CHART OF THE DAY: US per Capita Debt and GDP Growth

Monday, February 15, 2010

GRAPH: This needs no comment and is worth more than a year's bubble talk on cable TV, says John Rubino at (Click to enlarge)

Spanish Property Bubble Follow Up 2010

Thursday, February 11, 2010

It was in June 2007 that I warned investors and actors about the Spanish property bubble. I feel sad for the people depicted in this video.

GALLERY: A Collection of Company Logos After the Crisis

Tuesday, February 09, 2010

Blogger Alex visualizes the future of some of the world's best known brands and has re-designed them for the new reality.

German Company Will Make Biggest Gold Coin Ever, Weighing 3,333 Ounces

Here's a coin that will be without doubt the highlight of every coin collection. German gold seller Global Metal Agency takes reservations for the heaviest gold coin ever produced.
The "Global Liberty" has a fineness of 999.9, weighs 3,333 troy ounces or 103.6 kilos and will cost you a cool €2.99 million or €897 per ounce. I presume this price is subject to change when gold prices start to rise again. Oh, and hurry up, coinage is limited to 3 pieces.

PHOTO: The world's heaviest gold coin displays the Brandenburg Gate in Berlin, until 1989 a borderpoint between East and West Berlin until Germany's reunification, on the obverse side. The reverse side is loosely designed after the flag of the United Nations. The diameter of 50 centimeters may be a bit wide for most customer bank vaults.

Once manufactured the Global Liberty will replace the 100 kilo gold coin from the Royal Canadian Mint as the heaviest gold coin. Investors with deep pockets have already made solid profits. The Canadian Mint sold them in 2007 for 1 million Canadian Dollars each. The Royal Canadian mint made the coins - 20 inches in diameter and 1 inch thick - mostly to seize the bragging rights from Austria, which had held the record with a 1000 ounce, 15-inch wide coin. In 2004 the Austrian Mint was awarded the Guinness World Record for the World’s largest gold coin when it struck 15 1000 oz (31.1 kg, 69 pounds) Philharmonics.

CORRECTED: Central Bankers Will Print More Money to Save Greece - What Will They Do With Portugal, Spain, UK, Italy, Ireland, Austria, CEE, Baltics???

Monday, February 08, 2010

An emergency meeting of 24 central bankers in Sydney at the 50 year anniversary of the Reserve Bank of Australia on Sunday and Monday (corrects location and duration) has so far yielded no news information, intensifying this blogger's fears that the global default Tsunami has already begun.
The waves of bad news get higher from day to day.
Here are a few figures to acclimatize to the financial storm engulfing Europe from The Telegraph:
Barclays Capital says the net external liabilities of Greece are 87pc of GDP, or €208bn (£182bn). Spain is worse at 91pc (€950bn), and Portugal worse yet at 108pc (€177bn); Ireland is 68pc (€123bn), Italy is 23pc, (€347bn). Add East Europe's bubble and foreign debts top €2 trillion.
Let's add in the same cheat factor Greece displayed last week when it "suddenly" discovered another €40 billion in debts for a few other countries and attempting to get a grasp on the global debt picture leads to the same amount I arrived at half a year ago: It is simply too much once we are in the Trillions.
Don't forget that national debts are only one part of the picture. In my home country Austria 300 of 1,300 communities are sitting on mountains of debt and this picture is representative for Europe as a whole. Include the fact that Eurozone governments have been very creative in shifting debt from the national ledger to public companies with a state guaranty and the final figure of debts climbs from stratospheric levels halfway to the moon.

Landmark Shift
Tired of listening to central bankers who are not exactly the guardians of truth when proclaiming that they have been containing the crisis since its onset in August 2007 it is safe to say that this weekend's meeting in Sydney shows a landmark shift.
It is no longer Asian creditors flying around half the globe but panicking Western debtor nations who will try to reassure the holders of all this debt that the crisis is still manageable.
The Asians are smart people. Sydney is a face saving neutral location for all participants. And why travel 18 hours when one can see the burning Western house of fiat money on a Bloomberg 24/7?
Eastern creditors may use the meeting to remember that the one-way policy of papering over all financial crises has historically always ended in a dead-end-street.

