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Sunday, November 20, 2011

Gold World News Flash

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Gold World News Flash

Citibank UK U.S. Dollar Current Account Now Charging for Depositing Cheque's, How to Make an Extra 1% on Transfers

Posted: 19 Nov 2011 04:59 PM PST

Citibank for a number of years has provided UK customers a U.S. Dollar Checking account without fees if the balance across all Citi accounts is above &ound;2,000. This has proved especially useful in depositing dollar cheque's that normally attract significant fees per cheque in addition to exchange rate spread mark-ups.


The Complete And Annotated Guide To The European Bank Run (Or The Final Phase Of Goldman's World Domination Plan)

Posted: 19 Nov 2011 02:00 PM PST

from ZeroHedge:

"Nervous investors around the globe are accelerating their exit from the debt of European governments and banks, increasing the risk of a credit squeeze that could set off a downward spiral. Financial institutions are dumping their vast holdings of European government debt and spurning new bond issues by countries like Spain and Italy. And many have decided not to renew short-term loans to European banks, which are needed to finance day-to-day operations. " So begins an article not in some hyperventilating fringe blog, but a cover article in the venerable New York Times titled "Europe Fears a Credit Squeeze as Investors Sell Bond Holdings." Said otherwise, Europe's continental bank run in which virtually, but not quite, all banks are dumping any peripheral exposure with reckless abandon is now on. Granted, considering the epic collapse in bond prices of Italian, French, Austrian, Hungarian, Spanish and Belgian bonds which all hit record wide yields and spreads in the past week, and furthermore following last week's "Sold To You": European Banks Quietly Dumping €300 Billion In Italian Debt" which predicted precisely this outcome, the news is not much of a surprise. However, learning that everyone (with two exceptions) has given up on Europe's financial system should send a shudder through the back of everyone who still is capable of independent thought – because said otherwise, the world's largest economic block is becoming unglued, and its entire financial system is on the edge of a complete meltdown. And just to make sure that various fringe bloggers who warned this would happen over a year ago no longer lead to the hyperventilation of the venerable NYT, below, with the help of Goldman's Jernej Omahan, we bring to our readers the complete annotated and abbreviated beginner's guide to the pan-European bank run.

But first some more details from the NYT:

Read More @ ZeroHedge.com

[OTE132] On the Edge with Dan Collins of The China Money Report

Posted: 19 Nov 2011 01:04 PM PST

This guy, Dan Collins, has a great new site, The China Money Report, which covers all the local news in China, especially gold and silver!

Silver Update 11/19/11 – Mind Control

Posted: 19 Nov 2011 12:27 PM PST

Aaron Krowne – “Avoid Big Banks and Gold & Silver Bullion ETF's Due To Counterparty Risk”

Posted: 19 Nov 2011 11:48 AM PST

Kerry Lutz Interview with Gary Savage 11-18-11

Posted: 19 Nov 2011 11:39 AM PST

from The Financial Survival Network:

Gary Savage of http://smartmoneytracker.blogspot.com/ joins the show for the first time. He's a cycle guy and an ace technical analyst. You may think there's a lot of them around, and there are, however Gary has particular credibility in our book because he has lived by the advice he gives to others. Thus in late 2005 when he saw the real estate bust just around the corner, he sold his overpriced Las Vegas home and invested the money in safer investments such as gold and silver. He thinks there's another market crash heading our way and is very confident about the increasing price of precious metals which he believes is being fed in large measure by diminishing confidence in paper money. Gary's been through many market cycles and manias during his lifetime and is also a student of history, which gives his words added import.

Click Here to Listen to the Interview


This posting includes an audio/video/photo media file: Download Now

The Complete And Annotated Guide To The European Bank Run (Or The Final Phase Of Goldman's World Domination Plan)

Posted: 19 Nov 2011 11:38 AM PST

"Nervous investors around the globe are accelerating their exit from the debt of European governments and banks, increasing the risk of a credit squeeze that could set off a downward spiral. Financial institutions are dumping their vast holdings of European government debt and spurning new bond issues by countries like Spain and Italy. And many have decided not to renew short-term loans to European banks, which are needed to finance day-to-day operations. " So begins an article not in some hyperventilating fringe blog, but a cover article in the venerable New York Times titled "Europe Fears a Credit Squeeze as Investors Sell Bond Holdings." Said otherwise, Europe's continental bank run in which virtually, but not quite, all banks are dumping any peripheral exposure with reckless abandon is now on. Granted, considering the epic collapse in bond prices of Italian, French, Austrian, Hungarian, Spanish and Belgian bonds which all hit record wide yields and spreads in the past week, and furthermore following last week's "Sold To You": European Banks Quietly Dumping €300 Billion In Italian Debt" which predicted precisely this outcome, the news is not much of a surprise. However, learning that everyone (with two exceptions) has given up on Europe's financial system should send a shudder through the back of everyone who still is capable of independent thought - because said otherwise, the world's largest economic block is becoming unglued, and its entire financial system is on the edge of a complete meltdown. And just to make sure that various fringe bloggers who warned this would happen over a year ago no longer lead to the hyperventilation of the venerable NYT, below, with the help of Goldman's Jernej Omahan, we bring to our readers the complete annotated and abbreviated beginner's guide to the pan-European bank run.

But first some more details from the NYT:

The flight from European sovereign debt and banks has spanned the globe. European institutions like the Royal Bank of Scotland and pension funds in the Netherlands have been heavy sellers in recent days. And earlier this month, Kokusai Asset Management in Japan unloaded nearly $1 billion in Italian debt.

 

At the same time, American institutions are pulling back on loans to even the sturdiest banks in Europe. When a $300 million certificate of deposit held by Vanguard's $114 billion Prime Money Market Fund from Rabobank in the Netherlands came due on Nov. 9, Vanguard decided to let the loan expire and move the money out of Europe. Rabobank enjoys a AAA-credit rating and is considered one of the strongest banks in the world.

 

American money market funds, long a key supplier of dollars to European banks through short-term loans, have also become nervous. Fund managers have cut their holdings of notes issued by euro zone banks by $261 billion from around its peak in May, a 54 percent drop, according to JPMorgan Chase research.

Is this setting familiar to anyone? It should be: "Experts say the cycle of anxiety, forced selling and surging borrowing costs is reminiscent of the months before the collapse of Lehman Brothers in 2008, when worries about subprime mortgages in the United States metastasized into a global market crisis." 

Ah, but there is one major difference: last time around, the banks were not all in on the wrong side of the world's worst poker hand (as described by Kyle Bass earlier). Now they are. And should Europe's banks begin a domino-like spiral of collapse, there will be nobody to bail out first Europe, then Japan, then China, then the US and finally the world.

But lest someone suggest this is merely the deranged ramblings of yet another blogger, here is Goldman Sachs with a far more cool, calm and collected explanation for why we should all panic (which comes at the sublime moment: just as Goldman takes over all the key political locus points of the European continent: more on that in the conclusion...)

Core' banks cut GIIPS debt by €42 bn (-31%) in 3Q; a manifestation of PSI side-effects? 

