Read Here What Comes Next in the Eurozone Crisis

Tuesday, December 06, 2011

Parsing the multitude of ruminations about rating agency Standard & Poor's threat to downgrade all Eurozone members I am left wondering how this announcement comes as a surprise to many market observers while failing to see the bigger picture that was drawn so far in 2011.
Ring-fenced by exploding deficits, rocketing yields, stubbornly rising unemployment especially among the youth and a true inflation closer to 10% than official figures of three percent, the long term negative outlook for the Eurozone has not changed in the past 11 months.
This action was overdue but again serves more to highlight the deficiencies of an opaque rating process than act as a reliable guideline. After all, most of these Eurozone countries have smaller debt/GDP ratios than the USA, which passed the 100% mark this week and rises faster than EU deficits.

The Next Steps in the Eurozone Crisis Will Lead into the ESM Dictatorship

Friday, December 02, 2011

A downward spiral of short-lived political announcements that have declined from the superficious to the meaningless may fill the headlines of dutiful 24/7 news outlets.
But while attention is wasted on political gobbledygook, leading Eurocrats manage to steer the train wreck aka Eurozone towards greater centralization in Brussels that will ultimately lead to a political ambush in order to push through the true monster in the backyard, the European Stability Mechanism ESM.
Published in English only, depriving 85% of Europeans of their possibility to inform themselves, it is no exaggeration to say that the ESM will lead the Eurozone into a technocrat dictatorship without any democratic oversight at all.

Take the Money and Run

Monday, November 14, 2011

Irish finance expert Eddie Hobbs appeared on Irish TV on 11/11/11 and paints a compelling picture that the Euro is toast. His advice: Take the money (out of the bank) and run. I would add: Convert your paper savings into gold.
Watch this 6-minute video for a complete overview of the last stage of the Euro currency.

Austrian Central Bank Strikes Exotic Deal with PBoC While Entangled in Alleged Kickback Scandal

Friday, November 11, 2011

Austria's central bank, Oesterreichische Nationalbank (OeNB) delivers headlines ranging from opaque to criminal these days.
Market observers scratch their heads about a secretive agreement between the OeNB and the People's Bank of China (PBoC) that makes Austria the first non-Asian country permitted to engage in Renminbi investments with its Chinese counterpart as the intermediary. Further media inquiries were stonewalled.

Wikileaks: Merkel Hid Reality of Greek Debt Situation From Her People in 2010

Wednesday, November 09, 2011

A newly released cable from the German US embassy from February 2010 proves again that Eurozone leaders were happy to hide the full dimension of the Greek debt crisis and its implications for the German budget deficit as long as possible.
The confidential document published by Wikileaks again highlights the fact that politicians prefer to lie until the last possible moment.
This snippet says it all:
Chancellor Merkel is clearly relieved she does not, for now, have to explain to the public why the German government is running up its own deficit to bail out debt-laden Greece.
Here is the full text of the confidential cable:

The True Intrinsic Value of Euro 'Money'

Tuesday, November 08, 2011

Ever wondered about the true intrinsic value of Euro banknotes?
Prudent Investor blog reader Kurt Lindlgruber from Austria sent me this pragmatic approach, pulling up the calorific value of such notes once they have lost their purchasing power as did all fiat currencies in history.
Lindlgruber's calculations contradict French philosopher Voltaire's famous quote that
'Paper money will always return to its intrinsic value. Nothing.'
It is not all that bad. Your soon-to-be worthless Euros will at least keep you warm for a few minutes.
Here is his calculation:
The minimum value of paper money after the Euro crash corresponds with its calorific value.
A €5 banknote weighs 0.6 grams. The calorific value of one kilogram European fiat money (= 1,667 €5 notes) is 5 kilowatt hours (kWh).
You can fare much better with gold:
Based on Monday's Euro gold price of €1,260/oz one ounce will buy you 21 metric tons of wastepaper (current price €60/ton) which has a calorific value of 105,000 kilowatt hours.
The average heat energy consumption of a single family detached house is around 5 kWh. So 21 tons will heat a house for 21,000 hours or 2.4 years.
If you hold on to your Euros instead of gold, 252 €5 notes (=€1,260), they will deliver a calorific value of 0.76 kWh
(252 x 0.6 x 5 / 1000 = 0.76 kWh) 
will keep you warm for a mere 9 minutes instead of 2.4 years.

Perth Mint Issues a One-Ton Bullion Gold Coin Worth $56 Million

Saturday, October 29, 2011

Caution: It may prove difficult to get change when you go yacht shopping with this coin.
The Australian Perth Mint has produced the biggest 999.9 fine gold bullion coin in the world.
Featuring Queen Elizabeth II (Katie's silhouette would certainly have found more bidders) it weighs one metric ton. The coin is legal tender with a face value of one million Australian dollars.
Its current gold value is €39.6 million (39.55€ million).

Moody's Turns Spotlight on "Austria Banks Derivatives"

Thursday, October 20, 2011

Here comes the next market mover. Moody's Investors Service is apparently doing some due diligence work on Austria's banks. Austria and its banks have been overlooked in the daily market game of who gets downgraded next until now. Austria still carries a AAA sovereign rating from all Moody's, S&P and Fitch. Austrian banks have done surprisingly well during EU wide downgrading orgies by the big 3 rating agencies.
This may be about to change, given this indication from my webstats.

SCREENSHOT: Moody's Investors Service starts checks on Austria and its banks with a 'Go ogle' search on "Austrian banks derivatives". Click to enlarge.

Are You Reft or Light?

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20.10.2011: Unofficial Death Date of the Euro

It was exactly one year ago that I announced the death of the Euro due to the fact that EU talks on the EFSF had stalled by 20.10.2010.
Now here we are one year later and the latest official statement by French president Nicolas Sarkozy after a late night meeting with German chancellor Angela Merkel on Wednesday was only a terse "talks are stuck."
While this is not exactly news - that's been the situation since 2008 - Germany's first failed auction of 10 year Bunds is all the more and comes only a day after Spain could not sell the full allotment of €5 billion in short term treasury notes.
GET IT:  Europe is not able anymore to raise the money it needs!
Germany's Failed Bund Auction Implies There Is No More European Benchmark
On Wednesday Germany had attempted to top up its September 2021 Bund by another €5 billion. Alas, there were no buyers for this amount. The Bundesbank drew only 4.5 billion in bids and had to retain €925 million for 'secondary market operations' on its own books. This is the first time in the history of post WW2 Germany that investors balked away from a German government bond issue.

Citibank Has Clients Arrested Who Want to Close Their Accounts

Monday, October 17, 2011

So much about a free market economy: Citibank in New York had several people arrested because they wanted to close their accounts and take their money with them.
And I had thought police only gets involved in bank robberies.

These actions are likely to entail legal battles as an alleged plain clothes officer dragged a woman into the bank and had her arrested there.
So much about capitalism: YOUR money is obviously not yours when banks need it themselves to survive.

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The Hungarian Private Debt Crisis Explained in 35 Seconds

Thursday, October 13, 2011

If there is still anybody out there, wondering how Austrian banks got into such a mess in Central Eastern Europe (CEE) by handing out loans for houses and cars to more or less everybody with a pulse; this Raiffeisen TV commercial from 2007 should explain it all.

