Gold World News Flash

Greyerz – Worldwide Package Coming From Fed, ECB & IMF
10 Things That We Can Learn About Shortages And Preparation From The Economic Collapse In Greece
Steve Keen: Why 2012 Is Shaping Up To Be A Particularly Ugly Year
Gold futures price decline is an illusion, von Greyerz tells King World News
Alasdair Macleod: Gold data hints at possible market upswing
Trading Gold by Timing the Fed
Spain’s Rescate (“Rescue”)
Guest Post: Mark Carney Kicks The Can
Greyerz - Worldwide Package Coming From Fed, ECB & IMF
So Much Changes In Two Weeks
Spain IS Greece After All: Here Are The Main Outstanding Items Following The Spanish Bailout
Brodsky and Quaintance: Solution is Asset Monetization, Starting With Gold Revaluation
Marc Faber Bullish on Gold Shares
Reasons Why the U.S. Dollar is Really Rising
Despair As Collapse Accelerates: “My Shotgun is Full and Well Equipped. I Hope I Don’t Need to Use It.
Latest article posted at GoldMoney
This Past Week in Gold
Gold Chart and Comments
We are Back - The King World News Markets and Metals Wrap
Gold data hints at possible market upswing
Whatâ€™s Wrong With Gold?

Greyerz – Worldwide Package Coming From Fed, ECB & IMF

Posted: 09 Jun 2012 04:33 PM PDT

On the heels of Spain asking for $125 billion to bail out their collapsing banking system, today Egon von Greyerz told King World News, "There will be a massive worldwide package coming out between the Fed, the ECB, the IMF and other central banks." Egon von Greyerz is founder and managing partner at Matterhorn Asset Management out of Switzerland. Von Greyerz also said the money printing is "imminent." Here is what Greyerz had to say about the unfolding crisis: "As I see things, we are on the road to perdition. Eric, there is no exit strategy for the world (to get) out of these problems. There is no solution. If you look at what happened in 2008, people thought that was bad, but what's going to happen, starting this year and in the next few years, will make 2008 look like a small rehearsal because the real collapse is going to start now."

"We're seeing every week, one domino after the next that is falling. So far they are only smaller dominos such as banks, smaller countries, etc.. No (major) country has fallen, but that will come. Every single economic figure is looking worse. World trade is declining — Chinese exports of steel were down 14% last month, US exports to the eurozone were down 5% last month and that is likely to increase to minus 20% if not more.

Egon von Greyerz continues @ KingWorldNews.com

10 Things That We Can Learn About Shortages And Preparation From The Economic Collapse In Greece

Posted: 09 Jun 2012 02:15 PM PDT

by Michael Snyder, SHTFPlan:

When the economy of a nation collapses, almost everything changes. Unfortunately, most people have never been through anything like that, so it can be difficult to know how to prepare. For those that are busy preparing for the coming global financial collapse, there is a lot to be learned from the economic depression that is happening right now in Greece. Essentially, what Greece is experiencing is a low level economic collapse. Unemployment is absolutely rampant and poverty is rapidly spreading, but the good news for Greece is that the global financial system is still operating somewhat normally and they are getting some financial assistance from the outside.

Read More @ SHTFPlan.com

Steve Keen: Why 2012 Is Shaping Up To Be A Particularly Ugly Year

Posted: 09 Jun 2012 01:39 PM PDT

Submitted by Chris Martenson

Steve Keen: Why 2012 Is Shaping Up To Be A Particularly Ugly Year

At the high level, our global economic plight is quite simple to understand says noted Australian deflationist Steve Keen.

Banks began lending money at a faster rate than the global economy grew, and we're now at the turning point where we simply have run out of new borrowers for the ever-growing debt the system has become addicted to.

Once borrowers start eschewing rather than seeking debt, asset prices begin to fall -- which in turn makes these same people want to liquidate their holdings, which puts further downward pressure on asset prices:

The reason that we have this trauma for the asset markets is because of this whole relationship that rising debt has to the level of asset market. If you think about the best example is the demand for housing, where does it come from? It comes from new mortgages. Therefore, if you want to sustain he current price level of houses, you have to have a constant flow of new mortgages. If you want the prices to rise, you need the flow of mortgages to also be rising.

Therefore, there is a correlation between accelerating and rising asset markets. That correlation applies very directly to housing. You look at the 20-year period of the market relationship from 1990 to now; the correlation of accelerating mortgage debt with changing house prices is 0.8. It is a very high correlation.