 

In 3Q2011, banks from the 'core' cut their net GIIPS sovereign debt holdings by €42 bn (or by one-third), mostly Italian (€26 bn), Spanish (€7 bn) and Greek (markdown of €7 bn). French and Benelux banks cut their exposures most, by €21 bn and €9 bn, respectively. GIIPS portfolios remained unchanged with periphery banks.


 

Greek PSI sets a risky precedent, in our view, as the prospect of 'voluntary' haircuts becoming a template for GIIPS crisis resolution could drive exposure reduction. Core banks now have €88 bn of GIIPS sovereign bonds remaining. We expect this to decline. Problematically, we observe that GIIPS bond reductions are not resulting in 'core' bond purchases but in a rise in deposits at the ECB.

  • The disposal of GIIPS sovereign debt accelerated during 3Q2011, and we highlight the following.
  • Banks cut net GIIPS sovereign exposure by €43 bn. The largest reductions relate to Italian (€26 bn), Spanish (€7 bn) and Greek (€7 bn) net sovereign debt positions.
  • Almost all of the reduction (€42 bn) came from banks in the European 'core', where the GIIPS bond positions therefore fell by just over one-third (31%). At the same time the banks from the 'periphery' kept their exposures unchanged.
  • French (€21 bn) and Benelux (€9 bn) banks reduced their exposure most.
  • Individually BNP (€12 bn), KBC (€4.4 bn), SG (€4.1 bn), BARC (€3.5 bn) and ING (€3.5 bn) cut the net sovereign exposures most, in absolute terms.

 

We expect this trend to extend into 4Q and to ultimately lead to a long-term reduction GIIPS bond holdings by core banks.

 

Greek PSI – and the 'voluntary' 50% haircut – has changed the risk perception of GIIPS bonds. We believe it has allowed for an assumption that PSI will be used as a template in helping other GIIPS sovereigns improve their public finances. Such intention is denied by policy makers. Banks, on the other hand, express their view of the likelihood of such an event through the changes in their net positions.

 

It is important to emphasizes that a bank's decision to hold sovereign debt is not an expression of an investment preference. Rather, it is a decision related to liquidity management. As such banks seek 'risk free' assets that can be used to access liquidity at any time, particularly at the time of crisis. Regulators continue to treat sovereign debt as highest-quality and risk free (0% risk-weight) collateral. With no RWA constraint and full refinancing eligibility, banks are encouraged to hold sovereign debt; its (selective) transition from a 'risk free' to a 'risk' asset is therefore unexpected and highly damaging.

Earlier we said all but two entities have been dumping PIIGS (or GIIPS as Goldman prefers to call them). Sure enough, one of the unlucky two tasked with buying everything sold in the secondary market is of course the ECB: the same bank that everyone is accusing of not doing more to help.

Funding: Increasingly reliant on the ECB

 

The use of ECB facilities rose again in October, driven by Spanish (€7 bn) and Italian (€6 bn) banks. For 4Q, we expect a sharp increase in use by Italian banks, driven by: (1) LCH's increased margin requirements on Italian REPOs, which now make market REPOs comparatively more expensive than those at the ECB; and (2) a steady fading of the ECB funding 'stigma'. It is possible that the majority of the €300 bn of interbank funding and market REPOs could end up on ECB's balance sheet. That alone would have the capacity to lift current ECB use from €579 bn to just below €900 bn. This level of use would compare with previous crisis peak levels (2009) of €870-897 bn.

 

We have long argued that the ECB has capacity to back-stop bank funding requirements – and there is no change to this view. That said, a gradual closing of the last functioning wholesale funding market – short-term REPOs, backed by government bonds – is certainly not an encouraging sign. The re-opening of the long-term funding markets has been pushed further out, in our view.

 

LCH triggers increased margin requirements on Italian REPOs

 

On November 9, 2011, LCH.Clearnet (LCH) announced its decision to increase 'deposit factors' applied to Italian debt repo transactions (e.g. haircut on collateral) by 3.5% to 5% depending on the duration of the collateral. The move was not a surprise as LCH's Risk Management Framework states that it "would generally consider a spread of 450bp over the 10-year AAA benchmark to be indicative of additional sovereign risk", which may cause it to "materially increase the margin required for positions in that issuer". Previously, ECB interventions kept the spreads below the key trigger level of 450bp.

 

Italian banks likely to switch to the ECB

 

Owing to increased margin requirement, market REPOs have become more expensive. In our view, the banks are therefore likely to look for alternative sources of funding, especially with the ECB.

 

Typically, the cost a bank faces to fund a sovereign bond portfolio through a tri-party repo transaction consists of: (i) the funding rate ('repo rate') for the duration of the repo and applied to the market value of the bonds; and (ii) additional funding costs, mostly in the form of the haircut/margin required by the Central Clearing House as collateral. The higher the haircut/margin level and the marginal funding cost, the higher the cost of the borrowing, which becomes ineffective when it exceeds the cost of the ECB repo facility (1.5% repo rate + haircut funding cost).

 

The Italian banks' funding currently includes €155 bn of customer repos and €193 bn of interbank funding exposure to non resident MFIs. The large portion of the latter takes the form of secured funding (repos). In addition, the Italian banks currently draw on €111 bn of ECB funding.

 

It is possible that the majority of the €300 bn of interbank funding and market REPOs could end up on the ECB's balance sheet. That alone would have the capacity to lift current ECB use from €579 bn to just below €900 bn. This level of use would compare with previous crisis peak levels (2009) of €870-897 bn.

So just why again is it that anyone accuses the ECB of doing nothing? When all is said and done under the current regime, the ECB balance sheet will be just under €2 trillion, and that is without any incremental printing, courtesy of the farce that is "sterilization" with banks which exist only due to the ECB, thereby making said sterilization about the most idiotic thing ever conceived. Yet that is what spin is for...

In the meantime, the European shadow banking system is on the verge of a complete shutdown, with repos of all shapes and sizes about go dark.

And summarizing all of the above visually, here come the charts:

And while we already discussed that one half of Europe's dumb money is the ECB by necessity, to get the answer for who is the other half we go back to our post from last Friday:

Completing the picture is the answer of who the dumb money is:

Italian bonds still have one support bloc. Domestic banks appear to be holding on to their much larger holdings. As of last December, EBA stress tests showed Intesa Sanpaolo held €60bn of Italian debt. UniCredit and Banca Monte dei Paschi di Siena held €49bn and €32bn respectively. Recent results indicate that those holdings have changed little.

 

"We will keep investing the largest part of our liquidity in Italian government bonds," said Corrado Passera, chief executive officer at Intesa Sanpaolo, in a call with analysts this week. "We believe they provide the right yields vis-à-vis the cost. So no policy change on our side."

 

Still, according to the investment banker advising firms on their Italian holdings, the domestic banks' decisions to hold on could have more to do with their inability to offload such large amounts quickly and without deep losses. Indeed, some Italian bankers seem resigned to the situation.

 

Capital concerns are also preventing them from selling. "The key issue is on solvency and I think they made a mistake in requiring us to hold more capital," said the chief executive of a mid-sized Italian bank. "To meet these levels we cannot sell too much of our sovereign debt."

So instead of selling, Italian banks are doing all they can to dodecatuple down and...buy!?

