Euro Crisis: A Table of Who Claims How Much

All credit goes to the unknown creator of this table on "Consolidated foreign claims of reporting banks" from data from the Bank for International Settlements (BIS) which landed in my inbox.

Click to enlarge

The pink fields may give an indication about the location of those 3 Eurozone banks that got around half of all government money spent on bailouts so far, blogged here.
These bulk risks demonstrate clearly why France presses hard for a bailout solution in the Greek crisis as it stands to lose most in a bankruptcy. Overall, French banks are the biggest lender to the EUrozone's most troubled nations.

Greek Aid Mushrooms to €120 Billion, Spain Downgraded, More Disasters Certain to Happen

Having repeatedly expressed concerns about the reliability of figures in the worst crisis of the Eurozone news that stabilizing Greece will now require €120 billion - last week it was €80 billion, the week before €45 billion - over 3 years confirm my fears about the cluelessness and chaos in the Eurozone.
The Euro's tailspin accelerated to new one-year lows vs. Federal Reserve Notes (FRN) after Spain was downgraded a notch from AA+ to AA by Standard & Poor's.
A German Green party MP said on Wednesday, IMF head Dominique Strauss Kahn had given a range of €100 billion to €120 billion, according to Reuters:

A decision on granting aid to Greece is needed quickly, the heads of the European Central Bank and IMF said on Wednesday, but did not confirm reports the bailout package could balloon to 120 billion euros over three years.

ECB and International Monetary Fund officials are in Athens negotiating a three-year fiscal authority plan as a condition for releasing emergency loans to debt-stricken Greece.

"It's impossible to give any details on what will be finally agreed," IMF Managing Director Dominique Strauss-Kahn told a news conference after talks with German politicians.

"We hope that the negotiation will not take too much time, that it can be done rather rapidly. But until this time it's impossible to give any details on what will be finally agreed in the future."

Earlier, opposition members of Germany's parliament said Strauss-Kahn had told them a eurozone/IMF aid package for Greece will be worth 100 to 120 billion euros over three years.

At the news conference, Strauss-Kahn declined to comment on these figures.

So the high priests of ever expanding credit don't want to talk anymore about absolute numbers. Maybe they fear that Goldman Sachs' expectations become true.
Goldman Estimate for Greek Bailout Stands at  €150 billion.
Chief European Economist Erik F. Nielsen circulated this on last Monday:

On my numbers, a one-year fully funded program needs to provide a minimum EUR 50-55 bn; an 18-months program will require some EUR 75 bn, and a 3-year program a minimum EUR 150 bn.

As there is no solution in sight to the main problem that Germany balks at handing out loans without austerity guarantees, as this would create a precedent for the next dominoes - Portugal, Ireland, Spain - that will fall in the greatest financial crisis the old continent has ever seen, we are about to witness more near-term weakness in the Euro.
Trying to find a solution where debtors pile up more debt in order to save even worse debtors is simply not a concept that will work. At least it never did in history, and this a strong indicator for me that it will not be different this time.
All we know now is that we still don't have a clue what the final bailout sum for the whole Eurozone will be.
It maybe premature to write an obituary for the Euro, though. Ideas to solve the crisis and avoid contagion in the Eurozone range from Germany leaving the Euro, making it a weak fiat currency; or Greek and other failures leaving the Eurozone in order to re-establish the Euro as a hard currency.
Remembering that Greece will not be the last stumbling stone for the Euro I prefer to steer clear from more disasters that are certain to come. The dollar may indeed become a contrarian trade this year.
Oh, and if you are a Euro investor and want to make money, try gold. It just hit a new historic record of €890.
DISCLOSURE: Long gold bullion, waiting for a EURUSD correction to re-enter a short.

There Is a Greek Tragedy And All the EU Produces is Comedy

As this video was produced by the European Commission (EC) one must assume this is how the official Europe sees its single currency. I consider this a new mockery by the Brussels Moloch while Greece is on the brink of default after Germany recommended that the Hellenic Republic leave the Euro.



This video was released on March 31 and has a already created a stir as the EU wanted EUX.TV producer Raymond Frenken to withdraw this annotated version. If the EC forgets about the basic right of expression of thoughts because of a few annotations the Euro is probably a giant on clay feet.
The EU blunder does not stop here. Or can you tell who is the likely target audience for these 2 EC productions?

Proven wrong by now: The Euro: a solid foundation for growth.

