Global Central Banks Ring Gold Buyers' Bell

Peter Schiff is one of my most respected financial commentators, he called the sub-prime collapse and the equity crash of 2007-2009.

Today’s unprecedented announcement by the world’s most powerful central banks was a loud and clear bell ringing to buy precious metals. The move, disguised as an attempt to help the fragile state of the global economy, is in reality a move to prop up failing banks in Europe and the US. By reducing interest rates paid for dollar swaps, central bankers are in effect increasing the quantity of global dollars in circulation.

Eurogeddon

Death of a currency as eurogeddon approaches

The defining moment was the fiasco over Wednesday's bund auction, reinforced on Thursday by the spectacle of German sovereign bond yields rising above those of the UK.

If you are tempted to think this another vote of confidence by international investors in the UK, don't. It's actually got virtually nothing to do with us. Nor in truth does it have much to do with the idea that Germany will eventually get saddled with liability for periphery nation debts, thereby undermining its own creditworthiness.

No, what this is about is the markets starting to bet on what was previously a minority view - a complete collapse, or break-up, of the euro. Up until the past few days, it has remained just about possible to go along with the idea that ultimately Germany would bow to pressure and do whatever might be required to save the single currency.

Andrew Bailey: 'UK banks must brace themselves for euro break-up'

Andrew Bailey, deputy head of the Prudential Business Unit at the Financial Services Authority (FSA), noted that British banks are not heavily exposed to the eurozone, but said they must prepare for some countries to exit the single currency – or a complete break up.

"We cannot be, and are not, complacent on this front," Mr Bailey said. "As you would expect, as supervisors we are very keen to see the banks plan for any disorderly consequence of the euro area crisis. 

Hmmmm, aren't Barclays, Royal Bank of Scotland, Bank of Ireland and Allied Irish 'British'?

Europe Short on Cash as Bond Fears Deepen

The euro zone is stuck in a double crisis. On the one hand, investors are no longer interested in purchasing sovereign bonds. On the other, banks with such bonds on their books are being treated with extreme caution. A massive financial crisis threatens -- and it could be worse than the last.

Prepare for riots in euro collapse, Foreign Office warns

As the Italian government struggled to borrow and Spain considered seeking an international bail-out, British ministers privately warned that the break-up of the euro, once almost unthinkable, is now increasingly plausible.

Diplomats are preparing to help Britons abroad through a banking collapse and even riots arising from the debt crisis. 

The Treasury confirmed earlier this month that contingency planning for a collapse is now under way.

A senior minister has now revealed the extent of the Government’s concern, saying that Britain is now planning on the basis that a euro collapse is now just a matter of time.

“It’s in our interests that they keep playing for time because that gives us more time to prepare,” the minister told the Daily Telegraph. 

20 Banks That Will Get Crushed If The PIIGS Go Bust

We took a list of the largest European banks by assets and compared their market cap, common equity, and total exposure to PIIGS debt (thank you for the bank statistics, EBA!). Then we calculated exposure to PIIGS debt (sovereign and private) as a percentage of the banks' common equity. (Notice that HSBC, ING, and even Societe Generale are all absent from this list.)

So far our track record is pretty good--we predicted that Dexia was the most vulnerable bank outside of the PIIGS back in July. If the eurozone crisis continues to escalate, we will see more and more banks bow to the pressure of exposure and become unable to borrow money.

The List: Banks That Will Fail (A must read)

Foreign News: Eurobonds and contagion to Poland and Slovenia

The other major story is contagion. The English-language press has had considerable coverage of downgrades in Portugal, France and Hungary. What they have not got a lot on is the contagion into eastern Europe. Poland’s currency is tanking as a result. Moreover, the halt of Austrian loans into central Europe is creating a credit crunch there which will negatively affect the economy irrespective of the macro fundamentals (which are poor due to real economy effects out of Euroland). Slovenia, a former model country in the east, is the other major target of contagion.

I think we will have one more can kick to satisfy the markets temporarily. An IMF loan or some such bullshit that will put off Eurogeddon until early 2012. We can't let The Grinch steal Christmas via the Credit Default Swap sell App on his iPhone.

