   
• During times of monetary distress, people run to gold. Gold is real money throughout history. Fiat currencies have come and gone. Empires have fallen but gold has stood the test of time as real money. Paper currencies have collapsed, remember the Wiemar republic and Japanese Yen in WW2 ? The USD will collapse too.
   
• Will Gold collapse when USD collapse? Obviously not. Just because gold is traded in USD in the Comex does not mean that it will become worthless when USD collapses. On the contrary its value will skyrocket as people realize the USD is just a piece of paper. Bernanke and his cahoots have been creating trillions of USD out of thin air.
   
• The likely scenario when there is a monetary meltdown is : Gold will be coveted. The demand for gold will be mania like. Financial Times reports in Gold primed to be ‘mania asset’:
    
  Gold is exhibiting all the classic signs of being in a structural bull market. On fears of inflation in early 2008, it rallied. Then, on fears of deflation in late 2008, it rallied again. So does gold perform better during inflation or deflation?
   
  In our view, that question is the wrong starting point. On the contrary, the rationale for owning gold, as it once again approaches the $1,000-an-ounce level, is the prospect of mounting monetary disorder.
   
  The US Federal Reserve, having flooded the market with liquidity by more than doubling its balance sheet in less than six months, may be unable or unwilling to withdraw it in time for fear of precipitating a secondary relapse in economic activity. Other central bankers will also face intense pressures to “support” their domestic economy by weakening the currency, leading to competitive currency devaluations.
   
  The race to the bottom in fiat currencies has begun and hard assets, particularly gold and silver, should be the primary beneficiaries.
   
  Gold is a prime candidate to become a “mania asset” once its demand becomes chiefly financially driven as opposed to jewellery and/or industrial demand driven where its upside could be capped by “sticker shock.”
   
  In fact, gold is currently one of the few remaining major asset classes where a case could be made for it to rise in a parabolic fashion. Once the psychologically significant $1,000-an-ounce is breached convincingly, the speed of the move beyond that level could accelerate sharply. One precondition for a mania is there must be uncertainty about how the asset is properly valued which allows “new era” thinking to take hold. This is very true for gold.
    
  Price explosion might not be imminent, however. Gold is experiencing unprecedented buying by exchange-traded funds, offset by substantially reduced jewellery demand. The fall in the Indian rupee has meant Indian gold prices have reached record levels. This is causing a slowdown in jewellery purchases (even though rupee expenditure levels are holding up, the tonnage of gold imports is suffering).
   
  The long-term story for gold, however, is as a remonetisation play as investors lose faith in fiat currencies. Keep an eye on gold lease rates; a spike would be a good lead indicator that gold is about to punch higher as this would reflect a shortage of lendable bullion. Rising lease rates will cause gold to go into backwardation as holders of gold may not want to sell their gold forward under any circumstances a trend currently evidenced by the high physical premium being paid for gold coins. 
    …….
  Speaking to central bankers, this is the first time I can recall them actually favouring a high gold price. Normally they see high gold prices as a lack of trust in the financial system (not to mention their ability as central bankers). Alan Greenspan, the former Fed chairman, for example, used to target a gold price of around $400 to $500 an ounce.
   
  Recently, the central bankers have become more enamoured of higher gold prices as it would suggest that their attempts to stave off deflation were starting to work.
   
  Central bankers in favour of higher gold prices? Things really have changed.
   
• When fiat currencies collapse, trade will be done via bartering or gold as currency. Can foods will be valuable: bake beans, Spam, sardines etc ….dry foods like: Quaker Oats, instant noodle…etc . All these can be used for bartering. But remember the perfect store of wealth is still gold! Let me tell you that when people will not accept USD in the future, they will still accept gold as payment !
   
• See also :
   
  Gold About to SkyRocket ! China Worries about Treasuries and Diversify into Gold !
  European Banks may need US$ 23 Trillion Bailout !
  Gold Price Set to Soar !
  What’s not to Like about Gold ?
  Dollar Devaluation, Debt Default & Gold
  Massive US Dollar Devaluation Against Gold During 2009
  Gold Rush Worldwide!
  Obama, Roosevelt, Gold Confiscation and Dollar Devaluation
  Economic Depression and Gold
  Celente – Code Red ! Economy in Collapse !
  GEAB : Systemic Economic Crisis: The Sequence of Global Insolvency Begins
  Global Financial & Economic Meltdown
  GEAB forecasts Next Financial Tsunami in March 2009
  Global Monetary Meltdown in 2009 ?
  America’s Debt – Ticking Nuclear Bomb!
  American & British Banks are Bankrupt!
  Economic Collapse of 2009 – Greater than Great Depression of 1929
  America is at the Edge of Niagara Falls
  Gerald Celente – Trends 2009
  Can Countries Go Bankrupt ?

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David Letterman on Economic Stimulus Package (Humor)

• Letterman on what will happen.

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Signs of Great Depression: Newly Poor Swell Lines at Food Banks !

Cindy Dreeszen and her husband Alex Orejuela and their son Matthew at the Interfaith Food Pantry in Morristown, N.J. - James Estrin/The New York Times

• Things are getting rougher by the week. People who sailed through previous recessions unscathed are now caught in this economic meltdown. Families that were way above the poverty line are now having difficulty feeding themselves.
   
• Julie Bosman writes :
   
  MORRISTOWN, N.J. — Once a crutch for the most needy, food pantrieshave responded to the deepening recession by opening their doors to what Rosemary Gilmartin, who runs the Interfaith Food Pantry here, described as “the next layer of people” — a rapidly expanding roster of child-care workers, nurse’s aides, real estate agents and secretaries facing a financial crisis for the first time.
  Demand at food banks across the country increased by 30 percent in 2008 from the previous year, according to a survey by Feeding America, which distributes more than two billion pounds of food every year. And instead of their usual drop in customers after the holidays, many pantries in upscale suburbs this year are seeing the opposite.
   
  Here in Morris County, one of the wealthiest counties in the country, the Interfaith pantry opened for an extra night last week to accommodate the growing crowds. Among the first-time visitors were Cindy Dreeszen and her husband, who both have steady jobs — his at a movie theater and hers at a government office — with a combined annual income of about $55,000.
   