To summarize: everyone is dumping European paper, except for the ECB and Italian banks, which have no choice and instead have to double down and buy more. In the meantime, the market is going increasingly bidless as liquidity evaporates, confidence has disappeared and virtually everyone now expects a repeat of Lehman brothers. Of course, this means that when the bottom finally out from the market, the implosion of the Italian banking system, and thus economy, will be instantaneous. And when Italy goes, so goes its $2 trillion+ in sovereign debt, and at that point we will see just how effectively hedged and offloaded the rest of the world is, as contagion shifts from Italy and slowly but surely engulfs the entire world.

Incidentally, is it really that surprising that Goldman is now doing its best to precipitate a bank run of Europe's major financial institutions by "suddenly" exposing the truth that was there all along? During the great financial crisis of 2008, the one biggest winner from the collapse of Bear and Lehman was none other than the squid. This time around, Goldman has set its sights on Europe and has already made sure that its tentacles will be in firmly in control at all the right places when the collapse comes, as the Independent shows.

And when banks are falling over like houses of cards in the middle of a tornado cluster, and the financial power vacuum is in desperate need to be filled, who will step in once again but... Goldman Sachs.

[KR212] Keiser Report: Vampire Banker Hunter

Posted: 19 Nov 2011 10:51 AM PST

We discuss the ‘tiny rule changes’ and the Zombiebankland behind the collapse of MF Global. Meanwhile, in Pennsylvania, a Keiser-Celente 2012 bumper sticker spotted! In the second half of the show, Max Keiser interviews Barry Ritholtz about the big lie … Continue reading →

This Week?s BEST Financial Articles from munKNEE.com ? Your Key to Making Money!

Posted: 19 Nov 2011 10:31 AM PST

Given the hectic lives most people lead these days there is not much time to surf the internet in search of informative and well-written articles on the health of the economies of the U.S., Canada*and Europe; the development and implications of the world’s financial crisis and the various investment opportunities that present themselves related to commodities (gold and silver in particular) and*the stock market. Not to worry! I have done it for you. I read hundreds of articles each day, select the best and post edited excerpt summaries on munKNEE.com – Your Key to Making Money. Below are introductory paragraphs and links to the top 10 for the week ending November 19th, 2011.** [INDENT]Why wait until the end of the week to read the next*summary when you can sign up here*to receive every one of the select edited excerpt summaries the moment they are posted on munKNEE.com [/INDENT]1. The Dollar is Toast! The Future is Silver Psychologists tell us that there are five sta...


GGR Postponed to November 29

Posted: 19 Nov 2011 09:38 AM PST

Brief comments on the gold and silver pullback, the ongoing buyer's strike for The Little Guys and more. 

HOUSTON -- As we sat down to begin this week's full Got Gold Report we learned that we had to travel out of state rather unexpectedly.  If there was any way to delay our departure we would have done so but that was not possible.  We beg our reader's and subscriber's indulgence as we postpone this week's full report until after the U.S. Thanksgiving break.  

 
Continued…

Turkey Day Schedule, Research Break


In the "old days" it was our habit to take two weeks, Thanksgiving week and the following week, off completely - to spend the first part with family for the holiday and then to focus on aspects of the business that are essential to our year-end planning and positioning. 

It is the second week of the period that is the most valuable to us businesswise as, for example, this year we intend to carefully study all of our "target" and "watch" companies (including the 35 Guru-chosen issues we share as fully fledged VB issues and VBCI issues) as we move into the expected 4-week long retail peak of this year's excellent Vulture Tax Loss Selling period.  We are on the hunt for the now "very beaten up and bleeding" issues we think have a good shot for high percentage recoveries once the worldwide confidence puncture (underway now) eases and people begin figuratively breathing again. 

Buyer's strikes are no fun at all unless one has the opportunity and confidence to take advantage of them. 

In short, we are looking for "buys," and in particular, where on the charts we want to position or reposition our blue panic price target zones in the context of the ongoing buyer's strike, compounded by the double effects of hyper uncertainty, U.S. debt and deficit talks by the Super Committee and the fear of European contagion.  We cannot be surprised by at least one more panicky rush to liquidity ahead – the kind of event that delivers the best of the best stupid-cheap, baby-out-with-bathwater, throw-away prices for some of our "Faves." 

At times like that it pays to remember that in a panic scenario there is nothing "real" about the pricing and that panic pricing has no relationship to "value."  Of course everyone can make up their own minds about such things within their own tolerance for volatility.  We long-time Vultures are more or less immune to high volatility.  It goes with the territory we have chosen to game, but it can be unnerving to fledgling Vultures who have not experienced it in real time.     

We are also in the process now of taking our own tax losses to partially offset terrific gains earlier in the year to build up our Bargain War Chest and superb capital gains on our Vulture Bargain companies Hathor Exploration and Trade Winds Ventures (both the subject of takeovers this year). 

As much as possible, we intend to do that important study and research this year, our unexpected trip notwithstanding. 

Gold and Silver Selloff a Mini-Rush to Liquidity

Our snap impression of this week's COT report is that the COT remains more bullish than bearish and that the strong setback for gold and somewhat stronger knock for silver was likely a knee-jerk reaction to events in Europe, carryover effects of the MF Global blowup, along with the "strength" in the U.S. dollar as it affected most all commodities at the same time (except orange juice and lumber).  We believe the strength in the U.S. dollar is another reaction to perceived weakness in the Euro, but we find it important to note that even with all the angst in Europe the Euro Index is within just a few basis points of where it was one year ago. 

20111118Euro

(Euro Index, if any of the images are too small click on them for a larger version.)

For comparison, look at the chart for the U.S. Dollar Index, which is also not very far at all from where it was this time last year. 

20111118USD
 
(USD Index. Note that the ICE commercial traders remain significantly net short the buck.) 

One look at the next chart drives home an important (we think) aspect of the current condition.  Gold is roughly $350 or about 25% higher in USD than it was one year ago.  With both the Euro and the greenback more or less about where they were a year ago, we can conclude that there has been a significant increase in the amount of liquidity flowing into gold over the past year and that the rise in the gold price has little to do with any particular currency becoming weaker.  Instead it is defacto evidence of a general loss of confidence in all fiat currencies that underpins the bull market for gold (and silver).

20111118gold

 
We see no reason at all to believe there shall suddenly be less demand for gold relative to paper fiat currencies looking ahead and we sincerely believe that will eventually translate into relative outperformance for mining shares large and small in the future. 

Short term virtually anything is possible, including yet another sudden rush to liquidity with black swans circling in attack formation overhead.  With a buyer's strike still in play for The Little Guys, the second of two phases of tax loss selling season about to be in full swing and with a virtual ocean of fear/uncertainty overhanging the equity markets, we believe it is a great time to be a bargain hunting Vulture, but we shall be thinking cheap, very cheap for additions to our targeted, Guru-chosen members of The Little Guys or not at all just ahead. 

Technical Chart Updates


We shall send in our updates to the technical charts for posting while traveling, so look for changes to our annotations by the usual time on Sunday (18:00 ET).  We shall also continue to make incremental changes to the VB and VBCI charts from time to time on a daily basis just ahead as well, so if interested be sure to check the charts for changes frequently looking ahead. (Vultures log in to the GGR subscriber pages for the technical charts, Vulture Bargain charts and Vulture Bargain Candidates of Interest charts.)        

