Gold World News Flash

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• Gold Stocks At Historically Cheap Levels! Here?s Why
• Europe's Funding Scramble: Peeking Below The Calm Surface Waters Of French Bank Liquidity (And Lack Thereof)
• Europe's Funding Scramble: Peeking Below The Calm Surface Waters Of French Bank Liquidity (And Lack Thereof)
• What Could Lie Ahead for the S&P 500 & Gold
• Pavlov Rang the Bell
• Real Stimulus vs. Corporate Plundering
• Alasdair Macleod: Gold, politics, and Venezuela
• Ambrose Evans-Pritchard: Euro bailout in doubt as ‘hysteria’ sweeps Germany
• Weekly wrap and full audio of Davies and Lassonde interviews at King World News
• Expect spectacular short-covering rally in gold, Turk tells King World News
• GoldSeek’s Peter Spina describes bypassing the mainstream media
• Mene, Mene, Tekel, Upharsin - The Handwriting on the Wall
• 2012 Australian Kookaburra Silver Coins Announced
• GoldSeek.com Radio: John Williams, Charles Goyette, Robert Ian, The International Forecaster, and your host Chris Waltzek
• Gold Once Again Rising After Dramatic Drop
• Silver Market Update
• Housing Time Bomb Goes Tick Tock Tick Tock
• Vulture Bargain Update for August-September Posted
• Bob Chapman: A Monetary Maze From Which There Is No Easy Escape
• Ron Paul on FOX News Talks Fema, Libya, Mises & More
• The Five ?M’s” for Picking Gold Mining Stocks
• Guest Post: Has Gold Unwound its Overbought Status?
• Richard Russell - Gold Will Break to New All-Time Highs
• Gold, politics and Venezuela
• Ben Davies - Monetary Blunders & How it Will Impact Gold
• 100% Money
• Ambrose Evans-Pritchard: Euro bailout in doubt as 'hysteria' sweeps Germany
• Global Economic Growth Stalls Amidst Debt Crisis, Austerity
• September 23: The Beginning Of The End For Merkel... And The Eurozone?
• Nick Clegg Needs To Demand Action Over Chancellor's Reckless Economic Policy

Gold Stocks At Historically Cheap Levels! Here?s Why Posted: 28 Aug 2011 04:23 PM PDT One market trend that seems to be attracting more and more attention is the large performance gap between gold bullion and gold stocks. The price of gold bullion has increased roughly 28 percent in 2011, while the S&P/TSX Gold Index is down [about]*1 percent. [Let me convey why that is the case.] Words: 1001 So says Frank Holmes ([url]www.usfunds.com[/url]) *in an article* which Lorimer Wilson, editor of www.munKNEE.com (It's all about Money!), has further edited ([* ]), abridged (…) and*reformatted*below**for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.*Holmes goes*on to explain: BMO Capital Markets have offered one reason behind the performance gap, saying:* [INDENT]"The rate of change in the gold price has been high over the past decade, perhaps too high for investors to gain confidence in that price as sustainable for an equity investment decision"*9a...

Europe's Funding Scramble: Peeking Below The Calm Surface Waters Of French Bank Liquidity (And Lack Thereof) Posted: 28 Aug 2011 04:14 PM PDT That European wholesale, and particularly dollar, funding has been "problematic" in past weeks is an understatement. One merely needs to look at the Fed's recent expansion in its transatlatnic swap lines to figure out that someone, somewhere is struggling to meet their USD-denominated obligations. However, is it just one bank, as recent data out of the ECB suggest, or is this merely a symptom of a far more acute underlying cause? Alas, as Barclays' Joseph Abate confirms by looking at the transformation in funding patterns within that most fulcrum of European banking systems - that of France - the threat is far more prevalent than has been speculated. In fact, based on the rapid transition in funding from unsecured to secured lending markets within French banks in general, and one name in particular, it seems that while SocGen stock may have avoided its daily rout courtesy of the extension in the short selling ban, there is a far greater concern for the bank: one of maintaining orderly daily operation funding. And there is little that European stock market regulators can do to restore liquidity, aka confidence, once it starts evaporating. Which it has... although mostly in unsecured markets... for the time being. Should secured funding (ABCP and Repo) wilt next, then it gets really, really bad. To wit: "Bank funding worries have flared up again with the news that the Federal Reserve's currency swap line with other central banks has been tapped at least twice this month. The trivial amounts borrowed belie significant wholesale funding stresses for some institutions in dollar markets." Let's take a look at what "some" means... Abate's summary: Total financial CP outstanding is down 15%, or $90bn, since the start of June. Foreign bank outstandings are down nearly 20%, accounting for almost half of the decline in total financial CP over the period. WAMs have shortened as issuance piles up in overnights and replaces longer tenor (3m) paper. Average overall daily financial CP issuance has fallen to $3.5bn since June – down more than 50% from the average pace between January and May. The reduction in prime money fund holdings of French paper has been comparatively small – about $15bn in July. However, the decline probably accelerated in August. Given their confidence shock and the market's sensitivity to bank funding news, it will probably take some time before prime funds return to unsecured lending markets. Repo and demand for bills (along with AB-CP) should therefore remain robust through the fall. Step 1 is admitting you have a problem... Although the pullback in dollar funding for these banks has not reached crisis proportions given their large liquidity cushions, it has likely caused some banks to reduce their activity in dollar markets. Operations such as matched books and securities stockpiling that require access to large amounts of dollar funding are being scaled back. ...Alas, nobody is prepared to do that yet. Which means the dollar will have to do it for them. And it already is, pretty much everywhere, except Libor: Bank funding markets can't seem to catch a break. After some calm in 2009, worries about exposures to sovereign credit have flared up several times since 2010. And although the current flare has not pushed LOIS up as dramatically as in early 2010, it has pushed term LOIS about 20bp wider in 2012 (Figure 1). The modest reaction in spot Libor, however, belies significant strains in the market. Indeed, news that the Fed's currency swap program was tapped at least twice this month for trivial, one-week amounts set off a  firestorm of super-heated press coverage. As we have written, these borrowings are expensive and likely represent the actions of small banks completely shut out of dollar funding markets. They are by no means representative of the behavior of large, multi-national global institutions. That said, speculation and concerns are likely to continue in an already-nervous marketplace, but the signs of true financial stress lie elsewhere. Unsecured funding in the form of non-AB Commercial Paper is now virtually frozen: While the borrowings from the Fed's liquidity program have taken center stage, the financial stress experienced by the largest banks has shown up primarily in the CP market, where banks are finding it more difficult to raise dollars. Financial CP outstanding has  declined by 15%, or $90bn, since the end of May (Figure 2). And the decline in paper outstanding from foreign institutions has also been acute – down nearly 20%. By contrast, domestic outstandings are down 3% over the same period. (Domestic issuers with foreign bank parents have experienced the biggest decline in outstanding paper – down 24% since the end of May) It gets better... er, worse. Troublingly, the decline in outstandings has been accompanied by a sharp change in issuance patterns. Daily issuance has fallen from an average of $7.4bn/day between January and May to $3.5bn/day since the start of June. At the same time, the issuance has  become much shorter. Paper with an original maturity of more than three months has declined from 15% of total issuance in May to 10% so far in August. The result is that the WAM of all CP outstanding has contracted two days since the end of July. In effect, investors (typically money funds) are rolling less paper, and at a shorter maturity than earlier this year, reflecting their unwillingness to take on term unsecured bank risk.   Compared with the behavior of the commercial paper market during the first sovereign flare-up in spring 2010, the decline in outstandings has been a bit steeper (Figure 3). Outstanding financial paper declined by nearly 10% in the nine weeks following the  April 27, 2010, S&P downgrade of Greek sovereign debt. By contrast, in the nine weeks after June 1, outstanding financial paper has declined by 15%. Sorry Italy, this time nobody cares about you. It is all about AAA-rated (not for long) France: In recent weeks, particular attention has been focused on French banks and their access to dollar funding. But how much has their funding declined? The Federal Reserve does not break out the CP data by the origin of the bank's headquarters. However, the CP figures ignore other sources of French bank dollar funding – particularly Yankee CD issuance, which for most global banks is a much larger portion of their financing, as well as repo. Although imprecise because it ignores other cash lenders, we reckon we can estimate the total amount of French bank dollar funding by examining trends in the money fund holdings.   Four banks (BNP, Societe Generale, Natixis, and Credit Agricole) account for nearly all the money fund exposure to France. As of July 29, total money fund holdings of these banks' paper – in deposits, repo, and commercial paper – amounted to 8.6% of institutional prime fund balances. By contrast, at the end of June, these banks accounted for 9.0% of prime institutional balances. Fitch puts the money fund exposure to these four institutions at around 11% of its sample of the ten largest prime money funds, mostly unchanged from the end-of-July ratio of 11.2%. The difference between our calculations of prime fund French exposure and Fitch's estimate reflects the fact that the latter is based on a sample of the largest prime funds, while ours is based on the entire universe. Clearly, the 60% of the funds outside of the Fitch sample hold little to no French paper, so the aggregate holdings (8.6%) are smaller than Fitch's estimate of 11% from the bigger players.   At first blush, French bank dollar funding from the nearly $1trn prime institutional money fund industry appears to have hardly changed – falling by less than $15bn, to $79bn at the end of July. Our calculation is only $5bn more than the amount of the reduction implied by the Fitch figures. The estimated $15bn reduction across all front-end instruments is smaller than the reduction in foreign bank CP (including domestic banks with foreign parents) during July, which totals $30bn. In other words, the contraction in foreign bank CP outstanding has not been exclusively a French bank story; other banks' access to unsecured funding has also retreated. How about second blush? We believe that the relatively small reduction in money market funding of French banks belies a significant change in the composition of that financing. We split the funding from prime institutional money funds into secured (repo and asset-backed CP) and unsecured (primarily deposits and CP) for each of the four banks in both June and July. The figures reveal that the two largest money fund funders (BNP and SocGen) – kept the level they borrowed from these money funds constant in July (at roughly $25bn each) by shifting from unsecured to secured instruments. For instance, the proportion of BNP unsecured funding from prime funds declined from 76.2% in June to 72.6% in July. Likewise, SocGen reduced its unsecured financing from 95.3% to 83.8%. The remaining institutions, by contrast, did not change their funding mixes, which remain heavily skewed to deposits. Between them, they saw their funding from money funds decline by an average of 36%, accounting for all of the small reduction in French bank CP funding. Thus, the French banks have reacted to market funding concerns mostly by altering the composition of their funding – reducing the amount of deposits and commercial paper they sell to prime money funds while increasing their repo borrowings.   Of course, it may be premature to dismiss a sharper decline in money fund holdings of French banks' short-dated paper and a deeper contraction in their access to dollar funding. In the weeks since the end of July, foreign bank CP has contracted by an additional $30bn. And it is possible that there has been a further reduction in deposit and repo holdings. However, these updated data will not be available until mid-September. More important, is a reduction in access to front-end financing a significant problem for foreign banks? So we have an unsecured paper funding crisis. Now what? Why, enter the Fed of course, which again generously bailed out foreign banks with a massive dollar deposit surge as reported first by Zero Hedge. Ah yes, but the nearly 20% drop in USD deposit balances at the Fed is the clearest warning sign that not even the Fed is bailing out Europe's banks properly any longer. From the perspective of the European banks, the reduction in their money fund financing is significant but not incapacitating. These institutions have so far nimbly shifted the composition of their funding toward more secured alternatives to reduce the effects of the reduction in money market funding. And as many have already noted, non-US institutions have a surplus of dollars – most of which currently reside at the Federal Reserve. Foreign-related banks currently have an estimated $700bn on deposit at the central bank – of which an unknown but large proportion is owned by European banks. The decline in these balances since the end of QE2 in June, however, suggests that the increased difficulty of raising dollar funding may be causing these banks to cut back on operations that require plentiful access to dollar funding – such as their matched books and securities inventories. This is just the beginning... These banks are by no means desperate to raise dollar funding. Instead, they appear to be mostly holding the line on borrowing costs, refusing to chase yields higher. This (and their long dollar positions) is a reason the increase in Libor since its mid-June trough has been so mild – certainly compared with the 2010 sovereign flare-up. Of course, no bank – domestic or foreign – can survive for long without access to dollar funding. Instead, their thick dollar liquidity buffers and the winding down of certain dollar-heavy businesses buy banks several months and some flexibility such that the 60bp priced into the December ED contract seems a bit extreme. As always, Libor is the last to go: first very slowly, then very fast, as the entire French banking system, once one reads between the lines of the above, finds itself in funding limbo, and it last lifeline, that of secured repo funding, disappears. At that point we will be talking not about $500 million in USD swap lines going to rescue French banks, but vicious orders of magnitude greater. We just hope this latest market realization of facts happens after Labor day: is it too much to ask for at least one week without the world blowing up, please? Plus the higher stocks go up in the interim, the more fun it will be to short from a higher vantage point. Lastly, we are confident that uncle Warren is currently taking a bath with an atlas of Europe, feverishly trying to come up with his latest Eureka moment.