Edit Update. See what I mean (from Bloomberg as to why markets are up today)....

The IMF is preparing a 600 billion euro ($794 billion) loan for Italy in case the country’s debt crisis worsens, La Stampa reported, without saying where it got the information. As of Nov. 17, the Washington-based IMF had about $390 billion available for lending, which Managing Director Christine Lagarde has said may not suffice to meet loan demand if the global outlook worsens.

PS Meanwhile on the Debtstar...
Is the U.S. About to Invade Syria … and Pick a Fight with China and Russia?

Anatomy Of A Stock Market Crash

1929 - 1932 Dow Jones

• September 1929 - November 1929, a 49% fall from 381 to 198.
• November 1929 - April 1930, a 49%  rally from 198 to 294 (bear market rally)
• April 1930 - July 1932, an 86% fall from 294 to 41.
• September 1929 - July 1932, a total fall from peak of 89% fall from 381 to 41.
• The September 1929 peak was regained 25 years later in 1954.

2007 - 2011 Dow Jones

• October 2007 - March 2009, a 53% fall from 14066 to 6626.
  
• March 2009 - April 2011, a 93%  rally from 6626 to 12810 (bear market rally based on US Fed 'printing' money)
  
• April 2011 - ?????, an ??% fall from 12810 to ???.
• The October 2007 peak regained ?? years later in ????.

2007 - 2011 Australian All Ordinaries Index

• October 2007 - March 2009, a 54% fall from 6716 to 3111.
  
• March 2009 - April 2011, a 62%  rally from 3111 to 5036 (bear market rally, we didn't 'print' money)
• April 2011 - ?????, an ??% fall from 5036 to ??? (presently down 19% since April 2011
• The October 2007 peak regained ?? years later in ????.

Will the Fed print again when the shit hits the fan? Will it have any effect?

Headlines from the era



"We will not have any more crashes in our time." - John Maynard Keynes, 1927

"There will be no interruption of our permanent prosperity." - Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928

"There is no cause to worry. The high tide of prosperity will continue." - Andrew W. Mellon, Secretary of the Treasury, September 1929

"Stock prices have reached what looks like a permanently high plateau." - Irving Fisher, Ph.D. in economics, Oct. 17, 1929

"Secretary Lamont and officials of the Commerce Department today denied rumors that a severe depression in business and industrial activity was impending, which had been based on a mistaken interpretation of a review of industrial and credit conditions issued earlier in the day by the Federal Reserve Board." - New York Times, October 14, 1929

"This crash is not going to have much effect on business." - Arthur Reynolds, Chairman of Continental Illinois Bank of Chicago, October 24, 1929

"...despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression..." - Harvard Economic Society (HES), November 2, 1929

"The Government's business is in sound condition." - Andrew W. Mellon, Secretary of the Treasury, December 5, 1929

"President Hoover predicted today that the worst effect of the crash upon unemployment will have been passed during the next sixty days." - Washington Dispatch, March 8, 1930

"The spring of 1930 marks the end of a period of grave concern... American business is steadily coming back to a normal level of prosperity." - Julius Barnes, head of Hoover's National Business Survey Conference, Mar 16, 1930

"While the crash only took place six months ago, I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover. There is one certainty of the future of a people of the resources, intelligence and character of the people of the United States - that is, prosperity." - President Hoover, May 1, 1930

"The worst is over without a doubt." - James J. Davis, Secretary of Labor, June 29, 1930

Gentleman, you have come sixty days too late. The depression is over." - Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930

"We have hit bottom and are on the upswing." - James J. Davis, Secretary of Labor, September 12, 1930

"President Hoover has summoned Colonel Arthur Woods to help place 2,500,000 persons back to work this winter." - Washington dispatch, October 21, 1930

"I see no reason why 1931 should not be an extremely good year." - Alfred P. Sloan, Jr., General Motors Co, November 1930

"The depression has ended." - Dr. Julius Klein, Assistant Secretary of Commerce, June 9, 1931

"I believe July 8, 1932 was the end of the great bear market." - Dow Theorist, Robert Rhea, July 21, 1932

"All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S." - President F.D. Roosevelt, 1933

Australian Banking Crisis

GFC II on its way: Norris 

OUTGOING Commonwealth Bank chief executive Ralph Norris has warned that the European debt crisis has entered a dangerous phase, likening the current turmoil to the global financial crisis of three years ago.