  But with a 17-month-old son, another baby on the way, and, as Ms. Dreeszen put it, “the cost of everything going up and up,” the couple showed up in search of free groceries.
   
  “I didn’t think we’d even be allowed to come here,” said Ms. Dreeszen, 41, glancing around at the shelves of fruit, whole-wheat pasta and baby food. “This is totally something that I never expected to happen, to have to resort to this.”
   
  In Lake Forest, Ill., a wealthy Chicago suburb, a pantry in an Episcopal church that used to attract people from less affluent towns nearby has lately been flooded with people who have lost jobs. In Greenwich, Conn., a pantry organizer reported a “tremendous” increase in demand for food since December, with out-of-work landscapers and housekeepers as well as real estate professionals who have not made a sale in months filling the line.
   
  And amid the million-dollar houses of Marin County in California, a pantry at the San Geronimo Valley Community Center last month changed its policy to allow people to stop by once a week instead of every other week, since there are so many new faces in line alongside the regulars. “We’re seeing people who work at banks, for software firms, for marketing firms, and they’re all losing their jobs,” said Dave Cort, the executive director. “Here we are in big, fancy Marin County, but we have people who are standing in line with their eyes wide open, thinking, ‘Oh, my God, I can’t believe I’m here.’ ”
   
  The demand is not limited to pantries, which distribute groceries from food banks, supermarket surplus and individuals who donate through church or school can drives. The number of food-stamp recipients was up by 17 percent across New York State, and 12 percent in New Jersey, in November from a year before. When a mobile unit of the Essex County welfare office, as part of a pilot program to distribute food-stamp applications in other counties, stopped in Shop-Rite parking lots recently in Morris County, it was swamped.
   
  “If one of our richest counties has people signing up for food stamps who have never signed up before, that indicates the depth of this problem with the lack of food,” said Kathleen DiChiara, executive director of Community FoodBank of New Jersey. “It’s the canary in the coal mine.”
   
  Experts said that chronically poor people tend to adapt to the periods where money is scarce by asking for support from friends or tapping into social services, but that working-class people who suddenly lose jobs or homes often find themselves at sea, unsure how to navigate the system or ashamed to seek help.
   
  It is those people who, over the last several months, have started arriving in growing numbers at food pantries, which are often the first tentative step for those whose incomes are too high to qualify for government assistance. (Many pantries have a no-questions policy, though they might determine how many bags of groceries a customer can receive by the number of people in the household.)
   
  “These are people who never really had to ask for help before,” said Brenda Beavers, human services director for the Salvation Army in New Jersey, which dispenses emergency food supplies at 30 pantries throughout the state. “They were once givers and now they’re having to ask for assistance.”
    
  In Morristown, Ms. Gilmartin, who started volunteering at the Interfaith pantry 13 years ago, has watched a stream of new faces pushing shopping carts among the cardboard boxes on metal shelves in a former nursing home. In 2008, the pantry gave away 620,000 pounds of food, a 24 percent increase from 2007; in November, December and January it had a 24 percent increase in customers and a 45 percent increase in food distributed, compared with the same period the previous year.
   
• Many Americans are suffering big time. But the government wants to take their money and bailout millionaire/billionaire banksters! Bank of America and CitiBank are bankrupt ! Yet the US government insist on giving them money. The money given to them so far is way above the market valuation of these 2 companies. Any investor will want full say and fire all these banksters. I don’t think any of them will be in food lines begging for food.
   
• The US government says no nationalization of banks. How about we stop giving them money and use the money to help the newly poor. So you do not nationalize the banks and let the bankster keep control. The result is: they give themselves enormous bonuses. This is basic stupidity. No private investor will allow themselves to be taken for a ride like this. The US government is clearly not serving the American people. They are serving the banksters! Why are we not more pissed?

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Impending GeoPolitical Earthquake?

• José Miguel Alonso Trabanco has written an excellent piece on what is likely to happen next. What are the geopolitical consequences of the current financial meltdown? We know that when the Soviet Union collapsed 20 years ago, the USSR empire ended. We are at the early stage of the end of the American empire. How will it affect the key powers of the world? How will regional powers react and who will fill the void should America (though unlikely) totally collapse?
   
• Trabanco writes in An Impending Geopolitical Earthquake? :
    
  Some scholars frequently hold that politics and economics are somehow separate. Such view is profoundly mistaken because politics and economics are strongly interlinked. Actually, political power and economic wealth cultivate one another. Likewise, economic trouble, more often than not, tends to lead to political trouble and the reverse is equally true.
   
  Therefore, it is fairly reasonable to assert that this financial crisis will have a major impact on the international system’s balance of power. Some states (including Great Powers) could redefine their priorities. Other states are in a direr situation so they would have to make dramatic adjustments concerning their policies.
   
  Take the case of the United States. Following the end of the Cold War, the US intended to establish a unipolar era in which its hegemonic position would remain unrivaled (the so called ‘Project for a New American Century’). However, Washington has had to deal with several setbacks and challenges like the rise of other great powers (China and Russia), the proliferation of anti-American regimes (Iran, Venezuela) as well as Washington’s military quagmires (Iraq and Afghanistan). Thus, the position of the could be weakened as a result of the financial crisis.
   
  It is unknown at this point if the Dollar hegemony will prevail and remain unscathed. The dollar can certainly survive but its position could be critically eroded. This is extremely important to bear in mind because the Dollar hegemony is one of the twin pillars of American power, the other one being military strength. The US Dollar’s position as the top reserve currency is what has allowed the American economy to finance a huge trade deficit. A byproduct of that is the accumulation of the world’s largest external debt, equivalent to almost 99.95% of America’s GDP (!?).That means it cannot be paid so, what will happen if suddenly America’s creditors decide to collect at least a part of that debt? If the US refuses to pay, how will its debtors react?
   
  Moreover, the financial and economic crisis might acutely restrict NATO’s operational capabilities beyond its borders. The Atlantic alliance is currently contemplating an increased military presence in Afghanistan. It also seeks to advance further eastward into the Post-Soviet space. However, such agenda could be impeded by other concerns closer to home.
   