Europe's Funding Scramble: Peeking Below The Calm Surface Waters Of French Bank Liquidity (And Lack Thereof) Posted: 28 Aug 2011 04:14 PM PDT That European wholesale, and particularly dollar, funding has been "problematic" in past weeks is an understatement. One merely needs to look at the Fed's recent expansion in its transatlatnic swap lines to figure out that someone, somewhere is struggling to meet their USD-denominated obligations. However, is it just one bank, as recent data out of the ECB suggest, or is this merely a symptom of a far more acute underlying cause? Alas, as Barclays' Joseph Abate confirms by looking at the transformation in funding patterns within that most fulcrum of European banking systems - that of France - the threat is far more prevalent than has been speculated. In fact, based on the rapid transition in funding from unsecured to secured lending markets within French banks in general, and one name in particular, it seems that while SocGen stock may have avoided its daily rout courtesy of the extension in the short selling ban, there is a far greater concern for the bank: one of maintaining orderly daily operation funding. And there is little that European stock market regulators can do to restore liquidity, aka confidence, once it starts evaporating. Which it has... although mostly in unsecured markets... for the time being. Should secured funding (ABCP and Repo) wilt next, then it gets really, really bad. To wit: "Bank funding worries have flared up again with the news that the Federal Reserve's currency swap line with other central banks has been tapped at least twice this month. The trivial amounts borrowed belie significant wholesale funding stresses for some institutions in dollar markets." Let's take a look at what "some" means... Abate's summary: Total financial CP outstanding is down 15%, or $90bn, since the start of June. Foreign bank outstandings are down nearly 20%, accounting for almost half of the decline in total financial CP over the period. WAMs have shortened as issuance piles up in overnights and replaces longer tenor (3m) paper. Average overall daily financial CP issuance has fallen to $3.5bn since June – down more than 50% from the average pace between January and May. The reduction in prime money fund holdings of French paper has been comparatively small – about $15bn in July. However, the decline probably accelerated in August. Given their confidence shock and the market's sensitivity to bank funding news, it will probably take some time before prime funds return to unsecured lending markets. Repo and demand for bills (along with AB-CP) should therefore remain robust through the fall. Step 1 is admitting you have a problem... Although the pullback in dollar funding for these banks has not reached crisis proportions given their large liquidity cushions, it has likely caused some banks to reduce their activity in dollar markets. Operations such as matched books and securities stockpiling that require access to large amounts of dollar funding are being scaled back. ...Alas, nobody is prepared to do that yet. Which means the dollar will have to do it for them. And it already is, pretty much everywhere, except Libor: Bank funding markets can't seem to catch a break. After some calm in 2009, worries about exposures to sovereign credit have flared up several times since 2010. And although the current flare has not pushed LOIS up as dramatically as in early 2010, it has pushed term LOIS about 20bp wider in 2012 (Figure 1). The modest reaction in spot Libor, however, belies significant strains in the market. Indeed, news that the Fed's currency swap program was tapped at least twice this month for trivial, one-week amounts set off a  firestorm of super-heated press coverage. As we have written, these borrowings are expensive and likely represent the actions of small banks completely shut out of dollar funding markets. They are by no means representative of the behavior of large, multi-national global institutions. That said, speculation and concerns are likely to continue in an already-nervous marketplace, but the signs of true financial stress lie elsewhere. Unsecured funding in the form of non-AB Commercial Paper is now virtually frozen: While the borrowings from the Fed's liquidity program have taken center stage, the financial stress experienced by the largest banks has shown up primarily in the CP market, where banks are finding it more difficult to raise dollars. Financial CP outstanding has  declined by 15%, or $90bn, since the end of May (Figure 2). And the decline in paper outstanding from foreign institutions has also been acute – down nearly 20%. By contrast, domestic outstandings are down 3% over the same period. (Domestic issuers with foreign bank parents have experienced the biggest decline in outstanding paper – down 24% since the end of May) It gets better... er, worse. Troublingly, the decline in outstandings has been accompanied by a sharp change in issuance patterns. Daily issuance has fallen from an average of $7.4bn/day between January and May to $3.5bn/day since the start of June. At the same time, the issuance has  become much shorter. Paper with an original maturity of more than three months has declined from 15% of total issuance in May to 10% so far in August. The result is that the WAM of all CP outstanding has contracted two days since the end of July. In effect, investors (typically money funds) are rolling less paper, and at a shorter maturity than earlier this year, reflecting their unwillingness to take on term unsecured bank risk.   Compared with the behavior of the commercial paper market during the first sovereign flare-up in spring 2010, the decline in outstandings has been a bit steeper (Figure 3). Outstanding financial paper declined by nearly 10% in the nine weeks following the  April 27, 2010, S&P downgrade of Greek sovereign debt. By contrast, in the nine weeks after June 1, outstanding financial paper has declined by 15%. Sorry Italy, this time nobody cares about you. It is all about AAA-rated (not for long) France: In recent weeks, particular attention has been focused on French banks and their access to dollar funding. But how much has their funding declined? The Federal Reserve does not break out the CP data by the origin of the bank's headquarters. However, the CP figures ignore other sources of French bank dollar funding – particularly Yankee CD issuance, which for most global banks is a much larger portion of their financing, as well as repo. Although imprecise because it ignores other cash lenders, we reckon we can estimate the total amount of French bank dollar funding by examining trends in the money fund holdings.   Four banks (BNP, Societe Generale, Natixis, and Credit Agricole) account for nearly all the money fund exposure to France. As of July 29, total money fund holdings of these banks' paper – in deposits, repo, and commercial paper – amounted to 8.6% of institutional prime fund balances. By contrast, at the end of June, these banks accounted for 9.0% of prime institutional balances. Fitch puts the money fund exposure to these four institutions at around 11% of its sample of the ten largest prime money funds, mostly unchanged from the end-of-July ratio of 11.2%. The difference between our calculations of prime fund French exposure and Fitch's estimate reflects the fact that the latter is based on a sample of the largest prime funds, while ours is based on the entire universe. Clearly, the 60% of the funds outside of the Fitch sample hold little to no French paper, so the aggregate holdings (8.6%) are smaller than Fitch's estimate of 11% from the bigger players.   At first blush, French bank dollar funding from the nearly $1trn prime institutional money fund industry appears to have hardly changed – falling by less than $15bn, to $79bn at the end of July. Our calculation is only $5bn more than the amount of the reduction implied by the Fitch figures. The estimated $15bn reduction across all front-end instruments is smaller than the reduction in foreign bank CP (including domestic banks with foreign parents) during July, which totals $30bn. In other words, the contraction in foreign bank CP outstanding has not been exclusively a French bank story; other banks' access to unsecured funding has also retreated. How about second blush? We believe that the relatively small reduction in money market funding of French banks belies a significant change in the composition of that financing. We split the funding from prime institutional money funds into secured (repo and asset-backed CP) and unsecured (primarily deposits and CP) for each of the four banks in both June and July. The figures reveal that the two largest money fund funders (BNP and SocGen) – kept the level they borrowed from these money funds constant in July (at roughly $25bn each) by shifting from unsecured to secured instruments. For instance, the proportion of BNP unsecured funding from prime funds declined from 76.2% in June to 72.6% in July. Likewise, SocGen reduced its unsecured financing from 95.3% to 83.8%. The remaining institutions, by contrast, did not change their funding mixes, which remain heavily skewed to deposits. Between them, they saw their funding from money funds decline by an average of 36%, accounting for all of the small reduction in French bank CP funding. Thus, the French banks have reacted to market funding concerns mostly by altering the composition of their funding – reducing the amount of deposits and commercial paper they sell to prime money funds while increasing their repo borrowings.   Of course, it may be premature to dismiss a sharper decline in money fund holdings of French banks' short-dated paper and a deeper contraction in their access to dollar funding. In the weeks since the end of July, foreign bank CP has contracted by an additional $30bn. And it is possible that there has been a further reduction in deposit and repo holdings. However, these updated data will not be available until mid-September. More important, is a reduction in access to front-end financing a significant problem for foreign banks? So we have an unsecured paper funding crisis. Now what? Why, enter the Fed of course, which again generously bailed out foreign banks with a massive dollar deposit surge as reported first by Zero Hedge. Ah yes, but the nearly 20% drop in USD deposit balances at the Fed is the clearest warning sign that not even the Fed is bailing out Europe's banks properly any longer. From the perspective of the European banks, the reduction in their money fund financing is significant but not incapacitating. These institutions have so far nimbly shifted the composition of their funding toward more secured alternatives to reduce the effects of the reduction in money market funding. And as many have already noted, non-US institutions have a surplus of dollars – most of which currently reside at the Federal Reserve. Foreign-related banks currently have an estimated $700bn on deposit at the central bank – of which an unknown but large proportion is owned by European banks. The decline in these balances since the end of QE2 in June, however, suggests that the increased difficulty of raising dollar funding may be causing these banks to cut back on operations that require plentiful access to dollar funding – such as their matched books and securities inventories. This is just the beginning... These banks are by no means desperate to raise dollar funding. Instead, they appear to be mostly holding the line on borrowing costs, refusing to chase yields higher. This (and their long dollar positions) is a reason the increase in Libor since its mid-June trough has been so mild – certainly compared with the 2010 sovereign flare-up. Of course, no bank – domestic or foreign – can survive for long without access to dollar funding. Instead, their thick dollar liquidity buffers and the winding down of certain dollar-heavy businesses buy banks several months and some flexibility such that the 60bp priced into the December ED contract seems a bit extreme. As always, Libor is the last to go: first very slowly, then very fast, as the entire French banking system, once one reads between the lines of the above, finds itself in funding limbo, and it last lifeline, that of secured repo funding, disappears. At that point we will be talking not about $500 million in USD swap lines going to rescue French banks, but vicious orders of magnitude greater. We just hope this latest market realization of facts happens after Labor day: is it too much to ask for at least one week without the world blowing up, please? Plus the higher stocks go up in the interim, the more fun it will be to short from a higher vantage point. Lastly, we are confident that uncle Warren is currently taking a bath with an atlas of Europe, feverishly trying to come up with his latest Eureka moment.

