Gold World News Flash

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• Which Fiat Currency Behaves Most Like Gold?
• Minera Andes Merger Update And Argentina Mining Changes
• Eric Sprott Update
• In The News Today
• Jim's Mailbox
• US debt: how big is it and who owns it?
• Gold & Silver Gap Up on Globex Open
• Gold Follows Stocks Vertically
• Trading Tactics - S&500, USD, Gold and XAU
• Goldman: "As The Endgame Approaches, The Rally In AAA-Euro Area Sovereign Bonds No Longer Seems Sustainable"
• Goldman: "As The Endgame Approaches, The Rally In AAA-Euro Area Sovereign Bonds No Longer Seems Sustainable"
• Is This December Similar to 2007 and 2008 for Gold and Stocks?
• IMF devising huge aid plan to save Italy, Spain, and the euro
• Flair For The Drachma-tic: ICAP Preparing For Return Of Greek Currency
• Ambrose Evans-Pritchard: Fed should monetize all of Europe to save the banks
• Make-Or-Break Week For Europe
• Will Gold and Stocks Christmas Rally Be Like 2007 and 2008?
• Euro Bond: Europe's Only Way Out For Now
• American's Comfortably Numb on the Highway to Economic Collapse
• The Real Life CONTAGION Will Be Premeditated, And By Design
• Only gold is real money
• Rob Kirby: U.S. rigs bond market through big banks, ESF, and derivatives
• Bill Buckler Presents The Four Horsemen Of The (Financial) Apocalypse
• A Glimpse Into The Future Of The Stock Market And Dollar
• Reuters notes the warning from Jim Rickards' book 'Currency Wars'

Which Fiat Currency Behaves Most Like Gold? Posted: 27 Nov 2011 07:03 PM PST In this article we are going to be focusing on gold and showing how it behaves more like a currency than a commodity. We will be viewing how gold has performed in regards to other currencies and try and find the most correlated currency pair. In other words, we will be asking the question, “which other currency pair behaves most like gold?”

Minera Andes Merger Update And Argentina Mining Changes Posted: 27 Nov 2011 04:45 PM PST Well it seems we finally have a date for the merger vote, only 2 months late. Holders as of Dec 12th, 2011 can vote on Jan 19th, 2012, location to be announced. My guess is 1 King St W. as with all the recent annual meetings but we'll have to wait a bit. See meeting announcement here. Another recent announcement is the change in Argentina's 2004 mining decree which "may" impact Minera Andes, see here. From what I can tell it seems to imply that export revenue must go thru Argentina FX prior to it's final destination. See here. Here's hoping there aren't any negative tax implications down the road. Given what other south American countries have done it would seem possible. We'll have to see what MAI's analysis turns up. Here's what another Argentina miner Argentex Mining had to say, see here.

Eric Sprott Update Posted: 27 Nov 2011 04:17 PM PST Eric Sprott see's German failed auction as shocking, very important signpost. See's deflation happening first, wouldn't have considered this 3 months ago. Says gold and silver will increase regardless of deflation or inflation. Saw significant gold/silver purchases while at recent Munich conference. See's gold stocks as growth stocks now, thinks the possibility of doubling your money in the next 2 years is high. He notes in the 1930′s only gold mines could get financing. He would encourage silver producers to store cash in silver instead of a bank. See full interview here. This posting includes an audio/video/photo media file: Download Now

In The News Today Posted: 27 Nov 2011 04:02 PM PST Jim Sinclair's Commentary This is the rule that will not be violated by pre-emptive actions here or in Euroland. Jim Sinclair's Commentary The key item to any resolution of the euro crisis is that the dollar is then on its own. On its own and not held up by a mirror image Continue reading In The News Today

Jim's Mailbox Posted: 27 Nov 2011 03:53 PM PST Dear CIGAs, Once this was almost unthinkable, now it is increasingly plausible Things are escalating faster than I thought; maybe faster than anyone was expecting. I remember reading many warnings here about this. I am buying more gold and gold shares Regards, CIGA Luis Ahlborn Sequeira Prepare for riots in euro collapse, Foreign Continue reading Jim's Mailbox

US debt: how big is it and who owns it? Posted: 27 Nov 2011 03:07 PM PST Who owns US debt around the world - and how big is it? Find out how China got to own over $1.4 trillion - and see which other countries have a slice. Is the US economy going to avoid a $14tn debt meltdown? Barack Obama stepped up pressure on Republicans to sign up to a deficit reduction deal on Monday, warning that he will deploy his presidential veto to prevent them blocking billions of dollars in automatic spending cuts that are now scheduled to start in 2013. The cuts to military and domestic spending were triggged by the collapse of the congressional super committee set up to reach a compromise on reducing the national deficit. How big is the national debt? So, how does the US borrow money? Treasury bonds are how the US - and all governments for that matter - borrow hard cash: they issue government securities, which other countries and institutions buy. So, the US national debt is owned mostly in the US - and the $4tn foreign-owned debt is owned predominantly by Asian economies. Read more....

Gold & Silver Gap Up on Globex Open Posted: 27 Nov 2011 12:55 PM PST from SilverDoctors: Gold and silver have both gapped up on the Sunday night Globex open, almost instantaneously erasing all of their Black Friday sell-offs. Silver shot up from $31.08 to $31.80, and gold from $1681 to $1694. So much for a Cyber Monday discount in the assets that really matter. Read More @ SilverDoctors

Gold Follows Stocks Vertically Posted: 27 Nov 2011 12:14 PM PST Because if stocks like the prospect of imminent printing, or at least the latest daily rumor thereof, until Germany once again opens its mouth and refutes everything, gold should love it. Sure enough, the yellow metal has opened $20 higher and is back over $1700 again. Incidentally for anyone still clamoring about a bubble in gold, the following often recycled chart by Don Coxe should put things into perspective.

Trading Tactics - S&500, USD, Gold and XAU Posted: 27 Nov 2011 11:23 AM PST Anticipate a strong rally in Gold, Silver, XAU and S&P500 shortly. Supporting evidence for this event are as follows: [LIST] [*]The S&P500 and XAU, on a daily basis, are far from their TDI trend lines, as demonstrated here, and should return to at least equilibrium levels [/LIST] [LIST] [*]Market Pendulum's SRA Cycle indicator is at zero in both the XAU and S&P500 referenced charts [/LIST] [LIST] [*]The USD is in a continuing strong weekly up trend but near important resistance at the 79 and 81 levels. This is after virtually four straight up weeks [/LIST] Additional trading perspectives from Chris Vermeulen on this subject are below. Note the closeout of S&P500 short positions. Guest Editorial Trading Tactics in the S&P500, USD and Gold. Click Here. Strategy and Trading records are here. ...

