Guggenheim CIO: Europe on Brink of ‘Major Financial Collapse’!
- Europe on Brink of ‘Major Financial Collapse’: Guggenheim CIO
By: Gennine Kelly, http://www.cnbc.com/
Europe is a “train wreck” and on the “brink of a major financial crisis,” Scott Minerd, CIO of the fixed-income firm Guggenheim Partners, told CNBC Tuesday. “The way Europe is operating right now, it’s what I called recently ‘cognitive dissonance,’” Minerd said, or “basically doing the same thing thinking they’re going to get a different outcome.”
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“They keep throwing more and more liquidity at it thinking it’s going to get better and it’s not,” he added. Europe fails to recognize that it has a “structural problem, not a liquidity problem.” People will “flee the euro” unless they find a way to bifurcate the euro in some way where strong countries are in the euro only and the weak countries are out, Minerd explained, adding, “To be honest with you, I don’t see the mechanism to do that.”
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“As the capital is flooding out of Europe, which we’re starting to see now, the first place it’s going to go is to the safe havens—[U.S.] Treasurys, which [the market] perceives to be safe, and it’ll chase gold,” he added.
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Stop The Budget Lies: There Are NO Cuts – House Passes Bill To INCREASE Spending By $7 Trillion Over The Next 10 Years!
- The American MSM presents the whole debt ceiling charade as a great victory for America and the world. This is total BS! They tell you that both Houses of Congress are working very hard to reduce the budget deficit! This is total BS. It is fraudulent. They simply reduce their planned expenditure increases and count this reduction as deficit reduction. If you were to do this in the private sector, you will be sued for fraud and thrown in jail for mis-representation.
- - The accounting methodology used by the US government is fraudulent. The politician snakes tell you that the budget deficit is around US$1.3 – 1.5T. If the US government were to use GAAP, the deficit is really US$4-5T !
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To quote Williamss, who actually keeps track of the US economy as if it were a GAAP audited corporation: “The annual deficit is running $4-5 trillion a year, that includes the Y/Y change in the NPV of unfunded liabilities…
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Of course, the data in the following charts is from cash budget accounting and not GAAP accounting which would make the number considerably higher. For example, in FY 2010, the US cash budget deficit was reported at $1.294 trillion whereas the US Treasury GAAP deficit including all liabilities probably exceeded $4-5 trillion. Therefore, take the chart with a grain of salt.
- - 13 Reasons Why The U.S. Is Now OFFICIALLY BANKRUPT
by http://dailybail.com/
ATTENTION IDIOTS IN THE MAINSTREAM MEDIA – Stop The Budget Lies – There Are NO Cuts – House Passes Bill To INCREASE Spending By $7 Trillion Over The Next 10 Years
Lies, Damn Lies And Government Budgets
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I am so pissed off by the misreporting I could spit Ken Lewis hairballs.
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1) Corporate journalists and financial pundits know NOTHING about budgets.2) The Boehner led House passed legislation this evening that INCREASES spending by $7 TRILLION over the next ten years versus a baseline budget that would have increased spending by $9.5 TRILLION over the same period.
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3) CBO said today that LESS than 2% of the decrease in the GROWTH of spending will come before the 2012 elections. The remainder come after the election.
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4) Defense and war machine spending will grow at 3% per year instead of 4% per year.
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5) This was nothing but an agreement to agree at a later date to look for reductions in planned spending GROWTH.
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6) A Super Congress will decide on a mix of tax increases and reductions in planned spending growth to meet the targets at a later date.
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7) No one in Congress even considered Ron Paul’s simple plan, now endorsed by Time Magazine as well as liberal economist Dean Baker, to wipe out $1.6 trillion in fake debt owned by the Federal Reserve. Debt that we owe to ourselves, that is entirely legal to wipe away.
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8.) CBO says under this plan, the national debt will INCREASE from $14.4 TRILLION currently to more than $25 TRILLION over the next 10 years.
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9) The assumption for #8 above assumes the economy grows at 3% per year over the next 10 years, and that Treasury interest rates stay at historic lows. When rates increase, and bet your life that they will, interest on the debt will increase and so will annual deficits, leading to a national debt much higher than the $25 TRILLION that CBO estimates.
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10) Regarding Treasury rates and interest on the debt, get educated about a concept called ‘DURATION RISK.’ Turbo Geithner and his MENSA bed-fellows at Treasury have chosen to finance the great majority of recent and future borrowing in short-term bills, which means that they have to be rolled over frequently. This is perhaps the least-discussed and most dangerous issue related to Treasury debt.