Mr Norris said global money markets ''effectively froze'' this week as Germany failed to sell the entire stock of €6 billion ($8.2 billion) worth of long-term bonds.

But Mr Norris, who retires next Wednesday after more than six years in the role, cautioned that credit-crunch conditions were returning, which is threatening to choke off funding for banks around the world.

''This has potential to be significantly worse than the Lehman Brothers collapse and the subprime crisis because now we are talking about nation states,'' Mr Norris told BusinessDay.

''If you have a situation like you had today, where markets had effectively frozen, then it doesn't matter how good your name is, you are not going to be able to access markets,'' Mr Norris said. ''As of today, no banks could access these markets.''

Westpac boss Gail Kelly also expressed fears about the fragile situation and urged Europe's regulators to get on top of the crisis.

''What's happening in Europe is a major concern and not improving. The various authorities in Europe actually have the capacity to deal with these issues - I certainly wish they'd get on with it and do it,'' she said.

One misstep to an Aussie bank calamity

If the Australian bankers make the wrong decisions, then we will have a credit squeeze and dangerous asset price fall. Or putting it another way, Australian bank chief executives are about to really earn their money and if they fail, they will be put on the scrapheap. 

  

Banking Crisis Anatomy

If funds dry up in Europe, they will dry up elsewhere. And Australian banks rely on liquid funding markets overseas to run themselves.

If credit markets freeze overseas, so will bank lending in Australia. That means people won't be able to take out a loan to buy property. Demand for property will dry up. And property values will disappear. By that we mean that an asset without demand doesn't really have a price. It's like a pebble on the beach. Until someone wants to give you money for it, it's not worth anything.

Australians expecting a housing bubble to pop may have to adjust their narrative. The straw that breaks this camel's back may be falling on the other side of the world - in Europe's debt markets.

But it's not just home lending that could disappear. Personal loans usually freeze up first. All this means your business will not be able to get loans, your children won't be able to get a mortgage and your credit card will stop working. 

When the EFTPOS machine spits out 'insufficient funds', you won't know whether it means the bank can't afford to pay you or you don't have any money left in your account.

The Russian Federation Will...Take Out Any Part Of The US Missile Defense System, In Europe.

Nice.

(7 minutes in): "First, I am instructing the Defense Ministry to immediately put the missile attack early warning radar station in Kaliningrad on combat alert. Second, protective cover of Russia's strategic nuclear weapons, will be reinforced as a priority measure under the programme to develop out air and space defenses. Third, the new strategic ballistic missiles commissioned by the Strategic Missile Forces and the Navy will be equipped with advanced missile defense penetration systems and new highly-effective warheads. Fourth, I have instructed the Armed Forces to draw up measures for disabling missile defense system data and guidance systems if need be... Fifth, if the above measures prove insufficient, the Russian Federation will deploy modern offensive weapon systems in the west and south of the country, ensuring our ability to take out any part of the US missile defense system, in Europe. One step in this process will be to deploy Iskander missiles in Kaliningrad Region.

 Full must watch address to the public: for English closed captioning hit the CC button

Chinese Manufacturing Shrinking

The report below confirms some of my recent posts:
The Reasons For China's Imminent Bust
Its On: China vice premier sees chronic global recession
"Every Province Of China Is Greece"
Chinese Bears Getting Bigger (has further links within)


The internal Chinese economy is in trouble.

Credit Suisse: "The ‘Last Days’ of the Euro"

The ‘Last Days’ of the Euro

We seem to have entered the last days of the euro as we currently know it.

That doesn’t make a break-up very likely, but it does mean some extraordinary things will almost certainly need to happen – probably by mid-January – to prevent the progressive closure of all the euro zone sovereign bond markets, potentially accompanied by escalating runs on even the strongest banks.

That may sound overdramatic, but it reflects the inexorable logic of investors realizing that – as things currently stand – they simply cannot be sure what exactly they are holding or buying in the euro zone sovereign bond markets.

Print Euros and send Gold to the moon?