Goldman: "As The Endgame Approaches, The Rally In AAA-Euro Area Sovereign Bonds No Longer Seems Sustainable" Posted: 27 Nov 2011 11:06 AM PST Goldman Sachs has for the time being been very quiet in joining all of its colleagues from around the street in screaming for an immediate intervention by the ECB or else. The reasons are glaringly obvious: with a Goldman alum in charge of the ECB, and a 23 year Goldman veteran acting as ambassador to Germany, whatever Goldman wants, Goldman will get, without the need for convincing pitchbooks and dramatic expostulations that the world is ending unless... Intuitively it makes sense for Goldman to wait: after all why not take advantage of the situation a la Bear and Lehman, and wait for 3-4 major European banks to collapse, which will be the green light for Goldman to do what it does best: step in and fill the financial and power vacuum. Needless to say, when UniCredit, Commerzbank or Raiffeisen are down, the ECB will have no choice but to intervene with or without the Fed's help. Which is why anyone looking for clues as to what will happen in Europe has to focus on Goldman alone as we already know too well how everyone else is axed. Luckily GS' Francesco Garzarelli and Huw Pill have just released a much overdue note presenting just how the firm feel ont he topic of Europe's continuation as a going concern, or, alternatively, collapse. While we present the full note below in its entirety which naturally seeks to avoid broad panic, here are some notable extracts from a nuanced read: "considering how much damage to confidence has now been inflicted, one must also entertain the possibility that the intensification of market tensions and/or deterioration of economic activity reinforce each other feeding domestic political and social pressures precluding a final agreement among EMU member states from being reached. In this case, rather than being the 'forcing mechanism' that drives agreement, the economic and financial environment could feedback into the political process in a negative way, leading to a vicious downward spiral and, ultimately, to the failure of the Euro project." Simply said "an alternative scenario of a 'break-up' of the Euro area certainly cannot be ruled out", which leads to Goldman's conclusion: "For the same set of reasons, as the 'end game' approaches the rally in AAA-rated Euro area sovereign bonds (Germany's especially) no longer seems sustainable and could reverse in coming weeks. In our base case of more intrusive control on future deficit financing, the core countries will, in exchange, have to shoulder a greater part of the legacy credit risk of their peers if they want to keep EMU alive. In a 'break-up' scenario, the creditor 'core' countries will be confronted with a wave of insolvencies, which would also worsen their fiscal position. And in the middle ground between these two outcomes, where we currently stand, the ECB will be intermediating growing intra-Eurosystem imbalances. Through this monetary channel at the heart of EMU, the 'shadow' credit risk of the core countries is already rising, and at an increasingly rapid pace." As expected, it appears that Goldman sure will like occupying those European bank HQs for about $1 in equity. So, starting with Goldman's conclusion: The Rising 'Shadow' Credit Risk in the 'Core' Countries   To summarize, we interpret the current turmoil in financial markets and resulting weakening of the real economy as forcing mechanisms for agreement across EMU countries on fiscal governance to emerge: The history of European integration is littered with examples of crises forcing change. Viewed in this way, the current pain is a (necessary) part of the resolution process.   With market pressures mounting, economic activity weakening sharply, electoral pressures becoming more intense in some key countries, and the need to rollover large blocks of sovereign and bank debt in the New Year, the need for a breakthrough to the political impasse is increasing. Such a breakthrough should lead to the formulation of a road-map for institutional and governance reform that would limit the scope for undisciplined fiscal policy in the future. If sufficiently convincing, it should pave the way for an at least partial mutualization of the legacy debt of EMU countries, and a more pro-active response by the ECB.   But in order to avoid the large (if difficult to calculate) costs of a Euro area break-up, action on all policy fronts is urgently required. Nor can countries alone – for example, through further and necessary fiscal austerity – correct a situation that has become systemic in nature. The widening in spreads following the appointment of governments in Italy and Spain resolved to fiscal austerity is a case in point.   This makes investing across Euro area sovereign bonds (and the currency) at present time a very difficult proposition. True, spreads are abnormally high relative to credit fundamentals associated with our baseline scenario, as we have repeatedly said. Moreover, the ECB is likely to remain heavily engaged in secondary markets, 'home bias' alongside the relaxation of some regulatory constraints should help the primary government bond market, and access to central bank funding will remain unlimited. If the market is a forcing mechanism in the way we describe it, now that Italy and France are under so much pressure could mean a resolution is within reach. But the potential downside associated with break-up scenario is, for the reasons reviewed above, incommensurable. And even assuming that a political agreement on fiscal flows is reached, the exact form of mutualization of the sovereign debt currently outstanding could change expected returns considerably.   For the same set of reasons, as the 'end game' approaches the rally in AAA-rated Euro area sovereign bonds (Germany's especially) no longer seems sustainable and could reverse in coming weeks. In our base case of more intrusive control on future deficit financing, the core countries will, in exchange, have to shoulder a greater part of the legacy credit risk of their peers if they want to keep EMU alive. In a 'break-up' scenario, the creditor 'core' countries will be confronted with a wave of insolvencies, which would also worsen their fiscal position. And in the middle ground between these two outcomes, where we currently stand, the ECB will be intermediating growing intra-Eurosystem imbalances. Through this monetary channel at the heart of EMU, the 'shadow' credit risk of the core countries is already rising, and at an increasingly rapid pace. And then proceeding backward: Goldman on how the risk of a Euro 'Break-Up' is starting to be priced The situation in the Euro area funding markets took a sharper turn for the worse following the Greek government's announcement at the beginning of November that there would be a referendum on the austerity measures associated with the second Greek financing program. In response to this announcement, policy authorities at the highest level started to make explicit reference to the possibility of a country leaving the Euro area and (by implication) re-introducing a national currency. Although the Greek referendum was eventually aborted, such references to a 'break-up' have led to an escalation of market tensions, as the whole structure of EMU was formed on the basis that adoption of the Euro represented an irrevocable commitment.   No sovereign issuer, not even Germany, has been immune to the ensuing escalation of tensions, suggesting that the sovereign and banking crises have now assumed a fully systemic dimension: investors are increasingly questioning the survival of the Euro and the Euro area. In this context, French bonds have suffered in particular, owing to the large size of France's banking sector and its reliance on wholesale funding, the significant exposure of these banks to peripheral sovereigns, and the state's implicit guarantee of its banks. France is also currently debating its 2012 Budget and the opposition Socialist party (which controls the Upper House) is resisting the introduction of fiscal restrictions in the Constitution.   In currency markets, in spite of a sharp increase in option skew, the spot Euro exchange rate against the Dollar has declined moderately up to now, considering what is at play. As Thomas Stolper and team have argued in our Foreign Exchange Research contributions, the dislocation in sovereign and bank funding markets has largely been reflected in intra-Euro-area flows across countries (as 'home bias' has increased), rather than capital flight from the Euro area as a whole. On the contrary, inward flows have picked up, reflecting the sale of foreign assets from financial institutions.   Moreover, the ECB's full allotment policy against a wide collateral pool (extended in some cases by national provision of Emergency Liquidity Assistance, or ELA, where depository institutions can pledge poor quality assets that are no longer accepted in the ECB's repo operations to obtain cash) has played a significant role in intermediating these intra-Euro-area flows. This has led to an accumulation of credit risk at the ECB and rising intra-Eurosystem (im)balances (sometimes labeled TARGET 2 imbalances). This assumption of credit risk implies that creditor countries (like Germany) face significant losses in the event of a disorderly dissolution of the Euro area, and this helps explain why even German yields have come under upward pressure.   But, as the market situation deteriorates and the possibility of a break-up of the Euro area is re-priced, there is the potential for capital flight to occur from the Euro area as a whole (rather than from specific countries within the Euro area to other countries within the Euro area), creating pressure for a weaker Euro exchange rate at least until the policy stalemate is resolved. Goldman on "Market Pressures as a 'Forcing Mechanism'" -  as in the same pressures that forced Silvio to step down in less than 48 hours. To be clear, our base case remains that the Euro currency and the Euro area will survive intact. We are of the view that the intensification of market pressures in the 'core' countries (notably France and the Benelux) will play a crucial role as a 'forcing mechanism' of a political breakthrough in the ongoing negotiations over the Euro area governance structure (and news of a Franco-German initiative to be unveiled ahead of the EU Summit on 9 December is a step in this direction). In return for some 'socialisation' of the risk in the stock of outstanding sovereign liabilities (the 'debt overhang'), weaker EMU countries are likely to agree to being subject to more intrusive scrutiny over their public finances and ultimately a loss of fiscal sovereignty should adverse circumstances emerge. But whereas the 'flow problem' of this debate is becoming more intelligible along the dimensions discussed earlier, how the 'stock problem' will be handled is still very unclear. Indeed, a number of schemes to achieve what a mutualization of credit risk can be envisaged.   