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Speculators Punish Eurozone's High Risk Nations - Yield Spreads and CDS Skyrocket

The ongoing tussle in Germany's coalition how to justify and account for emergency funds for near-default Greece and the resulting delay in action has been harshly punished by speculators on Monday. Yield spreads and CDS prices reached new record highs not only in Greece, but in Portugal and Spain as well.
According to Marketwatch,

Ongoing worries about Greece's debt load and fears problems could spread to other indebted euro-zone countries drove up the cost of insuring Greek, Portuguese and Spanish government debt to record intra-day levels on Monday, according to CMA DataVision. 

The spread on five-year Greek credit default swaps traded near 703 basis points after trading at more than 713 basis points in earlier action. That's up from around 615 basis points late Friday. That means it would cost $703,000 a year to insure $10 million of Greek debt against default for five years. 

The Portuguese CDS spread rose to 305 basis points from around 279 basis points on Friday. 

The Spanish CDS spread jumped to 186 basis points from 174 basis points, CMA said.

Mr. Market is definitely taking the currently biggest risks in the Eurozone to the cleaners. On Monday Greek 2-year yields pierced the 13%-mark after closing above 11% before the weekend, we learn from FTAlphaville.
Such radical moves may be only a taste of what is to come for the possible breaking point for the Euro - Spain - and a UK with a worse structural deficit than Greece, as Burning Our Money blog reminds

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2010 Silver Mining Stocks and Companies List

As these 2 lists of silver companies published in 2007 and 2009 have become the most-read blog posts, here is a an extended update for the year 2010.
Compiling a list of silver companies is controversial as there are only very few pure silver plays.
The white metal is mostly mined in combination with gold or base metals which can dramatically change the bottom line of silver miners. In some cases the mining of base metals and gold can lead to negative cash costs for every ounce of silver produced.

Silver is primarily used in industrial applications as it is the best metallic electric conductor, and jewellery.
Expecting silver prices to multiply in the next 5 years these companies give extra leverage - if their plans come true.
All silver stocks got hammered in 2008 in the biggest crash in the mining sector in the last 80 years and most have not yet recovered to 2007 levels despite the recentrecovery in silver prices. Do your own research as some companies are trading at less than the cash they have in the till.
While the IPO train on Wall Street has become a train wreck due to the hesitancy of investment banks when underwriting new issues, junior miners are not dependent on investment banks to raise capital.
They (better) know how to attract investors with a long term horizon directly, as I was able to witness myself when living in Vancouver in 2007.
Vancouver stock exchange is the primary market for junior miners for all kinds of resources. The market had had a shady reputation in the 1980s but has cleared up his act by establishing mandatory reporting rules for junior miners. Its most important improvement was the introduction of standards for reporting new metals reserves.

GRAPH: Silver is a lot more volatile than gold while physical demand is unprecedented. The Austrian Mint produces silver Philharmonics 24/7 since introducing this bullion coin in 2008. The US Mint spits them at record rates too since 2009. Silver currently trades at a ratio of 1:60 to gold. In the long term this ratio has been closer to 1:15, leaving enormous upside potential for silver that could easily lead to a price around $40 next year. Chart courtesy of stockcharts.com. (Click to enlarge)

I consider investments in exploration companies as very risky and build up positions very slowly. But they come with a notable exception to the golden rule that for every percentage point of possible reward there is an equal risk.
In the case of explorers/developers there is a nice and profitable exception to the rule: As long as one invests without leverage there is a risk of 100% but a multiple of that in possible gains when an explorer hits silver indeed. When researching risky investments like this very small sector with only a few billions in market capitalization I look mainly for the following:

• Quality of management. Check the track record of management in past mining ventures.
• Management's stake in the company. If they don't sell or even buy more it is usually a good sign.
• Delays. Are there any delays in realizing the company's ventures ?
• Cost per ounce. What are the company's cash costs per ounce produced? How much do I pay per ounce when I buy their shares?
• Institutional shareholders. Which funds own the company, which analysts cover the stock?
• Proximity to production. Potential gains are higher with explorers in the early stages, but so are the risks. I like companies in the process of finalizing the feasibility study for financing or - at a later stage - companies that are close to production.
• Political risk. Your due diligence has to include the respective stability of the country where your miner digs the money out of the ground.