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Finger-Tapping As Even German Government Expects Greek Default

Wednesday, September 28, 2011

Gasping at the highest possible speed of standstill in Euro bailout negotiations, we have entered the finger-tapping phase.
Only political denial of the inevitable breakdown and official hopes for a breakthrough on the unsolvable question of a Eurozone bailout with Germany as the main contributor at the umpteenth emergency meeting will hold up markets another 2 days.
It can be safely expected that the Troika experts visit in Athens will not yield any news other than that EU, ECB and the IMF want to roll on with their plans of Eurobonds. This will not work as 80% of Germans are against a bailout.
Market expectations of the future of European banks reflect the futility of long dead-locked discussion on the political level best, this chart of 600 banks shows, which is back to levels last seen at the beginning of the biggest debt bubble in history in the early 1990s.

STOXX600Banks back to 18-year lows
Connect this with widespread layoffs in the financial industry where even Goldman Sachs cuts the bacon and this is a strong indicator that the coming system collapse is an accident waiting to happen, despite or because of zero interest rate policies.

Here is the latest daily digest on the non-progress of the Eurozone bailout from openeurope.
The FT reports that, according to senior European officials, splits are opening up between eurozone leaders over whether to revise the second Greek bailout package. Germany and the Netherlands, along with up to five other eurozone members, are leading the calls for bondholders to take bigger write downs on their holdings of Greek debt, while France and the ECB are fiercely resisting such a move. 
German government privately expects a Greek default by December

Eurozone Bailout Numbers Go Stratospheric From €440 billion to €4 Trillion

Monday, September 26, 2011

Yo-yoing markets mask the ongoing cluelessness in the Eurozone where guesstimates about the size of the European Financial Stability Fund (EFSF) have long gone stratospheric. While original plans set out at €440 billion, we have entered trillion territory by now, with the highest proposal coming from European think tank CEPS who wants to replace the EFSF framework with a European bad bank. Such a bad bank could leverage its original capital base roughly ten times to aforementioned €4 Trillion.
This record-setting figure shows that financial markets have long lost touch with the real world and would burden each Eurozone inhabitant with some €13,300 in debt.
There is only one obstacle: the EFSF has yet to come up with the first €440 billion and the list of balking Eurozone members just got a little bit longer. After initial protests by Austria, Germany and Finland it is now the Netherlands and Slovakia that voiced resentments against sinking more billions of debt into the rescue of the common currency that cannot work.

European Collapse

Sunday, September 25, 2011

This video was made a year ago and is more current than ever. The only fact that has changed are the numbers: debts have grown every day since it was posted. Enjoy a laugh amidst the biggest economic crisis in history.

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Countdown to the Eurozone Bank Run

Friday, September 23, 2011

A comatose interbank market and corporate and fund money fleeing Eurozone banks in droves have rung in the countdown to the Eurozone bank run that could become reality as early as next Monday.
The free fall in all major markets and commodities was only negatively outperformed by European banks whose shares fell to new 2011 lows.
Gossip about major institutions like Lloyds of London withdrawing all deposits from Eurozone banks and countless stories in German media about corporations that follow suit are the first indicators about a bank run that may come as soon as Monday when one major Eurozone bank may have to announce its insolvency.
A cascade of downgrades is only more fuel to the market fornication as we have never seen it before. As we are closer to the Endsieg, banks are resorting to a dog-eat-dog strategy, scrambling to save their own skin in a world where the only providers of liquidity are central banks letting their money printing presses spin 24/7.
Mounting rumors expect the announcement of a major bank closing its doors as soon as Monday and market speculation focuses on Unicredit and Societe Generale.
Unicredit shares dropping like a stone
The first bank to announce insolvency will not be the last one. It will be only the first domino piece that will destabilize the rest of the banking sector because interwovenness has reached the point where everybody owes everybody else.

It Takes Only a 4% Adverse Move and Austria's Banks Are Out of Business

Friday, September 16, 2011

Austria's banks sat on a derivative hoard valued at €1,786 Trillion at the end of June 2011. The volume of off balance derivative items is €99 billion more than at the end of 2010 but €800 billion less than a year earlier.
This dwarfs cumulative core capital of the banking sector, which stood at €75 billion or roughly 1/23rd of outstanding derivatives. It will take only a little more than a 4% adverse move against the desperate bets of the banks in the Alpenrepublik and they will be wiped out, can be read from figures released by Oesterreichische Nationalbank (OeNB) (German language only) on Wednesday and overlooked by all media so far.
The press release does not waste one word on the only trillion-figure that can be found in the economy of this 8-million small country. Austria's GDP rose 4.1% to €286 billion in 2010, according to official data.
Taking a clue from other affairs in Austria, where silence always means that something's boiling up, this figure serves well as a reminder that every Eurozone country has an explosive banking problem lingering in its backyard.

Beer Price at German Oktoberfest Jumps the €9 Mark

Seeing a lot of renewed interest in this 2010 post on surging inflation at Bavaria's Oktoberfest - a get together where millions of people get drunk and vomit on each other - here's a short update on 2011 prices.
One liter of beer will climb past the €9 mark with top prices announced at €9,20, according to the official Oktoberfest website. Compared to last year's highest price beer is now 3.4% more expensive. Such prices prove again the uselessness of official inflation figures, which stated latest German inflation at 2.4% in August.
You can still make a bargain by avoiding the Oktoberfest (and all the legal drug induced vomiting) by paying a visit to the now deserted watering holes downtown. Prices for a "Mass", the standard one liter mug used in Bavarian alcohol orgies, range from €6,60 to €8,80.

Germany to Delay ESM Vote Until 2012

German chancellor Angela Merkel becomes a loner, it appears. In a surprise move the German government will delay the parliament vote on the totalitarian European Stability Mechanism (ESM) until Q1 2012 as dissent in the rows of the junior coalition partner FDP endangers Merkel's costly plans that would put the Eurozone under the thumb of anonymous EUrocrats without the possibility of regress.
According to a report in German (language) daily FAZ on Friday, Merkel's cabinet had originally intended to push through Germany's one-way ticket back into corporatism/fascism by December 16. This plan got shattered by heavy resistance from the junior coalition partner, who does not find support for the EUro dictatorship called ESM among its rapidly dwindling liberal constituency. The FDP plunged from 8% to 2.9% in the latest regional elections in Mecklenburg-Vorpommern state.
Governance by Water Cannon
With 4 out 5 Germans being against a bailout of the PIIGS countries, Merkel's hardheaded course is destined to throw the country into turmoil. Drones hovering above public events and recent orders of higher pressure water cannons from Austrian supplier Rosenbauer AG, recently entangled in some cooking the books affair that led to the stepdown of its CEO, are a foretaste on Merkel's true intentions that have nothing to do with a democracy anymore.