The next COT report by the CFTC is due to be released on Monday, November 28, so we shall schedule the next full GGR for the following Tuesday, November 29.

Thankful Indeed

We want to take this opportunity to wish everyone in the U.S. a safe and happy Thanksgiving.  We have a great deal to be thankful for here at Got Gold Report, including the contemporary opportunity to add shares in some of our Faves at prices we would have thought impossible a few months ago.  We are very thankful for our valued Vulture subscribers for sure.  Subscribers help to make the Got Gold Report possible and we are proud of and thankful for your business.  

   
That is all for now, but there is more to come.

Will Dividends Make Mining Shares Glitter More Than Gold?

Posted: 19 Nov 2011 09:18 AM PST

Of late we've seen clever moves by some precious metals mining companies to link the dividends they pay to the income they achieve on a quarterly basis. Read More...



Kyle Bass Interview – Europe, Japan, and Gold

Posted: 19 Nov 2011 07:44 AM PST

A great interview with Kyle Bass on BBC. He gives some great insight on his approach to investing and has some great fun with the interviewer. He also comments that Japan is one of the best bets to take currently for a fall and finishes up with some thoughts on gold.

He notes, "Buying gold is just buying a put against the idiocy of the political cycle."

2008 All Over Again?

Posted: 19 Nov 2011 06:27 AM PST

When I was looking at some long term charts, I found out that the current situation for the SP500 is very similar to the situation in 2008.

Check out the following chart below, and you will see why…
- The RSI hasn't been overbought anymore in a long time, indicating weakness in stock markets… The same was true in 2008.
- The SP500 found heavy resistance in the 1260-1280 zone (just as we warned our subscribers), which was the low of June 2011. A similar thing happened back in May 2008, where price ran into resistance of the November 2007 low.
- Look at the exponential moving averages (20, 50, 100 and 200 EMA's). They have now been converging as price rallied, but right now, price is falling below these EMA's, just like in late May 2008.
- The MACD is now flirting to break the green support line, just like in May 2008, right before financial armageddon occured, and price is right at the green support line now, just like in 2008.


Chart courtesy stockcharts.com

If we are about to see the exact move as in 2008, this is what it would look like…


Chart courtesy stockcharts.com

The Ted Spread, which is the difference between the interest rates on interbank loans and on short-term U.S. government debt or "T-bills", is rising. This indicates that the banks don't trust each other anymore. The same thing happened in 2008.


Chart: Bloomberg

One positive thing however, is that when we look at the big picture, we are nowhere near the 2008 highs (yet)…


Chart: Bloomberg

In our weekend reports and nightly updates, we will describe the implications for the different asset classes (USD, Gold, Silver, Stocks, Bonds,…). Would you like to know more? Feel free to subscribe to our services.

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Latest GoldMoney article

Posted: 19 Nov 2011 05:29 AM PST

This article is posted at GoldMoney, here.  

Watch out for maturing debt

2011-NOV-19

Image001
It was hoped that the appointment of Mario Monti to head a new Italian government would stabilise Italian and European bond markets. Instead, after a brief pause, bond yields on Italian debt rose back above the seven per cent level, leading the yields of other euro-denominated sovereign bonds upwards. It is not just that markets have been unimpressed about the prospects for the new Italian government, but even maturing debt will be hard to refinance.

To understand why, assume you are an executive director of an average Euro-zone bank. You have loans to the private sector, the bulk of which gives you exposure to large and medium size businesses, with some smaller businesses thrown in through your branch network. You have exposure to residential and commercial real estate. Your in-house economist tells you that the wave of public spending cuts in the weaker Euro-zone states is going to have a negative effect on your borrowers doing business in those regions, and that the prospects for Germany, which exports to these markets, are also deteriorating. Your branch managers all tell you that smaller companies are struggling and with the prospect of deteriorating economic conditions you can expect a rise in bad debts.

Meanwhile, your large depositors are becoming aware of risks in the banking system, and are beginning to seek reassurance that their money is safe. Your branch managers also report that even small depositors are getting edgy. And in the interbank market, other banks are reducing the amounts they will lend to you.

You should be worried. As recently as three months ago your in-house economist had forecast reasonable German growth led by exports, and he expected the problems of Greece et al to be contained, if only because it was in everyone’s interest to do so. In less than three months the situation had deteriorated rapidly. And then there is all that sovereign debt you took on in happier times, when by borrowing euros in the interbank market, you could buy Greek, Portuguese, Spanish and Italian sovereign debt and turn five basis points on what seemed a risk-free deal. You remember the strategy: balance your private sector risk with risk-free sovereign debt.

You now have substantial losses on sovereign debt, and your private sector loans are exposed to economic weakness. You see risk everywhere, not reward. You have hidden sovereign losses by transferring the positions from trading accounts, where they were marked-to-market, to “investments”, which are marked-to-maturity. This is done on your auditor’s recommendation and with the central bank’s blessing.

What do you do? You know your financial position is considerably worse than stated, and sources of funding are becoming very difficult. You need more information. You ask your bond dealers to run off a list of government and corporate bonds held by the bank to enable you to estimate the money coming in from maturing redemptions. You need the cash.

Welcome to the world of European banking. As yet, few people understand the fundamental pressures driving bank balance sheets to contract, and while that remains the case, it is not enough for Euroland states to just balance their budgets: they will need to cut enough to pay back much of the maturing debt as well. Unless, that is, the ECB relents and steps in to cover the deficits.

Image002

Tags: buy gold, euro crisis, fiat currency, sovereign debt

Author: Alasdair Macleod

Alasdair Macleod

macleod@financeandeconomics.org

www.financeandeconomics.org

The Next Financial Crisis Will Be Hellish, And It’s On Its Way

Posted: 19 Nov 2011 05:25 AM PST

"There is definitely going to be another financial crisis around the corner," says hedge fund legend Mark Mobius, "because we haven't solved any of the things that caused the previous crisis."

We're raising our alert status for the next financial crisis. We already raised it last week after spreads on U.S. credit default swaps started blowing out.  We raised it again after seeing the remarks of Mr. Mobius, chief of the $50 billion emerging markets desk at Templeton Asset Management.

Speaking in Tokyo, he pointed to derivatives, the financial hairball of futures, options, and swaps in which nearly all the world's major banks are tangled up.

Estimates on the amount of derivatives out there worldwide vary. An oft-heard estimate is $600 trillion. That squares with Mobius' guess of 10 times the world's annual GDP. "Are the derivatives regulated?" asks Mobius. "No. Are you still getting growth in derivatives? Yes."

In other words, something along the lines of securitized mortgages is lurking out there, ready to trigger another crisis as in 2007-08.

What could it be? We'll offer up a good guess, one the market is discounting.

Seldom does a stock index rise so much, for so little reason, as the Dow did on the open Tuesday morning: 115 Dow points on a rumor that Greece is going to get a second bailout.

Let's step back for a moment: The Greek crisis is first and foremost about the German and French banks that were foolish enough to lend money to Greece in the first place. What sort of derivative contracts tied to Greek debt are they sitting on? What worldwide mayhem would ensue if Greece didn't pay back 100 centimes on the euro?