What Could Lie Ahead for the S&P 500 & Gold Posted: 28 Aug 2011 04:12 PM PDT By Chris Vermeulen, TheGoldAndOilGuy JW Jones & Chris Vermeulen – http://www.optionstradingsignals.com/specials/index.php Now that Mr. Bernanke's speech is old news, what was the financial media thinking exactly? A significant number of financial writers have been anticipating discussion of QE III or QE III Lite which clearly were never even on the Fed Chief's radar this week. The focus of the Jackson Hole Summit was how to achieve long-run growth, not conduct discussion of monetary policy. QE III will not be discussed openly until the next FOMC meeting in September, which noticeably was extended to two days. Besides the extension and the Fed Chairman's prediction of growth in the back half of the year, the remainder of Mr. Bernanke's speech was nothing more than a brief synopsis of what he has already said in the recent past. While Chairman Bernanke focuses on the U.S. economy, I have been more inclined to monitor the action across the pond. Price action in Europe is having a major impact on financial markets here in the United States. Traders are monitoring credit default swap (CDS) spreads on European sovereign debt as well as on domestic and European banks. Recently U.S. banks have seen the CDS swaps on their debt rising indicating that the marketplace believes their debt is a greater risk to investors. While the price action is nowhere near the 2008 & 2009 levels, current prices are relatively consistent with what was seen during the correction in the late spring of 2010. While there is no reason to panic at this point, this is a trend that I will be monitoring closely going forward. For now, I continue to believe that equity markets will rally in coming weeks as conditions are extremely oversold. The price action so far today makes sense as the wild price swings helped flush out weak hands that were long. Consequently, the snap back rally pushed shorts into stop levels as well. A significant move lower does not seem likely at this point, but a retest of the recent lows is possible, if not probable. I would remind readers that stock market crashes generally happen within the context of an oversold market. While the likelihood of a crash is remote, it is still possible and tight risk definition in this environment is warranted regardless of which side of the tape a trader is playing. One price chart that I have been watching closely is the German DAX. The German DAX is presently a thermometer for traders to monitor the situation in Europe. The reason the German stock market index is so important is due to the financial strength of Germany within the Eurozone. Without Germany, the Eurozone would crumble in on itself and the Euro currency would be in trouble. Recently Germany's equity markets have been crushed and the daily chart below illustrates the recent carnage: Another metric I monitor regularly is market momentum. The chart below illustrates the number of domestic stocks trading above their 200 period moving averages. As can be seen below, the U.S. equity market has not been this "oversold" since back in 2009. Chart courtesy of Barchart.com. In my previous article posted back on August 18th, I discussed the likelihood for stocks to pullback and put in some form of a basing pattern. I wrote the following statement in that article: "It is entirely plausible that Mr. Market thrusts lower from here to shake out longs. If that scenario plays out it could potentially carve out a double bottom or another basing pattern which would give active traders another entry point to get long." Since August 18th, we have seen the S&P 500 push lower and there is a double bottom on the daily chart which is capturing quite a bit of attention in the trading community. I would also draw your attention to the wedge pattern that is also present. A breakout higher or lower out of this wedge pattern will be the clue that will indicate Mr. Market's short term price direction. I continue to believe we will see a breakout higher, but a retest of the lows is always a possibility. The daily chart of the S&P 500 Index is shown below: In the short to intermediate term, I believe we will see higher prices and a test of the key S&P 1,220 area or possibly a re-test of the key S&P 1,250 price level which corresponds with the March 2011 pivot lows. Additional resistance would come in around the 1,260 – 1.270 area which marks the neckline of the recent head and shoulders pattern which triggered the selloff in the S&P 500. The daily chart of the SPX below illustrates the key resistance areas: Gold Analysis My most recent article argued that gold prices were going parabolic and that a pullback was likely. We have seen a major pullback in gold prices. Admittedly, I was about $200 an ounce early on my call, but members of my service were able to capitalize on an option trade that captured 32% based on maximum risk through the use of a double calendar spread. While my timing was not precise, the juiced volatility in the GLD options allowed me to roll contracts forward and make additional adjustments to produce a strong gain for the service. Some traders argue that gold prices are going to rally back sharply in short order, which I find hard to believe. Instead, I am of the opinion that we could see additional downside in the weeks/months ahead in gold prices. There is an ominous pattern starting to form on the gold daily chart which if it is carved out and triggered, it could produce the next leg of this selloff. The daily chart of gold is shown below: While it is far too early to determine if a head and shoulders pattern will be carved out or if lower prices take place, I am of the opinion that this selloff will offer an attractive entry point for longer term investors. At this point it is a bit too early to get involved, but if my analysis is accurate the next leg of the gold bull market will be potentially extreme. While I believe stocks will rally in the short to intermediate term, I am of the opinion that we have officially entered the next phase of the bear market. The next wave lower in stocks is going to be just as severe as the likely rally in gold. The reason I believe gold will rally is primarily due to future weakness in Europe. If European banks have a credit crisis, a sovereign nation unexpectedly defaults, Germany leaves the Eurozone, or a currency crisis transpires gold prices should soar while U.S. equity prices tank. While it is far too early to make that determination, if the S&P 500 puts in a lower high on this next advance higher and consequently takes out the recent lows on a selloff, the bear will be in full swing and gold prices should take off. The chart below illustrates my expectations for the S&P 500 in the future: The next few weeks are going to be very telling about the future in domestic markets. Is this just a correction that pushes stocks higher by the end of the year, or is this the beginning of something far worse? For now I am going with the latter, but price action in coming weeks will offer clues about what lies ahead for U.S. equity markets. Right now this is nothing more than speculation, but the next few months should be very interesting. Risk remains exceedingly high. Join Now at http://www.optionstradingsignals.com/specials/index.php for a 24 hour 66% off coupon. JW Jones & Chris Vermeulen This material should not be considered investment advice. J.W. Jones is not a registered investment advisor. Under no circumstances should any content from this article or the OptionsTradingSignals.com website be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for educational purposes only.