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11) If S&P or Moody’s has the sack to downgrade the U.S. AAA rating, a Sovereign CDS default will be triggered and Global Financial Armageddon will be unleashed.
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12) The bill passed by Boehner tonight was the BEST they could do after 6 weeks of fighting.
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13) Due to #12, the United States is officially f#####.
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Thank you and good night.
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Stephen Roach: China Loses Trust in US Economic Stewardship!
- The Chinese are in trouble and they know it. How do they get rid of their US$1.5-2T of USD denominated reserves? What market in the world can absorb such a large amount of money? The answer is there is none except for the US treasury market. The Chinese are caught in a web of their own making. They have maintain an exchange rate which is great for their export competitiveness and employment level but they have accumulated this great gob of USD. And these trillions of dollars may just become worthless overnight. When they start to dump the USD, it is Armageddon for the world and they know it!
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China loses trust in US economic stewardship
By Stephen S. Roach, http://gulfnews.com/
Asian giant to say no to dollar dominance!
New Haven: The Chinese have long admired America’s economic dynamism. But they have lost confidence in America’s government and its dysfunctional economic stewardship. That message came through loud and clear in my recent travels to Beijing, Shanghai, Chongqing, and Hong Kong.
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Coming so shortly on the heels of the subprime crisis, the debate over the debt ceiling and the budget deficit is the last straw. Senior Chinese officials are appalled at how the United States allows politics to trump financial stability. One high-ranking policymaker noted in mid-July, “This is truly shocking… We understand politics, but your government’s continued recklessness is astonishing.”
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China is no innocent bystander in America’s race to the abyss. In the aftermath of the Asian financial crisis of the late 1990′s, China amassed some $3.2 trillion (Dh11.74 trillion) in foreign-exchange reserves in order to insulate its system from external shocks. Fully two-thirds of that total — around $2 trillion — is invested in dollar-based assets, largely US Treasuries and agency securities (ie, Fannie Mae and Freddie Mac). As a result, China surpassed Japan in late 2008 as the largest foreign holder of US financial assets.
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Not only did China feel secure in placing such a large bet on the once relatively riskless components of the world’s reserve currency, but its exchange-rate policy left it little choice. In order to maintain a tight relationship between the renminbi and the dollar, China had to recycle a disproportionate share of its foreign-exchange reserves into dollar-based assets.
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Those days are over. China recognises that it no longer makes sense to stay with its current growth strategy — one that relies heavily on a combination of exports and a massive buffer of dollar-denominated foreign-exchange reserves. Three key developments led the Chinese leadership to this conclusion:
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… for the full article click here!
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Sharp Increase in Central Bank Gold Reserves: South Korea Up 17-Fold & Thailand 15.5% in 2 Months!
Asian central banks are escalating their gold purchases. They have to dramatically reduce their huge USD reserves or risk getting smashed easily 50% when everyone starts to get out of the USD. South Korea alone has US$311B of reserves. China has easily US$1.5T if not more. The problem is: there are no safe fiat currencies, some of you may argue that the Swiss Franc is safe. There is no way the Swiss Franc can absorbed all the trillions of dollars and not crater the Swiss economy. In the end, when all alternatives have been exhausted, it will go into gold !
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Sharp Increase in Central Bank Gold Reserves – South Korea Up 17-Fold & Thailand 15.5% in 2 Months
Gold is higher in all currencies today except for the Swiss franc and is trading at USD 1,629.20, EUR 1,147.30, GBP 1,000.20 and CHF 1,270.10 per ounce. Gold’s London AM fix was USD 1,624.00, EUR 1,145.28, GBP 997.30 (10:41 GMT). Gold reached new record nominal highs in euros and Canadian dollars yesterday at EUR 1,149.60/oz and CAD 1,566.48/oz yesterday and remains close to these record highs today, and close to record highs in most fiat currencies.
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South Korea bolsters gold reserves
By Christian Oliver in Seoul and Jack Farchy in London, http://www.ft.com/
South Korea, holder of the world’s seventh-biggest foreign exchange reserves, has almost tripled its gold reserves during the past two months, becoming the latest emerging economy to turn to bullion. The Bank of Korea said on Tuesday that it had purchased 25 tonnes of gold – worth $1.24bn – in its first acquisition of the precious metal since the Asian financial crisis of 1997-1998, when Korean citizens donated gold jewellery to the bank to help the nation through a period of economic emergency.