The 'cleanest' (and thus, given the markets' search for clarity, probably the most effective) solutions offer an unconditional underwriting of that risk among EMU members. The refinancing of existing public debt and new deficits through the issuance of joint and several Eurobonds would give an unambiguous signal that all Euro area sovereigns stand behind the legacy debt and that the credit risk in individual countries' liabilities will be shared on all countries of the area.   Potentially unlimited purchases of sovereign debt by the ECB to enforce pre-announced yields caps would achieve a largely equivalent result in economic terms, since – as we have argued in the past – the Eurosystem's balance sheet and capital structure offer an alternative vehicle to achieve such Euro area-wide risk sharing. In order to sterilize the injection of liquidity resulting from these purchases, the ECB could issue term bonds under its own name, which de facto would replicate the structure of a joint and several Eurobond.   However, the likelihood of such a 'clean' solution being introduced is, in our view, low, at least at this stage. The clarity of the commitment to risk-sharing that underpins these schemes stems from its unconditional nature. But those providing the financing are unwilling to offer such an unconditional commitment. Absent a pooling of the tax base across countries, both these outcomes would result in a transfer of credit risk onto the shoulders of the existing AAA-rated issuers, either explicitly or indirectly via the ECB's balance sheet.   Leaving aside the binding constitutional impediments in taking this route, the German authorities are not prepared to 'sign a blank cheque' underwriting the fiscal situation throughout the Euro area, as an unconditional Eurobond would imply. Equally, the ECB's reluctance to cap sovereign yields stems from its concern that the unconditional commitment this implies could soften governments' budget constraints and again offer opportunities to free-ride on the fiscal strength of others, leading to fiscal indiscipline and accumulation of new imbalances. No wonder, the ECB requested a series of fiscal measures before starting to purchase Italian debt this past summer.   Given these constraints, different schemes are required that recognize the need to satisfy the concerns of those effectively providing the underlying guarantee (the 'hard' core countries around Germany and the ECB), and concomitantly to impose discipline on governments to ensure that new imbalances do not emerge in future, while offering the clarity and simplicity of support that the financial markets currently demand. Said differently, the challenge facing the European authorities is to offer a sufficiently unconditional guarantee of credit risk socialization to satisfy markets, while simultaneously making the guarantee sufficiently conditional to discipline governments (incidentally, the same principles apply in relation to bank funding). Stated that way, the magnitude of the challenge is clear. Europe's only hope: "Towards a Mutualization of the Legacy Debt" The ongoing discussions in Brussels and between European capitals are edging towards formulation of schemes that address these issues, and some basic elements of an agreement are starting to transpire. Specifically, the fiscally stronger countries are prepared to accept some form of mutualization of the risk in the existing debt stock in return for a new, enforceable scheme for fiscal discipline in the future. That way, they are not writing a 'blank cheque', i.e., underwriting the rest of Europe forever without first ensuring a pooling of their tax bases, but rather making a finite one-off (albeit large) payment to cover the mistakes of the past and create opportunity for a 'clean start' by countries currently under market pressure. In our view, such mutualization of the risk in national debt overhangs should be enough to ensure the survival of the Euro and the Euro area, from which the fiscally strong countries – that underwrite this mutualization – benefit significantly.   Judging from the material emerging from Brussels and other capitals, technical work on various aspects of these schemes, each carrying its pros and cons, would appear reasonably advanced. A proposal to set up co-Investment Funds (CIFs) for sovereign bonds of selected issuers seeded by the EFSF (which would take the first loss on any credit event) forms part of the list of options under consideration. The EU Commission published last week a lengthy Green Paper on the design of Eurobond instruments. These could be used to fund a sovereign 'bad company' warehousing a large chunk of legacy liabilities of EMU members, until they run off. Of course, making decisions operational will take time: Treaty change in the EU is a lengthy and risky process, as we have seen in the past.   Given such reassurance from governments, we believe the ECB would move from its existing stance of passive 'containment' of bond market tensions to a more forceful response. The ECB's actions would represent a 'bridge financing' of sorts ahead of Treaty revision regulating the flows, which would be associated with the mutualization of the risks in the debt overhang. This shift could take place ahead of the heavy calendar of bank and sovereign bond rollovers starting in the first quarter of next year. Any increased purchases of sovereign debt arising from this new stance could be justified as a form of 'credit easing', in the face of already low ECB policy rates, a substantial weakening of economic activity amplified by the ongoing contraction of bank funding avenues, and the potential emergence of downside risks to price stability as inflation falls. Our forecasts and current PMI readings imply the Euro area is already re-entering a recession, supporting the case for further monetary easing of this type. Goldman's observations on a Potential Break-Up Scenario The above scenario sketches one path on how the Euro can be sustained, even from the current unfavorable starting point. Given that negotiating and agreeing Treaty changes (which, despite their current presentation by European leaders, are hardly 'limited') is necessary to resolve the current impasse but likely to be a drawn-out process, it is not difficult to foresee the recurrence of potentially destabilizing events of the kind we have witnessed in recent months during the interim: Failing bond auctions, political instability, bank failures, and simply outright disagreement. And all of this is occurring in an environment where a deepening recession is likely to make achieving current fiscal targets extremely challenging.   Our baseline case that policymakers will ultimately do what it takes to avoid such an outcome requires political actors to behave in a rational and consistent manner, and assumes there will be no further destabilizing unanticipated 'shocks' along the way. But particularly considering how much damage to confidence has now been inflicted, one must also entertain the possibility that the intensification of market tensions and/or deterioration of economic activity reinforce each other feeding domestic political and social pressures precluding a final agreement among EMU member states from being reached. In this case, rather than being the 'forcing mechanism' that drives agreement, the economic and financial environment could feedback into the political process in a negative way, leading to a vicious downward spiral and, ultimately, to the failure of the Euro project.   In short, an alternative scenario of a 'break-up' of the Euro area certainly cannot be ruled out. Given the intensely political nature of the determining process at play, assigning probabilities to our baseline scenario and alternative ones is difficult. What we can say at this stage is that the next several weeks will be crucial: If a political breakthrough of the type described above is not achieved before the refunding cycle picks up in earnest in mid-January, the probability of a spiraling out of control towards a break-up would substantially increases.   Against this background, we offer a few considerations on the implications of the Euro's demise: A break-up of the Euro area is, by definition, an extra-institutional event. It was not foreseen in the Treaty establishing EMU and thus there is no established legal procedure to govern the process. This implies that any such process is likely to be plagued by uncertainty and chaotic. We are in the realm of 'unknown unknowns' (or 'Knightian uncertainty' in economics parlance), rather than risks that can be associated with probabilities. By its nature, this scenario is therefore difficult to describe and hard to price and/or assess from a risk management perspective. Contrary to the opinion of some observers, we hold the view that the likelihood of an 'orderly break-up' or 'managed divorce' (the dissolution of Czechoslovakia is sometimes held up as a precedent) is low. Beyond the fact that there is no 'pre-nuptial' agreement in the event of such a divorce, markets operate more quickly than political negotiations. As soon as the prospect of an exit or break-up is entertained, we would expect a run on sovereign bonds and bank deposits in the weaker countries as investors seek to protect themselves from being paid in a devalued currency. And measures taken to limit these flows (and, by implication, to limit the exposure of other countries to any such devaluation) would lead to the dissolution of the monetary union ahead of any formal political announcement, as they would disrupt the equivalence between Euros held in one part of the Euro area and those in another (which is the key feature of monetary union). Moreover, given the legal and economic uncertainties mentioned above, such an eventuality could also precipitate such runs even in the fundamentally stronger countries, as investors seek safe-havens outside the Euro area. Recent experience with the Swiss Franc illustrates this case. The introduction of 'exit clauses' in the Treaty as a punishment for fiscal profligacy would, in our view, be similarly self-defeating. Given the deep integration of the European financial system and the deep inter-linkages we and others have amply documented and large intra-Euro-area financial exposures that result (not least on the Eurosystem balance sheet itself, as reflected in TARGET 2 imbalances), the exit of one country is unlikely to occur in isolation. While smaller strong countries – faced with the take-it-or-leave-it choice of keeping the Euro but with a potentially significant erosion of fiscal sovereignty – could possibly leave EMU without inducing a wider meltdown (we say possibly because an 'exit' route would have been opened, and this in itself could be destabilizing for the reasons stated in sub 2), in the event of a more disorderly exit of a weaker and/or larger country, the economic, financial, political, and psychological channels of contagion would trigger a wider market malaise, anticipation of further exits and runs on sovereigns and banks that may make further exits hard to resist. More generally, once the supposedly irrevocable commitment to monetary union is broken, the stabilizing mechanisms that result from that commitment break down. In short, removal of one country is unlikely to be an isolated event – it would quickly become systemic. The economic costs of a break-up scenario are difficult to calculate, but undeniably large. Implicit in the above discussion ar