That's a rhetorical question, since the balance sheets of European banks are even more opaque than American ones. Whatever the actual answer, it's scary enough that the European Central Bank has refused to entertain any talk about the holders of Greek sovereign debt taking a haircut, even in the form of Greece stretching out its payments.

That was the preferred solution among German leaders. But it seems the ECB is about to get its way. Greece will likely get another bailout — 30 billion euros on top of the 110 billion euro bailout it got a year ago.

It will accomplish nothing. Going deeper into hock is never a good way to get out of debt. And at some point, this exercise in kicking the can has to stop. When it does, you get your next financial crisis.

And what of the derivatives sitting on the balance sheet of the Federal Reserve? Here's another factor behind our heightened state of alert.

"Through quantitative easing efforts alone," says Euro Pacific Capital's Michael Pento, "Ben Bernanke has added $1.8 trillion of longer-term GSE debt and mortgage-backed securities (MBS)."

Think about that for a moment. The Fed's entire balance sheet totaled around $800 billion before the 2008 crash, nearly all of it Treasuries. Now the Fed holds more than double that amount in mortgage derivatives alone, junk that the banks needed to clear off their own balance sheets.

"As the size of the Fed's balance sheet ballooned," continues Mr. Pento, "the dollar amount of capital held at the Fed has remained fairly constant. Today, the Fed has $52.5 billion of capital backing a $2.7 trillion balance sheet.

"Prior to the bursting of the credit bubble, the public was shocked to learn that our biggest investment banks were levered 30-to-1. When asset values fell, those banks were quickly wiped out. But now the Fed is holding many of the same types of assets and is levered 51-to-1! If the value of their portfolio were to fall by just 2%, the Fed itself would be wiped out."

Mr. Pento's and Mr. Mobius' views line up with our own, which we laid out during interviews on our trip to China this month.

Source: Forbes

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Go for the Gold: Metal to Rise as Financial Tactics Fail

Posted: 19 Nov 2011 05:23 AM PST

Twelve years ago, Goldman Sachs converted from a private partnership to a publicly traded company. This enabled them to take more extreme risk at the expense of others (e.g., clients, taxpayers). Co-CEO Jon Corzine was instrumental in consummating this conversion, receiving roughly $400 million from the initial public offering (IPO).


Silver “Could Easily See $75”, James Turk

Posted: 19 Nov 2011 05:18 AM PST

Silver bugs anxiously waiting for a the next big move in silver could get one soon enough. Goldmoney's Founder James Turk is out with his next call for the silver price. He believes silver could reach between $60 to $75, "easily," but wouldn't put a time period for that target range.

Turk does, however, expect a technical breakout of the silver price from its consolidation to take place sometime in November, which he expects will embolden the bulls to race prices through $50 and to all-time highs. After $50, the sky's the limit for silver.

"Silver is forming a beautiful, long-term, flag consolidation pattern," Turk told King World News, Monday. "The flagpole started in 2010 at $18 and peaked at $49 earlier this year. We are now in the flag and we can expect a breakout, I think, within the next few weeks."

As one of several old hands of the bullion business, Turk understands what drives gold prices—therefore, silver prices. He takes publicly available Federal Reserve data to estimate the expected change in the Fed's balance sheet and calculates to a 'fair price' for gold and silver. He calls his simple, yet elegant, model, "The Gold Money Index".

As traders watch for any hint of a Fed announcement regarding more QE, the matter before the Fed appears to be fait accompli. As a reminder of the grotesque U.S. budget deficit, expected to reach at least $1.6 trillion for fiscal 2012, the U.S. Treasury issued a news release on Monday, announcing its funding needs for the quarters of Oct. – Dec. and Jan. – Mar., totaling $628 billion, or a 35 percent jump from the equivalent six-month period a year ago.

Here's the widely-known problem with Treasury's plan to fund additional deficits at this time:

Foreigners, who have propped up U.S. deficit spending for more than two decades through increasingly higher amounts, have been net sellers of Treasuries lately, not net buyers—and that 35% increase in additional funding needs comes at a time when foreigners are withdrawing from the dollar to debase their own currencies.

One question looms large. Will the Fed have to buy the entire $628 billion net issuance? If so, the Fed's balance sheet will grow at a 47.9% rate from its approximately $2.9 trillion total.

A collision course with a big precious metals move is near, as auction results should show larger and larger take-downs of Treasuries from its primary dealer network. That should spook the markets.

The formation for silver's recent consolidation indicates the market expects the Fed to mop up Treasury issuance in another QE operation. What else can it do? Talk of 'inflation expectations' and U.S. GDP is an obvious and tired smoke screen to the reality of Treasury's funding needs.

". . . it [silver price consolidation formation] projects to a $60 silver price, but given the strength of this pattern, one could easily see $75," said Turk. "The shakeout over the past six months has put a lot of people on the sidelines. I don't expect that money to come back into the market until silver goes back above $43. When silver takes out $43 it should rocket just like it did earlier this year when it nearly doubled in price."

The graph, below, illustrates James Turk's confidence of rapidly rising silver prices in the coming months, though the extent of the anticipated damage to the Fed's balance sheet, which drives precious metals prices, is unclear.

It's no secret that higher interest rates cannot be tolerated by the Fed. Near-zero rates at the short end of the curve until at least June 2013 is already entered into the record. That is clear. Therefore, if foreigners cannot be counted on (they don't have the additional cash) to buy U.S. Treasuries, no one else but the Fed can buy them.

PIMCO's Bill Gross asked the rhetorical question in one of his missives last summer, "Who will buy Treasuries if the Fed doesn't?" A better question might be, "How much Treasuries will the Fed buy?"

Or . . . and may be classified as a tin-foil hat proposition: what if an outrageous event occurred somewhere in the world that would scare investors into Treasuries at any price? We could see Treasuries mopped up at lower yields and soaring precious metals prices simultaneously. Who knows? But traders of both gold and silver shouldn't be disappointed in any event.

Source: Beacon Equity

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Gold, The Contrarian's Quandary

Posted: 19 Nov 2011 05:00 AM PST

Being right and sitting tight in gold might not be different things... The BEST WAY to hope you'll make money investing?


Gold Demand Increases As Central Bank Purchases Jump 556%

Posted: 19 Nov 2011 04:55 AM PST

Despite record high nominal prices and bubble claims, demand for gold continues to grow. In its most recent Gold Demand Trends report, the World Gold Council finds that third quarter gold demand volume increased 6% to 1,053.9 tonnes. By the end of September, the quarterly average price of gold increased 39% to $1,702.12, compared to $1,226.75 in last year’s third quarter.


Essential U.S. Budget Deficit Elephant Realities and Gold Antidote for Investors

Posted: 19 Nov 2011 04:50 AM PST

“U.S. Federal Budget Deficit Reality.  On November 23rd… the Congressional Super Committee is due to announce a mandatory plan for cutting the federal budget deficit.  Ostensibly, the package to be produced will provide at least a 1.2-trillion dollar deficit reduction over ten years.  Even if the Committee can reach an agreement… the deal will not be meaningful… consider the following:


Either the ECB Prints and Germany Walks… or the EU Sees a Domino Debt Collapse Followed by Systemic Failure

Posted: 19 Nov 2011 04:43 AM PST

By now, even the mainstream media is realizing what I've been saying for well over a year: that the EU in its current form is finished.