Pavlov Rang the Bell Posted: 28 Aug 2011 04:10 PM PDT Pavlov Rang the Bell Excerpt from Stock World Weekly Last week we wrote in To QE3 or Not to QE3, "The biggest hope for the markets may be another round of quantitative easing. Investors and traders have been carefully listening to the words of Fed officials, looking for clues of an impending announcement for QE3. Such a move might be bullish for the markets, at least in the short term." On Friday, Ben Bernanke gave his much anticipated speech in Jackson Hole, Wyoming. He expressed mild optimism for the U.S. economy and did not explicitly announce a third round of quantitative easing.  Bernanke acknowledged that while the housing market is bad, and the current rate of unemployment is unacceptably bad, the economy is not in terrible shape and can grow normally again. However, the U.S. government and European governments are going to need to step up to the plate and get involved. For as Bernanke put it, "most of the economic policies that support robust economic growth in the long run are outside the province of the central bank." The market initially sold off, but soon recovered as people realized that more easing is likely on the way.  While Bernanke didn't promise to announce QE3 at the September Fed policy meeting, he dropped enough hints to make the markets respond as if he had done so. The response of the market makes sense from the perspective of Pavlovian conditioning. First you ring the bell, then you give the food. After some repetition, all you have to do is ring the bell to make the subject salivate in anticipation of the food. While Bernanke may not have served the QE3 food to the hungry markets, he did "ring the bell" by dropping broad hints about how the Fed is "prepared to employ its tools as appropriate to promote a stronger economic recovery in a context of price stability."   So Bernanke laid the groundwork for justifying more easing at the Fed's September policy meeting. That meeting had originally been scheduled for one day, but was expanded to two days so members could enjoy a "fuller discussion" of their options. St. Louis Fed President James Bullard pointed out that adding a second day to the September meeting would allow more time to review easing options. "If the economy is weaker and the inflation picture moderates, we could consider more action. The call is much more difficult this year than last year. We have a much different inflation situation than last year."  Bernanke was probably telegraphing to the market that some form of QE3 would be announced in September. As Bruce Krasting surmised, "This is a heads up to the insiders that more monetary gas is in the works. The stock market's first reaction to today's nonevent was to sell off hard. But after the word got around that this was just a delay (and a short one at that) stocks caught a bid. Basically, the plan by Bernanke to leak his intentions worked..." (My read on the speech)  Commenting on the media's response to Bernanke's speech, Phil wrote, "What more can the guy say – they WILL do what they can – we DO have problems that the Fed is able to address. They think inflation is under control, but unemployment is too high and liquidity needs to be improved. How can someone read this and not conclude QE3 is coming?...CNBC has stopped saying no QE3 and is now saying that Bernanke has 'kicked the stimulus can into September.' I guess enough people finally pointed out to them how ridiculous they sounded saying that there was no QE3 in that speech."  Bruce Krasting made the point he felt obligated to repeat - and we agree:  "I flat out hate that this Fed is conducting monetary policy through leaks, a wink and a nod and innuendo. "It feels like we should just put up a tent, because a three-ring circus is what we are getting nonstop. And Bernanke is the strong man in the middle ring." (My read on the speech)  As reported by Zero Hedge, Jeff Snider of Atlantic Capital Management wrote, "His statement spoke volumes without saying anything. Yes, he disappointed the hardcore debasement enthusiasts called stock investors, but only at first. In between the lines of what he did say, it was crystal clear: Chairman Bernanke wants to do more QE. 'Want' is not really the right word because it doesn't really go far enough into Bernanke's canon. I think it is abundantly clear he believes the Fed needs to do it as soon as operationally possible...  "He said QE 3.0, without really saying it.  The markets, seeing the enlarged schedule for the September meeting and interpreting the likelihood of heavy discussions, have gotten the message. Stocks threw off the daily mortal struggle that is life as Bank of America and bid for the QE future that is now September (good riddance to August apparently). Gold prices followed on those expectations of a resumption to the willful and wanton dollar destruction that QE purely represents. "If the Chairman can influence a major market rally without ever having to face the growing dissent within the FOMC ranks, then his speech has proven to be a stroke of genius.  That is the essence of rational expectations, making others believe you have magical powers so that they do your bidding without any actual work or direct engagement on your part."  (Bernanke In A Box) Not everyone expects QE3 to be delivered at the September meeting. According to Diane Swonk, chief economist at Mesirow Financial Inc. in Chicago, "The move to a two-day meeting means [Bernanke] will work to build consensus. They will end up with QE3, but probably not in September. They will edge closer to it in the September statement." (Bernanke May Seek Consensus on Easing) Regardless of what eventually happens in September, expectations for more easing have now been established. The markets may now rise in Pavlovian anticipation of more free money from the Fed (or fall less than it may have otherwise).    Click here for a free trial to Stock World Weekly.

Real Stimulus vs. Corporate Plundering Posted: 28 Aug 2011 04:08 PM PDT By Jeff Nielson, Bullion Bulls Canada Regular readers are familiar with my harsh criticisms of the faux "stimulus" initiatives put forth by the Obama regime (and other Western governments) over the past 2 ½ years. Stuffing countless $billions into the vaults of large, multinational banks and corporations is not "stimulus". Rather, it is simply more of the same "wealth re-distribution" (i.e. stealing) which has been occurring at an accelerating rate in our economies for the past 40 years. From a theoretical standpoint, giving money to large (well-capitalized) corporations is the worst thing that any government could do with a dollar of stimulus – from several standpoints. First of all, what 2+ centuries of modern capitalism has shown us is that these corporations use such capital to reduce their number of employees by adding more labour-saving (but expensive) capital equipment. Indeed, at the Dawn of the Industrial Revolution the average "work week" was 7 days a week, 12 hours a day – or more than 80 hours/week. The reason why our current work week is only 40 hours long is because new technology always eliminates jobs faster than it creates new opportunities, and so our governments have been forced to shorten the work week every few decades. Currently there are approximately 50 million people in Western economies who are not allowed to work. This massive structural unemployment exists for only one reason, because our corrupt governments refuse to shorten the work week. It has been frozen at 40 hours/week for well over half a century, despite the fact it will never again be possible to have "full employment" with a forty-hour work week. Allowing corporations to get larger and larger simply accelerates the transition to ever more capital-intensive (and low-employment) business models. Stuffing taxpayer dollars into the pockets of these corporate Oligarchs just so they can reduce employment even further is not "stimulus". Of course I'm being unfair here. When the Obama regime showered these corporations with $100's of billions they did create jobs – in China. Similarly a tax cut for the wealthy is the second worst thing that one can do in pretending to "stimulate" an economy. Give a rich person a dollar and he/she will likely hoard it. If they do choose to spend it, it would very likely be on something like a vacation in the Bahamas, or buying a painting from some artist who has been dead for centuries. This is what is known as "trickle-down economics": give a dollar to the wealthy and (hopefully) a few pennies will slip through their greedy grasp and "trickle down" to the masses below. There has never been a successful example of the implementation of such a policy in all of history. It is nothing but a morally/intellectually bankrupt lie to justify the plundering by those on top of those on the bottom. The obvious alternative to this top-down plundering of our economies (masked as "stimulus") is real "stimulus": bottom-up investments in our economies. When a poor person or a middle-class person receives a dollar, we know two things about what they will do with that dollar. First they will spend a much larger portion of that dollar than if the same dollar was given to a wealthy person. Secondly (and even better) they will almost certainly spend that money locally – not on some exotic vacation in a foreign country or some "masterpiece" of art. The same is true when money is funneled into small businesses (versus Big Business). Give a dollar of stimulus to a small business and they are not going to build a new manufacturing facility in China, or buy an expensive piece of capital equipment so they can get rid of more of their workers. In fact, the most likely thing that a small business would do with that dollar is hire a new worker. More articles from Bullion Bulls Canada….

Alasdair Macleod: Gold, politics, and Venezuela Posted: 28 Aug 2011 04:05 PM PDT GATA 6:12p ET Sunday, August 27, 2011 Dear Friend of GATA and Gold: Economist and former banker Alasdair Macleod writes today that Venezuelan strongman Hugo Chavez, seeking to repatriate his country's gold reserves, is attacking capitalism's weakest point. Macleod writes of Chavez: "He has been told by his central bank that the Fed, the Bank of England, and the Bank for International Settlements hold gold for the whole central banking community in the main trading centers and that much of this gold exists only as a ledger entry and is not backed by physical metal. Whether or not Venezuela's gold is held in these fractionally backed sight accounts or in earmarked accounts where the gold is held separately, we do not actually know. But there is little doubt that this move is designed to encourage other central banks to demand that their gold is also repatriated." Macleod's commentary is headlined "Gold, Politics, and Venezuela" and you can find it at the GoldMoney Internet site here: http://www.goldmoney.com/gold-research/gold-politics-and-venezuela.html?… CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: http://www.gata.org To contribute to GATA, please visit: http://www.gata.org/node/16

Ambrose Evans-Pritchard: Euro bailout in doubt as ‘hysteria’ sweeps Germany Posted: 28 Aug 2011 04:05 PM PDT GATA By Ambrose Evans-Pritchard The Telegraph, London Sunday, August 28, 2011 http://www.telegraph.co.uk/finance/financialcrisis/8728628/Euro-bail-out… German Chancellor Angela Merkel no longer has enough coalition votes in the Bundestag to secure backing for Europe's revamped rescue machinery, threatening a consitutional crisis in Germany and a fresh eruption of the euro debt saga. Mrs Merkel has cancelled a high-profile trip to Russia on September 7, the crucial day when the package goes to the Bundestag and the country's constitutional court rules on the legality of the EU's bail-out machinery. If the court rules that the E440 billion rescue fund (EFSF) breaches treaty law or undermines German fiscal sovereignty, it risks setting off an instant brushfire across monetary union. The seething discontent in Germany over Europe's debt crisis has spread to all the key institutions of the state. "Hysteria is sweeping Germany," said Klaus Regling, the EFSF's director. German media reported that the latest tally of votes in the Bundestag shows that 23 members from Mrs Merkel's own coalition plan to vote against the package, including twelve of the 44 members of Bavaria's Social Christians (CSU). This may force the Chancellor to rely on opposition votes, risking a government collapse. Christian Wulff, Germany's president, stunned the country last week by accusing the European Central Bank of going "far beyond its mandate" with mass purchases of Spanish and Italian debt, and warning that the Europe's headlong rush towards fiscal union stikes at the "very core" of democracy. "Decisions have to be made in parliament in a liberal democracy. That is where legitimacy lies," he said. A day earlier the Bundesbank had fired its own volley, condemning the ECB's bond purchases and warning the EU is drifting towards debt union without "democratic legitimacy" or treaty backing. Joahannes Singhammer, leader of the CSU's Bundestag group, accused the ECB of acting "dangerously" by jumping the gun before parliaments had voted. The ECB is implicitly acting on behalf of the rescue fund until it is ratified. A CSU document to be released on Monday flatly rebuts the latest accord between Chancellor Merkel and French president Nicholas Sarkozy, saying plans for an "economic government for eurozone states" are unacceptable. It demands treaty changes to let EMU states go bankrupt, and to eject them from the euro altogether for serial abuses. "An unlimited transfer union and pooling of debts for any length of time would imply a shared financial government and decisively change the character of a European confederation of states," said the draft, obtained by Der Spiegel. Mrs Merkel faces mutiny even within her own Christian Democrat (CDU) family. Wolfgang Bossbach, the spokesman for internal affairs, said he would oppose the package. "I can't vote against my own conviction," he said. The Bundestag is expected to decide late next month on the package, which empowers the EFSF to buy bonds pre-emptively and recapitalize banks. While the bill is likely to pass, the furious debate leaves no doubt that Germany will resist moves to boost the EFSF's firepower yet further. Most City banks say the fund needs €2 trillion to stop the crisis engulfing Spain and Italy. Mrs Merkel's aides say she is facing "war on every front". The next month will decide her future, Germany's destiny, and the fate of monetary union. * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: http://www.gata.org To contribute to GATA, please visit: http://www.gata.org/node/16