Goldman: "As The Endgame Approaches, The Rally In AAA-Euro Area Sovereign Bonds No Longer Seems Sustainable" Posted: 27 Nov 2011 11:06 AM PST Goldman Sachs has for the time being been very quiet in joining all of its colleagues from around the street in screaming for an immediate intervention by the ECB or else. The reasons are glaringly obvious: with a Goldman alum in charge of the ECB, and a 23 year Goldman veteran acting as ambassador to Germany, whatever Goldman wants, Goldman will get, without the need for convincing pitchbooks and dramatic expostulations that the world is ending unless... Intuitively it makes sense for Goldman to wait: after all why not take advantage of the situation a la Bear and Lehman, and wait for 3-4 major European banks to collapse, which will be the green light for Goldman to do what it does best: step in and fill the financial and power vacuum. Needless to say, when UniCredit, Commerzbank or Raiffeisen are down, the ECB will have no choice but to intervene with or without the Fed's help. Which is why anyone looking for clues as to what will happen in Europe has to focus on Goldman alone as we already know too well how everyone else is axed. Luckily GS' Francesco Garzarelli and Huw Pill have just released a much overdue note presenting just how the firm feel ont he topic of Europe's continuation as a going concern, or, alternatively, collapse. While we present the full note below in its entirety which naturally seeks to avoid broad panic, here are some notable extracts from a nuanced read: "considering how much damage to confidence has now been inflicted, one must also entertain the possibility that the intensification of market tensions and/or deterioration of economic activity reinforce each other feeding domestic political and social pressures precluding a final agreement among EMU member states from being reached. In this case, rather than being the 'forcing mechanism' that drives agreement, the economic and financial environment could feedback into the political process in a negative way, leading to a vicious downward spiral and, ultimately, to the failure of the Euro project." Simply said "an alternative scenario of a 'break-up' of the Euro area certainly cannot be ruled out", which leads to Goldman's conclusion: "For the same set of reasons, as the 'end game' approaches the rally in AAA-rated Euro area sovereign bonds (Germany's especially) no longer seems sustainable and could reverse in coming weeks. In our base case of more intrusive control on future deficit financing, the core countries will, in exchange, have to shoulder a greater part of the legacy credit risk of their peers if they want to keep EMU alive. In a 'break-up' scenario, the creditor 'core' countries will be confronted with a wave of insolvencies, which would also worsen their fiscal position. And in the middle ground between these two outcomes, where we currently stand, the ECB will be intermediating growing intra-Eurosystem imbalances. Through this monetary channel at the heart of EMU, the 'shadow' credit risk of the core countries is already rising, and at an increasingly rapid pace." As expected, it appears that Goldman sure will like occupying those European bank HQs for about $1 in equity. So, starting with Goldman's conclusion: The Rising 'Shadow' Credit Risk in the 'Core' Countries   To summarize, we interpret the current turmoil in financial markets and resulting weakening of the real economy as forcing mechanisms for agreement across EMU countries on fiscal governance to emerge: The history of European integration is littered with examples of crises forcing change. Viewed in this way, the current pain is a (necessary) part of the resolution process.   With market pressures mounting, economic activity weakening sharply, electoral pressures becoming more intense in some key countries, and the need to rollover large blocks of sovereign and bank debt in the New Year, the need for a breakthrough to the political impasse is increasing. Such a breakthrough should lead to the formulation of a road-map for institutional and governance reform that would limit the scope for undisciplined fiscal policy in the future. If sufficiently convincing, it should pave the way for an at least partial mutualization of the legacy debt of EMU countries, and a more pro-active response by the ECB.   But in order to avoid the large (if difficult to calculate) costs of a Euro area break-up, action on all policy fronts is urgently required. Nor can countries alone – for example, through further and necessary fiscal austerity – correct a situation that has become systemic in nature. The widening in spreads following the appointment of governments in Italy and Spain resolved to fiscal austerity is a case in point.   This makes investing across Euro area sovereign bonds (and the currency) at present time a very difficult proposition. True, spreads are abnormally high relative to credit fundamentals associated with our baseline scenario, as we have repeatedly said. Moreover, the ECB is likely to remain heavily engaged in secondary markets, 'home bias' alongside the relaxation of some regulatory constraints should help the primary government bond market, and access to central bank funding will remain unlimited. If the market is a forcing mechanism in the way we describe it, now that Italy and France are under so much pressure could mean a resolution is within reach. But the potential downside associated with break-up scenario is, for the reasons reviewed above, incommensurable. And even assuming that a political agreement on fiscal flows is reached, the exact form of mutualization of the sovereign debt currently outstanding could change expected returns considerably.   For the same set of reasons, as the 'end game' approaches the rally in AAA-rated Euro area sovereign bonds (Germany's especially) no longer seems sustainable and could reverse in coming weeks. In our base case of more intrusive control on future deficit financing, the core countries will, in exchange, have to shoulder a greater part of the legacy credit risk of their peers if they want to keep EMU alive. In a 'break-up' scenario, the creditor 'core' countries will be confronted with a wave of insolvencies, which would also worsen their fiscal position. And in the middle ground between these two outcomes, where we currently stand, the ECB will be intermediating growing intra-Eurosystem imbalances. Through this monetary channel at the heart of EMU, the 'shadow' credit risk of the core countries is already rising, and at an increasingly rapid pace. And then proceeding backward: Goldman on how the risk of a Euro 'Break-Up' is starting to be priced The situation in the Euro area funding markets took a sharper turn for the worse following the Greek government's announcement at the beginning of November that there would be a referendum on the austerity measures associated with the second Greek financing program. In response to this announcement, policy authorities at the highest level started to make explicit reference to the possibility of a country leaving the Euro area and (by implication) re-introducing a national currency. Although the Greek referendum was eventually aborted, such references to a 'break-up' have led to an escalation of market tensions, as the whole structure of EMU was formed on the basis that adoption of the Euro represented an irrevocable commitment.   No sovereign issuer, not even Germany, has been immune to the ensuing escalation of tensions, suggesting that the sovereign and banking crises have now assumed a fully systemic dimension: investors are increasingly questioning the survival of the Euro and the Euro area. In this context, French bonds have suffered in particular, owing to the large size of France's banking sector and its reliance on wholesale funding, the significant exposure of these banks to peripheral sovereigns, and the state's implicit guarantee of its banks. France is also currently debating its 2012 Budget and the opposition Socialist party (which controls the Upper House) is resisting the introduction of fiscal restrictions in the Constitution.   In currency markets, in spite of a sharp increase in option skew, the spot Euro exchange rate against the Dollar has declined moderately up to now, considering what is at play. As Thomas Stolper and team have argued in our Foreign Exchange Research contributions, the dislocation in sovereign and bank funding markets has largely been reflected in intra-Euro-area flows across countries (as 'home bias' has increased), rather than capital flight from the Euro area as a whole. On the contrary, inward flows have picked up, reflecting the sale of foreign assets from financial institutions.   Moreover, the ECB's full allotment policy against a wide collateral pool (extended in some cases by national provision of Emergency Liquidity Assistance, or ELA, where depository institutions can pledge poor quality assets that are no longer accepted in the ECB's repo operations to obtain cash) has played a significant role in intermediating these intra-Euro-area flows. This has led to an accumulation of credit risk at the ECB and rising intra-Eurosystem (im)balances (sometimes labeled TARGET 2 imbalances). This assumption of credit risk implies that creditor countries (like Germany) face significant losses in the event of a disorderly dissolution of the Euro area, and this helps explain why even German yields have come under upward pressure.   But, as the market situation deteriorates and the possibility of a break-up of the Euro area is re-priced, there is the potential for capital flight to occur from the Euro area as a whole (rather than from specific countries within the Euro area to other countries within the Euro area), creating pressure for a weaker Euro exchange rate at least until the policy stalemate is resolved. Goldman on "Market Pressures as a 'Forcing Mechanism'" -  as in the same pressures that forced Silvio to step down in less than 48 hours. To be clear, our base case remains that the Euro currency and the Euro area will survive intact. We are of the view that the intensification of market pressures in the 'core' countries (notably France and the Benelux) will play a crucial role as a 'forcing mechanism' of a political breakthrough in the ongoing negotiations over the Euro area governance structure (and news of a Franco-German initiative to be unveiled ahead of the EU Summit on 9 December is a step in this direction). In return for some 'socialisation' of the risk in the stock of outstanding sovereign liabilities (the 'debt overhang'), weaker EMU countries are likely to agree to being subject to more intrusive scrutiny over their public finances and ultimately a loss of fiscal sovereignty should adverse circumstances emerge. But whereas the 'flow problem' of this debate is becoming more intelligible along the dimensions discussed earlier, how the 'stock problem' will be handled is still very unclear. Indeed, a number of schemes to achieve what a mutualization of credit risk can be envisaged.   The 'cleanest' (and thus, given the markets' search for clarity, probably the most effective) solutions offer an unconditional underwriting of that risk among EMU members. The refinancing of existing public debt and new deficits through the issuance of joint and several Eurobonds would give an unambiguous signal that all Euro area sovereigns stand behind the legacy debt and that the credit risk in individual countries' liabilities will be shared on all countries of the area.   Potentially unlimited purchases of sovereign debt by the ECB to enforce pre-announced yields caps would achieve a largely equivalent result in economic terms, since – as we have argued in the past – the Eurosystem's balance sheet and capital structure offer an alternative vehicle to achieve such Euro area-wide risk sharing. In order to sterilize the injection of liquidity resulting from these purchases, the ECB could issue term bonds under its own name, which de facto would replicate the structure of a joint and several Eurobond.   However, the likelihood of such a 'clean' solution being introduced is, in our view, low, at least at this stage. The clarity of the commitment to risk-sharing that underpins these schemes stems from its unconditional nature. But those providing the financing are unwilling to offer such an unconditional commitment. Absent a pooling of the tax base across countries, both these outcomes would result in a transfer of credit risk onto the shoulders of the existing AAA-rated issuers, either explicitly or indirectly via the ECB's balance sheet.   Leaving aside the binding constitutional impediments in taking this route, the German authorities are not prepared to 'sign a blank cheque' underwriting the fiscal situation throughout the Euro area, as an unconditional Eurobond would imply. Equally, the ECB's reluctance to cap sovereign yields stems from its concern that the unconditional commitment this implies could soften governments' budget constraints and again offer opportunities to free-ride on the fiscal strength of others, leading to fiscal indiscipline and accumulation of new imbalances. No wonder, the ECB requested a series of fiscal measures before starting to purchase Italian debt this past summer.   Given these constraints, different schemes are required that recognize the need to satisfy the concerns of those effectively providing the underlying guarantee (the 'hard' core countries around Germany and the ECB), and concomitantly to impose discipline on governments to ensure that new imbalances do not emerge in future, while offering the clarity and simplicity of support that the financial markets currently demand. Said differently, the challenge facing the European authorities is to offer a sufficiently unconditional guarantee of credit risk socialization to satisfy markets, while simultaneously making the guarantee sufficiently conditional to discipline governments (incidentally, the same principles apply in relation to bank funding). Stated that way, the magnitude of the challenge is clear. Europe's only hope: "Towards a Mutualization of the Legacy Debt" The ongoing discussions in Brussels and between European capitals are edging towards formulation of schemes that address these issues, and some basic elements of an agreement are starting to transpire. Specifically, the fiscally stronger countries are prepared to accept some form of mutualization of the risk in the existing debt stock in return for a new, enforceable scheme for fiscal discipline in the future. That way, they are not writing a 'blank cheque', i.e., underwriting the rest of Europe forever without first ensuring a pooling of their tax bases, but rather making a finite one-off (albeit large) payment to cover the mistakes of the past and create opportunity for a 'clean start' by countries currently under market pressure. In our view, such mutualization of the risk in national debt overhangs should be enough to ensure the survival of the Euro and the Euro area, from which the fiscally strong countries – that underwrite this mutualization – benefit significantly.   Judging from the material emerging from Brussels and other capitals, technical work on various aspects of these schemes, each carrying its pros and cons, would appear reasonably advanced. A proposal to set up co-Investment Funds (CIFs) for sovereign bonds of selected issuers seeded by the EFSF (which would take the first loss on any credit event) forms part of the list of options under consideration. The EU Commission published last week a lengthy Green Paper on the design of Eurobond instruments. These could be used to fund a sovereign 'bad company' warehousing a large chunk of legacy liabilities of EMU members, until they run off. Of course, making decisions operational will take time: Treaty change in the EU is a lengthy and risky process, as we have seen in the past.   Given such reassurance from governments, we believe the ECB would move from its existing stance of passive 'containment' of bond market tensions to a more forceful response. The ECB's actions would represent a 'bridge financing' of sorts ahead of Treaty revision regulating the flows, which would be associated with the mutualization of the risks in the debt overhang. This shift could take place ahead of the heavy calendar of bank and sovereign bond rollovers starting in the first quarter of next year. Any increased purchases of sovereign debt arising from this new stance could be justified as a form of 'credit easing', in the face of already low ECB policy rates, a substantial weakening of economic activity amplified by the ongoing contraction of bank funding avenues, and the potential emergence of downside risks to price stability as inflation falls. Our forecasts and current PMI readings imply the Euro area is already re-entering a recession, supporting the case for further monetary easing of this type. Goldman's observations on a Potential Break-Up Scenario The above scenario sketches one path on how the Euro can be sustained, even from the current unfavorable starting point. Given that negotiating and agreeing Treaty changes (which, despite their current presentation by European leaders, are hardly 'limited') is necessary to resolve the current impasse but likely to be a drawn-out process, it is not difficult to foresee the recurrence of potentially destabilizing events of the kind we have witnessed in recent months during the interim: Failing bond auctions, political instability, bank failures, and simply outright disagreement. And all of this is occurring in an environment where a deepening recession is likely to make achieving current fiscal targets extremely challenging.   Our baseline case that policymakers will ultimately do what it takes to avoid such an outcome requires political actors to behave in a rational and consistent manner, and assumes there will be no further destabilizing unanticipated 'shocks' along the way. But particularly considering how much damage to confidence has now been inflicted, one must also entertain the possibility that the intensification of market tensions and/or deterioration of economic activity reinforce each other feeding domestic political and social pressures precluding a final agreement among EMU member states from being reached. In this case, rather than being the 'forcing mechanism' that drives agreement, the economic and financial environment could feedback into the political process in a negative way, leading to a vicious downward spiral and, ultimately, to the failure of the Euro project.   In short, an alternative scenario of a 'break-up' of the Euro area certainly cannot be ruled out. Given the intensely political nature of the determining process at play, assigning probabilities to our baseline scenario and alternative ones is difficult. What we can say at this stage is that the next several weeks will be crucial: If a political breakthrough of the type described above is not achieved before the refunding cycle picks up in earnest in mid-January, the probability of a spiraling out of control towards a break-up would substantially increases.   Against this background, we offer a few considerations on the implications of the Euro's demise: A break-up of the Euro area is, by definition, an extra-institutional event. It was not foreseen in the Treaty establishing EMU and thus there is no established legal procedure to govern the process. This implies that any such process is likely to be plagued by uncertainty and chaotic. We are in the realm of 'unknown unknowns' (or 'Knightian uncertainty' in economics parlance), rather than risks that can be associated with probabilities. By its nature, this scenario is therefore difficult to describe and hard to price and/or assess from a risk management perspective. Contrary to the opinion of some observers, we hold the view that the likelihood of an 'orderly break-up' or 'managed divorce' (the dissolution of Czechoslovakia is sometimes held up as a precedent) is low. Beyond the fact that there is no 'pre-nuptial' agreement in the event of such a divorce, markets operate more quickly than political negotiations. As soon as the prospect of an exit or break-up is entertained, we would expect a run on sovereign bonds and bank deposits in the weaker countries as investors seek to protect themselves from being paid in a devalued currency. And measures taken to limit these flows (and, by implication, to limit the exposure of other countries to any such devaluation) would lead to the dissolution of the monetary union ahead of any formal political announcement, as they would disrupt the equivalence between Euros held in one part of the Euro area and those in another (which is the key feature of monetary union). Moreover, given the legal and economic uncertainties mentioned above, such an eventuality could also precipitate such runs even in the fundamentally stronger countries, as investors seek safe-havens outside the Euro area. Recent experience with the Swiss Franc illustrates this case. The introduction of 'exit clauses' in the Treaty as a punishment for fiscal profligacy would, in our view, be similarly self-defeating. Given the deep integration of the European financial system and the deep inter-linkages we and others have amply documented and large intra-Euro-area financial exposures that result (not least on the Eurosystem balance sheet itself, as reflected in TARGET 2 imbalances), the exit of one country is unlikely to occur in isolation. While smaller strong countries – faced with the take-it-or-leave-it choice of keeping the Euro but with a potentially significant erosion of fiscal sovereignty – could possibly leave EMU without inducing a wider meltdown (we say possibly because an 'exit' route would have been opened, and this in itself could be destabilizing for the reasons stated in sub 2), in the event of a more disorderly exit of a weaker and/or larger country, the economic, financial, political, and psychological channels of contagion would trigger a wider market malaise, anticipation of further exits and runs on sovereigns and banks that may make further exits hard to resist. More generally, once the supposedly irrevocable commitment