  It turns out that several European States (some with both NATO and European Union membership) are already facing sociopolitical complications that have been triggered by their severe financial and economic difficulties (lack of credit, unemployment, currency depreciation, external debt, GDP negative growth). If their situation deteriorates further, an eventual deployment of NATO troops in one or more of its members’ territory is not inconceivable at all. The official purpose would be the preservation of political stability. The unofficial (and real) goal would be to prevent NATO-friendly governments from collapsing. Iceland, Hungary, Greece and even Italy and France are in a particularly dire position. According to Der Spiegel Britain itself (the very cradle of modern finance) is “on the brink of financial ruin“.
   
  This scenario can be dismissed as far-fetched but even the American financial sector is under critical circumstances. Like Russian Prime Minister Vladimir Putin recently remarked “… investment  banks, [once] the pride of Wall Street, have virtually ceased to exist. In just twelve months, the have posted losses exceeding the profits they made in the last 25 years…”
   
  The Russian Federation itself is not immune. For instance, the Kremlin’s plans to make Moscow an international financial center do not seem very likely now, due to the ruble’s depreciation. In spite of that, the Russian government knows it has an important capability to maneuver through the crisis. Its main asset is the huge reserves of foreign currency (the third largest in the world) it has amassed during the last years. Plus, Russian energy and arms exports are a reliable source of income.
   
  Other Post-Soviet States are in a more delicate position. For instance, Kyrgyzstan decided to close the Manas Air Force Base (operated by the US Air Force) in exchange for Russian financial and economic concessions, which means Moscow scored a most crucial geopolitical victory. This teaches a vital lesson: Financial means are very useful to accomplish geopolitical objectives. On the other hand, Ukraine’s economy is rather fragile so it has been rumored that Kiev could even reconsider its foreign policy in exchange for financial assistance.
   
  It has to be taken into account that China possesses the world’s largest reserves of foreign currency so Beijing is not entirely unprotected. However, as a result of the global crisis, the Chinese need to avoid potentially destabilizing political consequences derived from unemployment and overall economic slowdown. Some prominent members of Obama’s administration intend to at least decrease the American trade deficit by pressuring Beijing to revaluate the Chinese yuan but China obviously is unwilling to artificially restrict its exports. This disagreement must not be underestimated because it could fuel dangerous tensions between both great powers.
   
  It is yet too early to accurately predict the full consequences of the world financial crisis. Nevertheless, it seems that it will spark some unforeseen geopolitical readjustments. The financial system is approaching a most critical turning point and so is the international balance of power.
   
• GEAB forecasts geopolitical dislocation by Q4 2009 (see earlier post). So 2009 will be a pretty interesting year. Which countries will rise up? Which will collapse? As the Chinese say: May you live in interesting times!? Let’s hope it does not get too interesting, with war breaking out all over the globe.

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Rick Santelli – Time for a Chicago Tea Party !

• Rick Santelli calling for a Chicago Tea Party in July ! He’s the Man !!!
• The filth and dirty trash in Congress are leading the nation to hell! Time for more to speak up and say we will not go quietly into the night ! “How about we all stop paying our mortgages! It’s a moral hazard !“

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Hospice for US$ – Launch for Gold !

• Jim Willie, of the Hat Trick Letter, is always politically incorrect, but fascinatingly true. His analysis gives insights you can find no where else. His writing style is quick pace and full of life and deep meaning. He comments in Russia’s Post U.S. New World Order Blueprint :
    
  US Dollar Essentially Dead
  The USDollar is essentially dead, the Davos Forum its funeral wake. It is enjoying a physical erection in the medical morgue, a rise in a death dance ceremony. US leaders refuse to accept the reality. They desperately need its continuation for assistance in funding the USGovt monstrous deficits. Western leaders struggle to admit the reality. Russian leaders, Chinese leaders, and Arab leaders (more quietly) openly admit the reality. Read the billboards, as the Davos Forum offered an entire row of them to observe. THE BEST STRESS METER IS NOW GOLD.Notice how gold rose all through the Davos Forum gathering. Nothing was solved. The Putin Blueprint for the ‘Post-US World’ shook up the currency markets, as gold reacted. The gold price is breaking out in all major currencies, except in USDollar terms. It just hit a new euro high.
   
  A cherished contact with deep global experience had some very strong words about Davos and the Putin Blueprint. He made additional comments about the Wen trip across major European capitals. In an important message, he said, “Read in between the lines of Putin’s speech and you find all the hints you want. The Chinese and Russians are burying the US alive. The Japanese, Germans, and Gulf States keep a very low profile for the moment. The decisions have been made: wait for 2010 . They will use the unfolding chaos to introduce the new currency basket and trade rules…
    
  There is a brand new system being designed that will borrow from the past and apply 21st century tools for barter / counter trade / excess capacity etc. An Exchange Platform will cut out the banks altogether … [Chinese Premier] Wen delivered his speech in Davos and went straight to Berlin where they put the final touch on the new world currency basket , sponsored by Berlin-Moscow-Beijing-Tokyo-Riyadh. Moscow and Berlin already have a massive counter trade / barter trade agreement in place, and Beijing was eager to joint that platform as well.” The new global currencies are planned for launch in January 2010. They will be launched amidst growing chaos. Events up to that time will be tumultuous.
    
  Very Bullish Gold Chart
  (See chart at top of post) The gold price has completed an important U-shaped reversal. Its low of 710 and top at 980 indicate a target of 1250 next. Notice the crossovers of the crucial moving average series. Both the 50-day MA and 100-day MA have run above the 200-day MA, very bullish. Technical chart traders use them to direct traffic flow. The cyclicals are aligned with strength. The fundamentals could not be better for gold than at any time in a few decades. All major governments are ruining their currencies in a desperate attempt to avoid economic collapse after bank system insolvency has rendered their nations hostage to dangerous accommodative monetary policies. All major currencies are now at risk simultaneously. The gold price breakout over 1000 again could come when the Dow Jones Industrial Index and the S&P500 index each breach critical support. They have been dancing at that support for days. The USEconomic field has become a swamp, and it is sinking. It should sink the US stock market.
   