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Gold Prices Spike on Safe-Haven Appeal, South Korea Buy
By Alix Steel, http://www.thestreet.com/
NEW YORK (TheStreet ) — Gold prices hit record highs Tuesday as the Bank of Korea bought more gold and as the Senate passed the debt ceiling deal. Gold for December delivery popped $22.80 to close at $1,644.50 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,646.80 and as low as $1,618.80 while the spot gold price was skyrocketing almost $30, according to Kitco’s gold index.
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Beyond the safe-haven appeal of the yellow metal on a down day for stocks, Bank of Korea announced it has bought 25 tons of gold over the past two months. The stake is valued at $1.24 billion, or roughly $1,550 an ounce, and it marks the country’s first gold purchase since 1998. Central banks tend to buy gold when they need to diversify or increase their holdings as mandated by the government and are not necessarily market timers, but they do buy as a long-term investment.
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The purchase brings Korea’s total gold holdings to almost 40 tons, still a fraction of the bank’s total reserves compared to the U.S. or Portugal, which hold 74% and 84% of their reserves in gold, respectively, according to the World Gold Council.
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The news does underscore the fact that central banks have become net buyers of gold, however, adding a huge floor under the gold market and reminding investors that countries are purchasing large quantities. Official sector buying in the first quarter was 129 tons, according to the World Gold Council’s Gold Demand Trends report, led by Mexico which bought 93 tons.
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“There has been a fundamental shift in the behavior of central banks,” says Natalie Dempster, head of government affairs for the World Gold Council. “Central banks on the whole have been net sellers of gold for the past two decades.”
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Since the second quarter of 2009, however, central banks from emerging market countries have transitioned into net buyers. One of the biggest buyers is China. Over the past five years, the country increased its gold holdings to 1,054 tons from 600 tons. China currently holds only 1.6% of its reserves in gold. Dempster says that if the continent were to reallocate its holdings to 3%, it would need to buy 1,000 tons of gold.
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Flight To Safety: Swiss Franc & Gold !
- Investors are fleeing to the Swiss Franc and Gold from USD and Euro. The US treasuries have rallied and yields have dropped dramatically. But you cannot convince me that US treasuries are safe. It is insane investor herd behavior. The market is signalling fear and crisis ahead ! The sovereign debt crisis is getting worse not better. QE3 will start in August. The market is smelling more currency debasement. Got gold yet?
Investors are dumping USD and Euros for Swiss Franc. Chart source: http://www.fxstreet.com/
Gold is the currency of last resort !
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Spain, Italy, Belgium Bond Spreads Hit Euro Record; Italy 10-Year Bond Yield Highest Since 1997; Self-Fulfilling Crisis!
- The 2nd Greek bailout was barely completed and the market has gone into a tailspin. So much for all the happy delusional talk. Fear and trepidation are stalking the Eurozone markets! I warned you that financial earthquakes are getting larger and larger going into 2H2011 and onwards.
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Spain, Italy, Belgium Bond Spreads Hit Euro Record; Italy 10-Year Bond Yield Highest Since 1997; Self-Fulfilling Crisis
by Mike Shedlock, http://globaleconomicanalysis.blogspot.com/
The idea that the latest Greek bailout plan would solve anything is officially dead. Government bond spreads of Spain, Italy, and Belgium are at all-time highs. The yield on 10-year bonds of Spain and Italy are now both well North of 6%. Here are a few charts to consider.
Does this look like the sovereign debt crisis is over?
- Bloomberg reports Italy, Spain 10-Year Bond Spreads Are at Euro-Era Record on Growth Concern :
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Italian and Spanish 10-year bonds dropped, pushing yields up to euro-era records versus benchmark German bunds, on concern that slowing growth will hamper efforts to tame the nations’ debt loads.
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“This has all the features of a self-fulfilling crisis,” said Harvinder Sian, a senior bond strategist at Royal Bank of Scotland Plc in London. “The rise in yields looks pretty relentless, and it doesn’t look as if the politicians are anywhere near to getting ahead of the curve.”
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The yield on 10-year Italian bonds jumped 18 basis points to 6.18 percent as of 8:48 a.m. in London, the most since November 1997. Spanish 10-year yields surged 16 basis points to 6.36 percent, pushing the spread over similar-maturity German debt up 19 basis points to 393 basis points. A 6.5 percent yield will be a key level for Spain, RBS’s Sian said.
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The yield premium investors demand to hold Belgian 10-year bonds instead of benchmark bunds widened to a euro-era record of 202 basis points before an auction of as much as 2.8 billion euros of 105-and 168 day bills.