It Will Become Very Tough: ECB Monetary Policy Kicked Off the Rail by Only One Lehman Event

Wednesday, September 14, 2011

One picture and a little memory of recent history is all you need. This is a current screenshot from the ECB website where the money printers in Frankfurt try to justify their existence with achieving the ECB's mandate to hold long-term inflation "close but not below 2%" according to its statutes.
This maybe a nice blue straight line keeping everybody well salaried at the ECB, but the long-term trend is most worrying.
Check this timetable against the chart:

First Anti-Euro Protest in Front of the ECB

Tuesday, September 13, 2011

Watching politicians and bankers bickering over a Euro rescue on the back of Eurozone taxpayers for more or less 2 years by now, a group of Germans has staged the first protest in front of the headquarters of the European Central Bank (ECB) on Tuesday.
Some 100 protesters, organized by the fringe Partei der Vernunft (Party of Reason) held up banners with two key demands: "Raus aus dem Euro" (Out of the Euro) and "Stoppt die Schuldenunion" (Stop the debt union), according to a report by German daily FAZ.

Raus aus dem Euro - Germans protest against the Euro and a European Union of debts in front of the ECB in Frankfurt.
This is a historic moment as it represents the first organized democratic resistance against the common currency that has led to the UDE aka United Debts of Europe.
Recent surveys show that 77% of Germans resist the creation of the European Financial Stability Fund (EFSF) and its highly undemocratic successor ESM (Euro Stability Mechanism). The German parliament will vote on the ESM on September 26 and due to heavy losses of the small liberal coalition partner in latest regional elections chancellor Angela Merkel must be less than certain to get a successful vote on an instrument that would put Germany into the  top position to pay for the long profligacy of the weaker Euro members. The strategy of paying thy neighbours debt has never worked in history.
It's now Down to 2 Choices
The growing bifurcation of opinions among Eurozone politicians and the general populations cannot be overlooked anymore. Europeans are taxed to the hilt, suffer from economic conditions where all the freshly digitized money reaches the financial industry but never the real economy and are fed up with an increasingly undemocratic EU apparatus where the few sane voices in the European Parliament (EP) like Nigel Farage are ignored by autocratic decisions in the unelected European Commission and the EU Council.
While politicians have busied themselves in the last 2 years with a string of weekly emergency meetings in 5-star locations - ironically preaching austerity - debts have seen only one way: up.
Either Germany Leaves - Or Greece Exits First
We are certainly very close to a major event that will mark the beginning of the disintegration of not only the Euro, but of the EU itself.

Why the Eurozone and the USA Deserve a CCC Rating

Sunday, September 11, 2011

I have always considered the alphabet soup of rating agencies as useful in determining the credit risk as a balance would be to find out the sweetness of a cookie bar.
As rating agencies have now come out in fear of litigation suits with the statement that their ratings are just an opinion and not a guideline, I think we can do away with opaque rating processes.
The Eurozone and the USA both deserve a
  • Corruption
  • Crisis
  • Chaos

Anybody disagree?

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The Silent Economic World War AKA Fiat Money

Saturday, September 10, 2011

Readers are urged to spend 2:44 minutes watching this video and help this go viral. It condenses everything the current unsustainable monetary system is all about. Fiat money is the silent economic war on the world.
Click here to go to the The Prudent Investor homepage for more interesting posts.

Mexican Central Bank Added Almost 100 Tons of Gold in H1 2011

Friday, July 15, 2011

Mexico's central bank was the most active official golf buyer in the first half of 2011. According to figures released by the World Gold Council it bought a net 98.8 tons of gold in the reporting period.
Russia was the second biggest net buyer with 41.8 tons.
Only two central banks, those of Greece and the Philippines, sold a combined net 600 kilos in the first half of 2011.
TABLE: Net changes in official gold reserves, i.e. central bank holdings, in the first half of 2011. Data: World Gold Council.
And here is the latest list of official gold holdings as of end June 2011.

Iranian Oil Bourse Inaugurated

The Iranian Oil Bourse (IOB), a concept in the making since 2005, has suddenly opened its doors for crude oil trading, but no trades occurred on the first day of trading on Wednesday.
According to a snippet at Tehran Times from Thursday,
The Iranian oil bourse was officially inaugurated on Wednesday, with 600,000 barrels of heavy crude oil being offered for sale on the Kish International Commodity Exchange. 
The crude oil stock was offered at the base price of $112.60 per barrel but no dealer was ready to pay above $109.65, so no transactions were carried out. 
Iran began offering fuel oil contracts on the oil bourse in April. 
“Iran, like other countries, needs to rely on the free market to be competitive,” Ahmad Rezaii, who is an adviser of the Iran Mercantile Exchange director general, said at the opening ceremony. 
“We want to put in place a system for the modernization of the exchange and trade of strategic items. Our exchange has these capabilities,” Rezaii added. 
Iran, which possesses the world’s second largest gas reserves and third largest oil reserves, is trying to play a more active role in oil and petrochemical transactions in international markets
It is worth noting that the Tehran Times stated US dollar prices for the oil on offer. Iran had earlier stated that it would not trade oil in dollars at the IOB.
The IOB started trading petrochemical products in February 2008 after several delays with contracts in Rials and Roubles but not dollars.

VIDEO - Money as Debt

A fast-paced and insightful animated feature on the inherent problem of unbacked money. This 47-minute cartoon by artist and videographer Paul Grignon explains the fallacy of a fiat money system built on ever-expanding credit in a most comprehensible way.

Click here to go to the The Prudent Investor homepage for more interesting posts.

Bernanke's Biggest Error: Gold is No Money

Wednesday, July 13, 2011

Watch this historic exchange between Congressman Ron Paul and Federal Reserve Chairman Ben Bernanke. Fast forward to 4:25 minutes to see and hear Bernanke claiming gold is not money and the Fed only holds it out of tradition.

VIDEO: Fed Chairman Ben Bernanke says gold is no money. More explanations why gold is has been - and is - money for 4,000 years can be found here:To Puzzled Ben Bernanke: Gold Now Again Serves As M-O-N-E-Y

Silver Coins Outsell Gold Coins on ebay

Tuesday, July 12, 2011

In for the physical? Check out ebay. Sales of silver coins have been outpacing gold coin sales since 2007, according to ebay data. Alix Steel from tells us further that only in the last quarter silver coin sales doubled again in volume.
This is reflected on the ebay USA website: Silver coin offers are roughly double the number of gold offers. has a most handy tool to compare ebay prices and premiums above the pure metal value. Click here for gold coins and here for silver coins and remember that numismatic coins were exempt from confiscation in the Great Depression.