 

I initially believed that we would see Greece kicked out of the EU. However, at this point it looks much more likely that it will be GERMANY who leaves.

 

The reason is quite simple really. Germany WILL NOT tolerate debt monetization. They've seen how that situation plays out (Weimar) and will not allow it again, END OF STORY. If the ECB opts to print money, Germany is out.

 

So… the only other option for the EU to last is the leveraged EFSF. However, as we've seen, that option is a dead end as well:

 

No new Euro zone money for debt crisis at G20

 

The Euro zone won verbal support but no new money at a G20 summit on Friday for its tortured efforts to overcome a sovereign debt crisis, while Italy was effectively placed under IMF supervision.

 

Leaders of the world's major economies, meeting on the French Riviera, told Europe to sort out its own problems and deferred until next year any move to provide more crisis-fighting resources to the International Monetary Fund.

 

"There are hardly any countries here which said they were ready to go along with the EFSF (Euro zone rescue fund)," German Chancellor Angela Merkel told a news conference.

 

http://www.reuters.com/article/2011/11/04/us-g-idUSTRE7A20E920111104

 

Remember, the EFSF failed to even stage a 3 billion Euro bond auction without buying some of the bonds itself. And with no one in the G20 wanting to fund the EFSF, the EFSF is in no way going to backstop Europe.

 

So there are now only two REAL outcomes:

 

1)   The ECB prints (and Germany walks) resulting in the Euro losing at the minimum 30-40% of its value

2)   Massive defaults and debt restructuring accompanied by systemic failure in Europe

 

These are the facts. I know that the mainstream financial media and other "experts" like to proclaim that Europe can somehow muddle through this, but they're wrong. The EU kicked the can down the road for over a year in terms of debt restructuring for Greece. Now it's facing a problem it CANNOT possibly bail out: Italy.

 

In other words, the can has finally hit up against the wall. The market is not willing to lend to Italy at present levels. Nor is the market willing to lend to the EFSF. The only two potential backstops for the EU are now Germany or the ECB. And Germany WILL NOT allow money printing/ debt monetization to take place.

 

Folks, I don't know how else to say this, but if Europe experiences just a 2008 type event, it will be LUCKY. The entire European banking system is leveraged at 26 to 1. At these levels even a 4% drop in asset prices wipes out all equity.

 

Add to this the fact that with unfunded liabilities included, the average EU member states sports a REAL Debt to GDP ratio north of 300%, and you've got the makings of systemic failure. Indeed, even Germany, the supposed beacon of fiscal stability has a REAL Debt to GDP of 200% (this data point comes straight from Axel Weber's mouth) and has yet to recapitalize its banks.

 

And Germany is THE most solvent major member of the EU.

 

I cannot say just how bad things will be when the stuff hits the fan in Europe. But the EU is going into a banking/ sovereign crisis with WORSE fundamentals than the US had when it went into its own 2008.

 

So if you have not already taken steps to prepare for systemic failure, you NEED to do so NOW. We're literally at most a few months, and very likely just a few weeks from Europe's banks imploding.

 

When this happens the entire system could go down. I'm talking about bank holidays, sovereign debt defaults, retirement accounts and pension funds wiped out, even food shortages in some areas.

So you NEED to take steps now to prepare for all of this. This includes having some cash on hand as well as actual physical bullion. It also means stockpiling some food and water.

 

And if you're looking for specific ideas to profit from this mess, my Surviving a Crisis Four Times Worse Than 2008 report can show you how to turn the unfolding disaster into a time of gains and profits for any investor.

 

Within its nine pages I explain precisely how the Second Round of the Crisis will unfold, where it will hit hardest, and the best means of profiting from it (the very investments my clients used to make triple digit returns in 2008).

 

Best of all, this report is 100% FREE. To pick up your copy today simply go to: http://www.gainspainscapital.com and click on the OUR FREE REPORTS tab.

 

Good Investing!

 

Graham Summers

 

PS. We also feature four other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it's my proprietary Crash Indicator which has caught every crash in the last 25 years, or how to stockpile food (where to get it, what to buy, and how to store it) our reports cover this information in great detail.

 

And ALL of this is available for FREE under the OUR FREE REPORTS tab at: http://www.gainspainscapital.com.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alf Field?s 7 ?D?s? of the Developing Disaster Revisited

Posted: 19 Nov 2011 04:31 AM PST

[/CENTER] [/CENTER] [INDENT]Lorimer Wilson, editor of [B]www.munKNEE.com (Your Key to Making Money!) and www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) has further edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The author's views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.[/B] [/INDENT]Who in the world is currently reading this article along with you? Click [COLOR=#0000ff]here[/COLOR] Field*goes on to say, in part: Most of the major problems facing the USA (and thus the world) commence with the letter “D”,[as follows]: [*]DEFICITS (US CURRENT ACCOUNT AND BUDGET) [*]DOLLAR (US) [*]DEVALUATIONS (COMPETITIVE) [*]DEBT [*]DEMO...


The Best of the Week

Posted: 19 Nov 2011 02:52 AM PST

Author: Vedran Vuk Synopsis: Welcome to the weekend edition of Casey Daily Dispatch, a compilation of our favorite stories from the week for the time-stressed readers. Dear Reader, Welcome to the weekend edition of Casey Daily Dispatch, a compilation of our favorite stories from the week for the time-stressed readers. Of course, if you want to read all of the Daily Dispatches from the week, you may do so in the archives at CaseyResearch.com. Allocating Precious Metals By Vedran Vuk It's that time again… the happy emails are filling our inboxes at Casey Research. With gold flirting with the $1,800 mark, it is once again clear that the rumors of gold's demise have been greatly exaggerated. Of course, we're always glad to hear from satisfied customers who are making money on our investment recommendations, but some emails can be concerning. A few subscribers are w...


Blast From The Past: Kyle Bass Was Right About Everything... Again

Posted: 19 Nov 2011 02:34 AM PST

When back in May 2010 Greece was bailed out for the first time, the corrupt authorities and the conflicted media said this is the beginning of a new beginning, and soon everything would be fixed. Nothing has been fixed and everything has gotten far worse. Back then we were among the few to point out that the "bailout" was a travesty and that you can't fix an excess debt problem with more debt, yet that has been precisely the methodology of every bailout ever since the first. Unfortunately, the world is caught in a Keynesian paradigm where this is the only recourse to kick the can, unfortunately the strength of every kick is getting weaker and weaker until one day, the can refuses to move, and it is game over. Looking back at this historic period which sealed the fate of the Keynesian system, nobody has caught the paradoxes of the current broken economic and financial model better than Kyle "Nickels" Bass. Below, for everyone's must read pleasure, we once again present his May 11, 2010 letter titled "The Pattern is Set ? Betting the Bank on a Keynesian Free Lunch" which fuses everything that has happened in Europe since then on the fiscal side, and is about to happen on the monetary one. "From now on, it seems everything will be deemed to be a liquidity crisis that will be met with more "bail?outs" and debt financed spending. This will eventually break traction in a violent way and facilitate severe inflation or even hyperinflation. The one thing the EU taught us this weekend is that paper money will be worth less (maybe much less) in the future." And indeed it will, because more than anything, money is increasingly and rightfully seen as the symbol of the free lunch that Keynesian economics promises, after that "just one final debt hit." Is there much or any hope? Not really, but being prepared while watching the inferno blazes soar higher and higher is the best we can all do.

