For the first time, the international organization has set a date for the moment when the “Age of America” will end and the U.S. economy will be overtaken by that of China.
And it’s a lot closer than you may think.
According to the latest IMF official forecasts, China’s economy will surpass that of America in real terms in 2016 — just five years from now.
Put that in your calendar.
It provides a painful context for the budget wrangling taking place in Washington, D.C., right now. It raises enormous questions about what the international security system is going to look like in just a handful of years. And it casts a deepening cloud over both the U.S. dollar and the giant Treasury market, which have been propped up for decades by their privileged status as the liabilities of the world’s hegemonic power.
According to the IMF forecast, whomever is elected U.S. president next year — Obama? Mitt Romney? Donald Trump? — will be the last to preside over the world’s largest economy.
Most people aren’t prepared for this. They aren’t even aware it’s that close. Listen to experts of various stripes, and they will tell you this moment is decades away. The most bearish will put the figure in the mid-2020s.
But they’re miscounting. They’re only comparing the gross domestic products of the two countries using current exchange rates.
That’s a largely meaningless comparison in real terms. Exchange rates change quickly. And China’s exchange rates are phony. China artificially undervalues its currency, the renminbi, through massive intervention in the markets.
The comparison that really matters
The IMF in its analysis looks beyond exchange rates to the true, real terms picture of the economies using “purchasing power parities.” That compares what people earn and spend in real terms in their domestic economies.
Under PPP, the Chinese economy will expand from $11.2 trillion this year to $19 trillion in 2016. Meanwhile the size of the U.S. economy will rise from $15.2 trillion to $18.8 trillion. That would take America’s share of the world output down to 17.7%, the lowest in modern times. China’s would reach 18%, and rising.
Just 10 years ago, the U.S. economy was three times the size of China’s.
Naturally, all forecasts are fallible. Time and chance happen to them all. The actual date when China surpasses the U.S. might come even earlier than the IMF predicts, or somewhat later. If the great Chinese juggernaut blows a tire, as a growing number fear it might, it could even delay things by several years. But the outcome is scarcely in doubt.
This is more than a statistical story. It is the end of the Age of America. As a bond strategist in Europe told me two weeks ago, “We are witnessing the end of America’s economic hegemony.”
We have lived in a world dominated by the U.S. for so long that there is no longer anyone alive who remembers anything else. America overtook Great Britain as the world’s leading economic power in the 1890s and never looked back.
And both those countries live under very similar rules of constitutional government, respect for civil liberties and the rights of property. China has none of those. The Age of China will feel very different.
Victor Cha, senior adviser on Asian affairs at Washington’s Center for Strategic and International Studies, told me China’s neighbors in Asia are already waking up to the dangers. “The region is overwhelmingly looking to the U.S. in a way that it hasn’t done in the past,” he said. “They see the U.S. as a counterweight to China. They also see American hegemony over the last half-century as fairly benign. In China they see the rise of an economic power that is not benevolent, that can be predatory. They don’t see it as a benign hegemony.”
The rise of China, and the relative decline of America, is the biggest story of our time. You can see its implications everywhere, from shuttered factories in the Midwest to soaring costs of oil and other commodities. Last fall, when I attended a conference in London about agricultural investment, I was struck by the number of people there who told stories about Chinese interests snapping up farmland and foodstuff supplies — from South America to China and elsewhere.
This is the result of decades during which China has successfully pursued economic policies aimed at national expansion and power, while the U.S. has embraced either free trade or, for want of a better term, economic appeasement.
“There are two systems in collision,” said Ralph Gomory, research professor at NYU’s Stern business school. “They have a state-guided form of capitalism, and we have a much freer former of capitalism.” What we have seen, he said, is “a massive shift in capability from the U.S. to China. What we have done is traded jobs for profit. The jobs have moved to China. The capability erodes in the U.S. and grows in China. That’s very destructive. That is a big reason why the U.S. is becoming more and more polarized between a small, very rich class and an eroding middle class. The people who get the profits are very different from the people who lost the wages.”
The next chapter of the story is just beginning.
U.S. spending spree won’t work
What the rise of China means for defense, and international affairs, has barely been touched on. The U.S. is now spending gigantic sums — from a beleaguered economy — to try to maintain its place in the sun. See: Pentagon spending is budget blind spot .
It’s a lesson we could learn more cheaply from the sad story of the British, Spanish and other empires. It doesn’t work. You can’t stay on top if your economy doesn’t.
Equally to the point, here is what this means economically, and for investors.
Some years ago I was having lunch with the smartest investor I know, London-based hedge-fund manager Crispin Odey. He made the argument that markets are reasonably efficient, most of the time, at setting prices. Where they are most likely to fail, though, is in correctly anticipating and pricing big, revolutionary, “paradigm” shifts — whether a rise of disruptive technologies or revolutionary changes in geopolitics. We are living through one now.