No Other Idea than Printing
Western debtors of course shy away from an end to excessive money printing as it is so comfortable - for the time being.
But they have yet to leave Wonderland and acknowledge an economic reality where we will see countries competing with higher yields for investor funds. Recent roller coaster rides of the Club Med yield spreads are only so shocking because the world has become accustomed to the lowest interest rates in history, thanks to irresponsible central banks who contorted risk premiums with their easy money policy for a decade.
Referring to this chart of US debt to GDP here I am highly confident that this debt surge will come to an end within the next 24 months. There is still the mother of bubbles that waits to be bursting aka US Treasuries.
Europe may have less time as the run on Greece has already begun according to Zerohedge who reports that €10 billion fled the country in a matter of days.
The troubles do not stop at the countries already mentioned. While European governments want to raise a record €2.2 Trillion in new debt issues this year, chances are slimming they will get a good deal.
Last week Portugal cancelled a €500 million government bond issue and one wonders if Greece will be able to get new debt at all. France's intentions to raise €454 billion this year show that the government of Nicolas Sarkozy wants to paper over all problems as it was done in the last 40 years. Who will be going to compete for these truckloads of government debt that come from all directions?

Market chatter about a "Eurobond" runs into a roadblock when taking a closer look. Who should issue it? The EU? The European Central Bank? This would not be a bond but an option on optimism for the future of Greece as neither the EU nor the ECB have a Treasury standing behind it, guaranteeing repayment with future tax income. And it would open the floodgates by creating a precedent for other ailing Eurozone economies.

MSNBC Says Fed Showered Banks with $23.7 Trillion

Wednesday, February 03, 2010

The numbers in the American bank bailout charade are ballooning and MSM begin to take notice. MSNBC pushed the tally to $23.7 Trillion in secret handouts to banks who never stopped weighing up their exexcutives and dealmakers in gold at bonus time.

VIDEO: This video was uploaded to Youtube last weekend. Enjoy a rabid TV presenter accusing the Fed of handing out a stunning $23.7 Trillion to the poor banks. The story lacks an explanation as to how they arrived at this 14-digit estimate.
Referring to this post on shifts in the global power structure I take note that authority bashing sees a revival in the US media. Will we finally get to read stories again that are not simple copy&paste government/lobby/bank etc. propaganda. I very much hope so.

Strong Acceleration in OECD Consumer Prices

Tuesday, February 02, 2010

Inflation is not at bay, according to the latest OECD release:
Consumer prices in the OECD area rose by 1.9% in the year to December 2009, compared with a rise of 1.3% in November 2009. Month-on-month, prices remained stable in December, compared with a rise of 0.1% in November 2009.
Consumer prices for energy went up by 8.5% in the year to December 2009, following a rise of 2.4% in November. Consumer prices for food fell by 1.0% in the year to December 2009, compared with a fall of 1.1% in November. Excluding food and energy, consumer prices rose by 1.6% in the year to December 2009, compared to a rise of 1.5% in November 2009.

GRAPH: Inflation rebounds strongly in OECD countries. I expect more to come.
The OECD extends its warnings,
In the euro area, annual inflation (HICP) was 0.9% in December 2009, up from 0.5% in November. Month-on-month, the HICP increased by 0.3% in December, compared to 0.1% in November. Excluding food and energy, the euro area annual inflation rate (HICP) increased by 1.1% in December, compared with a rate of 1.0% in November.
In the United States, the Consumer Price Index (CPI) rose by 2.7% over the year to December 2009, compared to an increase of 1.8% in the year to November.
In Japan, consumer prices decreased by 1.7% over the year to December, compared to a decline of 1.9% in November.
Over the year to December, annual inflation was 2.9% in the United Kingdom, 1.3% in Canada, 1.0% in Italy and 0.9% in France and Germany.
Consumer prices in the OECD area rose by 0.5% on average between 2008 and 2009 after increasing by 3.7% between 2007 and 2008. Consumer energy prices declined by 10.5% between 2008 and 2009, after an increase of 12.3% between 2007 and 2008. Excluding food and energy, the annual average increase in the price level from 2008 to 2009 amounted to 1.7%, compared with 2.2% between 2007 and 2008.
Download the complete OECD report and spreadsheet here.