Central Banks Gold Withdrawals From BIS Most in at Least 8 Years

As we watch the acceleration of history's biggest financial bubble, gold reserves at the Bank for International Settlements (BIS) are decreasing rapidly too. According to the BIS annual report for the year ending March 2011, gold reserves fell from 1,361 tons to 729 tons. This is the biggest withdrawal by other central banks since 2004.
From Bloomberg:
Central banks withdrew about 632 metric tons of gold from deposits at the Bank for International Settlements in the year ended March 31, the most in at least eight years.
Gold deposits at the BIS fell to about 729 tons, from 1,360.7 tons the previous year, according to its annual report. That’s the most since the year ended March 2004, when the bank began stating gold deposits in millions of special drawing rights. This year’s withdrawal compares with a deposit increase of about 194.1 tons in the year ended March 2010, according to BIS reports.
“Potential explanations include a resumption of central bank lending to the private sector as the balance sheets of commercial banks have improved and the fact that current low lease rates are giving little incentive for central banks to deposit their gold with the BIS,” said Edel Tully, a London based analyst at UBS AG.
On Tuesday gold traded to new records in the wake of the release of the Federal Reserve's FOMC

63% of Eurocrats See EU in a Lasting Crisis

Friday, July 08, 2011

Attractive salaries and perks may help the EU avert a staff crisis, alas its personnel does not agree with the optimistic official line of the EU's top echelons.
A recent survey has found deep pessimism among European Commission staff on a wide range of issues, including the course of European integration over the past decade and the likelihood of success of the EU's strategy for economic growth. Some 63% partially or totally agreed that "the European model has entered into a lasting crisis".
From EurActiv:

Swiss Parliament to Discuss a New Gold Franc

A Swiss 20 Franc Vreneli from 1900
Threatened to come under the wheels of that train wreck called global fiat money excess, a small Swiss right-wing party wants to reintroduce golden Franc coins and will discuss the issue later this year in parliament.
Switzerland has reduced the gold backing of its currency only in the last decade, selling 60% of its gold hoard since 2000. The country currently hold 1,040 tons of gold.
This has not damaged the safe haven status of the Swiss Franc, which appreciated markedly in the recent past against all other currencies.
The Swiss economy is reeling under the strong Franc as the country's exports and its tourism industry have to digest a 16% upward move of the currency versus the Euro in the last two years.
From Marketwatch:

Bird's View of the Fed's Secret Information Technology Center

Parking looks deserted, but this unmarked building is probably the heartpiece of the Federal Reserve's Information Technology (FRIT) division.
There is no reference to the Federal Reserve on the property. At the entrance is a black sign with white letters that reads "West Creek Operations Center." Security gates, hydraulic vehicle barriers, and guards with loaded weapons control access to the parking lot. A meticulously maintained and patrolled perimeter fence encloses the property.
According to Cryptome,

VIDEO - The Fed Is the Black Hole in American Democracy

Wednesday, July 06, 2011

No, it not a conspiracy. The Fed is above the law.
This short film by Lagan Sebert and Harry Hanbury of the American News Project featuring Ron Paul, Wlliam Greider, Dennis Kucinich, Darrell Issa and Alan Grayson highlights the problems of a central bank detached from any effective oversight.

If you are still undecided whether the unconstitutional Fed is only responsible to its anonymous shareholders, watch Greenspan saying it in his own words.

The Crisis Is Contained, Isn't It?

Tuesday, July 05, 2011

Does this remind you of politicians and central bankers?

If the Dollar Were Backed by Gold An Ounce Would be Just Under $10,000

Monday, July 04, 2011

The seasonal summer doldrums may still be underway, but as only CDS spreads and uncertainties are rallying these days, Erste Group's gold analyst Ronald Stöferle could well hit the black spot, forecasting a gold price of $2,000/oz by the end of 2011.
Sorry for not delivering a summary, but this gold standard setting 47-page report is a full must-read for all gold investors and especially all those who still have doubts about a golden future for the oldest universally accepted currency in the world.
Only so much for a teaser: If the US money stock were to be backed by gold again, one ounce would cover 9,942 single dollar notes. Now go read the rest for a multitude of research gems.

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Anonymous Wants to File RICO Class Action Suit Against the Fed

Is the Federal Reserve an illegal extortion racket? International hacker group Anonymous believes so and has issued a video, encouraging the concerned public to come forward with legal and research assistance for an intended RICO (Racketeer Influenced and Corrupt Organizations) Act class suit.

Here is a transcript of the Video:

Roadsign to the Greek Apocalypse

Saturday, July 02, 2011

The timing of the Greek debt apocalypse is still uncertain, but probably not far away. This Greek roadsign says 2.2 kilometers.

Photo courtesy

Other words with Greek roots:

  • Crisis 
  • Catastrophy
  • Chaos

GUEST POST - Swiss Franc and the Possibility of Huge Mortgage Defaults in Central Europe Affecting Austria

Friday, July 01, 2011

--- by TheTrader ---
It was really easy getting that mortgage in Hungary, and the best of all, denominated in Swiss Francs, so the interest rate was low. Such a great plan, if it wasn’t for that currency risk. Ordinary people don’t think in such terms, and definitely did not hedge that exposure. With the ever increasing strength in the Swiss Franc, people with mortgages in Swiss Francs are starting to feel the currency effect big time. Since such a big proportion of the mortgages are taken out in non domestic currencies, people are squeezed. Could the Swiss Franc increase the debt repayments of the mortgages, and ultimately cause huge defaults in these countries?
GRAPH: Exotic Currency risk by retail business of Austrian banks. Austrian banks are most exposed to forex loans in the Czech Republic and Romania. Chart courtesy Stratfor.
Historically low interest rates on loans in Swiss francs have led consumers in major Central European countries such as Poland, Slovakia, Hungary and the Czech Republic to acquire substantial loans, particularly mortgages, in francs. Currently, 53 percent of outstanding mortgages in Poland and about 60 percent of those in Hungary are denominated in francs.

CHART OF THE DAY - Austrian Banks Exposure to Central Eastern Europe

Click to enlarge
Austrian banks have aggressively ventured into Central Eastern Europe since 1990 - and are now saddled with a huge share of problematic foreign currency loans in Euros and Swiss Francs. Graph courtesy of Stratfor.
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GUEST POST - Silver Producers Enter Profitable Phase

Wednesday, June 29, 2011

--- by Sean Rakhimov ---
Over the past nine months or so silver has finally garnered the attention it deserves in the financial headlines after virtually tripling in price in that period and challenging its all-time high of US$50/ounce, well in time for it to be helpful to those paying attention.

Live Video From Athens' Syntagma Square

A live video feed from the protest in Athens' Syntagma Square. Greek workers have called for a 48-hour general strike, opposing the austerity measures that are a pre-condition for the Greek bailout, currently estimated at €138 billion.
UPDATE: The livestream went offline. This is a video from last night in Athens.

Austria's Green Party In Position to Kill the Greek Bailout Package

Friday, June 24, 2011

While EU leaders look forward to a multitude of emergency meetings until July 20, when Greece has to pay back a government bond with a volume of €6.6 billion, the fate of Greece's bailout may ultimately lie in the hands of the Green party in the dwarf nation Austria.
Austria's Green Party sent an open (German language) letter to the country's chancellor Werner Faymann on Thursday, threatening to boycott a vote in the Austrian parliament where a 2/3 majority is needed for a change of the constitution that would allow Austria to participate in the €138 billion bailout package for the Hellenic peninsula. As a Euro member Austria has the obligation to take part in the bailout that is hugely unpopular with voters/taxpayers.
The Greens got 9.8% of the votes in Austria's latest elections, making them the 4th biggest party in the five party Austrian parliament.
In their German language letter published on the party's website the Greens demand 2 key adaptions of the bailout package from Austria's socialdemocrat-conservative coalition government. The letter is signed by Chairwoman Eva Glawischnigg, budget speaker Werner Kogler and foreign policy speaker Alexander van der Bellen.
  • Firstly the Greens demand an obligatory inclusion of private creditors (that's the banks) and the regulatory introduction of an orderly default mode for bankrupt Euro members that shall be part of the final version of the legislature of the moneyless €750 billion European Stability Mechanism (ESM) that shall come to life in 2013 when the current European Financial Stability Facility (EFSF) will end. The greens explicitly noted that chancellor Faymann should inform the other Euro governments of their intention to block a constitutional change for the ESM if such measures are not taken.
This initiative finds my full support as it is clearly written on the wall that the Eurozone will see more defaults than Greece only. This was also indicated by Dutch central bank governor Nout Wellink last week. He proposed to double the ESM to an almost unimaginable €1.5 Trillion. This sum may still not be enough as Greek debt currently stands somewhere between €310 billion and €467 billion.
Europe needs a clear framework for such events that are historically much more frequent than politicians want to admit. In the last 2 centuries almost every European country has defaulted at least once. It was a major political blunder in the creation of the Euro not to include rules for those who turn out to be too weak for the Euro.
  • Secondly the Greens would support the issuance of Eurobonds by the European Central Bank (ECB) as proposed by outgoing ECB President Jean-Claude Trichet, arguing that this would strengthen European solidarity and could also help preventing another attack of speculators on bonds of single countries.