Is This December Similar to 2007 and 2008 for Gold and Stocks? Posted: 27 Nov 2011 10:54 AM PST Thus far in 2011 the overall stock market movement has been much different from what we had in 2010. This year we have seen nothing but sideways to lower prices with wild price swings on a day to day basis. Read More...

IMF devising huge aid plan to save Italy, Spain, and the euro Posted: 27 Nov 2011 10:54 AM PST IMF Drawing Up L517 Billion Package to Save Italy, Spain, and the Euro By Robert Winnett The Telegraph, London Sunday, November 27, 2011 http://www.telegraph.co.uk/finance/financialcrisis/8919470/IMF-drawing-u... The International Monetary Fund is being lined up potentially to help Italy and Spain amid growing fears that a European rescue scheme will not be able to prop up the countries. The International Monetary Fund is being lined up potentially to help Italy and Spain amid growing fears that a European rescue scheme will not be able to prop up the countries, it emerged last night. Reports in Italy suggested that the IMF is drawing up plans for a E600 billion (L517 billion) assistance package for the country. Spain may be offered access to IMF credit, rather than a rescue package, to avoid it being "picked off" by the markets in the coming weeks. Any IMF involvement in European rescue packages would be partly underwritten by British taxpayers, which could leave this country liable if Italy and Spain did not repay any international loan. ... Dispatch continues below ... ADVERTISEMENT 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... Britain provides 4.5 per cent of the IMF's funding and would, therefore, face a potential liability to an Italian package of up to E27 billion (L23 billion). An IMF rescue package involves a country being offered hundreds of billions of euros in return for agreeing to launch a major austerity programme to cut spending. A credit line is a more flexible arrangement which gives countries short term access to international finance. Italy and Spain are likely to be forced to accept some international help as the cost of their debts has risen to unsustainable levels of about seven per cent. The reports of an IMF rescue package being prepared come as European finance ministers meet tomorrow to discuss draft plans for a bail-out scheme. Under the scheme set to be discussed, the euro area's European Financial Stability Facility (EFSF), would have to "insure" bonds of troubled countries by covering the first 30 per cent of any unpaid debts. To offer this guarantee, the European bail-out fund would have to be able to raise E1.4 trillion -- a threefold increase compared to the current size of the scheme. Last night it was not clear if or how this money could be raised, although the EFSF may itself sell bonds to international investors. At the weekend, European finance ministers from Germany and the Netherlands met and disclosed that IMF involvement was under discussion. Wolfgang Schauble, the German finance minister, said yesterday he was confident that the euro would be saved -- and go on to become the most stable currency in the world. The next fortnight is now seen as one of the final opportunities to resolve the crisis because European leaders will meet on December 9 for crunch talks on the package and changes to EU treaties. * * * Join GATA here: Vancouver Resource Investment Conference Sunday-Monday, January 22-23, 2012 Vancouver Convention Centre West Vancouver, British Columbia, Canada http://cambridgehouse.com/conference-details/vancouver-resource-investme... California Investment Conference Saturday-Sunday, February 11-12, 2012 Hyatt Grand Champions Resort Indian Wells, California, USA http://cambridgehouse.com/conference-details/california-investment-confe... Support GATA by purchasing gold and silver commemorative coins: https://www.amsterdamgold.eu/gata/index.asp?BiD=12 Or by purchasing a colorful GATA T-shirt: http://gata.org/tshirts Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: http://www.goldrush21.com/ 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 ADVERTISEMENT For Continuous Wealth Creation, the Hera Research Newsletter The life cycles of companies that produce natural resources allow investors to allocate assets among companies at different stages of development and to profit from transitions between stages. Based on natural resource company life cycles, the Hera Research Newsletter maximizes profits through deep, fundamental analysis at each stage of development and by moving gains back to earlier-stage companies in a continuous wealth-creation process. Hera Research covers a pipeline of high-quality natural resource companies at different stages of development. The companies span discovery and production of gold, silver, and platinum group metals, select base metals, oil and gas, green energy, agriculture, rare earth elements, uranium, and more. 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Flair For The Drachma-tic: ICAP Preparing For Return Of Greek Currency Posted: 27 Nov 2011 10:06 AM PST As if we needed another reason to send the ES higher by a few more percent in the premarket session on 10 or so ES contracts, the news that ICAP is already preparing for the end of the Euro should do it: ICAP Testing Trades In Greek Drachma Against Dollar, Euro ICAP has reloaded old drachma templates for spot foreign exchange and derivatives (NDFs) ICAP Drachma Tests Are Only Precautionary Drachma Currency Pairs Not Yet Launched For Trading, May Never Be Used - Execs ICAP Testing Trades In Greek Drachma Against Dollar, Euro - Executives Via Dow Jones

Ambrose Evans-Pritchard: Fed should monetize all of Europe to save the banks Posted: 27 Nov 2011 10:04 AM PST Should the Fed Save Europe from Disaster? By Ambrose Evans-Pritchard The Telegraph, London Sunday, November 27, 2011 http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/891878... The dam is breaking in Europe. Interbank lending has seized up. Much of the financial system is paralysed, setting off a credit crunch just as Euroland slides back into slump. The Euribor/OIS spread or "fear gauge" is flashing red warning signals. Dollar funding costs in Europe have spiked to Lehman-crisis levels, leaving lenders struggling frantically to cover their $2 trillion (L1.3 trillion) funding gap. America's money markets are no longer willing to lend to over-leveraged Euroland banks, or only on drastically short maturities below seven days. Exposure to French banks has been slashed by 69 percent since May. Italy faces a "sudden stop" in funding, forced to pay 6.5 percent on Friday for six-month money, despite the technocrat takeover in Rome. ... Dispatch continues below ... ADVERTISEMENT 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... German Bund yields have risen to 59 basis points above Swedish bonds since Wednesday's failed auction. German debt has been relegated suddenly against Swiss, Nordic, Japanese, and US debt. As the Telegraph reported two weeks ago, Asian central banks and sovereign wealth funds are spurning all EMU bonds because they have lost confidence in a monetary system with no lender of last resort, coherent form of government, or respect for the rule of law. Even if EU leaders could agree on fiscal union and joint debt issuance -- which they can't -- such long-range changes cannot solve the immediate crisis at hand. The push for treaty changes has become a vast distraction. Unless Germany agrees to the full mobilization of the European Central Bank very fast, the eurozone will spiral out of control. As The Economist put it, "The risk that the currency disintegrates within weeks is alarmingly high." Theoretically, EMU can limp on though the Winter until the Italian debt auctions of E33 billion in the last week of January, and E48 billion in the last week of February. The reality is that sovereign contagion to the financial system may well bring matters to a head more swiftly. If breakup occurs in a disorderly fashion, with Club Med states and Ireland spun into oblivion one by one, the chain reaction will cause an implosion of Europe's E31 trillion banking nexus (S&P estimate), the world's biggest and most leveraged. This in turn risks an almighty global crash -- first-class passengers included. So the question arises: Should the rest of the world take over management of Europe to prevent or mitigate disaster? Specifically, should the US Federal Reserve assume leadership as a monetary superpower and impose policy on a paralyzed ECB, acting as a global lender of last resort? In essence, the US would do for EMU what it did in military and strategic terms for the Europe in the 1990s when Washington said enough is enough after squabbling EU leaders had allowed 200,000 people to be slaughtered in the Balkans. The Pentagon settled matters swiftly with "Operation Deliberate Force," raining Tomahawk missiles on the Serb positions. Power met greater power. I have not made up my mind about the wisdom of a Fed rescue. It is fraught with dangers, and one might argue that resources are better deployed breaking EMU into workable halves with minimal possible damage. However, debate is already joined -- and wheels are turning in Washington policy basements -- so let me throw this out for readers to chew over. Nobel economist Myron Scholes first floated the idea over lunch at a Riksbank forum in August. "I wonder whether Bernanke might not say that 'we believe in a harmonized world, that the Europeans are our friends, and we know that the ECB can't print money to buy bonds because the Germans won't let them. And since the ECB will soon run out of money, we will step in and start buying European government bonds for them.' It is something to think about," he said. This is not as eccentric as it sounds. The Fed's Ben Bernanke touched on the theme in a speech in November 2002 -- "Deflation: making sure it doesn't happen here" -- now viewed as his policy "road map" in extremis. "The Fed can inject money into the economy in still other ways. For example, the Fed has the authority to buy foreign government debt. Potentially, this class of assets offers huge scope for Fed operations," he said. Berkeley's Brad DeLong said it is time for Bernanke to act on this as the world lurches straight into 1931 and a Great Depression II. "The Federal Reserve needs to buy up every single European bond owned by every single American financial institution for cash," he said. The Fed could buy E2 trillion of EMU debt or more, intervening with crushing power. The credible threat of such action by the world's paramount monetary force might alone bring Italian and Spanish yields back down below 5 percent before one bent nickel is even spent. One presumes that the Fed would purchase both the triple-A core and Club Med in a symmetric blast of monetary stimulus across the board, avoiding the (fiscal) error of targeting semi-solvent states. In sense, the Fed would do quantitative easing for the Europeans, whether they liked it or not. David Zervos from Jefferies has proposed an extreme variant of this, accusing Germany's fiscal Puritans of reducing Europe's periphery to "indentured servants" and driving the whole region into depression with combined fiscal and monetary contraction. "We in the US need to snuff out these sado-fiscalists and fast. They are a danger to the world. The US can force monetisation at the ECB. We should back up the forklift and buy Euro-area bonds. Lots of them," he said. Some of the purchases could be achieved by tapping the Fed's euro account at the ECB, flush with funds as a result of currency swaps provided by Washington to help Europe shore up its banks. Ultimately mass EMU bond purchases would cause a sudden and potentially dangerous spike in the euro against the dollar. There lies the rub. If the ECB failed to loosen monetary policy drastically to offset this, the experiment could go badly wrong. A pioneering school of "market monetarists" -- perhaps the most creative in the current policy fog -- says the Fed should reflate the world through a different mechanism, preferably with the Bank of Japan and a coalition of the willing. Their strategy is to target nominal GDP (NGDP) growth in the United States and other aligned powers, restoring it to pre-crisis trend levels. The idea comes from Irving Fisher's "compensated dollar plan" in the 1930s. The school is not Keynesian. They are inspired by interwar economists Ralph Hawtrey and Sweden's Gustav Cassel, as well as monetarist guru Milton Friedman. "Anybody who has studied the Great Depression should find recent European events surreal. Day-by-day history repeats itself. It is tragic," said Lars Christensen from Danske Bank, author of a book on Friedman. "It is possible that a dramatic shift toward monetary stimulus could rescue the euro," said Scott Sumner, a professor at Bentley University and the group's eminence grise. Instead, EU authorities are repeating the errors of the slump by obsessing over inflation when (forward-looking) deflation is already the greater threat. "I used to think people were stupid back in the 1930s. Remember Hawtrey's famous "Crying fire, fire, in Noah's flood"? I used to wonder how people could have failed to see the real problem. I thought that progress in macroeconomic analysis made similar policy errors unlikely today. I couldn't have been more wrong. We're just as stupid," he said. Needless to say, reflation alone will not make Euroland a workable currency area. Nor will fiscal union, Eurobonds, and debt pooling down the road. "Even if they do two years of fiscal transfers, and the ECB buys all the bonds, and the problems are swept under the carpet, we are still going to be facing a crisis at the end of it," said Professor Scholes. None of the "cures" on offer tackle the 30-percent currency misalignment between North and South, the deeper cause of this crisis. What Fed-imposed QE for Euroland can do is make a solution at least possible by stoking inflation deliberately. This means inflicting a boomlet on the German bloc while allowing the South to take its fiscal punishment without crashing further into self-defeating debt deflation. It forces up prices in the North, compelling the neo-Calvinists to accept their share of the intra-EMU price readjustment. The Germans will not like this. If inflation causes them rise up in revolt and leave EMU to the Latins, so much the better. That is the best solution of all. What we know for certain is that Europe's current policy settings must lead ineluctably to ruin and perhaps to fascism. Nothing can be worse. * * * Join GATA here: Vancouver Resource Investment Conference Sunday-Monday, January 22-23, 2012 Vancouver Convention Centre West Vancouver, British Columbia, Canada http://cambridgehouse.com/conference-details/vancouver-resource-investme... California Investment Conference Saturday-Sunday, February 11-12, 2012 Hyatt Grand Champions Resort Indian Wells, California, USA http://cambridgehouse.com/conference-details/california-investment-confe... Support GATA by purchasing gold and silver commemorative coins: https://www.amsterdamgold.eu/gata/index.asp?BiD=12 Or by purchasing a colorful GATA T-shirt: http://gata.org/tshirts Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: http://www.goldrush21.com/ 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 ADVERTISEMENT For Continuous Wealth Creation, the Hera Research Newsletter The life cycles of companies that produce natural resources allow investors to allocate assets among companies at different stages of development and to profit from transitions between stages. Based on natural resource company life cycles, the Hera Research Newsletter maximizes profits through deep, fundamental analysis at each stage of development and by moving gains back to earlier-stage companies in a continuous wealth-creation process. Hera Research covers a pipeline of high-quality natural resource companies at different stages of development. The companies span discovery and production of gold, silver, and platinum group metals, select base metals, oil and gas, green energy, agriculture, rare earth elements, uranium, and more. Discover the unique value of the Hera Research Newsletter by visiting: http://www.heraresearch.com/newsletter.html Or call Ron Hera at 360-339-8541x101.