In respect of the political risk I also shun US based silver miners as there exists a possibility that the government can nationalize virtually any company under the Trading With the Enemy Act, which became law in 1917 during World War I and applies during declared wars, and from 1977's International Emergency Economic Powers Act, which can be applied without declared wars. Read more on this issue on GATA's website.
Marc Courtenay has penned a story at SeekingAlpha that deals with the possibility of another confiscation of gold and silver and mining shares by the US government. Seeing all the current nationalizations of car makers, banks and the health sector in the USA I don't rule out anything anymore.

List of Silver Explorers, Developers and Miners
Here comes the list of more than 100 silver companies (click the name for the company's website and the ticker symbol for price information):

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Here Comes the Next "Single Irregularity" from Goldman Sachs

After branding Fabrice Tourre's actions of knowingly selling garbage to its customers as a single irregularity, Goldman Sachs is again grabbing web space, getting deeper into hot water with every day.
The Wall Street Journal points to several more "irregularities" - plain language: fraud - that may haunt the once prestigious Wall Street Institution for times to come.

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Putin Wins Austrian Gas Deal, Scorns Nabucco Project

Russian Prime Minister Vladimir Putin appears to have enjoyed a particularly nice weekend in Vienna, Austria.
Apart from attending the European Judo Championship and feasting on Tafelspitz (reportedly Emperor Franz Josef I's favourite dish) in Restaurant Plachutta Putin will also fly home with a lucrative gas pipeline contract that makes him independent of the long planned, but very slowly progressing EU's Nabucco project.
According to a Reuters report,

Austria signed up to build part of Russia's South Stream gas pipeline on Saturday, and visiting Prime Minister Vladimir Putin scorned the EU's rival Nabucco project as futile.

Politically neutral Austria has become a key battleground for the competing pipelines, both of which are expected to cross the alpine state before delivering gas to other European Union members.

The 7.9 billion euro ($10.62 billion) Nabucco pipeline is part of the EU's long-term effort to diversify its natural gas supplies and reduce dependence on Russia by bringing up to 31 billion cubic meters (bcm) of gas annually from the Caspian regioregion tonto an Austrian hub via Turkey and the Balkans.

But it has no confirmed suppliers and has been hit by numerous delays.

"Building a pipeline without supply contracts is pointless and extremely dangerous," Putin said in the Austrian capital. "Name me one contract that has been signed for Nabucco."

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EU Sovereign Debts Exploded in 2009 - Governments Now Biggest Spenders

Recent predictions by ECB staff that warned of 16 years of pain before sovereign debt levels in the Eurozone would recede to the treaty level of 60% are getting backed up by the accelerating trajectory of the European debt pile-up, new Eurostat data (pdf) shows. Desperately trying to immunize their countries against the Eurozone recession 2009, governments have embarked on a spending spree that resulted in an increase of public debts by a breathtaking 225% in 2008 and and an equally horrendous 211% in 2009, when they took on new debts of € 565 billion after €181 billion a year earlier.

So far these new stones around taxpayer's necks have not yet resulted in more than a modest bounce back in some industries that may find an explanation in the most recent decline in construction activity. Eurostat reported last week,

In the construction sector, seasonally adjusted production fell by 3.3% in the euro area (EA16) and by 2.9% in the EU272 in February 2010, compared with the previous month. In January, production decreased by 0.9% in the euro-area and by 1.1% in the EU27.  

Compared with February 2009, output in February 2010 dropped by 15.2% in the euro area and by 10.2% in the EU27.

As this is hardly the stuff recovery dreams are made from, a look at Eurozone and EU 27 data shows we can expect both lower GDP and continuing higher government debts before the background of record unemployment and worsening demographics. Government debt has soared from 69.4% to 78.7% in the Eurozone in 2009 while government revenue has descended from 44.9% to 44.4% YOY.

TABLE: The whole European Union shows an uneasy trend: Government deficits shot from 2.3% of EU 27 GDP to 6.8% in 2009 while revenues declined from 44.6% to 44% of GDP. Total government debt rocketed from 61.6% to 73.6% in 2009. Data: Eurostat 
(Click to enlarge)

So far neither national governments nor the EU have implemented other changes than pondering new taxes and cuts in social spending despite the wave of unemployment. Youth unemployment remains above 20% in 24 of the 27 EU states.

Will Europe Need Another €3 TRILLION?
While talk about possible debt:GDP ratios in the wake of Europe's worst financial crisis has climbed above the 100% threshold this blogger wonders why there is no serious debt reduction discussion.