The U.S. Treasury market continues to operate on the assumption that it will always remain the global benchmark of money. Business schools still teach students, for example, that the interest rate on the 10-year Treasury bond is the “risk-free rate” on money. And so it has been for more than a century. But that’s all based on the Age of America.
No wonder so many have been buying gold. If the U.S. dollar ceases to be the world’s sole reserve currency, what will be? The euro would be fine if it acts like the old deutschemark. If it’s just the Greek drachma in drag ... not so much.
The last time the world’s dominant hegemon lost its ability to run things singlehandedly was early in the past century. That’s when the U.S. and Germany surpassed Great Britain. It didn’t turn out well.
Brett Arends is a senior columnist for MarketWatch and a personal-finance columnist for The Wall Street Journal.
Monday, April 25, 2011
Market Manipulation: A Recipe in Three Parts
Market Manipulation: A Recipe in Three Parts
Price Manipulation and its cousin “mismarked books” are as much a product of systemic
dysfunction as they are of unethical individual behavior. The 3 part series we have planned is educational in nature and aims to outline those system-wide imperfections at the highest level.
For today we must focus on what is shaping up to be a rare opportunity to watch a pitched battle between major players in Gold. In short, we are interrupting your regularly scheduled program.
Current Events: The Potential Pin in Gold Options Tomorrow
Right now there is a war in Gold options. It is between the May 1520 longs, who mostlikely are unhedged, and their short option counterparts, who most likely are hedged.One would think the longs intend to sell futures at some point, perhaps 1520, perhaps1540 we do not know. It is also possible that they intend to take delivery, but that isunknowable for the moment. The shorts are probably delta hedgers and have no desireto see this market go above 1520, much less move at all.
The Players
The Longs- have accumulated over 5,000 lots in a two week period and wewould assume they are bullish. They are patient dip buyers and seem to havelittle fear of the Bullion Banks that are often accused of manipulating PM priceslower or keeping prices range bound at expiration.The Shorts- are Bullion Banks, market-making firms, locals and possibly somehedge funds. There is no collusion implied here. In fact, these firms are usually atodds with each other in terms of option open interest. The majority of the shortstrade options from a non-directional point of view. That is, they are professionalswho, when short an option do not want the market to move either way.Conversely, when they are long an option, they want the market to move quicklythrough or away from the strike they own.
The Play
We feel the Longs were betting that once the gravitational pull of the $1500 strike wasbroken, that the market would move quite easily to the strike with the next largest openinterest, the $1520 strike. They may be privy to large order flow in futures, they mayhave large futures order flow, or they may simply be speculating with nothing other thantheir wallets and the ability to read market behavior through price action. They can spota market that is lopsided in one direction when they see it.
Gold Opens $1,520, Silver Over $50 Everywhere But Comex (For At Least A Few More Minutes)
While markets are relatively quiet everywhere, precious metals have just gone apeshit. Gold opens at $1,520 while silver hits $49.70 on the Comex, drops, and is backing up again last treading at $49.22, as the world is pricing in the end of the US reserve currency. The parabolic melt up is in full force and we expect the nominal Hunt high to be taken out today, after which the resistance is the real Hunt high somewhere around $140, courtesy of the Federal Reserve confetti.
Thursday, April 21, 2011
The Debt Ceiling Fight Is Over and The Democrats Lost
The U.S. debt ceiling is definitely going to get raised, but the Democrats have lost any hope of getting a "clean" no-strings-attached hike.
As HuffPo's Sam Stein reports, a number of Democrats have already basically agreed to some kind of discretionary spending cap as a condition for passage.
FireDogLake says similar stuff, that a cap on future spending is likely going to be part of any agreement, but that the debt ceiling hike will get passed.
So that's that. Just pray the economy holds on, and no more fiscal stimulus is needed. It doesn't sound like it's coming.
Read more: http://www.businessinsider.com/the-democrats-lose-the-debt-ceiling-fight-2011-4#ixzz1KBjQ7sCd
As HuffPo's Sam Stein reports, a number of Democrats have already basically agreed to some kind of discretionary spending cap as a condition for passage.
FireDogLake says similar stuff, that a cap on future spending is likely going to be part of any agreement, but that the debt ceiling hike will get passed.
So that's that. Just pray the economy holds on, and no more fiscal stimulus is needed. It doesn't sound like it's coming.
Read more: http://www.businessinsider.com/the-democrats-lose-the-debt-ceiling-fight-2011-4#ixzz1KBjQ7sCd
50 FACTORS POWERING THE GOLD BULL
50 FACTORS POWERING THE GOLD BULL
1) USFed is stuck at 0% for over two years and printing $1.7 trillion in Quantitative Easing, otherwise called monetary hyper inflation. They are not finished destroying both money and capital.
2) USFed tripled its balance sheet, with over half of it bonds of exaggerated value, while it gobbled up toxic mortgage bonds as buyer of last resort. The mortgage bonds have turned worthless. The USFed waits for a housing revival to bail itself out, but it will not arrive.