Make-Or-Break Week For Europe Posted: 27 Nov 2011 07:59 AM PST The people buying bonds issued by Italy and Spain are clearly looking past the dysfunctional balance sheets and focusing on Germany's reluctance to let a major PIIGS country default. So an Italian bond, in the mind of the market, becomes a German bond. But this sword cuts both ways. If European debts are tossed into one big communal pot with everyone responsible for everyone else, then buying a German bond is the same thing as buying an Italian bond — since German taxpayers are ultimately on the hook for both. Viewed that way, lending money to Germany for ten years at 2% is hardly risk-free. Which is why the failure of German's most recent bond auction is so interesting: German Bonds Fall Prey to Contagion Nov. 26 (Bloomberg) — European bonds slumped after Germany failed to draw bids for 35 percent of the offered amount at an auction of 10-year bunds, stoking concern the region's debt crisis is infecting even the safest sovereign securities. Thirty-year German bonds slid, with yields rising the most since the week through Sept. 3, 2010, amid concern Germany will need to offer greater financial support to its euro-area peers. "Non-residential investors are increasingly troubled by events," said Eric Wand, a fixed-income strategist at Lloyds Bank Corporate Markets in London. "It was ignited by the 10- year bund auction result showing further credit dilution, and hasn't been helped by the outcome of Italian sales." Thirty-year German bond yields rose 21 basis points to 2.83 percent at 4:54 p.m. London time yesterday, from 2.61 percent the week earlier. Total bids at the auction of German securities due in January 2022 amounted to 3.889 billion euros ($5.15 billion), out of a maximum target for the sale of 6 billion euros, sparking concern that the turmoil emanating from Greece's debt crisis now risks engulfing the region's biggest economy. And last week was just the warmup for next week's deluge of new borrowing: Italy Leads Busy Week of Euro-Zone Bond Sales FRANKFURT—Italy, Belgium, Spain and France all plan to sell bonds next week, a big test for a region still reeling from unexpectedly weak demand for debt from its German core. Given the surge in bond-market yields in recent weeks, all four countries are expected to pay considerably more for cash than they did at their previous auctions. Just how much higher the tab turns out to be will indicate the extent to which investors are giving up on the ability of politicians to take tough measures to reduce their debt loads. All told, five euro-zone governments are together expected to sell about €19 billion ($25.36 billion) in debt next week, more than double the amount three governments sold this week. Italy will offer up to €750 million in 2023-dated inflation-linked bonds on Monday, followed a day later by up to €8 billion in debt maturing in 2014, 2020 and 2022. The sales come after the country on Friday paid 6.5% to borrow six-month funds, nearly double the 3.5% it paid only a month ago, and its bond yields again soared, to worrying levels solidly above 7%. Meanwhile, the shape of the bailout is becoming more clear: IMF Readying Loan of as Much as $794 Billion for Italy, La Stampa Reports The International Monetary Fund is preparing a 600-billion euro ($794 billion) loan for Italy in case the country's debt crisis worsens, La Stampa said. The money would give Italy's Prime Minister Mario Monti 12 to 18 months to implement his reforms without having to refinance the country's existing debt, the Italian daily reported, without saying where it got the information. Monti could draw on the money if his planned austerity measures fail to stop speculation on Italian debt, La Stampa said. Italy would pay an interest rate of 4 percent to 5 percent on the loan, the newspaper said. The amount could vary from 400 billion euros to 600 billion euros, La Stampa said. Huge week coming up It's no surprise that a new bailout is announced today. Without a compelling distraction, the markets would fixate on upcoming bond sales and would probably demand even higher rates, effectively bankrupting the PIIGS countries and hobbling Germany and France. So something big has to happen, and right away. The International Monetary Fund, meanwhile, isn't some independent government with farms and factories and oil wells that it can tax to fund its foreign aid activities. It's just a bank, sort of, holding deposits from the US and other formerly rich countries, which it then lends to supposedly poorer ones. So an IMF loan to Italy is in reality a US/German bailout. There is no free lunch, there is no extra money sitting around. Everything the IMF has comes, directly or indirectly, from the printing presses of safe haven governments. And the soon-to-be-announced 600 billion euro bailout is just for Italy. Since Spain, Ireland and Portugal between them owe just as much and are just as functionally bankrupt, expect them to get as much or more in coming weeks. Which brings us to the nature and function of money. This game is only possible while the US and Germany have currencies with relatively stable values. Should the dollar and/or euro start to fall, then loan guarantees denominated in those currencies become a lot less attractive. Bond prices will fall commensurately, and the owners of those bonds will have massive losses that they'll have to acknowledge one way or another. The result: zombie banks that can't afford to lend and underfunded pensions that can't meet their obligations — and the need for even bigger bailouts. That's why this week is so huge. If investors realize that German bonds are really Italian bonds, they'll demand higher interest rates from all involved (and we should be short the major stock indexes). And if investors realize that the IMF is just the Fed/ECB in drag, they might finally lose faith in those banks' currencies (in which case gold and silver will soar). In either case, it's game over for the current system.

Will Gold and Stocks Christmas Rally Be Like 2007 and 2008? Posted: 27 Nov 2011 07:54 AM PST Thus far in 2011 the overall stock market movement has been much different from what we had in 2010. This year we have seen nothing but sideways to lower prices with wild price swings on a day to day basis. There just has not been any really solid trends to take advantage of this year. Instead we had to actively trade the oversold dips and sell into the overbought rallies to just pull money out of the market on a monthly basis. Last year we saw 3 major rallies that lasted several months making it easy for anyone who bought into the trend to make money if managed properly.