McKinsey Says Deleveraging Will Exert Drag on GDP Growth

International consulter Mc Kinsey is another mainstream thinking business that takes a seat in the orchestra of doom, fearing years of gloom:
The specter of deleveraging has been haunting the global economy since the credit crunch reached crisis proportions in 2008. The fear: an unwinding of unsustainable debt burdens will drag down growth rates for years to come. So far, reality has been more benign, with economic growth recovering sooner than expected in some countries, even though the financial sector is still cleaning up its balance sheets and consumer demand remains weak.
New research from the McKinsey Global Institute (MGI), though, suggests that the deleveraging process may just be getting under way and is likely to exert a significant drag on GDP growth.1 Our study of debt and leverage2 in ten mature and four emerging economies3 indicates that some sectors of the economies of five countries—Canada, South Korea, Spain, the United Kingdom, and the United States—will very probably experience deleveraging.
What’s more, our analysis of deleveraging episodes since 1930 shows that virtually every major financial crisis after World War II was followed by a prolonged period in which the ratio of total debt to GDP declined significantly. The one exception was Japan, whose bursting asset bubbles in the early 1990s touched off a financial crisis followed by many years... (register to read the rest)
GRAPH: Sovereign debt growth explodes on a worldwide scale. Save money, get out of government bonds as yields will rise in a process of countries competing against each other. (Click to enlarge)
Still betting on a swift recovery? I am taking bets.

CHART OF THE DAY: US debt vs. GDP in 2009

This the bubble the Federal Reserve declines to see. The debt to GDP ratio has far outpaced the levels seen after the crash of '29.
Click this post from 2005 to see the current mess was foreseeable. Do you still expect a swift recovery?

NO Comedy: Need a Job? Become a Bank Director in Fed Online Course

No crisis can be so deep as that it were impossible to find some amusement. My last cynicism hit out at "Moody's Offers Training Courses on CDO/S - After Getting 99% of Ratings Wrong" but this new offer of the Federal Reserve tops everything else unnecessary.
Probably aiming at hundreds of thousands now unemployed real estate agents the Fed has
launched a website to help new bank directors learn how they can work to ensure the safety and soundness of their institutions. The website,, also provides a refresher course for experienced board members.
one learns from a Fed release from Monday.

Surfing to the site fears of a folly of the more serious size become reality.
After a few lines of introduction future superstars of the banking industry start out with the basics:
What is a bank?
If you now thought some answer like,
"banks are the financial intermediary ion the economy, providing liquidity to government, business and consumer"
would elevate you a step on the way to your tailor-made boardroom pin-striped suit, you may have to compete with answers that contain stones and vaults. Here's the Fed's 101 definition what may be seen as a bank:
The word “bank” evokes different mental pictures for different individuals. Some will think of the quintessential bank building with big stone columns and a large vault. Others will envision a balance sheet showing a bank’s assets, liabilities, and capital. Still others will fall back on the regulatory definition of a bank: generally, an organization that is chartered by either a state or the federal government for the purpose of accepting deposits.
Hey, wasn't that easy? Stay on your floating chair in the pool (just keep your iPad dry) as the Fed promises that
When you finish this section of the course, you should be able to:
  1. define a bank and
  2. describe the role of a bank director.
What's even better, once you are a director you don't have to work Mon-Fri, the Fed lures millions of potential bank directors with a 'don't worry, be happy' approach:
As a director, you won’t be involved in the day-to-day management of the bank, but you will be involved in the strategic plan the board adopts for the bank. Your involvement also comes from:
  • participating in the board of directors meetings,
  • reading the various reports reviewed at the meetings,
  • supervising bank management and
  • knowing the bank’s financial condition.
Light your fat Cohiba now as the Fed assures you you are THE boss:
One word of caution before we move on. Directors are typically asked to serve on a board by the bank’s chief executive officer (CEO). That often engenders some allegiance to that CEO; however, it is important to remember that management works for the board of directors, not the other way around. It is equally important for both the board and management to understand this concept.
Skipping sections on regulatory issues - did anybody care in the last 10 years? - I am not gonna get bothered by a chapter on Bank Safety and Soundness either. Or did anybody at the Fed in this millennium?
Once you chew your Cohiba dressed in pin stripes with an "interesting" tie you need not worry about things going wrong. Finish the Fed's course and follow their advice:
Regulators share a common goal with bank directors and management. Regulators want a bank to be run safely and in full compliance with laws and regulations. When these goals are not met, regulators have a wide range of informal and formal supervisory actions they can use to correct deficiencies and problems. Additionally, regulators can assess civil money penalties for violations of the terms of a formal supervisory action. In the event of noncompliance with a supervisory action, a bank or individual risks the possibility of more severe supervisory sanctions.
If this last chapter on solving a bank crisis was a bit too difficult, here's a plain English translation: If things go wrong, collect your bonus and retire in Cancun.
Can somebody pls wake me up and say this is not for real!!!