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Website: How Goldman Sachs Killed Ghana's Ashanti Gold Miner

It seems Goldman Sachs may have a history of conflict of interest (which always worked in their favour) and the Abacus scandal may be only a recent case.
This story from Ghana details how Goldman Sachs first talked black-owned gold miner Ashanti into a hedge book in 1999 and after Ashanti bled out, it was sold to Anglogold. Goldman Sachs was adviser to all parties.
From Ghanaweb:

In 1998, Ashanti Gold was the 3rd largest Gold Mining company in the world. The first "black" company on the London Stock Exchange, Ashanti had just purchased the Geita mine in Tanzania, positioning Ashanti to become even larger. But in May 1999, the Treasury of the United Kingdom decided to sell off 415 tons of its gold reserves. With all that gold flooding the world market, the price of gold began to decline. By August 1999, the price of gold had fallen to $252/ounce, the lowest it had been in 20 years.

Ashanti turned to its Financial Advisors - Goldman Sachs - for advice. Goldman Sachs recommended that Ashanti purchase enormous hedge contracts - "bets" on the price of gold. 

But Goldman was more than just Ashanti's advisors. They were also sellers of these Hedge contracts, and stood to make money simply by selling them. And they were also world-wide sellers of Gold itself.

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EU Madhatters Want to Squander on Subsidized Holidays

Never mind that the European Union is amidst its worst economic crisis ever. The madhatters in Brussels have proposed a new way to spend more money the EU does not have in the first place.
According to British website TravelWeekly,

The EU has proposed plans to subsidise holidays for pensioners, young people and those who cannot afford to travel, after declaring that an overseas holiday is a "human right."

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Greek Aid Needs Almost Double Overnight to €80 Billion - Does Anybody Have Reliable Figures At All?

So, haha, you want to know, haha, what dimensions the Eurozone debt disaster actually has? Well, how about trying some free random number generator? Just set its range from a few hundred billion to a few trillion, give it a spin and believe the number as much as any of the official lies disguised as press releases by Eurozone governments and monetary institutions.
This method will yield the same error of margin than "official" figures which can now double overnight. It was the Wall Street Journal that scooped the shocker of the day:

Greece may require financial assistance of as much as €80 billion ($107.92 billion) to escape its debt crisis and avoid default, Bundesbank President Axel Weber told a group of German lawmakers Monday, according to a person familiar with the matter.

The estimate, considerably more than the €45 billion that European countries and the International Monetary Fund are currently prepared to extend Greece this year if it needs a bailout, suggests that a rescue of the country may come in several stages and reach beyond 2010.  

Mr. Weber, a member of the European Central Bank's governing council and a leading candidate to succeed Jean-Claude Trichet as ECB president next year, told the legislators that Greece's situation was worsening and that "the numbers are changing all the time," according to the person. A Bundesbank spokesman declined to comment.

If you now think this will cover Greece's stabilization, haha, you are dead wrong. Give the random number generator another spin and you will arrive at the exact figure this blogger has stated last summer and that is now also used by the German Bundesbank.
According to a Reuters report,

German newspaper Bild said Weber warned that the total amount of aid Greece requires may not be known until later, drawing a parallel with the case of nationalised German property lender Hypo Real Estate in 2008.

I would not carve Weber's figure of €80 billion in stone,

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Klumpenrisiko

While the latest woes around Godman Sachs' alleged malversations against its own clients overshadow the financial world like the Icelandic ash cloud above Europe, latest ECB data are a strong indication that the Eurozone's troubled banks will grab the headlines again.
The April monthly bulletin of the ECB contains a graph that shows a huge Klumpenrisiko (bulk risk) in the Eurozone banking sector: Only 3 large ailing banks have been on the receiving end of almost half of all government money infusions between 2008 and 2010.

GRAPH: Just 3 large banks have not only received 46% of all Eurozone capital injections but also 36% of all capital guarantees and 52% of asset protection funds. Source: ECB

3 Largest Banks Account for Up to 9% of Eurozone Banking Assets
In absolute figures this translates into €32.5 billion in capital injections, €150.9 billion in liability guarantees and €21 billion in asset protection funds.

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IMF Sends Team to Greece

The IMF tries to help Greece as yield spreads soar to new highs. According to a release IMF head Dominique Strauss-Kahn will dispatch a team to Athens in order to evaluate a possible IMF intervention.

The release quoted Strauss-Kahn:

Following a request by the Greek authorities, I have agreed to send an IMF team to Athens to begin discussions with the Greek authorities this coming Monday on policies that could provide the basis for Fund financial assistance, under a multi-year program, in the case that the authorities decide to ask for such assistance. The Greek decision to initiate Fund program engagement is consistent with the agreement among European leaders last weekend that financial support from members of the euro area should go hand-in-hand with IMF engagement and financial assistance.