Weekly wrap and full audio of Davies and Lassonde interviews at King World News Posted: 28 Aug 2011 04:05 PM PDT GATA 5:43p ET Saturday, August 27, 2011 Dear Friend of GATA and Gold: Gold's stunning comeback this week from the recent smashdown is the topic of the weekly precious metals review at King World News, with comments by Bill Haynes of CMI Gold and Silver and futures market analyst Dan Norcini: http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/8/27_KWN_W… Also at King World News, full audio of the recent interview with Hinde Capital CEO Ben Davies has been posted here: http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/8/27_Ben_D… And full audio of the recent interview with mining entrepreneur Pierre Lassonde has been posted here: http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/8/27_Ben_D… CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: http://www.gata.org To contribute to GATA, please visit: http://www.gata.org/node/16

Expect spectacular short-covering rally in gold, Turk tells King World News Posted: 28 Aug 2011 04:05 PM PDT GATA 8:35p ET Friday, August 26, 2011 Dear Friend of GATA and Gold (and Silver): GoldMoney founder James Turk tells King World News tonight that short covering well may send gold back to $1,900 very quickly, that silver likely will follow to $44, and that he is very impressed by the strength of the mining shares. An excerpt from Turk's interview, headlined "Expect a Spectacular Short-Covering Rally in Gold," can be found at the King World News blog here: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/8/27_Ja… CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: http://www.gata.org To contribute to GATA, please visit: http://www.gata.org/node/16

GoldSeek’s Peter Spina describes bypassing the mainstream media Posted: 28 Aug 2011 04:05 PM PDT GATA 5:05p ET Friday, August 26, 2011 Dear Friend of GATA and Gold: Peter Spina, founder of GoldSeek.com, attended GATA's Gold Rush 2011 conference in London this month and in an interview there with GoldMoney's James Turk described how his Internet site strove to provide information about the gold market that the mainstream news media would not cover. Spina also remarked on the difference between producing mining companies and junior explorers and the geopolitical risks of mining. The interview is 12 minutes long and you can watch it at the GoldMoney Internet site here: http://www.goldmoney.com/video/spina-turk-interview.html?gmrefcode=gata CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: http://www.gata.org To contribute to GATA, please visit: http://www.gata.org/node/16

Mene, Mene, Tekel, Upharsin - The Handwriting on the Wall Posted: 28 Aug 2011 04:01 PM PDT My recent focus has been on the XAU/Gold and HUI/Gold ratios whose performance has been less than favorable in recent months. [B]Stocks are being valued like charitable donations in a bread line. [/B] Without significant progress in this area, we will go nowhere. However, there are signs of life. But first, let's review how we got here. [CENTER]A History Lesson [/CENTER] [B]In February of this year, my friend Dan Norcini had a great piece on ratio spread trading and the HUI/Gold ratio which should be reviewed again here. His more recent commentary is here[/B][B]. These financial fads, of course, do not usually have a long shelf life.[/B] In my recent piece, "Rising from the Deep", additional background issues were noted. - Many exploration stocks require periodic financing. Short sellers also know that additional financing's will be required due to their cash burn rate which will further depress the price, so they jump on those too for easy money. - A further depressant ...

2012 Australian Kookaburra Silver Coins Announced Posted: 28 Aug 2011 04:01 PM PDT The Perth Mint of Australia has announced plans for the pending release of the highly anticipated 2012 Australian Kookaburra Silver Coins. Those looking to add the unique bullion Kookaburra silver coins to either their portfolios or their collections can after September 1, 2011 when the Mint releases them to the public. Three different 2012 Kookaburra [...]

GoldSeek.com Radio: John Williams, Charles Goyette, Robert Ian, The International Forecaster, and your host Chris Waltzek Posted: 28 Aug 2011 04:00 PM PDT Headline news & the Market Weatherman Report. Spotlight Stock Picks. Host Chris Waltzek & Bob Chapman, The International Forecaster discussion and answer listener's questions. GUEST BIOS: Charles Goyette, The Dollar Meltdown John Williams, Shadowstats.com

Gold Once Again Rising After Dramatic Drop Posted: 28 Aug 2011 03:51 PM PDT Gold continues on its upward trend, with periodic drops in price. This week gold reached a new high of over $1900 per ounce, followed by a $200 drop in price. I can`t say I`m surprised by that, since every time prices soar there will be traders and speculators rushing to sell off their gold to take quick profits, and then possibly buy gold once again after the prices have fallen temporarily. Whenever the price falls, some people will claim that the bullmarket is over and that the gold bubble has burst. But all you need to do is look at the current economic climate to know that gold is still going to be sought out as a safe haven, despite daily fluctuations due to trading. Uncertainty over Europe`s debt troubles remains, and this week`s unemployment figures in the US also resparked economic worries (well, they never really went away) and the gold price has begun approaching its all-time highs again. You can read more about the differing interpretations of the $200 drop in the gold price in this article on Forbes.com http://www.forbes.com/sites/afontevecchia/2011/08/25/gold-falls-10-due-to-over-extension-bullish-fundamentals-still-in-place/?feed=rss_home Read more….

Silver Market Update Posted: 28 Aug 2011 03:41 PM PDT After one more up day silver reacted back with gold as predicted in the last update and then found support at the lower trendline shown on its 6-month chart above its rising 50-day moving average. We now have to be careful with silver because there is widespread rampant bullishness with some extravagent targets being bandied about, and we know what usually happens when that is the case. Also, as set out in the Gold Market update, gold is still way overbought and thought to be vulnerable to a potentially substantial correction. Read more….

Housing Time Bomb Goes Tick Tock Tick Tock Posted: 28 Aug 2011 12:48 PM PDT Housing Time Bomb Goes Tick Tock Tick Tock Courtesy of Lee Adler of the Wall Street Examiner   A couple of data points reported today marked a tick and a tock on the housing market clock. The Mortgage Bankers Association Mortgage Applications Index release was weak but not explosive. The FHFA (Federal Housing Finance Agency) monthly data on home sale prices was up, but meaningless. The FHFA data is after the fact price data using paired sales of properties previously financed through Fannie and Freddie, which recently resold and were again financed by them. Given the lag in the reported data, the FHFA data is slightly more useful than the Case Shiller data, which suffers from use of moving average smoothing, but less timely than the NAR data, which has validity issues, and even less timely than real time listings data. FHFA reported that sales prices in June were up 1.4% from May. That's very nice, but that was June, and this is late August, and we already know from more timely listings data (see Housingtracker.net) that prices probably peaked in July, as they normally do each year. We also know from more than 5 years of historical data that while listing prices are typically about 10% above selling prices, they appear to accurately reflect the direction of the trend and changes in trend. Their biggest advantage is that they are available in real time. The other advantage is that the aggregated listings data is not smoothed, seasonally adjusted, or massaged by an organization that may have motive to make the numbers look better than they really are. It is simply an independent compilation of raw, individual listings data available publicly and updated daily on the internet through the NAR's website. Applying simple trendline analysis, and considering the fact that the usual seasonal peak is now behind us, we can see that the downtrend in house prices has yet to be broken. The next significant point will be this winter when prices normally hit their seasonal nadir. If prices in January hold above last January's level, then we'd have a basis for calling a potential bottom in housing prices. However, a higher low would not be sufficient for a change in trend. Prices must break the downtrend line, and make a higher seasonal high before we can be confident that the lows are behind us. The other data released today that's also useful because it is so timely is the weekly purchase applications data from the Mortgage Bankers Association. On a seasonally adjusted basis, which is the only thing that the MBAA reports publicly, the index reached a record low for the week ended August 19. In actuality, applications were well above the record low, but about 7.3% below the levels of August 19 a year ago. To that extent, it was a record low for this date. The fact that the NAR reported that cash sales now make up about 29% of the market is partly offset by the fact that 16% of NAR members report sales falling through as a result mortgage applications being rejected by lenders. Considering the offset, purchase mortgage applications may slightly understate current market demand. On the other hand, many cash buyers are investors, not owner occupants, and investors do not remove supply from the market. Considering all those factors, purchase mortgage applications are probably still a reasonably good indication of current effective housing demand. The actual, not seasonally adjusted, data suggests that the momentum of declining sales has leveled off. However, in order for the oversupply in distressed markets to be absorbed, that's not enough. Sales must increase. That is largely dependent on household formation, which in turn is dependent on growth in full time jobs. And that's not happening. I connect the dots of all of the key housing and related economic data in the Wall St. Examiner Professional Edition. An understanding of the US housing market is important not because the industry is important to the US economy, although that's part of it. It is especially important because the financial system is so dependent on housing collateral, which neither the banks, nor the government owned GSEs, nor the Fed with its trillion dollar MBS portfolio, have even begun to mark down to market. They extend, pretend, and hope prices turn up before it's too late. This is a time bomb that without a housing recovery, will keep right on ticking. If you aren't already a subscriber, click here to try WSE's Professional Edition risk free for 30 days!    Pic via Black Belt Workouts

Vulture Bargain Update for August-September Posted Posted: 28 Aug 2011 12:29 PM PDT Vultures (Got Gold Report Subscribers) please log in to the password-protected GGR subscriber pages for an important Vulture Bargain Update posted today, Sunday, August 28.  We share our notations for all of our Vulture Bargain companies during this protracted small resource company buyer's strike.  To continue reading, please log in or click here to subscribe to a Got Gold Report Membership.