UPDATED - ECB Website Went Down

Thursday, June 23, 2011

Die the European Central Bank (ECB) get hacked?
The website of the ECB at has been offline for more than an hour as of 14:20 GMT.
H/T to Austrian Tweeter @grasbueschel who was the first to note this event.
UPDATE: The ECB website went online again at 15:55 GMT

Total Exposure of Europe Towards Greece Stands at €310 Billion (Or €467 Billion?)

Greece, the heat is definitely on. According to this table (h/t @ZH_CB) based on official data and OpenEurope estimates Greece owes a tad more than €310 billion to its European bank creditors.
Total EU (EMU + non EMU) exposure to GRE  on Twitpic
Click image for better resolution
When checking single country data, the biggest conspicuousness is the exposure of French and German banks coming in at €165 billion or more than half of the total exposure and this again is much more than admitted by the European Commission last November, which put German bank exposure with €28 billion at hardly two Fifths of the sum stated now.
This again raises the questions if we are told 99% lies or is it even 100%.

FWIW: The Fed's Key Indicator Forecasts for 2011 - 2013

The Federal Reserve has had a dismal record with its projections of key indicators in the past decade. As the Fed has expressed a clear bias towards optimism, only to revise everything to the downside, I would take the latest forecast with no less than at least 2 grains of salt.
This time is no different. The Federal Reserve Board and the presidents of the local Fed banks has reduced its forecasts mostly to the downside
Click for fullscreen mode in order to read the Fed's very optimistic forecast that now projects only 2.7% to 2.9% GDP growth in 2011 after an April set of data that had seen GDP growth markedly higher at 3.1% to 3.3%. Inflation is expected to remain below 2% but we all know that the Consumer Price Index (CPI) has rather become a Cheap Political Instrument that is manipulated by hedonic changes according to the whim of TPTB in the past 2 decades.
Make sure to check out the graphical display of the Fed's forecasts on page 2 of the document displayed below.
Fed key indicator forecasts 2011-2013
Click to enlarge
The Fed itself, mandated to keep inflation low and employment high, meanwhile takes itself out of the game. Fed Chairman Ben Bernanke said in the second press conference ever after a FOMC meeting that he expects to stand on the sideline for at least another 2 to 3 meetings, keeping the Fed Funds rate unchanged at between 0% and 0.25%.

British MEP Blasts EU For Greek Bailout, Says It Will Lead to 3rd Bailout

Wednesday, June 22, 2011

Nigel Farage, Member of the Europen Parliament (MEP), lambasted the European Parliament (EP) on Wednesday, saying that the planned EU growth package puts Greece on the straight road for another bailout.

Farage also reminded Greek MEP Niki Tzavela that Britain left the European Exchange Rate Mechanism (ERM) in 1992, after it was forced to raise interest rates to the double level of Germany then. This had cost the UK one million jobs.
Nigel Farage is the only knowledgeable MEP who understands that the EFSF and ERM will not work as described here 20.10.2010 - The Day The EU Started Dying and here "The ESM Will Be Just Another Failed Attempt Of Fighting Debt With Debt".

Debtocracy - The Movie

Tuesday, June 21, 2011

Watch this video! For the first time in Greece a documentary has been produced by the audience. “Debtocracy” seeks the causes of the debt crisis and proposes solutions, hidden by the government and the dominant media. It has become an instant hit with more than one million views on various platforms since it was published.
The movie has been online since a month and delivers both a timeline of the Greek debt crisis plus statements from discontent Greeks who criticize the prevailing neoliberal policies that grounded the roots if Greece's fiscal disaster by uninhibited deficit spending. It has to be noted that the decision to accept Greece as a Euro member had been inofficially taken long before Greece joined the Euro on June 19, 2000 as the first new Euro member after the initial 14 countries and special zones like the Vatican had adopted the currency on December 31, 1998. As it now comes to light, EU officials and central bankers had discarded all warning signs in their political drive to spread the common currency across the continent and were well aware that Greece had cooked its economic statistics books.

Was Greek Finance Minister Fired Because of a Slip of Tongue?

Friday, June 17, 2011

Faced with a debt crisis that will finally see no other cure than a Greek default Premier Georges Papandreou has reshuffled his cabinet on Friday, replacing Finance Minister George Papaconstantinou with Evengelos Venizelos, who held the post of Defence Minister until now.
According to Bloomberg G-Pap fired his finance minister in orer to quell a rebellion amongts his own party ranks.
But there may me more to the story. On Wednesday ran an alert saying "PAPACONSTANTINOU: GREECE CAN'T ACCESS MARKETS"
This alert, where Papaconstantinou effectively conceded Greece's default, was never followed by a backup story and was never seen on any other newswire.
It may have been exactly this slip of tongue sending Greek yields somewhere close to the moon. 30% yields are certainly designed to shut out Greece from capital markets. Or could you afford that?
The theory gets a little more weight from 2 contradictory statements from Berlin on Wednesday morning. First Berlin called for a delay of negotiations until September and only a few minutes later the German government came out saying that Greece could expect emergency help at any time.

Video Proof That the Euro Has Not Worked for Greece

Wednesday, June 15, 2011

If anyone still needs proof that the Euro is no good concept for Europeans, but just another fiat money-Ponzi ending in foreseeable massive devaluation, check out this bird view of protests in the Greek capital Athens. Greek CDS spreads rocketed an unprecedented 170 basis points to a record 1,760 bp and we can comfortably rule out any contribution from the tourism industry this year
Prime Minister Georges Papandreou has offered his resignation on Wednesday. This may bring a new face, but do nothing to resolve the Greek Euro disaster.

VIDEO: More than 40,000 protesters spread violence in Athens as the government wants to save €30 billion in the next 3 years, employing radical austerity measures dictated by creditors and the IMF.
Only one thing changed in deadlocked negotiations in the past 2 weeks. Estimates for the needed package shot up 50% to €120 billion, after a €100 billion package arranged in 2010. When guesstimates arrive at such wide ranges I doubt that we are yet at the end of that deficit road.