Now, that means that when there is a period where private debt is accelerating you are generally going to see rising asset markets, which of course is what we had up to 2000 for the stock market and of course 2006 for the housing market. Now that we have decelerating debt -- so debt is slowing down more rapidly at this time rather than accelerating -- that is going to mean falling asset markets.

Because we have such a huge overhang of debt, that process of debt decelerating downwards is more likely to rule most of the time. We will therefore find the asset markets traumatizing on the way down -- which of course encourages people to get out of debt. Therefore, it is a positive feedback process on the way up and it is a positive feedback process on the way down.

He sees all of the major countries of the world grappling with deflation now, and in many cases, focusing their efforts in exactly the wrong direction to address the root cause:

Europe is imploding under its own volition and I think the Euro is probably going to collapse at some stage or contract to being a Northern Euro rather than the whole of Euro. We will probably see every government of Europe be overthrown and quite possibly have a return to fascist governments. It came very close to that in Greece with fascists getting five percent of the vote up from zero. So political turmoil in Europe and that seems to be Europe's fate.

I can see England going into a credit crunch year, because if you think America's debt is scary, you have not seen England's level of debt. America has a maximum ratio of private debt to GDP adjusted over 300%; England's is 450%. America's financial sector debt was 120% of GDP, England's is 250%. It is the hot money capital of the western world.

And now that we are finally seeing decelerating debt over there plus the government running on an austerity program at the same time, which means there are two factors pulling on demand out of that economy at once. I think there will be a credit crunch in England, so that is going to take place as well.

America is still caught in the deleveraging process. It tried to get out, it seemed to be working for a short while, and the government stimulus seemed to certainly help. Now, that they are going back to reducing that stimulus, they are pulling up the one thing that was keeping the demand up in the American economy and it is heading back down again. We are now seeing the assets market crashing once more. That should cause a return to decelerating debt -- for a while you were accelerating very rapidly and that's what gave you a boost in employment -- so you are falling back down again.

Australia is running out of steam because it got through the financial crisis by literally kicking the can down the road by restarting the housing bubble with a policy I call the first-time vendors boost. Where they gave first time buyers a larger amount of money from the government and they handed over times five or ten to the people they bought the house off from the leverage they got from the banking sector. Therefore, that finally ran out for them.

China got through the crisis with an enormous stimulus package. I think in that case it is increasing the money supply by 28% in one year. That is setting off a huge property bubble, which from what I have heard from colleagues of mine is also ending.

Therefore, it is a particularly ugly year for the global economy and as you say, we are still trying to get business back to usual. We are trying to rescue the creditors and restart the world that is dominated by the creditors. We have to rescue the debtors instead before we are going to see the end of this process.

In order to successfully emerge on the other side of this this painful period with a more sustainable system, he believes the moral hazard of bailing out the banks is going to have end:

[The banks] have to suffer and suffer badly. They will have to suffer in such a way that in a decade they will be scared in order to never behave in this way again. You have to reduce the financial sector to about one third of its current size and we have to also ultimately set up financial institutions and financial instruments in such a way that it is no longer desirable from a public point of view to borrow and gamble in rising assets processes.

The real mistake we made was to let this gambling happen as it has so many times in the past, however, we let it go on for far longer than we have ever let it go on for before. Therefore, we have a far greater financial parasite and a far greater crisis.

And he offers an unconventional proposal for how this can be achieved:

I think the mistake [central banks] are going to make is to continue honoring debts that should never have been created in the first place. We really know that that the subprime lending was totally irresponsible lending. When it comes to saying "who is responsible for bad debt?" you have to really blame the lender rather than the borrower, because lenders have far greater resources to work out whether or not the borrower can actually afford the debt they are putting out there.

They were creating debt just because it was a way of getting fees, short-term profit, and they then sold the debt onto unsuspecting members of the public as well and securitized their way out of trouble. They ended up giving the hot potato to the public. So, you should not be honoring that debt, you should be abolishing it. But of course they have actually packaged a lot of that debt and sold it to the public as well, you cannot just abolish it, because you then would penalize people who actually thought they were being responsible in saving and buying assets.

Therefore, I am talking in favor of what I call a modern debt jubilee or quantitative easing for the public, where the central banks would create 'central bank money' (we cannot destroy or abolish the debt, which would also destroy the incomes of the people who own the bonds the banks have sold). We have to create the state money and give it to the public, but on condition that if you have any debt you have to pay your debt down -- no choice. Therefore, if you have debt, you can reduce the debt level, but if you do not have debt, you get a cash injection.