Gold Price Holds Up Well for Non-US Investors

Monday, February 01, 2010

Gold looks technically bearish when looking on the US Dollar and Yen price per ounce but appears to bottom out in most other major currencies.
The Euro's strong decline to a 6-month low below $1.39 in the wake of continuing woes about Greece's precarious position - which is probably only the precursor to more deficit disasters in the Eurozone - has cushioned gold's correction from the all time high for Euro investors.
Swiss and British savers see a similarly pronounced effect.
Gold has also built what could be a bottom in Australian and Canadian dollars.
I am always puzzled to see that gold prices are still exclusively expressed in Federal Reserve Notes in media worldwide as this masks the real change for local investors.
The charts below again confirm my thoughts about fundamental flaws in technical forecasting, like simply which chart to take in the first place. Most investment advisors outside the US (and Japan) should actually ring the buy bell based on stabilizing domestic gold prices.

Gold in FRN/Dollars
CHART: Gold priced in Federal Reserve Notes (FRN) looks certainly bearish.
Gold in Euros
CHART: Gold priced in Euros held up fairly well thanks to stronger FRN and erased half of the losses since the top by now. This is an entirely different picture compared to FRN.
CHART: Gold price expressed in USD Index units. The downtrend is due to the hevy weighting of Yen in the index.
Gold in Sterling
CHART: Gold priced in British Pounds. Brits, caught in the deepest recession, do well with gold.
Gold in Swiss Francs
CHART: Gold priced in Swiss Francs. The Swiss may fare well with gold if the banking world amidst the Alps caves in.
Gold in Yen
CHART: Gold priced in Yen. I expect this chart to turn bullish as Japan's net debt-to-GDP ratio exceeds 115%, the highest in the developed world, while demographics will impede any structural growth chances.
Gold in Australian Dollars
CHART: Gold priced in Australian Dollars has bottomed out, it appears.
Gold in Canadian Dollars
CHART: Gold priced in Canadian Dollars. A commodity currency like the Aussie dollar, the Loonie manages to avoid further appreciation against FRN.
Gold in Indian Rupees
CHART: Gold priced in Indian Rupees. With not much recovery news coming out of India the Indian Rupee has stabilized against the US currency, hitting Indian gold holders twice.

Deficit Madness Fundamentally Supports Gold
Speculations that US President Barack Obama will most likely present a US budget that will see the deficit explode to $1.556 Trillion, after an earlier, more conservative estimate of $1.35 Trillion by the Congressional Budget Office were fueled by a Reuters report:
A congressional source told Reuters that the White House would project a record $1.6 trillion deficit for the United States in the current 2010 fiscal year that ends Sept. 30. That is an increase from the $1.4 trillion gap in 2009.
The budget is due out at 10 a.m. EST/1500 GMT.
For more news on the coming tsunamis of worldwide government bond issuances and sovereign defaults that may drown those at the end of the food chain I refer readers to yesterday's post .

Wikinvest Wire