Bob Chapman: A Monetary Maze From Which There Is No Easy Escape Posted: 28 Aug 2011 11:46 AM PDT Only safe way to protect your wealth, Gold is on its way to $3,000-$3,200 by the beginning of March & silver $100. You do not want to miss the boat.

Ron Paul on FOX News Talks Fema, Libya, Mises & More Posted: 28 Aug 2011 11:04 AM PDT Filed under: budget cutters, bullion traders, Buy Gold, Buy Silver, commodity futures contracts, debt ceiling, debt limit, federal debt ceiling, federal reserve chairman ben bernanke, federal reserve system, jp morgan chase, members of congress, national legislators, Recession, Ron Paul, silver futures, timothy geithner, US Dollar, US Foreign Policy This posting includes an audio/video/photo media file: Download Now

The Five ?M’s” for Picking Gold Mining Stocks Posted: 28 Aug 2011 10:12 AM PDT With gold miners, in general, so attractively valued relative to the gold bullion price, the question becomes which stocks are the most compelling and have the best leverage to robust precious metals prices…In order to find the diamonds in the rough, I use what I call "The Five M's" for mining stocks…*Market cap, Management, Money, Minerals and Mine life cycle. [Let me explain each .] Words: 1146 So says Frank Holmes ([url]www.usfunds.com[/url])**in an article* which Lorimer Wilson, editor of www.munKNEE.com (It's all about Money!), has further edited ([* ]), abridged (…) and*reformatted*below**for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.*Holmes goes*on to explain: 1) Market Cap Market cap is simply the number of shares outstanding multiplied by the stock price. The gold sector is broken down into three sectors by market cap: Seniors (market ...

Guest Post: Has Gold Unwound its Overbought Status? Posted: 28 Aug 2011 09:57 AM PDT Submitted by Chris Capre of Second Skies LLC Has Gold Unwound its Overbought Status? One of the biggest questions being written about which is on traders and analysts minds is whether Gold has moved into bubble territory and is about to start a major reversal, or is going to keep on truckin' Blind Boy Fuller style.  While my fundamental hat suggests it's likely to continue its trend (as a hedge against bad govt's), being a quantitative price action and ichimoku trader, I have to see what the technical picture is communicating. For looking at whether a market is in an extreme phase and is set to reverse, we often look towards our weekly 20EMA spread.  This model plots the distance from the weekly closing price to the 20EMA as a gauge of market extremes or whether the trend is likely to continue.  If a market is at an extreme level, it usually has a very large spread from the 20EMA.  Any abnormal spread from the 20EMA is likely to return to the 20EMA. Looking at the chart below, you are seeing the weekly chart on Gold over the last 6 years.  In this chart, you can see price's movement and its relationship to the 20EMA, along with the lower indicator/model representing the spread between the week's closing price and the 20EMA.  We have highlighted the key peaks which generally occurred around a 1258 reading, or price having $125.8 price spread from the weekly closing price to the 20EMA.  This generally led to a pullback minimally to the 20EMA within an average of 4 weeks and a maximum of 10.  We would like to note that historically, since April of 2005, Gold has spent only 43 weeks below the 20EMA (closing basis) out of 541 for a total of 8% of the time, statistically displaying its tendency to trend upward.  It also means should Gold break below the 20EMA, the chances of price staying below it for extended periods of time are unlikely. What we do have to note is the most recent parabolic run away from the 20EMA created an abnormal spike never before seen in history with a reading of 2718 or price closing $271.8 away from the 20EMA.  So the next logical question becomes what do we make of this and is it the end of this massive uptrend? Our view is this is unlikely, considering the historical relationship to the 20EMA as noted before (8% of time below).   In fact, we may consider a pullback to the 20EMA to be a healthy thing as it will put Gold through a re-distribution phase and allow the order flows behind it to start another run higher.  But, the extreme nature of this suggests price is likely to pullback to the 20ema within the next 2mos or by year end.  Across most instruments, price rarely has this kind of extreme or unstable relationship to the 20EMA and usually means the orders behind such movements have to normalize a bit before starting another run.  Keep in mind, this does not have to happen with a violent sell-off and could be the result of price hanging around the $1700-$1900 range while the 20EMA catches up to current price levels. In fact, to add any new positions, we'd rather wait to let the spread normalize and move back into the prior range which suggested a very healthy trend.  We also do have to add to the bullish prospects how price had one of its biggest weekly drops from an open of $1860.92, to an all-time high of $1911.89, then shedding $209 to the weekly $1702 low to do what??? Bounce strongly and end the week at $1827.  This is highly suggestive of how the buyers were ready to stand up to one of the most violent and largest % based weekly sell-offs and send the metal within roughly $40 or 2% of where it opened the week. Thus, although the short-term price structure may suggest consolidation or mild pullback to the 20EMA, our medium and long term technical view is still strongly bullish.

Richard Russell - Gold Will Break to New All-Time Highs Posted: 28 Aug 2011 09:50 AM PDT With gold trading above $1,930, the Godfather of newsletter writers Richard Russell had this to say in his latest commentary, "

Gold, politics and Venezuela Posted: 28 Aug 2011 09:49 AM PDT This article is posted at Goldmoney.com.      Gold, politics, and Venezuela 2011-AUG-27 Markets were abuzz last week with Chavez’s recall of Venezuela’s gold reserves not currently held in Caracas. Bulls are excited by the thought that withdrawing some 150-200 tonnes from the Bank of England and the bullion banks will force a bear squeeze on the LBMA, where gearing between the physical and paper markets are assumed to be 100 to 1. This stretches the relationship between paper gold and physical gold even further. They are also excited by the possibility that others might follow Venezuela’s example. These concerns are real and should not be dismissed lightly, and the announcement could not have come at a worse time for LBMA members, who also face being caught up in a European banking crisis. Fear dominates, but the real trigger for this market emotion, and therefore its outcome, is global politics. Chavez is not just recalling his country’s gold to protect its integrity, he is waging an idealist’s war against the capitalist system and the US in particular. This is why he has threatened to move gold and foreign reserves to the countries he says he trusts, principally Russia and China, and why he is proposing to nationalise Venezuela’s gold mines. He has picked the capitalist system’s weakest point. He has been told by his central bank that the Fed, the BoE and the Bank for International Settlements hold gold for the whole central banking community in the main trading centres, and that much of this gold exists only as a ledger entry and is not backed by physical metal. Whether or not Venezuela’s gold is held in these fractionally-backed sight accounts, or in earmarked accounts where the gold is held separately, we do not actually know; but there is little doubt that this move is designed to encourage other central banks to demand that their gold is also repatriated. Chavez has a point. It is a fair bet that the International Monetary Fund’s 2009 sales of 212 tonnes of gold to other central banks are held in sight accounts as a condition of sale. India, Mauritius and Sri Lanka, who bought this gold, must be very nervous. Interestingly, India and Sri Lanka are also associated with the Shanghai Cooperation Organisation, which was set up by China and Russia with the eventual goal of establishing an Asian supranational state. This little-known connection is extremely important. The SCO even has a website. The central banks of its member states, observer states and dialogue partners are nearly all buying gold, overtly or covertly. This is more likely to be a co-ordinated economic attack on the West than just a purely random event. Until Chavez’s intervention, China and Russia – who run the SCO – were gently turning the screws on the gold market: Russia by announcing regular purchases and China by encouraging its citizens to buy. They appear to have put the word about through the SCO that gold will have an important role in the SCO’s future, and those involved should have some. This is a world Chavez wants to be part of, and by removing his country’s gold from capitalist markets he is declaring his credentials. Underlying this extreme socialist action is the Marxist belief that capitalism will destroy itself. Chavez believes it is his duty to give it a helping hand. Alasdair Macleod macleod@financeandeconomics.org www.financeandeconomics.org

Ben Davies - Monetary Blunders & How it Will Impact Gold Posted: 28 Aug 2011 09:44 AM PDT This latest pullback in the gold price is an opportunity to initiate a new investment or augment existing holdings.