Of course, this would then feed into the financial sector would have to reduce the value of the debts that it currently owns, which means income from debt instruments would also fall. So, people who had bought bonds for their retirement and so on would find that their income would go down, but on the other hand, they would be compensated by a cash injection.

The one part of the system that would be reduced in size is the financial sector itself. That is the part we have to reduce and we have to make smaller. That is the one that I am putting forward and I think there is a very little chance of implementing it in America for the next few years not all my home country [Australia] because we still think we are doing brilliantly and all that. But, I think at some stage in Europe, and possibly in a very short time frame, that idea might be considered.

Click the play button below to listen to Chris' interview with Steve Keen (48m:50s):

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Gold futures price decline is an illusion, von Greyerz tells King World News

Posted: 09 Jun 2012 12:23 PM PDT

8:22a HKT Sunday, July 10, 2012

Dear Friend of GATA and Gold:

Gold fund manager Egon von Greyerz tells King World News he expects a massive program of money issuance coordinated by the Federal Reserve, European Central Bank, International Monetary Fund, and other central banks to avert the decline of world trade and a worldwide depression. Von Greyerz also dismisses the recent decline of gold on the futures markets as an illusion. "We saw no selling of physical gold," he says. "It was all manipulation in the paper market. There is no selling in the physical market. It's very important to understand that there is manipulation of the paper market to a massive extent. At some point people will not trust the paper market anymore."

An excerpt from Von Greyerz's interview is posted at the King World News blog here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/6/9_Gre...

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

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Prophecy Platinum (TSXV:NKL) Announces Encouraging Rhodium, Ruthenium, Osmium,
Iridium Assays from WS11-188 of Wellgreen Project in Yukon Territory, Canada

Company Press Release
May 25, 2012

VANCOUVER, British Columbia, Canada -- Prophecy Platinum Corp. (TSX-V: NKL; OTC-QX: PNIKF; Frankfurt: P94P) is pleased to provide results of full spectrum 6E (Platinum, Palladian, Rhodium, Ruthenium, Osmium, and Iridium) analysis of platinum group elements on the first batch of samples from the company's wholly-owned Wellgreen PGM-Ni-Cu project in the Yukon Territory, Canada.

The company enlisted Activation Laboratories (Actlabs) of Ancaster, Ontario, to conduct a full-spectrum 6E analysis of samples taken from the 2011 drill hole WS11-188. Adding Rh, Ru, Os, and Ir to Pt and Pd increased the total PGE content (6E) by an average of 28 percent, based on a population of 90 samples, most of which are from disseminated sulphide-type mineralization.

Assay results with 6E exceeding 0.50 ppm (0.5 g/t) (excluding copper and gold assays) are tabulated at Prophecy's Internet site and are available with assay results from the entire batch of 90 samples here:

http://prophecyplat.com/news_2012_may25_prophecy_platinum_announces_rare...

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Sona Discovers Potential High-Grade Gold Mineralization
at Blackdome in British Columbia -- 13.6g over 1.5 Meters

From a Company Press Release
November 22, 2011

VANCOUVER, British Columbia -- With its latest surface diamond drilling program at its 100-percent-owned, formerly producing Blackdome gold mine in southern British Columbia, Sona Resources Corp. has discovered a potentially high-grade gold-mineralized area, with one hole intersecting 13.6 grams of gold in 1.5 meters of core drilling.

"We intersected a promising new mineralized zone, and we feel optimistic about the assay results," says Sona's president and CEO, John P. Thompson. "We have undertaken an aggressive exploration program that has tested a number of target zones. Our discovery of this new gold-bearing structure is significant, and it represents a positive development for the company."

Sona aims to bring its permitted Blackdome mill back into production over the next year and a half, at a rate of 200 tonnes per day, with feed from the formerly producing Blackdome mine and the nearby Elizabeth gold deposit property. A positive preliminary economic assessment by Micon International Ltd., based on a gold price of $950 per ounce over eight years, has estimated a cash cost of $208 per tonne milled, or $686 per gold ounce recovered.

For the company's complete press release, please visit:

http://www.sonaresources.com/_resources/news/SONA_NR18_2011-opt.pdf

Alasdair Macleod: Gold data hints at possible market upswing

Posted: 09 Jun 2012 12:07 PM PDT

8a HKT Sunday, June 10, 2012

Dear Friend of GATA and Gold:

Gold futures market data suggests that the gold price is too low and will be moving up, the economist Alasdair Macleod writes at GoldMoney. His commentary is headlined "Gold Data Hints at Possible Market Upswing" and it's posted here:

http://www.goldmoney.com/gold-research/alasdair-macleod/gold-data-hints-...