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Europe’s Money Markets Freeze as Crisis Escalates in Italy And Spain!
Source: http://www.telegraph.co.uk/ . Photo: Alamy
- Warning!! Warning!! Major financial tsunami is approaching! Gold prices rocketed US$40 to record high of US$1660/oz. Silver followed suit and rose 3.3%. The S&P500 plunged 2.5%. What happened to all the happy, self-congratulatory talk over the success in raising the debt ceiling? Didn’t the politician snakes in the District of Criminals (DC) just rescued the world from financial disaster? Nonsense! The whole episode is a political theatre farce. The snakes have just signed the death warrant for America!
- - The Illuminist snakes are lining up the dominoes for the coming global economic, financial and monetary collapse. It will start in the PIIGS and cascade across the globe! They have designed the system for failure to amass power and wealth into Illuminist hands. It is a deliberately engineered collapse! Got gold yet? (emphasis mine)
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Europe’s money markets freeze as crisis escalates in Italy and Spain
By Ambrose Evans-Pritchard, http://www.telegraph.co.uk/
The European money markets have begun to seize up as pressure mounts on the Italian and Spanish banking systems, tracking the pattern seen during the build-up towards the financial crisis in 2008.
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The three-month euribor/OIS spread, the fear gauge of credit markets, reached the highest level in two years today, jumping 7 basis points to 40 in wild trading. “Europe’s money markets are undoubtedly starting to freeze up,” said Marc Ostwald from Monument Securities. “It’s not as dramatic as pre-Lehman but it is alarming and shows the pervasive degree of fear in the markets. People are again refusing to lend except on a secured basis.”
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The credit stress was triggered by fresh mayhem in the southern European bond markets and ominously in parts of the eurozone’s soft core as well, including Belgium. Spanish yields pushed further into the danger zone to 6.42pc. Italian debt reached a post-EMU high of 6.22pc before falling back slightly on reports of Chinese buying.
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“We have a revolt taking place by foreign investors in these bond markets,” said Hans Redeker, currency chief at Morgan Stanley. “There have been hardly any purchases for several months. We are seeing net disinvestment because people fear that these countries lack the potential to grow their way out of the problem, and risk falling into a Fisherite debt trap.”
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Mr Redeker said the eurozone needs a lender-of-last resort along the lines of the US Federal Reserve to backstop the Spanish and Italan bond markets. The European Central Bank cannot easly step into the breach under its current legal mandate and treaty authority. “The eurozone faces a very big decision: it either creates a central fiscal authority or accepts reality and starts to think the unthinkable, which is to cut the currency union into workable pieces.”
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The escalating drama forced Spain’s premier Jose Luis Zapatero to delay his holiday in the Doñana biodiversity park near Huelva. … In Rome, Italy’s president Giorgio Napolitano held a second meeting in days with central bank chief Mario Draghi, the future head of the ECB. There has been speculation in the Italian press that the well-respected Mr Draghi might be called to lead an emergency government to restore market confidence. Finance minister Giulio Tremonti invoked the country’s financial crisis committee on Tuesday as the Milan bourse fell to a three-year low, once again led by bank stocks.
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An EU spokesman said there was “no emergency plan” on the table. “There are no factual reasons that we are aware of that can explain this sudden acute surge in spreads. What matters is that the Spanish and Italian authorities are taking the necessary action towards fiscal consolidation,” she said.
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Simon Derrick from the BNY Mellon said the trigger for the final denouement in each of the eurozone’s bond crises so far has been when the spread over German Bunds reaches 450 basis points, prompting LCH Clearnet to impose higher margin requirements. The Spanish spread hit a record 400 on Tuesday.
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The EU summit accord in late July has clearly failed to reassure investors. It gave the EFSF bail-out fund powers to buy Spanish and Italian bond pre-emptively but this has to be ratified by all parliaments, which may take four months. Willem Buiter from Citigroup said the €440bn fund is far too small to cope with Italy and Spain, and requires immediate firepower of €2.5 trillion. Such demands risk setting off a political crisis in Berlin.
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Even if the crisis is resolved, Italy and Spain may have to pay significantly higher borrowing costs to attract buyers. Anthony Peters from Swissinvest says large clients have been telling asset managers to eliminate Sourthern European risk. “They have kissed peripheral Europe good-bye,” he said.
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Societal and economics observer and commentator with an endtimes, future history perspective. Follow me at Twitter: socioecohistory
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