100% Money Posted: 28 Aug 2011 09:39 AM PDT By www.thetrader.se While Ben Hur is trying to flood the system with even more Debt, there are alternative ways of running the Economy. As with all systems, there are pros and cons, but maybe something in the middle would work. Irving Fisher's 100% Money, A Summary; In the United States, as in a few other countries, most of our bills are paid by check—not by money passing from hand to hand. When a person draws a check, he draws it against what he calls "the money I have in the bank" as shown by his deposit balance on the stub of his check book. The sum of all such balances, on all such stubs in the whole country, i.e. all checking deposits, or what we ordinarily think of as the "money" lying on deposit in banks and subject to check, constitutes the chief circulating medium of the United States. This I propose to call "check¬book money" as distinct from actual cash or "pocket-book money." Pocket-book money is the more basic of the two. It is visible and tangible; check-book money is not. Its claim to be money and to pass as if it were real money is derived from the belief that it "represents" real money and can be converted into real money on demand by "cashing" a check. But the chief practical difference between check-book money and pocket-book money is that the latter is bearer money, good in anybody's hands, whereas check-book money requires the special per¬mission of the payee in order to pass. In 1926, a representative year before the great depression, the total check-book money of the peo¬ple of the United States, according to one estimate, was 22 billion dollars, whereas, outside of the banks and the United States Treasury, the pocket-book money—that is, the actual physical bearer money in the people's pockets and in the tills of merchants —amounted, all told, to less than 4 billion dollars. Both together made the total circulating medium of the country, in the hands of the public, 26 billion dollars, 4 billions circulating by hand and 22 by check. Many people imagine that check-book money is really money and really in the bank. Of course, this is far from true.   What, then, is this mysterious check-book money which we mistakenly call our "money in the bank"? It is simply the bank's promise to furnish money to its depositors when asked. Behind the 22 billions of checking deposits in 1926, the banks held only some 3 billions in actual money. The re¬maining 19 billions were assets other than money—assets such as the promissory notes of borrowers and assets such as Government bonds and corporation bonds. In ordinary times, as for instance in 1926, the 3 billions of money were enough to enable the banks to furnish any depositor all the money or "cash" he asked for. But if all the depositors had demanded cash at one and the same time, the banks, though they could have gotten together a certain amount of cash by selling their other assets, could not have gotten enough; for there was not enough cash in the entire country to make up the 22 billions. And if all the depositors had demanded gold at the same time, there would not have been enough gold in the whole world. Between 1926 and 1929, the total circulating medium increased slightly—from about 26 to about 27 billions, 23 billions being check-book money and 4 billions, pocket-book money. On the other hand, between 1929 and 1933, check-book money shrank to 15 billions which, with 5 billions of actual money in pockets and tills, made, in all, 20 billions of circulating medium, in¬stead of 27, as in 1929. The increase from 26 to 27 billions was inflation; and the decrease from 27 to 2 0 billions was deflation. The boom and depression since 1926 are largely epitomized by these three figures (in billions of dollars)—26, 27, 20—for the three years 1926, 1929, 1933. These changes in the quantity of money were somewhat aggravated by like changes in velocity. In 1932 and 1933, for instance, not only was the circulating medium small, but its circulation was slow—even to the extent of widespread hoarding. If we assume that the quantities of circulating medium for 1929 and 1933 were respectively 27 and 20 billions and that its turnover for those years was respectively 30 and 20, the total circulation mold be, for 1929, 27 x 30 = over 800 billion collars and, for 1933, 20 x 20 = 400 billion dollars. The changes in quantity were chiefly in the de¬posits. The three figures for the check-book money were, as stated, 22, 23, 15; those for the pocket-book money were 4, 4, 5. An essential part of this depression has been the shrinkage from the 23 to the 15 billion in check-book money, that is, the wiping out of 8 billions of dollars of the nation's chief circulating medium which we all need as a common highway for business. The shrinkage of 8 billions in the nation's check¬-book money reflects the increase of 1 billion (i.e. from 4 to 5) in pocket-book money. The public withdrew this billion of cash from the banks and the banks, to provide it, had to destroy the 8 billions of credit. This loss, or destruction, of 8 billions of check¬-book money has been realized by few and seldom mentioned. There would have been big newspaper headlines if 8 thousand miles out of every 23 thou¬sand miles of railway had been destroyed. Yet such a disaster would have been a small one compared with the destruction of 8 billions out of 23 billions of our main monetary highway. That destruction of 8 billion dollars of what the public counted on as their money was the chief sinister fact in the depression from which followed the two chief trage¬dies, unemployment and bankruptcies. The public was forced to sacrifice 8 billion dol¬lars out of 23 billions of the main circulating me¬dium which would not have been sacrificed had the 100% system been in use. And, in that case, as we shall see in Chapter VII, there would have been no great depression. This destruction of check-book money was not something natural and inevitable; it was due to a faulty system. Under our present system, the banks create and destroy check-book money by granting, or calling, loans. When a bank grants me a $1,000 loan, and so adds $1,000 to my checking deposit, that $1,000 of "money I have in the bank" is new. It was freshly manufactured by the bank out of my loan and written by pen and ink on the stub of my check book and on the books of the bank. As already noted, except for these pen and ink records, this "money" has no real physical existence. When later I repay the bank that $1,000, I take it out of my checking deposit, and that much circu¬lating medium is destroyed on the stub of my check book and on the books of the bank. That is, it dis-appears altogether. Thus our national circulating medium is now at the mercy of loan transactions of banks; and our thousands of checking banks are, in effect, so many irresponsible private mints. What makes the trouble is the fact that the bank lends not money but merely a promise to furnish money on demand—money it does not possess. The banks can build upon their meager cash reserves an inverted pyramid of such "credits," that is, check¬book money, the volume of which can be inflated and deflated. It is obvious that such a top-heavy system is dangerous—dangerous to depositors, dangerous to the banks, and above all dangerous to the millions of "innocent bystanders," the general public. In particular, when deflation results, the public is de¬prived of part of its essential circulating medium through which goods change hands. There is little practical difference between per¬mitting banks to issue these book credits which perform monetary service, and permitting them to issue paper currency as they did during the "wild cat bank note" period. It is essentially the same un¬sound practice. Deposits are the modern equivalent of bank notes. But deposits may be created and destroyed invisibly, whereas bank notes have to be printed and cremated. If eight billion bank notes had been cremated between 1929 and 1933, the fact could scarcely have been overlooked. As the system of checking accounts, or check¬book money, based chiefly on loans, spreads from the few countries now using it to the whole world, all its dangers will grow greater. As a consequence, future booms and depressions threaten to be worse than those of the past, unless the system is changed. The dangers and other defects of the present sys¬tem will be discussed at length in later chapters. But only a few sentences are needed to outline the proposed remedy, which is this: The Proposal Let the Government, through an especially cre¬ated "Currency Commission," turn into cash enough of the assets of every commercial bank to increase the cash reserve of each bank up to 100% of its checking deposits. In other words, let the Government, through the Currency Commission, issue this money, and, with it, buy some of the bonds, notes, or other assets of the bank or lend it to the banks on those assets as security.1 Then all check-book money would have actual money— pocket-book money—behind it. This new money (Commission Currency, or United States notes), would merely give an all-cash backing for the checking deposits and would, of itself, neither increase nor decrease the total circu¬lating medium of the country. A bank which pre-viously had $100,000,000 of deposits subject to check with only $10,000,000 of cash behind them (along with $90,000,000 in securities) would send these $90,000,000 of securities to the Currency Commission in return for $90,000,000 more cash, thus bringing its total cash reserve up to $100,000,000, or 100% of the deposits. After this substitution of actual money for se¬curities had been completed, the bank would be required to maintain permanently a cash reserve of 100% against its demand deposits. In other words, the demand deposits would literally be deposits, consisting of cash held in trust for the depositor. Thus, the new money would, in effect, be tied up by the 100% reserve requirement. The checking deposit department of the bank would become a mere storage warehouse for bearer money belonging to its depositors and would be given a separate corporate existence as a Check Bank. There would then be no practical distinction between the checking deposits and the reserve. The "money I have in the bank," as recorded on the stub of my check book, would literally be money and literally be in the bank (or near at hand). The bank's deposits could rise to $125,000,000 only if its cash also rose to $125,000,000, i. e. by depositors depositing $25,000,000 more cash, that is, taking that much out of their pockets or tills and putting it into the bank. And if deposits shrank it would mean that depositors withdrew some of their stored-up money, that is, taking it out of the bank and putting it into their pockets or tills. In neither case would there be any change in the total.

Ambrose Evans-Pritchard: Euro bailout in doubt as 'hysteria' sweeps Germany Posted: 28 Aug 2011 09:33 AM PDT By Ambrose Evans-Pritchard The Telegraph, London Sunday, August 28, 2011 http://www.telegraph.co.uk/finance/financialcrisis/8728628/Euro-bail-out... German Chancellor Angela Merkel no longer has enough coalition votes in the Bundestag to secure backing for Europe's revamped rescue machinery, threatening a consitutional crisis in Germany and a fresh eruption of the euro debt saga. Mrs Merkel has cancelled a high-profile trip to Russia on September 7, the crucial day when the package goes to the Bundestag and the country's constitutional court rules on the legality of the EU's bail-out machinery. If the court rules that the E440 billion rescue fund (EFSF) breaches treaty law or undermines German fiscal sovereignty, it risks setting off an instant brushfire across monetary union. ... Dispatch continues below ... 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View company videos here: http://goldenphoenix.us/ The seething discontent in Germany over Europe's debt crisis has spread to all the key institutions of the state. "Hysteria is sweeping Germany," said Klaus Regling, the EFSF's director. German media reported that the latest tally of votes in the Bundestag shows that 23 members from Mrs Merkel's own coalition plan to vote against the package, including twelve of the 44 members of Bavaria's Social Christians (CSU). This may force the Chancellor to rely on opposition votes, risking a government collapse. Christian Wulff, Germany's president, stunned the country last week by accusing the European Central Bank of going "far beyond its mandate" with mass purchases of Spanish and Italian debt, and warning that the Europe's headlong rush towards fiscal union stikes at the "very core" of democracy. "Decisions have to be made in parliament in a liberal democracy. That is where legitimacy lies," he said. A day earlier the Bundesbank had fired its own volley, condemning the ECB's bond purchases and warning the EU is drifting towards debt union without "democratic legitimacy" or treaty backing. Joahannes Singhammer, leader of the CSU's Bundestag group, accused the ECB of acting "dangerously" by jumping the gun before parliaments had voted. The ECB is implicitly acting on behalf of the rescue fund until it is ratified. A CSU document to be released on Monday flatly rebuts the latest accord between Chancellor Merkel and French president Nicholas Sarkozy, saying plans for an "economic government for eurozone states" are unacceptable. It demands treaty changes to let EMU states go bankrupt, and to eject them from the euro altogether for serial abuses. "An unlimited transfer union and pooling of debts for any length of time would imply a shared financial government and decisively change the character of a European confederation of states," said the draft, obtained by Der Spiegel. Mrs Merkel faces mutiny even within her own Christian Democrat (CDU) family. Wolfgang Bossbach, the spokesman for internal affairs, said he would oppose the package. "I can't vote against my own conviction," he said. The Bundestag is expected to decide late next month on the package, which empowers the EFSF to buy bonds pre-emptively and recapitalize banks. While the bill is likely to pass, the furious debate leaves no doubt that Germany will resist moves to boost the EFSF's firepower yet further. Most City banks say the fund needs €2 trillion to stop the crisis engulfing Spain and Italy. Mrs Merkel's aides say she is facing "war on every front". The next month will decide her future, Germany's destiny, and the fate of monetary union. * * * Join GATA here: Toronto Resource Investment Conference Thursday-Friday, September 15-16, 2011 Sheraton Toronto Centre http://cambridgehouse.com/conference-details/toronto-resource-investment... 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Global Economic Growth Stalls Amidst Debt Crisis, Austerity Posted: 28 Aug 2011 07:30 AM PDT Global Research Andre Damon writes: A new batch of economic figures released this week confirms a renewed economic downturn, amidst an intensified assault on jobs and living conditions internationally. The Organization for Economic Cooperation and Development (OECD) said the gross domestic product of its member countries grew by only 0.2 percent in the second quarter of this year, dropping from 0.3 percent in the first quarter. Growth has slowed for four consecutive quarters, hitting the lowest level in two years. Financial markets are looking to Federal Reserve Chairman Ben Bernanke's speech on Friday in the hopes that he will announce another round of "quantitative easing," that is, the printing of money to flood the financial system with cash.Such a move, motivated by the overriding concern of the Obama administration to defend the wealth of the financial aristocracy, would do no more to resolve the crisis than previous such measures. On the contrary, it would only further undermine the credibility of the dollar, intensify national divisions, and set the stage for even greater attacks on the working class. More Here..