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

Trading Gold by Timing the Fed

Posted: 09 Jun 2012 11:52 AM PDT

Gold's recent sell-off seems to be a continuing pattern of major price movements and directional changes after a significant policy event or any announcement by the Federal Reserve. Read More...

Spain’s Rescate (“Rescue”)

Posted: 09 Jun 2012 10:36 AM PDT

Courtesy of Russ Winter of Winter Watch at Wall Street Examiner

Spain's Rescate ("Rescue")

Spain's bank rescue news is out, and the obfuscation is very high, as usual. The rescate (rescue) amount offered is 100 billion euros, a mere two and a half times last week's estimate. This tells us the Spanish banks are under-capitalized by at least 100 billion euros. That's positive? We already knew the ESFS and ESM would lend Spain money, the question is in what manner? This uses up about all the capacity Europe has on it's own. This opens up more cans of worms.

Once Spain takes the money, then their obligation in the EFSF and ESM bail out mechanisms would be taken over by others. Those "others" are Italy, whose share rises from 19% to 22%. France's share rises from 22% to 25%, and Germany's from 29% to 33%. The smaller core countries like the Netherlands, Belgium, etc will pick up a little more as well. By piling more on Italy and Belgium, the credibility of the guarantees given to EFSF bonds would collapse.

That's why I think the American clown posse was out in force last week hinting at involvement to placate Germany (and Italy and France). This may not be revealed upfront at first, because it is now necessary to go back to Germany, and have them object to the unconditional rescate. Already Finland is demanding collateral if Spanish aid is through EFSF, and good collateral is in short supply, especially when Moody downgrades Spain to BBB. In response the IMF and US in particular will get involved. It could even take the form of a unilateral US participation without needing the harder sale involved in bringing in the IMF.

Apparently the IMF will supervise the "rescue plan", in an advisory role, with focus on the banking system. That is strange given that IMF advocates bail ins (bondholders and equity holders take the hit). It will really going to be impossible to sell this to Germany without broader international involvement. US-Spain ties have historically been strong and I think when the fog lifts, the US will be involved backing this rescate (and further rescates) with money. If so, this very well could mark the end of the US phony safe haven house of mirrors, and it will impact both the USD and Treasury market. The commercials have lined up big shorts of Treasuries ( 2 year, 5 year, 10 year, and 30 year), and are long Swiss Francs and Euros. Now we may know why.

This sets up an enormous Euro short squeeze. The boyz are so off side, that this one could take some down. Somebody important is going to gush blood. That is why I have been long a good size position in Swiss Francs in the forex market. From an actionable perspective I could see a euro rally up to 1.28-1.29 convergence overhead.

Source: Sober Look, Euro positioning.

Spain is saying that it is 'agreeing' to a bailout without conditions and only after the bank audit has been completed June 20- in other words sometime after the Greek election.

This should be a boost to the mutually assured depression tactics (MADT) of the anti-bailout partidos in Greece (and elsewhere). It would be logical that political partidos in Ireland, and Portugal also adopt MADT. In fact Italy should too, because of the new burdens that have been piled on.

For additional analysis on this topic and related trades subscribe to Russ Winter's Actionable - risk free for 30 days.The subscription fee is $69 per quarter and helps support Russ's work on your behalf. Click here for more information.

Guest Post: Mark Carney Kicks The Can

Posted: 09 Jun 2012 09:37 AM PDT

Submitted by James Miller of the Ludwig von Mises Institute of Canada

Mark Carney Kicks The Can

Bank of Canada Governor Mark Carney takes a lot of cues from his U.S. equivalent and fellow central banker Ben Bernanke. Both took interest rates to anorexic levels in light of the financial crisis in 2008. Both used their positions of power as stewards of the people's money to bail out the big banks. Both take credit for the gains of their respective stock markets and for guiding their economies through the global recession. Both are forever on a quest to rid of the world of the boogeyman of deflation.