Euro Bond: Europe's Only Way Out For Now Posted: 27 Nov 2011 07:49 AM PST By EconMatters The Euro crisis is getting deeper into the uncharted territory with bond yields surging across Europe on Friday Nov. 25, after Fitch Ratings cut Portugal's debt rating to "junk" status.  Standard & Poor's later also delivered a debt downgrade to Belgium to AA from AA+.  Moody's stayed busy and lowered Hungary's debt rating to junk on Thursday.  Meanwhile, Greece reportedly was trying to negotiate a bigger haircut with its creditors.   Elsewhere, Italy has a debt load of €1.9 trillion, or 120% of GDP, with €306 billion due to mature in 2012 alone.  With its 2-year and 10-year sovereign  bond yield spiking to a record 7%+, "too big to bail" would be an appropriate description of Italy right now.   Telegraph cited an analyst estimate that rescuing Italy would cost around €1.4 trillion, while the Euro Zone's rescue fund has only  €440 billion, a near €1 trillion shortfall.  And the Financial Times reported that the European Financial Stability Facility may not be able to increase its capacity from the current €440 billion due to "worsening of market conditions over the past month."    Spain is definitely feeling the pain.  Spanish I0-year government bond yield already got pushed up to close to 7%.  Reuters reported that the new Spanish centre-right government is considering an application for international aid.   Markets are concerned about the potential exposure of European banks now that the borrowing cost of both Italy and Spain is hovering at the proverbial 7%, which was the level that sent Greece, Ireland and Portugal seeking bailout.  German and French banks have the most exposure to Italy and Spain sovereign debt (see chart below).   The bond rout has spread into the other major Euro members while putting a strain on Europe's financial system as well.  German debt has long been the safe haven, but even Germany could not find buyers for about 40% of its €6-billion 10-year bonds auction last week.     Meanwhile, both Fitch and Moody's warned of a possible downgrade of France  AAA status due to the continuing intensification of Euro debt crisis.  S&P did downgrade France, although an error now under investigation, it nevertheless suggests something in the works at S&P.     The two chartspublishedat the Guardian from analysts show the unrelenting ascend of Euro Zone government 10-year and 2-year bond yields weighted by each country's GDP, which is a rough approximation of borrowing costs for the entire Euro Zone.     10-year Euro Zone Government Bond Yield Weighted by GDP (Source: The Guardian, 23 Nov 2011)       2-year Euro Zone Government Bond Yield Weighted by GDP (Source: The Guardian, 23 Nov 2011)     So far analysts and market players have formulated two possibilities to contain the situation: Euro Zone sovereign debt pooled in the form of Euro bonds, which would put Germany on the line implicitly guarantee the peripheral debt The European Central Bank (ECB) as the lender of last resort by buying up massive quantities of sovereign bonds from indebted euro-zone members Between the two, we see the Euro bond as the more likely option.   ECB's Euro Zone bond-buying spree of  €195 billion since May 2010 has not been successful to contain the interest rate spike, and we doubt more purchases would restore market confidence that much.  Moreover, concern over the potential inflationary effect is part of the reason behind German Chancellor Angela Merkel's opposition to ECB expanding its role in bond monetization.   Although there are some market chatters of a potential dissolutionordefault of the Euro, some economists believe that the outright collapse of the Euro could reduce GDP in its member-states by up to half and trigger mass unemployment, which could lead to widespread civil unrest and property losses.  In that scenario, a recession/depression in Europe and the world would be closer to a probability of 100%.       On the other hand, Euro bond, with the guarantee of the stronger Euro countries, would leverage and facilitate the highly indebted weaker members to get financing at sustainable rates, to repay debt while maintaining some growth.  That would in turn benefit other European countries, such as Germany, export business as well.   The failure of the last German bond auction is a reflection of markets losing confidence in the Euro rather than in Germany itself.  Without the Germans backing up other troubled sovereign debt, Europe will be increasingly short on cash as investors flee the region. Eventually, Germany would not be immune to an ensuing catastrophic financial system meltdown. Although Merkel has been vehemently opposed to the idea of Euro bond, some within Merkel's governing coalition reportedly are no longer ruling out the introduction of euro bonds.  FromSpiegel,   "We never say never. We only say: No euro bonds under the existing conditions," Norbert Barthle, budgetary spokesperson for the conservatives in parliament, told the Financial Times Deutschland.    Spain and Italy have lion's share of the peripheral government debt to mature over the next three years with 2012 being the most critical (See Chart Below)     Working within that timeline, even if busting up the Euro union were a viable option to entertain, the complexity involved with multiple currency conversions would preclude it as something that could be implemented within a year.   During the past 2+ years of this debt crisis in the Euro Zone, Germany, with its strong economy, has emerged as the leader wielding the most power.  Euro bond will not achieve its intended purpose without the support of Germany.  Europe's future now lies largely in the hands of the German.   Italy, Spain, France and Belgium will each go to market this week to auction bonds worth billions of euros.  The outcome of these auctions most likely would push up Euro bond discussion with the Europe decision makers.   Time is basically running out, eventually some compromise, for example, certain GIIPS club member(s) leaving the Union, has to be accomplished to break the current stalemate.     A swift decision making process has not been one of Merkel's traits, but the consequence of inaction and delayed action could be much more disastrous for Europe and the world.   Further Reading - Expect A Global Recession No Matters What Happens In The Euro Zone   ©EconMattersAll Rights Reserved | Facebook| Twitter| Post Alert| Kindle

American's Comfortably Numb on the Highway to Economic Collapse Posted: 27 Nov 2011 07:36 AM PST As I observe the zombie like reactions of Americans to our catastrophic economic highway to collapse, the continued plundering and pillaging of the national treasury by criminal Wall Street bankers, non-enforcement of existing laws against those who committed the largest crime in history, and reaction to young people across the country getting beaten, bludgeoned, shot with tear gas and pepper sprayed by police, I can’t help but wonder whether there is anyone home. Why are most Americans so passively accepting of these calamitous conditions? How did we become so comfortably numb? I’ve concluded Americans have chosen willful ignorance over thoughtful critical thinking due to their own intellectual laziness and overpowering mind manipulation by the elite through their propaganda emitting media machines. Some people are awaking from their trance, but the vast majority is still slumbering or fuming at erroneous perpetrators.

The Real Life CONTAGION Will Be Premeditated, And By Design Posted: 27 Nov 2011 07:00 AM PST By SGT In Steven Soderbergh's most recent mega-budget Hollywood thriller 'Contagion' the world population is annihilated by a new deadly strain of flu. This slick cinematic effort in predictive programming pulls out all the stops with its all-star cast which includes Matt Damon, Gwyneth Paltrow, Jude Law and Kate Winslet. In perhaps the most disingenuous scene in the film, 30 Rock's Scott Adsit asks Laurence Fishburne's character, "Is there any way someone could weaponize the bird flu, is that what we're looking at?" to which Fishburne responds, "Someone doesn't have to weaponize the bird flu. The birds are doing that." Watch that scene and the trailer for yourself: The problem is, despite Soderbergh's penchant for quality filmmaking, this exchange stands out like a sore thumb in an otherwise frighteningly accurate film. You see friends, the psychopaths within the Bio-tech military industrial complex just announced that they have weaponzied the bird flu. And they've made it unimaginably deadly. With the ability to kill 1 of every 2 people it infects, this new, man-made strain of H5N1 bird flu has the ability to wipe half the world's population from the face of the globe. And a group of scientists are now debating whether or not to release a paper on how they created this humanity-ending concoction. Here's an excerpt from Digital Journal: A group of scientists are trying to publish a paper on how they created a new flu virus that could wipe out all humanity. The study that produced the virus is the subject of raging controversy, with some scientists saying it should never have been done. Concern about the threat of the virus is heightened by the realization of the damage it could do if it is accidentally released from the laboratory or it gets into the hands of people who may want to use it for mischief purposes. The research study has raised a debate on the limits of scientific freedom, especially in cases of "dual-use research," that is, studies with potential public health benefit but which could also be adapted for mischief, such as bio-warfare. Daily Mail reports the new deadly virus is the genetically modified version of H5N1 bird flu virus. The new virus, however, is much more infectious than the original H5N1 strain and if accidentally released could spread across the globe in a short time. If you think reporting this fact is fear mongering, you're clearly not thinking. The psychopathic elite in control of this planet has a blood thirst for death and destruction. And sadly, the 'humanity is a cancer' meme long ago spread into the halls and classrooms of higher education. In 2006, Dr. Eric R. Pianka gave a speech to the Texas Academy of Science in which he advocated the need to exterminate 90% of the population through the airborne ebola virus. According to Paul Joseph Watson the chilling comments and the enthusiastic reception Pianka received from both students and faculty merely underscored the elite's strategy to enact horrifying measures of population control. Standing in front of a slide of human skulls, Pianka gleefully advocated airborne ebola as his preferred method of exterminating the necessary 90% of humans, choosing it over AIDS because of its faster kill time. "If I were reincarnated, I would wish to be returned to earth as a killer virus to lower the human population levels." – Prince Phillip, Duke of Edinburgh, head of the World Wildlife Fund In 2009, the Deerfield, Illinois-based pharmaceutical company Baxter International was caught shipping flu vaccines contaminated with deadly avian flu viruses, to 18 countries. The laboratory protocols that are routine for vaccine makers makes the mixing of a live virus biological weapon with vaccine material accidentally, a virtually impossibility. So, just what the hell is going on here? As the world financial picture continues to dim, as the derivatives bomb explodes, as the Euro falls, and as the United States government takes new, ever bolder steps towards Authoritarian tyranny, all of this madness leads me to wonder. Is it not likely for the elite, which has so much disdain for humanity, to at some point in the future release a deadly bio-weapon in order to thin the herd? The predictive programming in Hollywood films has already given us the answer. With no more rule of law, and a complete loss of national sovereignty around the planet, I fear that now, it's just a matter of time. And if you think the behavior of the mindless zombies was horrifying on Black Friday, just wait until they are broke AND sick.

Only gold is real money Posted: 27 Nov 2011 06:10 AM PST Bill Buckler Presents The Four Horsemen Of The (Financial) Apocalypse

Rob Kirby: U.S. rigs bond market through big banks, ESF, and derivatives Posted: 27 Nov 2011 05:42 AM PST 1:41p ET Sunday, November 27, 2011 Dear Friend of GATA and Gold: In commentary posted today at GoldSeek, GATA consultant Rob Kirby of Kirby Analytics in Toronto describes how the U.S. government, through the secretive Exchange Stabilization Fund, likely is arranging and subsidizing the purchase of U.S. government bonds by five major U.S. banks holding huge derivatives books, another act of deceptive and market-destroying financial repression. Kirby's commentary is headlined "Tomfoolery at Its Finest: The Truman Show Redux" and you can find it at GoldSeek here: http://news.goldseek.com/GoldSeek/1322414866.php CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. ADVERTISEMENT Be Part of a Chance to Discover Multi-Million-Ounce Gold and Silver Deposits in Canada Northaven Resources Corp. (TSX-V:NTV) is advancing five gold and silver projects in highly prospective and politically stable British Columbia, Canada. Check out the exploration program on our Allco gold/silver project : -- A large (13,000 hectare) property, covering more than 15 square kilometers of a regional mineralized trend just 3km from a recently announced 1.2-million-ounce gold and 15-million-ounce silver deposit. -- The property hosts historic high-grade silver workings and many mineral showings as well as former mines at the property's northern and southern boundaries. -- A deep-penetrating airborne geophysics survey has just been completed on the entire property and neighboring deposits and its results are eagerly awaited. To learn more about the Allco property or Northaven's other gold and silver projects, please visit: http://www.northavenresources.com Or call Northaven CEO Allen Leschert at 604-696-3600. Join GATA here: Vancouver Resource Investment Conference Sunday-Monday, January 22-23, 2012 Vancouver Convention Centre West Vancouver, British Columbia, Canada http://cambridgehouse.com/conference-details/vancouver-resource-investme... California Investment Conference Saturday-Sunday, February 11-12, 2012 Hyatt Grand Champions Resort Indian Wells, California, USA http://cambridgehouse.com/conference-details/california-investment-confe... Support GATA by purchasing a silver commemorative coin: https://www.amsterdamgold.eu/gata/index.asp?BiD=12 Or by purchasing a colorful GATA T-shirt: http://gata.org/tshirts Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: http://www.goldrush21.com/ 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 ADVERTISEMENT The United States Once Again Can Establish a Stable Dollar Worth Its Weight in Gold Lewis E. Lehrman, chairman of the Lehrman Institute, sponsor of The Gold Standard Now project, has released a plan to restore economic growth through a stable dollar. The plan, titled "The True Gold Standard: A Monetary Reform Plan Without Official Reserve Currencies," responds to the recurrent economic crises of the last century and outlines a detailed proposal for America's leadership on "how we get from here to there." That is, how we get from the present unstable paper dollar to a stable dollar as good as gold. James Grant, author and editor of Grant's Interest Rate Observer, says of the Lehrman plan: "If you have ever wondered how the world can get from here to there -- from the chaos of depreciating paper to a convertible currency worthy of our children and our grandchildren -- wonder no more. The answer, brilliantly expounded, is between these covers. America has long needed a modern Alexander Hamilton. In Lewis E. Lehrman the country has finally found him." To learn more and to sign up for The Gold Standard Now's free, noncommercial, weekly report, "Prosperity through Gold," please visit: http://www.thegoldstandardnow.org/gata