A First In History: The Coming Simultaneous European Banking Collapse

Sunday, June 05, 2011

Watching international financial policy persisting on a concept to fight debt with more debt in an environment where official GDP growth rates only remain positive because of ridiculously low deflators, while interest rates apart from those central bank help for banks via laughingly low interest rates begin to surge everywhere else, this observer begins to wonder if one can expect anything else than a fast-rolling, simultaneous European banking collapse.
Engulfed in more exponentially rising debt on public and private levels than ever before there simply cannot be another end of the longest growth cycle in history than a simultaneous collapse of international banking when lending freezes up due to fears about the real creditworthiness of the respective counter party.
Globalization will have made it possible.
Bank Reserve Requirements: EU 2% - China 21%
The rise of supra-regional financial institutions that have evolved from two decades of radical deregulation of financial markets and are now too big to fail overshadows all major industrial nations as it has given birth to unprecedented bulks risks never seen before. The situation gets aggravated by the fact that banks have never held more derivatives than nowadays.

True Finns Leader Attacks "Brussels-Frankfurt Extortion Racket" in WSJ Opinion Peace

Monday, May 16, 2011

Timo Soini, the leader of the True Finns party, rides a scathing attack against the European Union (EU) and the European Central Bank, calling the institutions an extortion racket in a guest commentary for the Wall Street Journal (WSJ).
Soini says his party blocks a continuation of a failed policy of fighting debt with more debt and claims that Greece, Ireland and Portugal are already ruined.
Enjoy the full opinion piece which expresses the feelings of the majority of Europeans who do not want solidarity in debt. How much longer will it take until the official Europe acknowledges its Euro project has failed?

Why I Don't Support Europe's Bailouts

Our political leaders borrow ever more money to pay off the banks, which return the favor by lending ever more money back to our governments.

--- by Timo Soini ---
When I had the honor of leading the True Finn Party to electoral victory in April, we made a solemn promise to oppose the bailouts of euro-zone member states. Europe is suffering from the economic gangrene of insolvency—both public and private. Unless we amputate that which cannot be saved, we risk poisoning the whole body.
To understand the real nature and purpose of the bailouts, we first have to understand who really benefits from them.
At the risk of being accused of populism, we'll begin with the obvious: It is not the little guy who benefits. He is being milked and lied to in order to keep the insolvent system running. He is paid less and taxed more to provide the money needed to keep this Ponzi scheme going. Meanwhile, a symbiosis has developed between politicians and banks: Our political leaders borrow ever more money to pay off the banks, which return the favor by lending ever more money back to our governments.
In a true market economy, bad choices get penalized. Instead of accepting losses on unsound investments - which would have led to the probable collapse of some banks - it was decided to transfer the losses to taxpayers via loans, guarantees and opaque constructs such as the European Financial Stability Fund.
The money did not go to help indebted economies. It flowed through the European Central Bank and recipient states to the coffers of big banks and investment funds.
Further contrary to the official wisdom, the recipient states did not want such "help," not this way. The natural option for them was to admit insolvency and let failed private lenders, wherever they were based, eat their losses.
That was not to be. Ireland was forced to take the money. The same happened to Portugal.
Why did the Brussels-Frankfurt extortion racket force these countries to accept the money along with "recovery" plans that would inevitably fail? Because they needed to please the tax-guzzling banks, which might otherwise refuse to turn up at the next Spanish, Belgian, Italian or even French bond auction.
Unfortunately for this financial and political cartel, their plan isn't working. Already under this scheme, Greece, Ireland and Portugal are ruined. They will never be able to save and grow fast enough to pay back the debts with which Brussels has saddled them in the name of saving them.
Setting up the European Stability Mechanism is no solution. It would institutionalize the system of wealth transfers from private citizens to compromised politicians and failed bankers, creating a huge moral hazard and destroying what remains of Europe's competitive banking landscape.
Fortunately, it is not too late to stop the rot. For the banks, we need honest, serious stress tests. Stop the current politically inspired farce. Instead, have parallel assessments done by regulators and independent groups including stakeholders and academics. Trust, but verify.
Insolvent banks and financial institutions must be shut down, purging insolvency from the system. We must restore the market principle of freedom to fail.
If some banks are recapitalized with taxpayer money, taxpayers should get ownership stakes in return, and the entire board should be kicked out. But before any such taxpayer participation can be contemplated, it is essential to first apply big haircuts to bondholders.
For sovereign debt, the freedom to fail is again key. Significant restructuring is needed for genuine recovery. Yes, markets will punish defaulting states, but they are also quick to forgive. Current plans are destroying the real economies of Europe through elevated taxes and transfers of wealth from ordinary families to the coffers of insolvent states and banks. A restructuring that left a country's debt burden at a manageable level and encouraged a return to growth-oriented policies could lead to a swift return to international debt markets.
This is not just about economics. People feel betrayed. In Ireland, the incoming parties to the new government promised to hold senior bondholders responsible, but under pressure they succumbed, leaving their voters with a sense of disenfranchisement. The elites in Brussels have said that Finland must honor its commitments to its European partners, but Brussels is silent on whether national politicians should honor their commitments to their own voters.
I was raised to know that genocidal war must never again be visited on our continent and I came to understand the values and principles that originally motivated the establishment of what became the European Union. This Europe, this vision, was one that offered the people of Finland and all of Europe the gift of peace founded on democracy, freedom and justice. This is a Europe worth having, so it is with great distress that I see this project being put in jeopardy by a political elite who would sacrifice the interests of Europe's ordinary people in order to protect certain corporate interests.
The BBC offers a useful info graphic, comparing the PIG with the rest of Europe. It is not a rosy picture at all, considering that deficits in the EU have been growing similar to the development in Russia before its collapse in 1998.
UPDATE: A Bloomberg report confirms Soini's worries, saying a Portuguese austerity package could lead to a Greek-style recession.
Portugal may have followed Greece into recession even before implementing austerity measures demanded for its European Union bailout that are set to further choke the economic growth needed to tame the country’s debt.

Data to be released tomorrow may show the economy shrank 0.3 percent in the first quarter, economists surveyed by Bloomberg forecast, matching the contraction of the previous three months. The slump may deepen as the government starts executing the spending cuts and tax increases it agreed to in return for its 78 billion-euro aid package.
“With the adjustment measures, the outlook for Portugal in the next few months isn’t good, particularly in terms of consumption,” said Francisco Vidal, an economist at Intermoney Valores in Madrid. Portugal, Ireland and Greece will make up the lagging group of European nations from an economic standpoint, he said.

Constitution Thrashed: US President Can Now Declare Wars Without Asking Congress

Thursday, May 12, 2011

This must be the most overlooked attack on the US Constitution. A Bill from the Republican leadership, passed by Congress on Thursday shifts the power to declare war from Congress to the President.
The National Defense Authorization Act (NDAA) effectively enables the US President to declare unlimited worldwide war on terror, circumventing Congress and the Constitution, warns the American Civil Liberties Union (ACLU):

We Feed The World - And It Must Not Be Left to Speculators

Tuesday, May 10, 2011

One of the best decumentaries ever made on the craziness in the food industry.

Every day in Vienna the amount of unsold bread sent back to be disposed of is enough to supply Austria's second-largest city, Graz. Around 350,000 hectares of agricultural land, above all in Latin America, are dedicated to the cultivation of soybeans to feed Austria's livestock while one quarter of the local population starves. Every European eats ten kilograms a year of artificially irrigated greenhouse vegetables from southern Spain, with water shortages the result.