And both are sewing the seeds of their own destruction by keeping interest rates artificially low and ultimately driving unsustainable investment that must eventually be liquidated. All around the world, the boom bust cycle continues to occur due to central banks attempting to induce economic growth with money printing. China's economy is continuing to come apart as manufacturing output and real estate prices plummet. These sectors were bid up by double digit increases per annum in the country's money supply over the past decade. Since inflationary growth, by definition, can't go on forever, as its continuance results in what Ludwig von Mises called the "crack-up boom" and destruction of the currency, the chickens of the People's Bank of China's reckless monetary policy are finally coming home to roost. The PBOC has responded to the downturn by recently cutting interest rates for the first time since 2008 in what will likely be a vain effort to reinflate the bubble.

Over in Europe, the year over year change in the broad money supply has dropped dramatically since 2010. This provided the spark for the sovereign debt crisis which shows no sign of slowing down unless Angela Merkel and Germany concede to further inflationary measures by the European Central Bank. Just like her support for the big banks and the austerity measures that ensure idiotic bankers don't take too much of a loss on their holdings of euro government bonds, Merkel will likely give in to money printing in the end as she has already endorsed the push for a political union.

And now in Canada, Mark Carney announced a few days ago the Bank of Canada will keep its benchmark interest rate steady at 1%. This announcement comes despite his previous warnings over the enormous increase in Canadian private debt. But of course the run up in debt couldn't have occurred if interest rates were determined by market factors only. Had supply and demand been allowed to function freely, interest rates would have risen as a check on the swell in debt accumulation. Carney won't admit this though. Like all central bankers, he has made a habit of boasting the positive effects of his low interest rates policies while avoiding blame for the negative consequences.

He is a bartender who gleefully takes the drunk's cash while replying with "who, me?" when said drunk drinks himself to death.

What makes the promise of continually low interest rates especially worrisome is not only does it tell the market to keep accumulating debt, but it is also an attempt to keep what some are calling a nation-wide housing bubble from deflating. Over the past decade, Canadian home prices have shot up at a far steeper pace compared to the decades that preceded it. In recent years, the acceleration in home prices has been fueled by the Bank of Canada's historically low overnight lending rate which went from 3% before the financial crisis to .25% in 2009 and now rests steadily at 1%. The BoC has already acknowledged that its interest rate policies directly affect mortgage rates. Many Canadian media publications and investment newsletters are pointing out this trend and warning of a potential collapse. The BBC even did a report on it. There is nothing potential about a sharp downturn in home prices however; it will happen. It's only a question of when.

With China and Europe leading the pack, the world economy is beginning to take a turn for the worse. The orgy of money printing which took place over the past few years has slowed down significantly; even in the U.S. Central bankers are standing at a precipice in which they must decide if they will forge ahead and prime the monetary pump to paper over the various malinvestments caused by their previous interventions or actually allow for a contraction and the market to adjust to a new path of sustainable growth. If history is any indication, the latter is not a considerable option as it would be devastating to the banking sector which is reliant on piggybacking credit expansion off of an uninterrupted flow of newly printed monies.

Carney's decision to keep interest rates suppressed is yet another instance of a central banker unable to face reality. The malinvestments will continue to accumulate and will have to be liquidated at another date. What Carney has done to mitigate the looming debt and housing bubble is effectively kick the can down the road. He has revealed through his actions the undeniable truth which holds for all central bankers: that they have no other card to play but the printing press. As legendary investor Marc Faber has noted,

"I do not believe that the central banks around the world will ever, and I repeat ever, reduce their balance sheets. They've gone the path of money printing… And once you choose that path, you're in it and you have to print more money."

The Austrian theory of the trade cycle developed by Mises a century ago tells us that credit expansion is bound to end in depression. To quote Herbert Stein's Law, the business cycle theory essentially boils down to "if something cannot go on forever, it will stop." The debt fueled boom in Canada is a house of cards. No matter how much money printing or interest rate manipulation Carney attempts, the collapse in inevitable. His record, along with Ben Bernanke's, will eventually be one of dismal failure.

Greyerz - Worldwide Package Coming From Fed, ECB & IMF

Posted: 09 Jun 2012 08:51 AM PDT

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

So Much Changes In Two Weeks

Posted: 09 Jun 2012 08:50 AM PDT

"When it becomes serious, you have to lie", Jean-Claude Juncker

Mariano Rajoy from May 28, or 12 days ago: "No va a haber ningún rescate de la banca española." Or, more conveniently for the America-based readers: "There will be no rescue of Spanish banks." We have finally found the official Jean-Claude Juncker (and of course Tim Geithner) replacement.