  The USDollar should not be the true focus of attention. Paradoxically, as it dies a horrible death, its reserve currency status ensures it might be last to crumble. All other currencies are at risk, except perhaps the Japanese yen. The focus of attention should be directed to gold & silver. The pundits, anchors, and supposed experts believe that the rise in the gold price means that price inflation is an imminent but hidden threat. THEY ARE SO WRONG. The threat is of a collapsed global financial foundation, complete with rising chaos from no current viable alternative, as the Untied States finds itself tossed into a dungeon. The process is slow, but the pace is accelerating. The signpost in the dungeon is marked ‘Third World’ with full shame. The charges will go without trial, as the marketplace is brutal. But bank ruin, institutional corruption, exported bond fraud, permission of counterfeit rings, protection of crime syndicates, and abused global reserve currency custodial responsibility lie at the core. Most scrutiny of charges will be conducted much later, when too late, in an examination of the wreckage.
   
• America is heading towards 3rd world country status.
   
  The broken bank system, crippled households, endless housing decline, corporations in retreat, and federal debt that cannot be financed by foreign creditors, these work together to guarantee that the Untied States does not just enter the Third World, but that the US will be thrust quickly into the Third World . Imagine a criminal in old colonial times being thrown down a staircase into a dirty dank dungeon, landing with many bruises, a bloody mouth, and perhaps a broken arm. The new US leadership is already making huge errors. Their lack of integrity is for now a well-kept secret, since the camp they emerged from is foul. Third World nations are not known for integrity or sound judgment. At a time when the US, UK, and European banks face dire need for bailouts and rescues, one might consider the specter of entire nations requiring bailouts, not just their banks. Iceland gave notice. Watch in horror as the risk rises for failures of states. 
    …… 
  The reality is that foreign creditors have already announced to key USCongressional members that they will not be purchasing any USTreasury Bonds for several months. Whether active boycott or inability from lack of trade surplus, it does not matter. Dire straits come to the US shores very soon.

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Major Crash Alert – Dow Jones (DJIA) to Plunge to 4500 !!

• We are at the point where the DJIA will likely crash and many people will get burnt. My gut feeling and simple chart analysis tells me we are close to a movement down to 5800 region and thereafter a movement down to 4800-5000 region. So be prepared for a major plunge in the DJIA in the coming weeks.
   
• Mike Paulenoff is of similar opinion, Dow Jones Monthly Stock Chart Points to 4500 Crash  :
   
  Not much commentary is needed when viewing the monthly chart of the Dow. We only need an active imagination. All I will say here is that I have projections from this monthly chart to 6800-6500 and then to 4500. Since this is a monthly chart, however, we need to realize that the timeframe for such a move, and the volatility that could emerge between 8500 and 7500, add some definite challenges to capitalizing from such a move in trading the Dow Diamonds Trust (NYSE: DIA) or the ultra long or short Dow ETF instruments. 
   
  

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Zbigniew Brzezinski- Massive Unemployment & Increasing Risk of Riots !

• Dr. Zbigniew Brzezinski former National Security Chief of Carter administration, was on Morning Joe (17 Feb 08)  to discuss about what’s wrong with the economy and his ideas for turning it around. He sounds a warning about massive unemployment and class warfare. A backlash is coming against all these banksters that have ripped off the country.
   
• The breakdown of American society is around the corner. Think Iceland, Lithuania, Latvia and perestroika Poland in the late 80s early 90s. 
   
• Admiral Michael Mullen, chairman of the Joint Chiefs highlighted his concerns recently. Tom Philpott reports:
    
  Though he’s a warrior, not an economist, Adm. Michael Mullen, chairman of the Joint Chiefs of Staff, ranks the financial crisis as a higher priority and greater risk to security than current wars in Iraq and Afghanistan.
    
  “The scope of it is, to me, mind-boggling,” said Mullen in an interview, hours before President Obama made his first visit to the Pentagon as commander in chief.
   
  Mullen said it is a testament to the nation’s strength and to the severity of the fiscal crisis that Congress last fall swiftly approved a relief fund of $700 billion to bail out banks and thaw frozen credit markets. The amount nearly matched last year’s defense budget, Mullen noted, contrasting the speed of that action to the long, detailed process of setting military requirements, debating programs and passing a defense budget.
   
  That’s “not even to speak of discussions, literally today, of a stimulus package that’s going to be another eight or nine hundred billion. I think that’s going to affect all of us much more than personally,” Mullen said. “I’ve been concerned and remain concerned about the impact of this on security,” he said. “It’s a global crisis. And as that impacts security issues, or feeds greater instability, I think it will impact on our national security in ways that we quite haven’t figured out yet”
   

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Britain on the Brink of Collapse!

• Standard and Poor (S&P) has warned Britain that its ‘AAA’ rating may be cut! This will be calamitous, interest rates will go up and fund managers will sell its debt. Some funds have policies that bar them from buying non ‘AAA’ sovereign debt. This warning is coming at a time when Britain needs to borrow more money.
   
• Interest rate is already close to zero. The Bank of England is seriously pushing for Quantitative Easing as options run out. Printing money out of thin air !  

“I care not what puppet is placed on the throne of England to rule the Empire, … The man that controls Britain’s money supply controls the British Empire. And I control the money supply.”
- Baron Nathan Mayer Rothschild

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Eastern Europe Contagion Fear ! Ukraine Crumbling !

• As mentioned in my past 2 posts :
   
  Next Wave of Banking Crisis to come from Eastern Europe
  Eastern Europe Economic Collapse & Looming Debt Defaults
   
  The panic is getting palpable for EU member nations.
   
• The fear is growing that any day now, the falling dominoes of Eastern European countries will cascade into a rushing tsunami and collapse Western Europe!
   
• The Telegraph reports in EU mulls action as Ukraine crumble triggers contagion fears for Europe:
    
  Europe’s institutions are scrambling for ways to prevent financial contagion from Ukraine and the rest of Eastern Europe from setting off a full-blown banking crisis in Austria, with risks of systemic contagion across the eurozone. 
   