September 23: The Beginning Of The End For Merkel... And The Eurozone? Posted: 28 Aug 2011 07:08 AM PDT Every time we discuss the futility of the nth bailout of [Greece\PIIGS\Europe\the Euro] we make it all too clear (most recently here and here) that the trade off between Germany onboarding ever more peripheral financial risk in one after another all too brief attempt to prevent the implosion of European capital markets and its currency, is not only a relentless creep higher in German default risk (and lower in the German stock market, as August has so violently demonstrated) but increasing political discontent, which after claiming countless political regimes across the world, has finally settled down on one that truly matters: that of German chancellor Angela Merkel. And as Reuters reports, Merkel's disappointing response to an ever escalating set of crises, both domestic and international, means that the beginning of her end (and by implication of the Eurozone, and of the Euro) may be as soon as September 23, when the vote over the expansion of the latest and greatest European bailout lynchpin, EFSF, will take place. To wit: "Germany's Angela Merkel faces the biggest challenge to her leadership since coming to power in 2005, with traditionally loyal conservative allies openly criticizing her approach to the euro zone crisis and her hands-off Libya policy in shambles....it is Merkel's piecemeal approach to the euro zone's worsening debt crisis that has come under fire over the past week and now threatens her iron grip on power in Germany." The biggest problem for Merkel is that she has gone "Japanese" in the opinion of the public: doing neither nothing, nor enough, to halt the European crisis in its tracks: "For some in Germany, she has gone too far by bailing out stricken euro zone members and agreeing to intervention in the bond markets to prop them up. For others at home and abroad, she has not done enough, shirking bold steps that might solve the debt crisis because they would be unpopular at home." This latest attempt to placate everyone, while achieving precisely the opposite, will come to a head on September 23 when the vote to expand the EFSF takes place: she is for the time being expected to have a sufficient number of votes to pass the critical for the eurozone proposal. "If it's not enough, Merkel would be forced to resign. It would lead to a crisis." And should there be a crisis, it will be the end for the European experiment as well, since with the political situation at the Euro's biggest financial backer in flux, the free fall in European risk will be one that no one, certainly not the ECB, will be able to arrest. Cue even more improvised bailouts by the central banker oligarchy, yet without Germany, the credibility of any and all such deseprate measures will be nil. This incremental political uncertainty will likely make the life of the FOMC's Sept 20-21 meeting slightly easier, as an adverse monetary announcement by the Fed, contrary to that priced in, coupled with the risk of a full blown European crisis, will be very frowned upon by the Status QuoTM. From Reuters: Seen for much of the past six years as a reliable, steady leader whose competence and knack for brokering deals made up for a lack of bold vision, Merkel's image has taken a beating over the past months and polls show an increasing number of Germans view her government as directionless.   The chancellor's troubles can be traced back to two decisions taken in March, when she abruptly dropped her long-standing support for nuclear power in the aftermath of the Fukushima disaster in Japan, and days later backed Germany's abstention from a U.N. vote authorising military action in Libya.   Coming shortly before a crucial state election, which her conservatives subsequently lost, the steps looked to many in Germany and abroad like cynical political ploys to placate domestic opinion.   For some in Germany, she has gone too far by bailing out stricken euro zone members and agreeing to intervention in the bond markets to prop them up. For others at home and abroad, she has not done enough, shirking bold steps that might solve the debt crisis because they would be unpopular at home.   This conflict will come to a head next month.   Merkel's coalition has a comfortable 20-seat majority in the lower house of parliament. But if she is hit with dissent in her own ranks, and is forced to rely on opposition parties to pass legislation to expand the single currency bloc's rescue mechanism -- the European Financial Stability Facility (EFSF) -- then her coalition could collapse, sparking early elections.   "The euro crisis entered a new phase over the past week," influential German weekly Der Spiegel said on Sunday.   "Before the main question had been how the common currency could be saved. Now it is also about saving Merkel's chancellorship. If her coalition does not deliver a majority for the enhanced euro rescue mechanism in the autumn, people close to the chancellor say, the coalition is all but finished." On the significance of September 23: The chances of Merkel failing to secure her own majority in the EFSF vote, which is likely to take place on Sept. 23, still seem slim.   Her Christian Democrats (CDU), hovering at a weak 30 percent in opinion polls, have little incentive right now to bring forward an election that is not scheduled to take place until the autumn of 2013.   Merkel's conservative bloc -- composed of the CDU, Bavarian Christian Social Union (CSU) and Free Democrats (FDP) -- has shown discipline in previous euro zone aid votes, with only a handful of lawmakers rebelling.   "I expect she will get majority backing from her own coalition," said Gerd Langguth, a political scientist at Bonn University and biographer of Merkel, putting the number of dissenters at around fifteen.   "If it's not enough, Merkel would be forced to resign. It would lead to a crisis. No one is interested in an early election." Slim... but getting bigger: Critical voices from within the party have grown louder over the past week, with senior CDU lawmaker Wolfgang Bosbach vowing publicly to vote against the EFSF increase and popular Labour Minister Ursula von der Leyen -- seen as a potential successor to Merkel -- wading into the euro zone debate with comments that went against official policy. Helmut Kohl enters the frey: Perhaps most damaging of all, however, was former Chancellor Helmut Kohl's rare public criticism of his protege last week. Kohl plucked Merkel out of obscurity in East Germany after the fall of the Berlin Wall in 1989, bringing her into his cabinet and helping to launch one of the most unlikely and astonishing political careers that Germany has ever seen.   In an interview with newspaper Internationale Politik, Germany's longest-serving post-war leader and father of reunification broke his silence and unleashed a broadside against Merkel's foreign policy, saying it lacked direction and risked undermining Germany's global influence.   "The enormous changes in the world can be no excuse for having no view or idea where you belong and where you are going," Kohl, 81, said. Yet not even the EFSF vote will do much to help Europe if the German economic implosion (documented here, here and here) continues. Should her own GDP not rebound, it won't matter one bit whether Merkel succeeds in sending the PIIGS to unseen economic golden ages. However the biggest threat to her hold on power, should she survive the EFSF vote next month, could be the slowing German economy. Data over the past two weeks showed that Europe's biggest economy ground to a virtual halt in the second quarter of the year.   Business confidence plunged this month by its largest amount since shortly after the bankruptcy of U.S. investment bank Lehman Brothers in 2008. Some economists now see the risk of a recession in Germany.   The country's robust rebound from the global economic downturn of 2008/2009, and sinking unemployment, was one asset Merkel thought she could count on heading into the next election.   Now that support is crumbling too, wiping away some more of the magic that she exuded in her first years in office, when she was celebrated in Germany and abroad as the "Gipfelkoenigen" -- or Summit Queen -- for brokering deals with in the EU and G8.   "Her downfall may not come from the euro crisis, but simply from the fact that she has lost the shine, the sure footing that she had at the start," said Josef Joffe, editor of German weekly Die Zeit. At the end, should Merkel drop out of the picture, and Europe be left with finding scraps of capital everywhere else it can, we can't wait for the ensuing hilarity as the future of a failed European experiment then proceeds to be a burden on the far narrower shoulders of one (AAA-rated) Nicholas Sarkozy.

Nick Clegg Needs To Demand Action Over Chancellor's Reckless Economic Policy Posted: 28 Aug 2011 07:03 AM PDT Voice of the Mirror Chancellor George Osborne's tax rises and spending cuts are choking recovery – with economic growth stalled at 0.2% over nine months. Conservative economic policy is bankrupt, and the price of his ideological experiment is being borne by families and businesses struggling to make ends meet. The economy was doing better under Labor, getting back on its feet after the global financial collapse. Mr. Osborne first slammed on the brakes then rammed it into reverse gear. The result is an unbearable squeeze in living standards and lost jobs. The Chancellor was reckless to suck £12billion spending power out of the economy with a record VAT rise then impose too deep, too soon spending cuts. Nick Clegg appears to be waking up to the damage inflicted by the Tory coalition. Instead of grumbling, the Deputy Prime Minister should demand action – or the future prosperity of Britain will be destroyed. More Here..

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