Spain IS Greece After All: Here Are The Main Outstanding Items Following The Spanish Bailout

Posted: 09 Jun 2012 06:52 AM PDT

After two years of denials, we finally have the right answer: Spain IS Greece. Only much bigger (it is also the US, although while the US TARP was $700 billion or 5% of then GDP, the just announced Spanish tarp is 10% of Spanish GDP, so technically Spain is 2x the US). So now that the European bailout has moved from Greece, Ireland and Portugal on to the big one, Spain, here are the key outstanding questions.

1. Where will the money come from?

De Guindos, Schauble and the Eurogroup, all announced that the sole source of cash would be the ESM and/or the EFSF. The problem with this is that the ESM has yet to be ratified by Germany, whose parliament said previously it is sternly against allowing the ESM to fund a direct bank bailout, something which just happened. Thus, the successful German ESM ratification vote, whenever it comes, and which previously was taken for granted, now appears to be far more questionable.

Which leaves the EFSF. The problem with the EFSF is that there is about €200 billion in dry powder. And this includes the Spanish quota of €93 billion, which we can only assume is now officially scrapped.

Which brings us to a bigger question: now that Spain is officially to be bailed out, what happens next. And by that we mean of course the big one: Italy. Recall that as we posted in Brussels... We Have A Problem, once the contagion spreads again to Italy, and that country also needs a bailout, it is game over. From the world's biggest hedge fund Bridgewater:

In other words, it is very likely that the funding for the Spanish bailout will have yet to be procured. Who will provide cash which is virtually certain to disappear forever in the Spanish real-estate market mismarking vortex?

2. Where will the money go?

According to the de Guindos press conference, the bailout cash will go to the FROB, or the Fund for Orderly Bank Restructuring: as the name implies a sinking fund to fund insolvent banks. This is merely a liquidity vehicle to net out evaporating capital due to realistic marks of assets, or ongoing deposit flight. However, a far bigger concern is how will the FROB be treated from a sovereign debt perspective?

As was noted previously, the bailout will come in the form of a loan, which while at better terms than market, will still result in a material increase in Spanish debt/GDP. In other words, while the bailout itself may have been without sovereign conditions, it will still impair the country in the eyes of sovereign creditors. And just as important is the mention that the loan will have "better terms than market" - this implies added security compared to general Spanish obligations. Hence priming.

Recall the official breakdown of the complete Spanish debt, presented here courtesy of Mark Grant 2 months ago:

The Data

Spain's GDP $1.295 trillion

SPAIN'S NATIONAL DEBT

Admitted Sovereign Debt                   $732 billion
Admitted Regional Debt                   $183 billion
Admitted Bank Guaranteed Debt                 $103 billion
Admitted Other Sovereign Gtd. Debt           $ 72 billion
Total National Debt                             $1.090 trillion

SPAIN'S EUROPEAN DEBT

Spain's Liabilities at the ECB                   $332 billion
Spain's Cost for the EU budget                       $ 20 billion
Spain's Liabilities for the Stabilization Funds   $125 billion
Spain's Liabilities for the Macro Fin. Ass. Fund $ 99 billion
Spain's Guarantee of the EIB debt                  $ 67 billion
Spain's Total European Debt                   $643 billion

----------------------------------------------------------------------

Spain's National and European Debt $1.733 trillion

Spain's OFFICAL debt to GDP Ratio 68.5%

Spain's ACTUAL Debt to GDP Ratio 133.8%

* * *

Now we have another €100 billion or so in admitted sovereign debt to add to the top of the list. In other words, total Spanish admitted debt will likely increase by up to 17% from $732 billion to $857, adding the $125 billion FROB "loan."

3. What happens to Spanish sovereign debt?

Perhaps the most important thing to note in the above analysis is that the FROB loan is effectively a priming DIP: think Troika loans to Greece, Ireland and Portugal.

In other words, Spanish bondholders just got their first taste of subordination!

Basically, first thing Monday the trade off will be: does the temporary improvement in bank solvency offset the fact that bonds just got primed, hinting at a future that in the case of Greece has resulted in the old Greek bonds trading an equivalent price of sub 10 cents on the dollar.

How long until Spanish bondholders get the hell out of Dodge, knowing quite well that their Spanish bond holdings will suffer the same fate as GGBs?

Our advice for those who need to have exposure, as we wrote 5 months ago: sell local-law, covenant-lite Spanish bonds, and buy their UK-law, covenant-protected cousins.

Then sit back and watch the spread explode.

4. Precedent

Naturally with Spain now officially biting the bullet, the only question remaining is: when is Italy going to drop next.

And ironically, what just happened, is that the Eurozone, with the tacit agreement of Germany, essentially gave insolvent banks a green light to short themselves into a full bailout.