  Joaquin Almunia, EU’s economic commissioner, said Brussels is ready to co-ordinate a pan-EU response to contain the crisis before matters get out of hand.
   
  “I share with the Austrian authorities their concern about the situation of these economies. Everybody shares their concern about the risks involved. We are extremely concerned about the difficulties with the Ukrainian government,” he said.
   
  West European banks have lent roughly $1.6 trillion (£1.13 trillion) to the region, led by Austrian, Swedish, Italian, Greek, Belgian, and Swiss banks. Almost $400bn must be rolled over this year in hostile markets.
   
  Lithuania’s president Andrius Kubilius echoed the warnings on Wednesday. “We are worried about what can happen in Ukraine and Russia. The collapse of one of these markets would have a very negative impact. It would be good to see a more co-ordinated approach,” he told the Financial Times.
   
  Ukraine’s travails appear to be snowballing out of control after the central bank said the economy contracted 20pc in January year-on-year, with a dramatic 34pc slide in industrial production. Valery Lytvytsky, the bank’s top adviser, said the collapse is the worst in recorded Ukrainian history, exceeding the darkest days after the Bolshevik revolution.
   
  The currency has fallen 40pc since the crisis began, a crippling blow to companies with large debts in dollars or euros. Three banks have failed.
   
  Credit default swaps measuring risk on Ukraine’s state debt rose to panic levels of 3,500 on rumours of imminent default following the refusal of the International Monetary Fund to disburse the second tranche of its $16.4bn rescue package. The IMF said the government had failed to rein in public spending as agreed.
   
  Premier Yulia Tymoshenko insisted there was no danger of default. “I would like to tell the whole country that the state is paying all its credits,” she said.
    
  She appeared unrepentant over the loss of her finance minister, Viktor Pynzenyk, who resigned this week saying he was no longer willing to serve as a political pawn. “Not all government officials are capable of working in difficult circumstances. The weakest ones abandon the battlefield,” she said, in comments bordering on political farce.
   
  Neil Shearing from Capital Economics said Eastern Europe as a whole is likely to contract by 5pc to 10pc this year. “It’s pretty grim and it creates the risk of a retreat into populism,” he said.
   
  The political risks in Ukraine are huge. The country has a large Russian minority, much of it living in oblasts near Russia’s frontier, creating an open door for the Kremlin to intervene if the crisis leads to civil disorder.
   
  Lars Christensen from Danske Bank said ex-Soviet bloc had been a casualty of the blanket extension of guarantees to banks across Western Europe. “East Europe’s governments are not strong enough to offer such guarantees for their own banks. This has increased relative risk.” he said.
   
  The European Bank for Reconstruction and Development said it is mulling $500m in aid to boost Ukraine’s banks, but first the country has to restore credibility.
   
  “We see an urgent need for conducive, comprehensive actions by the Ukrainian authorities,” EBRD chief Thomas Mirow said. 
   
• How bad is this unfolding crisis? Very very bad ! Nightmarish ! Ukraine is but 1 domino. There are alot more dominoes that are set to fall. You can put out 1 fire but can you put out tens of firestorms in Eastern Europe? I am not optimistic. This is a danger alarm going off! The world is a few weeks (maybe even days) away from catastrophe. Wakey ! Wakey !!

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G7 sets sights on New World Economic Order

“Economic crises have been produced by us for the goyim by no other means than the withdrawal of money from circulation.”  - Protocols of Zion – 20

• I am of the opinion that t the current crisis is created by the Illuminati elite to drive the world towards their 1 World Government fascist police state. The bells are chiming louder for this New World Order, New World Financial Order, New World Economic Order…
   
• This plan has been in place for a long time. Consider the Protocols of Zion, a Satanic manual delineating the plan for global conquest. It reads very much like what is happening in the world now.
   
• Now we hear more noises from our leaders pushing for this New World Order. G7 sets sights on new world economic order :
   
  The world’s richest nations called Saturday for urgent reform of global finance to save the world from the economic devastation that is dragging more and more countries into recession.
   
  Italy’s Finance Minister called for a “new world economic order” as he wrapped up the crisis meeting of finance leaders from the Group of Seven leading economies over which he presided here.
   
  In a joint declaration, the G7 called for “urgent reforms” of the international financial system. Tremonti said a so-called set of “legal standards” discussed in Rome would be presented at a meeting of 20 key advanced and emerging economies (G20) in London in April and a summit of the Group of Eight (G8) world powers in July.
   
  “A new world economic order might seem rhetorical,” he told reporters. “But it is a true goal we should be aiming towards… today right here in Rome we’ve embarked on a very significant journey, both technical and ethical.”
   
  The G7 delegates in a joint statement vowed to avoid protectionism as they seek to stabilise the tottering world economy and financial markets and said stabilisation of the world economy was their “highest priority.”
   
  The global crisis “has highlighted fundamental weaknesses in the international financial system and that urgent reforms are needed,” the statement said.
   
  US Treasury Secretary Timothy Geithner vowed that his country, the biggest economy in the world and the source of much of the financial drama in recent months, would work with other nations for a consensus on reforms.
   
  “We need to begin the process of comprehensive reform of our financial system and the international financial system, so the world never again faces a crisis this severe,” Geithner said after the talks.
   
  Dominique Strauss-Kahn, head of the International Monetary Fund (IMF) — the body coming to the rescue of some crisis-hit countries — said restructuring banks damaged by the credit crunch was the main problem facing governments.
   
• The Illuminati’s philosophy is : Order out of Chaos. They create the crisis – chaos and when the world react in horror and fear, they come out with their pre-planned solution. So they end up looking like saviors. But in reality they are the cause of the world’s problem. To understand more on this, you may want to read Paul Joseph Watson’s similarly titled book : Order Out Of Chaos .

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Lindsey Williams – Global Bankruptcies and One World Government

Part    4      ,    Part    5     ,     Part    6  

• Pastor Lindsey Williams on the Alex Jones show (18 Feb). He gives us his latest update on what the Illuminati elite is planning for the world for the next 1-2 years.
   