Bill Buckler Presents The Four Horsemen Of The (Financial) Apocalypse Posted: 27 Nov 2011 05:20 AM PST As usual, "The Privateer" author Bill Buckler does a great job at summarizing a complicated, and quite terminal, situation in a few short sentences. Today is one of those occasions. The Four Harbingers Of The Apocalypse:   There are four indicators today which show as clearly as anything can be shown the state of our global debt-based monetary and financial system. Any one of them alone should be all the evidence one needs that the system is unsustainable. Put them together and much more than the canary is singing. First, the most popular (measured by its nominal "value") investment vehicle today is a combination of a bet that sovereign debt will go bankrupt and an "insurance policy" that if/when it does, the holders of the debt paper will be made whole. These are called "credit default swaps" or CDSs, conceived in the early 1990s and unleashed on the investment world shortly thereafter. The total of CDSs outstanding doubled every year from 2003 to 2007. This growth paused in 2008 - early 2009 and then exploded again with the onset of "quantitative easing". The second indicator is the mere fact that it is now universally accepted in the investment world that the only "safe" government debt is one issued by a government whose central bank has demonstrated its willingness to print money. The third indicator is the fact that the "sovereign debt crisis" hype is focussed exclusively on Europe in a desperate attempt to prevent the discovery that everybody is in the same boat. And the fourth and last is Gold. On the paper markets, the price of Gold can and is being manipulated. Beyond Gold's price appreciation is the ever increasing global demand for physical Gold and the fact that central banks throughout Europe and Asia are ADDING to their supply. The worse the situation gets, the more dangerous becomes a "promise to pay" which relies on nothing except a central bank's ability and willingness to PRINT. In these circumstances, the last paper asset standing will be the "money" - the actual CASH money - itself. Everywhere today, cash is king. But that old saying comes from an era when there were still limits on how much of it governments could create. Those limits have long since been removed. For REAL markets - you need REAL money.

A Glimpse Into The Future Of The Stock Market And Dollar Posted: 27 Nov 2011 05:11 AM PST The "accident" many have been waiting for has finally happened, and it’s called Europe. That doesn’t bode well for the U.S. stock market. A lot of technical analysts and financial pundits are expecting a standard-issue Santa Claus Rally once a "solution" to Europe’s debt crisis magically appears. There will be no such magical solution for the simple reason the problems are intrinsic to the euro, the Eurozone’s immense debts and the structure of the E.U. itself.

Reuters notes the warning from Jim Rickards' book 'Currency Wars' Posted: 27 Nov 2011 03:26 AM PST Today's Currency War May Be Tomorrow's Global Crisis: Book By Steven C. Johnson Reuters Sunday, November 27, 2011 http://uk.reuters.com/article/2011/11/27/uk-markets-currencywars-idUKTRE... NEW YORK -- "Hold on -- I'm in the middle of a Twitter war with Nouriel Roubini," author James Rickards says as he answers the phone from his Manhattan office. The martial metaphors come easily for Rickards, who argues in his new book, "Currency Wars," that government attempts to devalue their currencies and inflate away their debts could set the stage for the mother of all financial crises, complete with a dollar collapse and the breakdown of all civil order. The book reads in places more like a post-apocalyptic nightmare story than a book on international finance. In Rickards' worst-case scenario, "a person's net worth would consist of those things she can carry on her back." ... Dispatch continues below ... ADVERTISEMENT The United States Once Again Can Establish a Stable Dollar Worth Its Weight in Gold Lewis E. Lehrman, chairman of the Lehrman Institute, sponsor of The Gold Standard Now project, has released a plan to restore economic growth through a stable dollar. The plan, titled "The True Gold Standard: A Monetary Reform Plan Without Official Reserve Currencies," responds to the recurrent economic crises of the last century and outlines a detailed proposal for America's leadership on "how we get from here to there." That is, how we get from the present unstable paper dollar to a stable dollar as good as gold. James Grant, author and editor of Grant's Interest Rate Observer, says of the Lehrman plan: "If you have ever wondered how the world can get from here to there -- from the chaos of depreciating paper to a convertible currency worthy of our children and our grandchildren -- wonder no more. The answer, brilliantly expounded, is between these covers. America has long needed a modern Alexander Hamilton. In Lewis E. Lehrman the country has finally found him." To learn more and to sign up for The Gold Standard Now's free, noncommercial, weekly report, "Prosperity through Gold," please visit: http://www.thegoldstandardnow.org/gata It's hardly surprising that his opinions elicit strong reactions. Roubini, the economist who predicted the 2008 banking crisis, takes issue with Rickards' call for a new gold standard to correct decades of central bank excess and error. "Why is he for a return to the gold standard when such a return was a major cause of the Great Depression," Roubini asked via his popular Twitter feed this week, reviving a debate that has raged among economists for nearly a century. "The thing is," Rickards told Reuters, "my preference is not a gold standard but a strong dollar." But he says that since U.S. policymakers aren't ready to embrace the sort of policies that would lift the dollar -- an end to the zero interest rates and quantitative easing -- a flexible gold standard is the next best option. Rickards, a senior managing director at Tangent Capital Partners and a 30-year Wall Street veteran, sees the United States as the main antagonist in a currency war he says began in 2008. The "secret weapon" was the Federal Reserve's policy of zero interest rates and printing trillions of dollars to stimulate U.S. growth. Much of the money flooded into China, increasing pressure on Beijing to let the yuan rise against the dollar. That, in theory, should undercut what Washington considers China's unfair trade advantage, boost U.S. exports to help revive growth, and chip away at a large U.S. trade deficit. What it has really done is push up inflation in China and other fast-growing developing countries and set off the sort of competitive currency devaluations that Rickards says helped bring Nazis to power in Germany in the 1930s and set off a devastating wave of inflation in the 1970s, when the United States delinked the dollar from gold. This time, he fears, things could get worse, particularly when Europe's debt crisis and political paralysis in Washington have investors reconsidering whether lending money to indebted governments is really such a safe or wise bet. In what he refers to as the "chaos scenario," Rickards imagines a failed Spanish bond auction that spurs investors to bail out of the euro and dollar in favor of gold and sparks enough fear to turn the move into a worldwide panic. In the book, he recounts how he conducted a war game for the Pentagon in which the Russia team moves all its gold to a bank in Switzerland and decides to accept payment for oil and gas only in a new gold-backed currency, not in dollars. "The Fed thinks they are playing with a thermostat -- the house is too cool so we dial it up a little bit, now it's too warm, so we dial it down," Rickards said. "In reality, they are playing with a nuclear reactor. If you get it wrong, you're going to have a meltdown." Of course, while China and Russia have been candid lately about their desire to reduce reliance on the dollar, neither would seem to benefit through precipitating a dollar collapse. And some of Rickards' preferred solutions, economists say, have frightening side effects of their own, particularly limiting Fed flexibility by moving back to a gold standard, even the one Rickards advocates in which, say, only 20 percent of the money supply needs to be backed by gold. As Barry Eichengreen, an economist at the University of California at Berkeley and an expert on international monetary system, told Reuters recently, a return to gold would prevent the Fed from taking emergency action to forestall disaster. Quantitative easing may have weakened the dollar and stoked some commodity price inflation, but doing nothing could have inflicted pain more widely through an even higher jobless rate and possibly turned a deep recession into a Great Depression. "There have been some undesirable side effects to what the central banks did, but radiation therapy has undesirable side effects, too," Eichengreen said. "But if the alternative is to kill the patient, it's better to suffer the side effects." Rickards doesn't think chaos and collapse are inevitable but says that in today's nervous and interconnected markets, it may not take much for events to spiral out of control. "You don't have to change the minds of 20 percent of the population in such a dynamic system," he said. "A fraction of 1 percent can start a stampede that everyone else follows." * * * Join GATA here: Vancouver Resource Investment Conference Sunday-Monday, January 22-23, 2012 Vancouver Convention Centre West Vancouver, British Columbia, Canada http://cambridgehouse.com/conference-details/vancouver-resource-investme... California Investment Conference Saturday-Sunday, February 11-12, 2012 Hyatt Grand Champions Resort Indian Wells, California, USA http://cambridgehouse.com/conference-details/california-investment-confe... Support GATA by purchasing a silver commemorative coin: https://www.amsterdamgold.eu/gata/index.asp?BiD=12 Or by purchasing a colorful GATA T-shirt: http://gata.org/tshirts Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: http://www.goldrush21.com/ 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 ADVERTISEMENT Be Part of a Chance to Discover Multi-Million-Ounce Gold and Silver Deposits in Canada Northaven Resources Corp. (TSX-V:NTV) is advancing five gold and silver projects in highly prospective and politically stable British Columbia, Canada. Check out the exploration program on our Allco gold/silver project : -- A large (13,000 hectare) property, covering more than 15 square kilometers of a regional mineralized trend just 3km from a recently announced 1.2-million-ounce gold and 15-million-ounce silver deposit. -- The property hosts historic high-grade silver workings and many mineral showings as well as former mines at the property's northern and southern boundaries. -- A deep-penetrating airborne geophysics survey has just been completed on the entire property and neighboring deposits and its results are eagerly awaited. To learn more about the Allco property or Northaven's other gold and silver projects, please visit: http://www.northavenresources.com Or call Northaven CEO Allen Leschert at 604-696-3600.

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