Weekend Reading: Ludwig von Mises on "The Principle of Sound Money"

Enjoying a few days in sunny Hungary I prepare for cold weekend weather. Nothing could be more heart-warming than this excerpt from Austrian economist Ludwig von Mises' "The Theory of Money and Credit" on the virtues of a gold standard while one watches the foreseeable destruction of the unbacked Euro only 11 years after its inception. Hat tip goes to Mises.org.
Click to jump to this timeless piece which is a fantastic short primer on the gold standard.

Fantastic Free Online Resource for Classical Economic Texts and Books
In case you are running out of economic reading matter I recommend the McMaster University's Archive for the History of Economic Thought which is a free online resource containing all important classical economic texts and books ranging from Aristotle to Arthur Young.

Soros Pumps $50 Million in New Economic Think Tank

Billionaire investor George Soros is in the process of setting up a new think tank at Oxford, a result of his growing criticism of mainstream free market economics. According to the Times Online,

It is part of an attempt to steer the discipline away from the champions of the free market and deregulation who, the billionaire financier believes, share the blame for the global economic crisis.

Soros wants to incorporate a variety of sciences from philosophy to literature. The article did not mention whether Soros has suddenly developed a taste for Austrian economics although the projected framework could be interpreted as such. After all, what else is left once we disembark Keynesianism/Friedmanism and arbitrage-free portfolios, all concepts that ran into the detah trap of monetary expansion accompanied by capital misallocations?

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ECB Gold Data Feeds Suspicions of Market Manipulation

Noticing an increase in investigative stories concerning manipulation of gold prices with paper contracts on the world's futures exchanges that sound plausible this blogger took a closer look at the EUropean Central Bank's (ECB) gold data, only to arrive at a conclusion that feeds these suspicions.
With the extended Central Bank Gold Sales Agreement (CBGSA) annual gold sales have been limited to 500 tons per year from 1999 to 2009. This ceiling has been lowered to 400 tons per year last September.
ECB data show that slowing central bank sales undershot this ceiling by a wide margin in the last 10 years. Overall Eurozone central banks sold a mere 55.6 million troy ounces of gold or 1,729 metric tons since December 1999 while the CBGSA would have allowed sales of 5,000 tons in this period.

GRAPH: Are central bankers good asset managers? The Eurozone management of central banks gold holdings raise doubts. Why did central bankers continuously sell the best performing asset of the past 4 decades? Although Eurozone central banks sold 55 million troy ounces or 1,729 metric tons - equalling 13.8% of total holdings - of gold in the last 10 years, the Eurozone's gold stash rose 130% in Euro terms. Show me another market sector with this performance. Data: ECB (Click to enlarge)

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Blog Revamp

This blog is getting a makeover. Enjoy easier navigation and added features from the beginning of next week.

VIDEO: Ratzinger Slapped Reporter's Hand When Asked About Cover-Up

Most recent PR disasters in the Vatican, where the preacher to the papal house compared recent attacks on the sex- and sadism plagued Catholic church with anti-Semitism, have sparked an outrage around the world.
Pope Ratzinger, appearing frail on TV after weeks of countless new revelations how widespread abuse was (is?), so far has only dug in his heels, willing to refer everybody to justice as longs as he can save his own career. It is undisputed that Ratzinger was a key figure in the cover-ups of abuse scandals in the 1980s and 1990s, when he was the Vaticans special envoy for everything that needed to be swept under the rug.
Ratzinger's nerves are definitely lying blank when confronted with cover-ups of systematic child abuse. This YouTube video shows the then pope slapping a reporter's hand (at 00:19 mins) and was posted in August 2008. See the video after the jump.

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Fed Board Will Convene in "Meeting under Expedited Procedures" on Monday

While most market participants will enjoy a long Easter weekend, the Fed heads are called in for an emergency meeting, the Fed announced on Friday.
The release states a single focal point for the meeting, indicating that a rate rise is under discussion:

"Review and determination by the Board of Governors of the advance and discount rates to be charged by Federal Reserve Banks."

Here's the announcement:

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See the German Budget Deficit With Your Own Eyes

It is a recession when this

GRAPH: Take note that Germans actual 2009 budget deficit rose 21-fold to €105.5 billion or more than double the projection, it was announced on Wednesday.

turns into this:

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