How long until Italian banks get the hint, and proceed to short each other, or themselves, either with shares of stock or , better yet, through CDS which unlike in the sovereign case, can be held without an offsetting cash basis position. In other words: is it time for the Italian bank suicide trade?

Because only when they are on the verge of nationalization, will Italian banks be rescued. And remember: he who defects (or in this case drops the fastest), first, reaps the biggest benefits of the resultant action.

We also wonder how will Ireland feel knowing that it has to suffer under backbreaking austerity in exchange for Troika generosity, while Spain gets away scott free.

Finally, there is the question of how today's action will impact the Greek elections. As noted earlier today, today's precedent will likely serve as a huge boost to the popularity of Syriza. Oh yes, the Greek elections next Sunday. Remember those, and the whole Grexit thing?

5. Market reaction

The long-term reaction is obvious: this latest confirmation that Europe is a sinking ship has been predicted by many for years. As such, that European risk markets will continue sinking, and capital flows continue rushing to Germany, is a given. In the short run, however, courtesy of a new all time record high number of EUR shorts (at a record -214,418 net non-commercial contracts as of this past week) it is likely we may see an aggressive short covering squeeze.

This will send all risk higher as well. Of course, the really is to be faded aggressively as soon as the weak-hand shorts capitulate and cover.

* * *

For those curious just what this mysterious FROB is, which simply stated is, or rather was, a woefully underfunded FDIC equivalent, and is now the Spanish banking system loophole, here is a succinct presentation:

* * *

Finally, for those wondering if today's action will halt the catalyst for the entire move, namely the furious bank run that Spain has been experiencing in the past month, we don't know. It likely all depends on how many Spiderman towels are in circulation and held in inventory by Spain's insolvent banks.

Brodsky and Quaintance: Solution is Asset Monetization, Starting With Gold Revaluation

Posted: 09 Jun 2012 06:38 AM PDT

"It's not much of stretch to say that the next few weeks and months could bring some sort of ugly Apocalyptic resolution." ...

Marc Faber Bullish on Gold Shares

Posted: 09 Jun 2012 05:51 AM PDT

Marc Faber : I am also warming to gold shares....

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Reasons Why the U.S. Dollar is Really Rising

Posted: 09 Jun 2012 05:46 AM PDT

Keith Fitz-Gerald writes: By all accounts, the U.S. dollar should be the functional equivalent of a Zimbabwean bill.

The Fed has pumped trillions into the worldwide financial system as part of misguided stimulus efforts that should be incredibly inflationary.

Yet, instead of a disastrous repeat of the Weimar Republic, the U.S. dollar has strengthened considerably.

This despite rising unemployment, slowing economic growth and a debt debate that's about to begin anew.

Since last July, the U.S. dollar has risen against all 16 major currencies while the Intercontinental Exchange Dollar Index is up 12%, according to Bloomberg.

In fact, the greenback is now higher than it was when the Fed engaged in Operation Twist in late 2011 as part of a plan to keep the dollar low by buying bonds. Read more....

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Despair As Collapse Accelerates: “My Shotgun is Full and Well Equipped. I Hope I Don’t Need to Use It.

Posted: 09 Jun 2012 05:31 AM PDT

Our long time friend and regular contributor Manos has been keeping us abreast of the day-to-day goings on in Greece for the better part of three years. Suffice it to say, it's getting worse with very little hope of resolution to the economic and political woes facing the country, as well as its European neighbors.

The following is a first person perspective of the realities on the ground, and what it looks like in the midst of a truly frightening economic collapse that threatens to not only wipe out the financial wealth and life savings of an entire nation, but may potentially lead to a breakdown in the rule of law and civil war between extreme political factions trying to fill the vacuum of power.

This is real, it's happening right now, and it's coming to America in due time. Read more.....

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Gold data hints at possible market upswing

2012-JUN-09

With eurozone troubles taking yet another turn for the worse, China’s economy struggling, and US jobs data showing the American economy is again heading in the wrong direction, gold has at last started to make some interesting moves. While it is often a mistake to directly link the price of gold to specific macro-economic events, the coincidence is notable.

If one can rank news in order of importance, the announcement that China imported 101.78 tonnes of gold through Hong Kong in April, a substantial increase, is at least a tangible fact. Furthermore, news that Iran has escalated her imports through Turkey could also prove to be significant, given she has no access to foreign exchange markets, and gold is presumably being used as currency.