The all-encompassing summary paragraph:

This weekend, the EU and the IMF effectively went all?in with a bad hand in the highest stakes game of financial poker ever played with the world. We believe the agreement released was nothing more than a Potemkin agreement in order to placate bond investors. In the end (and there will be a reckoning for many countries) nations, including the United States, need to dramatically cut spending and get their fiscal balances in order. Unfortunately, our elected officials are on the hamster wheel of electoral cycles and are not able to make tough decisions like this as they would likely not be re?elected without a "sea change" in public opinion towards government spending and deficits. We are therefore on the path to significant currency devaluation around the world that will likely result in significant inflation. We increased our holdings of gold on Monday morning as well as taking other steps to position ourselves for the most likely outcome over the next few years. Interestingly enough, based upon the market reaction in the last 36 hours, it seems the law of diminishing returns applies to bailouts as well.

Full letter.

 

This Past Week in Gold

Posted: 19 Nov 2011 02:20 AM PST

Summary: Long term - on major buy signal. Short term - on sell signals. No harm done as we were invested on the short side and did not trade the recent buy set ups. Read More...



Florida huckster jailed for behaving like bullion banks, which aren't jailed

Posted: 19 Nov 2011 01:50 AM PST

Gold Firm Owner Sentenced in $29.5 Million Ponzi Scheme

By Jon Burnstein
South Florida Sun-Sentinel
Fort Lauderdale, Florida
Friday, November 18, 2011

http://www.sun-sentinel.com/news/local/breakingnews/fl-global-bullion-ex...

The founder of a Lake Worth-based precious metals firm that was a front for a $29.5 million fraud was sentenced Friday to more than 12 years in prison.

Jamie Campany, the owner of the grandiose-sounding Global Bullion Exchange, took money from more than 1,400 customers nationwide who thought precious metals would be good to have in uncertain economic times. The firm told customers that the metals would be stored at secured locations until they wanted to sell.

But those metals were never bought, Campany admitted. Global Bullion Exchange was a Ponzi scheme, with old clients getting paid with new clients' money.

Global Bullion Exchange often would run the addresses of potential customers through Google Earth to check the size of their homes, Campany told ABC's "Nightline" last month. The bigger the home, the more money that could be squeezed out using high-pressure sales tactics, Campany said.

... Dispatch continues below ...


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Global Bullion Exchange was part of an explosion of precious metals firms that set up shop in Broward and Palm Beach counties, operating in what has been a largely unregulated niche of the precious metals industry. More than 45 firms opened locally between 2007 and last year, most offering gold, silver and palladium via heavily financed transactions.

A Sun-Sentinel investigation in March found that convicted felons and people with checkered regulatory histories were able to operate such businesses with little if any scrutiny. Nine precious metals firms in South Florida have left customers suffering total losses of more than $91 million, according to court records.

Campany, 48, apologized Friday in Fort Lauderdale federal court, calling what he did "wrong, selfish, and irresponsible." Since Global Bullion Exchange closed in December 2009, Campany has been cooperating with federal authorities, as well as attorneys trying to recover money for investors.

Campany, of Delray Beach, pleaded guilty in August to one count of mail fraud and one count of wire fraud. Under his plea deal, he faced at least 10 years in prison and up to 12 1/2 years.

U.S. District Judge James I. Cohn said the toughest possible sentence was warranted for the fraud that cost some investors their life's savings.

"I think we must be the Ponzi scheme capital of the world here in South Florida," Cohn said.

It's unclear if Global Bullion Exchange clients will get any money back, said Daniel Stermer, the attorney tasked with trying to recover the funds. He has been filing lawsuits against people and businesses that had been affiliated with Global Bullion Exchange.

Stermer sued Campany in Miami-Dade Circuit Court, alleging Global Bullion Exchange sought out elderly customers. The majority of the firm's 20 largest clients were senior citizens. One 87-year-old man lost $686,000 to the company before he died.

Christopher Bruno, Campany's attorney, denied that Global Bullion Exchange targeted the elderly. The firm had its most success getting money from men who own small businesses, Bruno said.

Much of the money raised by Global Bullion Exchange went to the brokers working the phones. The company's tax returns for 2007 show that 77 percent of the firm's gross receipts went to brokers.

Even with Campany's sentencing, some questions still remain involving Global Bullion Exchange, particularly what happened to $500,000 in silver bars. Campany has told deputies from the Palm Beach County Sheriff's Office that the day after Global Bullion Exchange shut down, the bars were stolen from a U-Haul he had parked along an unlit gravel road in Delray Beach.

Prior to forming Global Bullion Exchange, Campany ran two other precious metals firms -- Barclay Trading Group and The Bullion Group Inc. Both were operated out of West Palm Beach.

Bruno argued Friday that his client resorted to running Global Bullion Exchange as a Ponzi scheme after he was ripped off by a Miami-based firm involved in financing the purchase of precious metals. By December 2009, Campany realized that he had evolved into a financial predator and voluntarily shut down the firm, Bruno said.

Campany then went to federal authorities on his own, admitting what he had done, Bruno said. Campany was arrested in June.

"There is simply no excuse for my actions," Campany told Cohn.

The judge agreed.

"I have no sympathy for you, no sympathy at all," Cohn told Campany. "My sympathy is with the victims."

* * *

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Golden Phoenix Signs Definitive Agreement to Acquire and Reopen Santa Rosa Gold Mine in Panama

Company Press Release
Monday, September 19, 2011

SPARKS, Nevada -- Golden Phoenix Minerals Inc. (OTC Bulletin Board: GPXM) has signed a definitive agreement to acquire a 60 percent interest, with an option to buy an additional 20 percent interest, in the Santa Rosa gold mine in Panama, now owned by Silver Global S.A., a Panamanian corporation.

Santa Rosa produced more than 100,000 ounces of gold from 1996 to 1998 before being closed in part to low gold prices, which are now more than five times higher.

Golden Phoenix intends to acquire its initial 60 percent interest in Santa Rosa by acquiring 60 percent of the share capital of a recently created company under the name Golden Phoenix Panama S.A., formed to hold and operate the mine.

Tom Klein, CEO of Golden Phoenix says: "The agreement establishes a solid framework from which we can advance Mina Santa Rosa to production-ready status."

For Golden Phoenix's complete statement, please visit:

http://goldenphoenix.us/press-release/golden-phoenix-signs-definitive-ac...

On Capital Flight and Forced Repatriation

Posted: 19 Nov 2011 01:41 AM PST

There are some folks in America who will wake up this morning and read that Jefferies has been sued for its role in a bond deal with MF Global and they will vote with their feet (Zero hedge Link). They will close their accounts with JEF and move to a safer address. That's an example of capital flight.

There are people all over the globe who have looked at the rapid un-gluing of the financial system and have bought gold as a safe haven. That's another example of capital flight.