• Pastor Williams :
   
  - Dubai will be a ghost town
  - Oil prices will hover at or below US$50/barrel for the next 1-1.5 years. US states’ tax revenue have plunged 75% because of the drop in oil price from US$147 to under US$40/barrel.
  - Middle East oil producing nations are falling into bankruptcies.
  - This crisis created by the Satanic Illuminati elite will not just affect America and the Middle East. It is a planned global bankruptcy.
  - Eastern Europe is in deep trouble and falling into bankruptcy.
  - Russia will be hit hard but will rise from the ashes as a much greater power.
  - America will collapse into chaos, hyper-inflation, food shortages, riots …. and will take many years to recover from this crisis.
  - When the USD collapses, American’s will be taking a wheel barrow of USD to buy a loaf of bread. Americans will beg the ruling elite for a new currency. The Illuminati elite already has this new currency planned and awaiting implementation.
  - We will see a new global economic and financial order. The plan is to bankrupt the entire world and buy up assets on the cheap. The Illuminati is driving the world towards a 1 World Government ruled by them.
   
• Will we see global enslavement and ’666′ in our life time? It is getting alot closer.

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Next Wave of Banking Crisis to come from Eastern Europe

• As mentioned in my earlier post: Eastern Europe Economic Collapse & Looming Debt Defaults , the world is in a very precarious situation. Any time now, Eastern European countries will collapse one by one. The result will cause a cascading domino effect throughout Western Europe. Western European countries will then collapse and go into bankruptcies. This will cascade throughout the globe into rolling bankruptcies across all region and countries.
   
• This financial tsunami is about to hit the entire world ! Western banks are already insolvent. With the default of Eastern European countries, the entire world will go into a terrifying meltdown!
   
• F. William Engdahl reports :
   
  European banks face an entirely new wave of losses in coming months not yet calculated in any government bank rescue aid to date. Unlike the losses of US banks which derive initially from their exposures to low-quality sub-prime real estate and other securitized lending, the problems of western European banks, most especially in Austria, Sweden and perhaps Switzerland arise from the massive volumes of loans they made during the 2002-2007 period of extreme low international interest rates to clients in eastern European countries.
   
  The problems in Eastern Europe which are just now emerging with full force are, if you will, an indirect consequence of the libertine monetary policies of the Greenspan Fed from 2002 until 2006, the period where Wall Street’s asset backed securitization Ponzi Scheme took off.
   
  The riskiness of these eastern European loans is now coming to light as the global economic recession in both east and west Europe is forcing western banks to pull back, refusing to renew loans or ‘rollover’ the credits, leaving thousands of borrowers with unpayable loan debts. The dimension of the eastern European emerging loan crisis pales anything yet realized. It will force a radical new look at the entire question of bank nationalizations in coming weeks regardless what nice hopes politicians in any party entertain.
   
  Moody’s Rating Service has just announced it ‘might’ downgrade a number of western European banks with large exposures to eastern Europe. On the report, the Euro fell to 2 and a half month lows against the dollar.
   
  The Moodys report mentioned especially banks in eastern Europe owned by western European banks including specifically Raiffeisen Zenetralbank Oesterreich and Sweden’s Swedbank. The public Moody’s warning will now force western banks with subsidiaries in eastern Europe to dramatically tighten lending conditions in the east at just the time the opposite is needed to keep economic growth from collapsing and thereby setting off chair-reaction loan defaults. The western banks are caught in a devil’s circle.
   
  According to my well-informed City of London sources, the new concerns over bank exposures to eastern Europe will define the next wave of the global financial crisis, one they believe could be even more devastating than the US sub-prime securitization collapse which triggered the entire crisis of confidence. 
   
  As a result of the Moody’s warning, west European banks will now likely be selective in supporting their subsidiaries. Moody’s report noted that ‘banks in countries that are associated with higher systemic risks might face reduced support.’ Western European governments may also establish rules to ensure banks receiving state support are forbidden to aid foreign subsidiaries. This is already the case with Greek banks and the Greek Government. The result is to make a bad situation far worse.
   
  The size of risks are staggering
  The amount of loans potentially at risk involve mostly Italian, Austrian, Swiss, Swedish and it is believed German banks. Once the countries of the former Soviet Union and Warsaw Pact declared independence in the early 1990’s west European banks rushed in to buy on the cheap the major banks in most of the newly independent east countries. As US interest rate cuts after the stock crisis in 2002  pushed interest rates around the world to new lows, easy credit led to higher risk lending across borders in foreign currencies. In countries such as Hungary Swiss and Austrian banks promoted home mortgage loans denominated in Swiss Franc where interest rates were significantly lower. The only risk at the time was if the Hungarian currency were to devalue, forcing homeowners in Hungary to repay sometimes double the monthly amount in Swiss Francs. That is what has happened over the past 18 months as western banks and funds have dramatically reduced their speculative investments in eastern countries to repatriate capital back home where the mother banks had serious problems caused by the US banking catastrophe. In the case of the Polish Zloty, the currency has dropped in recent months by 50%. The volume of mortgages existing in foreign currencies in Poland is not known but London estimates are that it could be huge.
   
  In the case of Austrian banks, the country faces a rerun of the 1931 Vienna Creditanstalt crisis which in chain-reaction spread to the German banks and brought Continental Europe into the economic crisis of 1931-33. At the recent EU Finance Ministers’ meeting in Brussels, Austrian Finance Minister Josef Pröll reportedly pleaded with his colleagues to come up with a €150 billion rescue package for the banks in eastern Europe. Austrian banks alone have lent €230 billion there, equivalent to 70% of Austria’s GDP. Austria’s largest bank, Bank Austria, which in turn is owned by Italy’s Unicredito along with the German HypoVereinsbank, faces what the Vienna press calls a ‘monetary Stalingrad’ over its loan exposure in the east. In a bitter historic irony, Bank Austria bought the Vienna Creditanstalt in recent years in its wave of mergers.
   
  According to estimates published in the Viennafinancial press, were only 10% of the Austrian loans in the east to default in coming months, it ‘would lead to the collapse of the Austrian financial system.’ The EU’s European Bank for Reconstruction and Development (EBRD) in London estimates that bad debts in the east will exceed 10% and ‘may reach 20%.’
    