It's Official: Euro Crisis Will Last For Many Years To Come

Tuesday, May 03, 2011

4 years into the biggest financial crisis in history the EU's super watchdog ESRB (European Systemic Risk Board) has officially announced that the banking disaster will stay with us for many years to come. While the report concludes correctly that banks have to undergo stronger supervision and withdraw from risky gambling with structured assets and derivatives the past 4 years have shown that this will remain a wish forever.
From EUObserver:

List of Central Bank Interest Rates Worldwide

Saturday, April 30, 2011

Central Bank Leading Interest Rates April 2011

Only 30 Years After First US Deficits, S&P Cuts Outlook to Negative

Monday, April 18, 2011

It is nice to be right once in a while. After more or less 3 decades of double and triple deficits ratings agency Standard & Poor's has changed the outlook for US government debt to "Negative".
From Reuters:

Standard & Poor's on Monday downgraded its credit outlook for the United States, citing a "material risk" that policymakers may not reach agreement on a plan trim its large budget deficit.
While the agency maintained the country's top AAA credit rating, it said that authorities have not made clear how they will tackle long-term fiscal pressures.
S&P said the move signals there's at least a one-in-three chance that it could cut its long-term rating on the United States within two years.
"Because the U.S. has, relative to its AAA peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revise dour outlook on the long-term rating to negative from stable," S&P said in a release.
U.S. government bond prices fell after S&P's announcement, while stock futures extended losses and the dollar pared gains against the euro.
"The headline has enough of a shock value. The initial reaction is that this is negative for dollar assets across the board." said Lou Brien, a market strategist with DRW Trading in Chicago.
Outstanding public U.S. debt has swelled to more than 60 percent of total output in the aftermath of the 2007-2009 financial crisis, and with a budget deficit projected at more than 0.69€ trillion, is set to grow further.
A U.S. Treasury official said the S&P negative outlook underestimates the ability of U.S. lawmakers to tackle the country's fiscal challenges.

The first post of this blog dealt with the questionability of the US "AAA" rating 6 years ago.
US AAA Rating - How Much Longer???
The strategy for 2011 remains unchanged as chances of a simultaneous replacement of Federal Reserve Notes and Euros with some new funny IMF fiat currency are rising rapidly with every day.
The Prudent Investor's Forecast and Strategy 2011
There is no need for a new artificial global reserve currency. Today's new highs in gold proves the oldest universally accepted currency in the world is back on its way to regain that status again.

List of Central Bank Interest Rates Worldwide

Friday, April 08, 2011

Central Bank Leading Interest Rates April 2011

4-Minute Tour of a Spanish Ghost Town

Friday, April 01, 2011

Europe's latest import from China: the ghost town.

VIDEO: The Spanish town of Soto del Henares stands virtually empty.
A search on Soto del Henares returned mostly property forums on top. Last entries date from early 2009. Another ruin of the modern times.

See the Irish Property Bust: Ghost Estates and 1 Million Empty Homes

Thursday, March 31, 2011

While waiting on the results of the Irish bank stress test, sniff out Ireland on the ground. Join our virtual tour of the collapsing Republic of Ireland and see its widespread eyesore called 'ghost estates'. In the world's economic disaster zones Ireland weighs in with roughly one million excess homes, the result of a decade of low interest rates and banks willing to sponsor any and every building project that will leave a final tab of anywhere north of €300 billion.
Forget the statistics, this economy is definitely dead.

VIDEO: Ghost estates are defined as building projects of 10 or more units where more than half are empty or unfinished.
By now all Irish banks have been nationalized, leaving taxpayers to foot the bill of the country's financial and economic crisis. So far banks have received a whopping €208 billion or 154% of Ireland's GDP in aid from the ECB and the Irish central bank, another €67 billion come in state guarantees and IMF loans. Ireland is wrecked and this is only the first Euro member to crush under its debts.
Maybe it would have helped if YouTube had been around earlier. Check this Irishman who knew how it would all end - 13 years ago.

See the Spanish Property Bust: Ciudad Fantasma

Wednesday, March 30, 2011

Readers of this blog have known it since 2007: The Spanish property bust was only a matter of when, not if.
Our virtual adhoc tour of economic disaster zones brings us to Spain today.
Watch this video of a Spanish ghost town (h/t @izakaminska), ironically named "Ciudad Fantasma". It is definitely a good indicator for the challenges Spain faces. This is the result of a decade of low interest rates and banks willing to finance every building project without many questions asked. According to Spanish realtor Tinsa prices fell 4.5% in the last 12 months to February and there is no end of the decline in view.

VIDEO: Ciudad Fantasma is only one of countless ghost communities that litter Spain and will become the ruins of modern times.
The video above is from 2009.
Here is one from September 2010.

Austrian Banks Get Dressed Up, Slash Loss Provisions (And More News from the Alpenrepublik)

Tuesday, March 29, 2011

Balance sheet alchemy has bloated the bottom line of the Austrian banking industry which is expected to report operating group profits of €4.58 (2009: €1.53) billion in 2010. The rosy figure is spiked with thorns though, shows a (German only) release from Austria's central bank, Oesterreichische Nationalbank (OeNB). With overall business growing in the 1% range, banks resorted to slashing their loan loss provisions by €3.25 billion, or €200 million more than the net change of €3.05 billion at the banks' bottom lines.

See the China Property Bust: An Empty City For 12 Million People

Are you long the China stock market? Better reconsider your position! This video (h/t @izakaminska) about a Chinese town for 12 million people that has been standing empty for 6 years will shatter any illusions that China's property slump may be short term.
Forget all statistics, business is definitely dead here.

Millions and millions of empty apartments may lead to massive social unrest. It cannot be ruled out that inflation-hit Chinese peasants could one day take over these apartments. Such a redistribution of property may also be called civil war.