However, translating this into higher prices is not a done deal, because the valuation of paper currencies with no right of conversion into commodity money is purely subjective. This is why gold moves independently from most monetary developments, and if it does so it is often because of underlying market positions, rather than facts as reported by the press.

With this in mind, I have put together the chart below to show the net positions of the swap dealers and producers and merchants. The context for these two categories is obviously open interest in the market, and the market price of gold.

The first point to note is that net swap positions have moved from minus 110,000 contracts 15 months ago to about even today. Swaps are essentially hedges against positions on other markets, so when the hedges are short on the Comex market, it is because they have long positions elsewhere (mostly London). Interestingly, these swap positions were reduced during the run-up to $1,900 last autumn. Since then, some stock has obviously come on the market as a result of the shake-out from the highs, reflected in net shorts totalling 43,750 contracts last February. Following that date these shorts have now been closed.

To summarise, the net swap position indicates the extent of long positions on other markets, including physical and forwards; and the current reduction tells us there has been substantial buying in excess of 120 tonnes on this recent dip.

Now let’s look at the producers and merchants category, which also includes processors and users. Participants in this category use the futures market to transfer entrepreneurial risk: producers and processors sell forward to lock in the price with an eye to covering costs, and merchants and users lock in a price against likely demand. The net short position has reduced to about 128,000 contracts, close to historical lows last seen in February 2011 and March 2010. Importantly, this category has almost halved its net short since February 2010. We know from the swaps that this decline in shorts has not been offset elsewhere. So about 250 tonnes of supply has been withdrawn by this category.

To summarise, this major category may be telling us that the gold price is too low. How it responds to increasing systemic instability, and the demand this creates around the world, is the key question. But for now, the bullion markets look to have been cleared of stock, offering the prospect of rising prices.

Tags: China, Comex, gold price

This Past Week in Gold

Posted: 09 Jun 2012 04:47 AM PDT

Summary: Long term - on major sell signal. Short term - on buy signals. Gold cycle has bottomed but set ups are counter trend trades, actionable if risks are manageable. Read More...

Gold Chart and Comments

Posted: 09 Jun 2012 04:15 AM PDT

[url]http://www.traderdannorcini.blogspot.com/[/url] [url]http://www.fortwealth.com/[/url] I have provided an 8 hour gold chart today as it provides a very good glimpse into the technical composition of that market's recent price action. Note that you can clearly see the solid zone of buying support extending from just slightly above the $1550 level on down towards $1520. It has been at these levels that strong buying has continued to emerge over the last month. I suspect that it is in this zone that Asian Central Banks are gobbling up the metal. Remember, they will not chase the metal higher - only the hedge fund managers buy high and hope to buy even higher before selling. By keeping an eye on this chart we can therefore get a sense of at just what level these buyers believe gold has "value". It is this sort of buying that provides a base for a market upon which it will eventually launch a rally. For gold, that spark is not there just yet as the absence of an "immediate or for...

We are Back - The King World News Markets and Metals Wrap

Posted: 09 Jun 2012 03:03 AM PDT

[url]http://www.traderdannorcini.blogspot.com/[/url] [url]http://www.fortwealth.com/[/url] Trader Dan has been taking a bit of a break away from writing as the volatility in the market tends to wear down even the veterans at times and requires a great deal of undistracted attention to survive. I am back for the regular weekly radio interview with Eric King at King World News. Join, Eric, Bill (who always provides a terrific insight into what is going on in the world of real gold and real silver transactions) and myself on the Markets and Metals Wrap. [URL]http://tinyurl.com/752htrn[/URL] I hope to be able to provide some charting and analyis this coming week. To those who wrote, expressing concern, thanks for that. All is well - just busy, busy, busy, bzzzzzzzzzzzzz. ...

Gold data hints at possible market upswing

Posted: 09 Jun 2012 02:00 AM PDT

With eurozone troubles taking yet another turn for the worse, China's economy struggling, and US jobs data showing the American economy is again heading in the wrong direction, gold has at ...

Whatâ€™s Wrong With Gold?

Posted: 08 Jun 2012 09:04 PM PDT

While the stock market has been a loser on a buy and hold basis over the last 12 years (the S&P 500 is still 14% below its peak in 1999), gold surged up 625% over the same period, from $255 an ounce in 1999 to its recent high of $1,850 in March. As with each of its previous record highs there was much excitement and widespread forecasts of $2,500 gold by year end, $5,000 gold in the not too distant future. But this time instead of still higher highs, gold has dropped $300 an ounce.