  German Finance Minister Peer Steinbrück reportedly flatly rejected any EU rescue funds for the east, claiming it was not Germany’s problem. He may soon regret that as the crisis spreads to German banks and results in far greater costs to German taxpayers. One of the most striking aspects of the present crisis which first erupted in summer of 2007 is the increasingly evident incompetence of leading finance ministers and central bankers from Washington to Brussels to Paris and Frankfurt and Berlin to deal resolutely with the crisis.
   
  The London office of US investment bank, Morgan Stanley has issued a report estimating the total of western European bank lending to the east. According to the report Eastern Europe has borrowed a total of more than $1.7 TRILLION abroad from mainly west European banks. Much of that has been short-term borrowing of less than a year. In 2009 eastern countries must repay or roll-over (renew) some $400 billion, fully 33% of the region’s total GDP. As global recession deepens the chances of that are fading by the day. Now western banks are refusing to roll-over such loans, under political pressure and financial pressure back home. The credit window in the east, only two years ago the source of booming profits for the west European banks, have now slammed shut.
   
  Even Russia which a year ago had more than $600 billion foreign exchange reserves, is in a difficult situation. Russian large companies must repay or roll-over $500 billion this year. Russia has bled 36pc of its foreign reserves since August defending the rouble.
    
  In Poland, 60% of all mortgages are in Swiss francs. The Polish zloty has just fallen in half against the Swiss franc. Hungary, the Balkans, the Baltics, and Ukraine are all suffering variants of this same story. As an act of collective folly – by lenders and borrowers – it matches America’s sub-prime debacle. This crisis, for European banks comes atop their losses in US real estate securities. In is the next wave of the crisis that is about to hit. Almost all East bloc debts are owed to West Europe, especially Austrian, Swedish, Greek, Italian, and Belgian banks. Europeans account for an astonishing 74% of the entire $4.9 trillion portfolio of loans to emerging markets. They are five times more exposed to this latest crisis than American or Japanese banks, and they are 50pc more leveraged according to the IMF.
   
  Whether it takes months, or just weeks, Europe’s financial system now faces a major test and the situation is complicated by the fact that when the rules of the European Central Bank were finalized in the late 1990’s, governments could not agree to surrender total national central banking powers to the new ECB. As a result, in this first test of the ECB in a systemic crisis, the bank is unable to act in the same manner as say the Federal Reserve and fulfill the role of lender of last resort or to flood the markets with emergency stimulus.
   
  By some estimates the European Central Bank already needs to cut rates to zero and then purchase bonds and Pfandbriefe on a huge scale. It is constrained by geopolitics – a German-Dutch veto – and the Maastricht Treaty. The EBRD estimates that eastern Europe needs at least €400bn in help to cover loans and prop up the credit system. 
   
  Europe‘s governments are making matters worse. Some are pressuring their banks to pull back, undercutting subsidiaries in East Europe. Athens has ordered Greek banks to pull out of the Balkans. The sums needed are beyond the limits of the IMF, which has already bailed out Hungary, Ukraine, Latvia, Belarus, Iceland, and Pakistan – and Turkey next – and is fast exhausting its own €155bn reserve, forcing it to sell its gold reserves to raise cash.
   
  The recent IMF $16bn rescue of Ukrainehas unravelled. The country – facing a 12pc contraction in GDP after the collapse of steel prices – is going towards default, leaving Unicredit, Raffeisen and ING facing disaster. Latvia’s central bank governor has declared his economy “clinically dead” after it shrank 10.5pc in the fourth quarter. Protesters have smashed the treasury and stormed parliament.
    
  Perhaps most alarming is that the EU institutions don’t have any framework for dealing with this. The day they decide not to save one of these one countries will be the trigger for a massive crisis with contagion spreading into the EU. 
   
  Clear at present is that for small-minded political reasons, Berlin is not going to rescue Ireland, Spain, Greece and Portugal as the collapse of their credit bubbles leads to rising defaults, or rescue Italy by accepting plans for EU ‘union bonds’ should the debt markets boycott Italy’s exploding public debt, hitting 112% of GDP next year, just revised up from 101%.
   
• How is the EU going to dig themselves out of this hole? I doubt it can be done. The EU may disintegrate and a new EU rise out of its ashes. Some are suggesting that Germany and France take the lead role and bailout not just banks but entire countries! Bloomberg reports Germany, France May Face Bailout of Euro Nations :
    
  Germany and France may be forced to contemplate the bailout of entire nations rather than just individual banks as European government budgets buckle under the weight of recession.
   
  German Finance Minister Peer Steinbrueck became the first senior policy maker to broach the topic earlier this week, saying some of the 16 euro nations are “getting into difficulties” and may need help. He went further today, saying Germany would show its “ability to act.” French officials are also concerned about market tensions as the cost of insuring Irish, Greek and Spanish debt against default rises to records and bond spreads widen.
   
  The nightmare for Angela Merkel and Nicolas Sarkozy is that widening deficits will prompt investors to shun the debt of some countries, sparking a region-wide crisis. While few investors are yet forecasting any defaults, the mere risk of it may prompt the bloc’s two richest economies to ignore the European Central Bank and announce their willingness to come to the rescue.
   
  “When push comes to shove Germany, France, the larger players will bail out those smaller peripheral players,” said Alex Allen, chief investment officer of Eddington Capital Management. “You can’t let one part of the system fail because it leads to failure of the whole system.”
   
  Allen’s betting that the risk at least one nation will leave the bloc is higher than the market currently expects.Swelling Deficits
  European deficits have ballooned as governments from Berlin to Dublin committed more than 1.2 trillion euros ($1.5 trillion) to save their banking systems from collapse. The European Commission urged countries to bring their deficits back in line today as EU Monetary Affairs Commissioner Joaquin Almunia said the best way Greece and Ireland could deal with market pressure was by strengthening their finances.
   
  The European Union’s executive arm forecasts a deficit of 11 percent in Ireland, 6.2 percent in Spain and 4.6 percent in Portugal this year, compared with an average gap for the euro region of less than 1 percent in 2007.
    