Every time that something stupid crosses the tape from one of the EU deep thinkers the US bond market catches a bid. Yet another example of capital flight.

I could go on for a bit with this. There are dozens of examples. All around the globe one can find evidence that money is moving around with the sole purpose of finding someplace "safe".

Capital flight is a perfectly logical consequence in today's world. Barely a day passes where we are not reminded that nothing is safe any more. Not our currencies, not our equities, not our bonds and certainly not our banks/brokers.

In Greece there are many example where capital flight is undermining stability. The most obvious is the capital flight from the Greek banks that has taken place over the past few years. This flow of money is also perfectly logical. There are many risks of leaving money in a Greek bank:

-The Bank could default. The principal in the account is at risk.The guarantee (up to E100k) is from the government. What's that worth?

-The government could default. The chaos that would follow would result in a freeze of all bank balances.

-The government could announce one morning that it was re-establishing the Drachma. This would mean that any Euros in a Greek bank would be automatically converted into Drachmas at the old official rate. The value of those Drachma would be worth half (or less) as a result of the immediate devaluation that would occur.

Put yourself in the mind of a Greek who had some savings in a local bank. What would you do? You would do whatever you could to get your money to high ground. It would be perfectly reasonable for you to do that. And that is exactly what the Greeks have done. They've moved billions of Euros to Swiss banks in an effort to preserve their wealth. In the process they have crippled the Greek banks and have added to the downward spiral in Greece and the rest of the EU.

There was (IMHO) a very significant development on this front last week. A move is being made in Brussels to "force" the Swiss government/banks to transfer all of the assets of Greek citizens back to the Greek banks. For a Greek this means that your money is hostage. It has been functionally expropriated. It will be transferred into a banking system that is fraught with risk. Some portion of the money that goes back to Greece will certainly be lost.

I have talked with some who I know in Athens. They are out of their minds with this development.

Some thoughts/quotes:

- BRUSSELS—The European Commission is helping Greece negotiate an agreement with Switzerland to repatriate as much as $81 billion believed to be hidden in Swiss bank accounts, a high level European Union executive body official said Nov. 17.

$81 billion?? That's massive. This is not the shopkeeper or pensioner. This is big bucks and that means the Greek shippers. It is a fact that the Greek government doesn't tax the foreign earnings of the shippers. Call that a mistake, but that is the law. As a result, the shippers have held huge bucks in Switzerland. It's not dirty money. Right or wrong, there was no legal tax on this.

The European Commission is working with Switzerland and Greece stop what it believes is an ongoing exodus of money from Greek bank accounts into Swiss and other offshore banking centers, the EU official said.

The only way to stop capital flight is to address the underlying causes of the flight. That can't happen in Greece for years. The alternative is to trap the money, force it to go where it is at most risk. The owner of the money will have no choice. Any rights they might have to preserve their assets will be abrogated.

I'm amazed at this development. The Swiss government/banks are obligated to cooperate with EU tax authorities when there is evidence of tax fraud. But that is not what this is about. The people in Brussels and Bern know that. The fact is that the Greek tax system is so screwed up that there simply are no taxes levied on certain types of income/capital (the shippers). No doubt, some of the Greek cash that is in Switzerland is there because of tax avoidance. But the vast majority is simply safe haven money.

The word "Repatriation" sounds nice enough but really it means "Theft and expropriation". There will be nothing voluntary about this. There will be little (if any) due process.

If this happens (the folks in Brussels are pushing hard) a very dangerous precedent will have been set. Flight capital will have been made illegal. Where might this go?

 

-It will go to Spain very quickly. After that it will go to Italy where there are truly huge fortunes outside the country. I see a development like that as being a lights out event.


 

-It will come to the USA. EU residents have tons of assets here.



-Money that is subject to forced repatriation back to countries with weak banks and bankrupt governments will seek the last remaining safe haven, gold. If governments go so far as to repatriate money, they would also not hesitate to make gold ownership illegal. That too would be a lights out event.

 

We have a situation developing where the technocrats in Brussels are trying to institute capital controls. They have put a gun to the Swiss government to achieve their objectives. They will likely succeed. The fear of broader capital controls and more repatriation will spread like wildfire. The fact is, capital flight is a very reasonable response in our current environment. Capital controls that either stop or reverse it will undermine confidence and create a panic.

Those officials in Brussels have no idea what they are unleashing.

.

 

Indifference, volatility cited in weekly metals review at King World News

Posted: 19 Nov 2011 01:24 AM PST

9:22a ET Saturday, November 19, 2011

Dear Friend of GATA and Gold (and Silver):

The weekly precious metals market review at King World News finds Bill Haynes of CMI Gold & Silver amazed by the lack of retail interest in the metals and futures market analyst Dan Norcini commenting on the volatility in the gold and silver futures markets and identifying key price points. You can listen to the interviews at King World News here:

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2011/11/19_...

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


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Golden Phoenix Completes Operating Agreement
for Santa Rosa Gold Mine in Panama

Golden Phoenix Minerals Inc. (GPXM) has entered a joint venture operating agreement with Silver Global S.A., a Panamanian corporation, governing the operational and management aspects of their new joint venture company, Golden Phoenix Panama S.A., a Panamanian corporation formed to hold and operate the Santa Rosa gold mine in Canazas, Panama, and explore the mine's adjacent property.

Golden Phoenix will be manager of the joint venture company. Silver Global will handle all social programs, political and community relations, and human resource matters for the joint venture company in Panama. Golden Phoenix and Silver Global also have agreed to work together on all future acquisitions within Panama and to bring such new opportunities to the joint venture company.

Golden Phoenix will be earning in to a 60 percent interest (and potentially an 80 percent interest) in the Santa Rosa mine. Upon signing the joint venture agreement and completing the corresponding acquisition payment, Golden Phoenix will earn an initial 15 percent interest in the joint venture company.

Tom Klein, CEO of Golden Phoenix, says the agreement "creates a solid foundation for the development and planned re-opening of Mina Santa Rosa."

For Golden Phoenix's full statement on the joint venture operating agreement, please visit:

http://goldenphoenix.us/press-release/golden-phoenix-completes-joint-ven...


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Ford Library Confirms Fed Letter Tying Germany to Gold Price Suppression

Posted: 19 Nov 2011 12:51 AM PST

¤ Yesterday in Gold and Silver The gold price recovered quickly from it's 9:00 a.m. Hong Kong time downdraft during Friday morning trading...and then began a slow climb that lasted until shortly before lunch in London. Then the rally developed considerably more legs from there...and about an hour later, a not-for-profit seller showed up and drove the price down about twenty bucks going into the London p.m. gold fix. The rally that followed got smacked before it went vertical...and then the gold price got sold off. Once Comex trading was over and electronic trading began at 1:30 p.m. Eastern time, the gold price traded sideway going into the close of the New York Access Market. Gold closed at $1,724.80 spot...up $4.90 on the day. Net volume was reasonably light at 127,000 contracts. Silver also got whacked at 9:00 a.m. in Hong Kong...but by 1:00 p.m. it was on the rise again...and pretty much followed the same price path as gold. The major difference between gol...


Max Keiser on Financial Apartheid, Germany 4.0, and Gold vs. SDR

Posted: 18 Nov 2011 07:15 PM PST
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