The ESM Will Be Just Another Failed Attempt Of Fighting Debt With More Debt

Friday, March 25, 2011

After 5 months of political haggling the European Union has finally agreed on the next rescue package for the Euro. But the so called European Stability Mechanism (ESM) is just another debt issuing vehicle that cannot make up for the fact that all Eurozone members are trundling along in an anemic economy that faces more pressure from runaway commodity prices and rising interest rates.
While the ESM agreement talks of a €700 billion fund, it is actually only an empty shell. Strained Eurozone nations will only inject €80 billion in five annual tranches, a sign that even Germany is not exactly a strongman among Europe's weak. Germany will inject €22 billion between 2013 and 2017.
Chancellor Angela Merkel Thursday said she would seek to secure an agreement for Germany to spread its contributions to the euro zone's permanent bailout fund over five years instead of the three- to four-year timeline European Union leaders had been discussing, the WSJ reported.
The other €620 billion are only guarantees from the Euro countries and who believes anymore into such promises of battered European politicians?
Altogether the ESM is just a dressed-up version of the 'temporary' €440 billion European Financial Stability Facility (EFSF) which it will replace in 2013 as a permanent bailout instrument for profligate governments.
Hopes for a cheap way out of the European debt crisis will probably be futile. Only six Eurozone countries still brandish a AAA rating (Austria, Finland, France, Germany, Luxembourg, Netherlands). It will be difficult to gain a AAA rating for ESM debt issues as the other Eurozone members are basically nothing else than the subprime borrowers were in the US housing bubble.
The rating agencies will want to avoid a repeat of their debacle, when they rated subprime with AAA and started the biggest financial crisis in history.
The timing for the new debt facility may come a bit late too. While bare cash needs of banks have subsided in the recent past, banks and governments still face a near term future of higher funding costs that will punch their bottom lines or the budget hard.
Exploding CDS spreads for Greece, Ireland and Portugal are a strong indication that funding the weak Euro members - as if there would be a strong member - via the EMS facility with a probably inflated rating may not become as easy as EU politicians are wishing for.
Portugal needs €75 billion now and not in a distant 2013.
The current ESFS vehicle has not been seen in capital markets after it issued a €5 billion benchmark issue at 6 basis points over Germany in last January.
Over 2011 and 2012 the EFSF will in total raise up to €26.5 billion in the capital markets as part of the Irish support programme which will include two further benchmark bonds of €3-5 billion per transaction in the current year. In 2011 the EU under the EFSM will raise up to €17.6 billion and in 2012 up to €4.9 billion.
I highly doubt this is anywhere near the actual demands of troubled Eurozone countries in the running year.
As the debt comes hand in hand with a slew of austerity measures, Europe's left takes to the streets.
Belgian trade unions staged a mass protest in Brussels at the opening of the EU summit that turned violent.

VIDEO: Belgian trade unions took to the streets in Brussels, saying that the public does not accept the cuts in social budgets.
The ESM is not off to a good start. After a principal agreement reached on Thursday, politicians weighed in again on Friday.
Bloomberg has the details:

The Dollar Must Be In Deep Trouble: Uncle Ben Needs To Talk To You

Thursday, March 24, 2011

It's been a while since the Fed has gone into repetitive mode since the introduction of zero interest rate policy, with FOMC statements only changing in nuances while real inflation hits home hard.
As this may not be enough of a shield in a future of inevitable higher inflation - who would have called 70.37€ oil 'good news' once - Federal Reserve Chairman Ben Bernanke now creates a new platform to table the Fed's view.
According to a stunning Fed press release, Bernanke will make good on his almost decade old vision: to transmit FOMC meetings live, adding more spice to traders' lives. Bernanke's step is not the whole nine yards but a move in the right direction. For the first time in history the Fed will enter into a regular Q&A session, following the ECB which has held press conferences after rate decisions since its inception.
From the Fed release: 
Chairman Ben S. Bernanke will hold press briefings four times per year to present the Federal Open Market Committee's current economic projections and to provide additional context for the FOMC's policy decisions.
In 2011, the Chairman's press briefings will be held at 2:15 p.m. following FOMC decisions scheduled on April 27, June 22 and November 2. The briefings will be broadcast live on the Federal Reserve's website. For these meetings, the FOMC statement is expected to be released at around 12:30 p.m., one hour and forty-five minutes earlier than for other FOMC meetings.
The introduction of regular press briefings is intended to further enhance the clarity and timeliness of the Federal Reserve's monetary policy communication. The Federal Reserve will continue to review its communications practices in the interest of ensuring accountability and increasing public understanding.
As this is a remarkable development one wonders, why?

Inflation Is Moderate, Only Prices Rise Like Mad - Costa Rica Edition

Friday, February 04, 2011

Costa Rican frog
If you think about moving to a sunny exile in order to escape the suicidal politics of perma-money-printing that has been engulfing the bigger part of this world in the last 10 yeards, better act fast or you may suffer a price shock on the way out.
Forget about any "official", i.e. doctored, inflation figures in the low single digits. In reality, prices rise like mad worldwide.
Leafing through the two latest print issues of Costa Ricas expat weekly Tico Times I stumbled about this ad posted in the January 28 edition.
Shipping a standard 40-foot container from Miami to your residence here was 4,365.22€ last week.
That has changed dramatically. Only a week later the same service is offered for 5,092.76€ Without applying any hedonic changes this is a huge 16.67% jump in a week.
So much about tame inflation. Don't expect that changing your residence could save you from the global inflationary onslaught. Bar chats revolve around the same central topic as everywhere else in the world. While official inflation is stated at 6.4% in this lovely Central American country, oldtimers here estimate it closer to 20%.

CHART OF THE DAY: Oil Prices vs. Food Prices

Saturday, January 29, 2011

Keep it simple and see the coming food-energy price spiral. The FAO Food Index and EIA oil index show a very high correlation of 0.93, according to this graph plotted by Paul Chefurka.

GRAPH: Food prices doubled in the last 11 years while oil rose more than 150%. Data: Nov 2000 to Nov 2010 by EIA, FAO. Chart courtesy Paul Chefurka
As global protests have spread to Saudi Arabia oil prices are destined to lead the next step up and remain high. The possibility of supply disruptions by either a closure of the Suez Canal or riots getting out of hand in Saudi Arabia will put in a solid floor at current levels.
This does not bode well for food prices. Check some 11.1 million Go ogle results for "rising food prices" or look at your latest grocery bill.
Forget about seemingly stable "core" ex food/energy inflation and tepid "consumer price indices" with overweighted consumer electronics and underweighted everyday needs. No human being can fight inflation by stopping to eat and no business can cut its energy consumption deliberately. Riots in Africa are not for cheaper iPads but stable food prices.

Alan Greenspan Advocated For A Gold Standard - In 2007

Saturday, January 22, 2011

Hold your breath. This must be the most overlooked video of former Federal Reserve Chairman Alan Greenspan and it's beginning to make news more than 3 years after its original recording.
Greenspan, creator of the biggest fiat money bubble in the world until his retirement in 2006, not only considers the question of the necessity of a central bank "very interesting" but says, yes, says, that fiat money creation must be limited by a gold standard (or a currency board).

VIDEO: Alan Greenspan advocates a gold standard to restrict the limitless money supply in a fiat money system and says the (central bank free) period of 1870 to 1914 is a good example.

The Prudent Investor's Forecast and Strategy 2011

Thursday, January 13, 2011

BONDS: The 20-year interest rate downtrend reversed in 4Q10: Short all government bonds (and hope your counter party will remain solvent.)
Rising rates will become the tightening noose for all debtors. Mortgage holders may find comfort by switching to fixed rate contracts as far out as possible.
SHARES: As inflation heats up, go long energy, food stocks (and convert ensuing profits into gold.) Underweight consumer (durables) products in a cool economic environment, short debt-laden financials, especially the "dumb money" insurance sector.
DERIVATIVES: Stay away from all OTC instruments as your contract will ultimately only be worth as much as your counter party can pay. Square all derivatives in disguise like ETFs.
COMMODITIES: Buy silver as it is still 70% away from its nominal high seen in 1980 and has a dual use as money and industrial resource. Take profits once gold:silver ratio has descended to 1:30 and reenter after technical consolidation. All other commodities have reversed and have overshot the mean by now.
CURRENCIES: Buy the real stuff - gold. All other fiat currencies are just a claim on some central bank counter party and historically they have all wrecked their product via inflation in the last 300 years.
Once you have done this handful of trades, turn off the charts, lean back, contemplate the world and check back here in January 2012.

Wikinvest Wire