  European officials have already expressed concern that their bond market could potentially face a crisis similar to that unleashed by the collapse of Lehman Brothers Holdings Inc.in September. ECB board member Lorenzo Bini Smaghi said Feb. 12 there’s a “risk that the mistrust that there is today in financial markets” is “transformed into mistrust in states.”
   
  Bond Spreads
  “I would be very reluctant to say: ‘O.K., let Ireland or Greece default, the market will sort it out, punish them for their irresponsibility of the past,’” said Thomas Mayer, co-head of global economics at Deutsche Bank AG in London. “They tried it with Lehman and realized that was not a good idea.”
   
  The gap between the interest rates Greece, Portugal and Spain must pay investors to borrow for 10 years and the rate charged to Germany rose yesterday to the widest since before they adopted the euro and credit-default swaps on Ireland hit a record. The differential between Austrian and German yields widened to a record today as concern intensified about Austria’s exposure to eastern European banks.
   
  “Austria is on the hook for so much money that essentially if they don’t get paid by eastern Europe they’ll go bust,” Marc Faber, managing director of Marc Faber Ltd., said in a Bloomberg Television interview. “So the European Union basically has to help Austria one way or the other.”
   
  Greek credit-default swaps, at 270 points on Feb. 16, show a 4.5 percent chance that the country will default in the next 12 months, according to ING Bank NV. 
    
• The problem is way beyond the combined ability and resources of France and Germany. What we will likely see is a disintegration of the current EU structure and organization followed by the disappearance of smaller states/countries. These smaller countries like Iceland, Ireland… will have to merge with a much bigger European country to survive. So nationalism and separatism will give way to economic and survival reality. The thrust will be a 1 common European destiny and entity. A re-formed EU, the new revived Roman empire, will re-appear later much stronger and less fractious (hopefully).
   
• Credit Default Swaps (CDS) of sovereign debts are reflecting the increasing risk of debt defaults by countries across Europe. If you think countries cannot go bust: Think Again ! It is coming!

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California – Schwarzenegger sends out 10,000 layoff notices.

Unemployed construction workers demonstrate in Los Angeles, California.

• What is happening in California is about to be repeated across practically all states in America. As many as 46 states are going bust. No recovery is in sight for the next few years. The budget deficits caused by the collapsing economy is going to force states to cut back on services, entitlements and even increase layoffs. This will add greatly to the rising number of unemployed in the private sector. See my earlier posts :
   
  Who’s the Girlie Man Now? Governator?
  California Is Broke – Halts $3.5B in Payment, 46 States Near Bankruptcy !
  California Economy Near Collapse – Pension Funds Close To Bankruptcy!
   
• CNN reports :
   
  California Gov. Arnold Schwarzenegger issued 10,000 layoff notices Tuesday, affecting a wide spectrum of state employees and aimed at dealing with the state’s budget crisis, a spokesman said.
     
  California lawmakers resumed negotiations late Tuesday after the longest legislative session in state history over the weekend resulted in a budget impasse.
   
  “Every state employee who receives a salary under the general fund is affected, and the governor began issuing layoff notices for the least-senior employees in various agencies,” said Aaron McLear, the governor’s press secretary.
   
  The layoffs would begin on July 1, which marks the fiscal year, and includes jobs in the Departments of Health and Human Services and Corrections, among others, McLear said. Another 10,000 layoff notices could be issued on Wednesday in other departments, he said.
   
  The governor, facing a $42 billion deficit, was prompted to move on the layoff notices after lawmakers missed a Monday night deadline to reach a budget deal, McLear told CNN late Monday.
   
  The Republican governor, who declared a fiscal emergency in December, has butted heads for months with the Democratic majority over alleviating the state’s $11.2 billion revenue shortfall this fiscal year alone. The cuts would save California $750 million for the year. The state’s $42 billion deficit is for the current and next fiscal years.
   
  Schwarzenegger warned lawmakers about the cuts last week, urging them to approve the latest budget proposal. However, voting was stalled over a 30-hour weekend session as the legislature mulled over 26 pieces of legislation that make up the budget package. 
   
  The State Assembly in Sacramento postponed action until Tuesday. A single Republican vote was holding the budget from passing with a two-thirds majority, McLear said. The cuts wouldn’t begin until the start of the fiscal year on July 1, starting with employees with the least seniority.
   
  Last month, the state began delaying $3.5 billion in payments to taxpayers, contractors, counties and social service agencies so the state could continue funding schools and making debt payments. 
   
  On Tuesday, Kansas managed to work through its budget issues, which had forced the state to suspend tax refunds and caused concern it would not be able to to pay state employees.
  But Gov. Kathleen Sebelius ended the budget impasse by signing a bill to balance the budget, according to CNN affiliate KMBC-TV. 
     
• Americans must wake up to the reality that the country is bankrupt at almost every level. Otherwise, they will not prepare themselves for the worse that is to come: riots, social unrest, street violence, hyper-inflation, rising lawlessness, secession, food shortages, price controls….. It ain’t pretty brother !

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America – Worst is Yet to Come!

Source : Aaron Task

• There’s no question the American consumer is hurting in the face of a burst housing bubble, financial market meltdown and rising unemployment.
   
• But “the worst is yet to come,” according to Howard Davidowitz, chairman of Davidowitz & Associates, who believes American’s standard of living is undergoing a “permanent change” – and not for the better as a result of:
  • An $8 trillion negative wealth effect from declining home values.
  • A $10 trillion negative wealth effect from weakened capital markets.
  • A $14 trillion consumer debt load amid “exploding unemployment”, leading to “exploding bankruptcies.”
      
• “The average American used to be able to borrow to buy a home, send their kids to a good school [and] buy a car,” Davidowitz says. “A lot of that is gone.”
     
• Going forward, the veteran retail industry consultant foresees higher savings rate and people trading down in both the goods and services they buy – as well as their aspirations.
   
• The end of rampant consumerism is ultimately a good thing, he says, but the unraveling of an economy built on debt-fueled spending will be painful for years to come.

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