3) Debt monetization has gone haywire, as over 70% of USTBond sales from the USFed printing press. The QE was urgently needed, since legitimate buyers vanished. Even the primary dealers have been reimbursed in open market operations within a few weeks.
4) PIMCO has shed its entire USTreasury Bond holdings, seeing no value. They joined many foreign creditors in an unannounced buyer boycott in disgusted reaction to QE which is essentially a compulsory unilateral debt writedown.
5) Growing USGovt deficits have run over $1.5 trillion annually, with absent cuts, obscene entitlements, endless war. The prevailing short-term 0% interest rates are out of synch with exploding debt supply and rising price inflation.
6) Unfunded USGovt liabilities total nearly $100 trillion for medicare, social security, pensions, and more. The obligations are never included in the official debt. It represents insult to injury within insolvency.
7) Standard & Poors warned that USGovt could lose AAA rating in lousy credit outlook, one chance in three within the next two years. Ironically, the announcement came on the day when the USGovt exceeded its debt limit. The network news missed it.
8) State & Municipal debt have collapsed, as 41 states have huge shortfalls, and four large states are broken. They might receive a federal bailout. It could be called QE3, maybe QE4.
9) Coordinated USTBond purchases from Japanese sales have relieved the USFed, as other major central banks act as global monetarist agents. The sales by Japan are vast and growing. Witness the last phase in unwind of Yen Carry Trade, where 0% borrowed Japanese money funded the USTreasury Bonds and US Stocks.
10) Quantitative Easing, a catch word for extreme monetary inflation and debt monetization, has become engrained into global central bank policy, soon hidden. It is so controversial and deadly to the global financial structures that it will go hidden, and attempt to avoid the furious anger in feedback by global leaders. This is the most important and powerful of all 50 factors in my view.
11) The FedFunds Rate is stuck near 0%, yet the actual CPI is near 10%, for a real rate of interest of minus 9%. Historically a negative real rate of interest has been the primary fuel for a Gold bull. This time the fuel has been applied for a longer period of time, and a bigger negative real rate than ever.
12) The USGovt claims to have 8000 tons of Gold in reserve, but it is all in Deep Storage, as in unmined ore bodies. The collateral for the USDollar and USTreasury debt is vacant. It is in raw form like in the Rocky Mountain range or Sierra Nevada range.
13) Fast rising food prices, fast rising gasoline prices, and fast rising metals, coffee, sugar, and cotton serve as testament to broad price inflation. So far it has shown up on the cost structure. Either the business sector will vanish from a cost squeeze or pass on higher costs as end product and service price increases.
14) The entire world seeks to protect wealth from the ravages of inflation & the American sponsored QE by buying Gold & Silver. The rest of the world can spot price inflation more effectively than the US population. The United States is subjected to the world's broadest and most pervasive propaganda in the industrialized world.
15) The European sovereign debt breakdown with high bond yields in PIIGS nations points out the broken debt foundation to the monetary system. The solutions like with Greece in May 2010 were a sham, nothing but a bandaid and cup of elixir. Spain is next to experience major shocks that destabilize all of Europe again, this time much bigger than Greece. The Portuguese Govt debt rises toward 10% on the 10-year yield, while the Greek Govt debt has risen to reach 20% on the 2-year yield.
16) Germany is pushing for Southern Europe bank climax in their Euro Central Bank rate hike. Europe will be pushed to crisis this year, orchestrated by the impatient and angry Germans. They have no more appetitive for $300 to $400 billion in annual welfare to the broken nations in Southern Europe.
17) Isolation of the USFed and Bank of England and Bank of Japan has come. The small rate hike by the European Central Bank separated them finally. The Anglos with their Japanese lackeys are the only central banks not raising rates. With isolation comes all the earmarks on the path to the Third World.
18) The shortage of gold is acute, as 51 million gold bars have been sold forward versus the 11 million held by the COMEX in inventory. Be sure that hundreds of millions of nonexistent fractionalized gold ounces are polluting the system. Word is getting out that the COMEX is empty of precious metals.
19) Such extreme Silver shortage has befallen the COMEX that the corrupted metals exchange routinely offers cash settlement in silver with a 25% bonus if a non-disclosure agreement is signed. The practice cannot be kept under wraps, as some hedge funds push for fat returns in under two months holding positions with delivery demanded.
20) China has begun grand initiatives to replace its precious metal stockpiles. They are pursuing the Yuan currency to become a global reserve currency. As they build collateral for the Yuan, they are also elevating Silver as reserves asset.
21) A global shortage of Gold & Silver has been realized in national mint production. From the United States to Canada to Australia to Germany, shortages exist. Many interruptions will continue amidst the shortages, which feed the publicity.
22) The Teddy Roosevelt stockpile of 6 billion Silver ounces was depleted in 2003. He saw the strategic importance of Silver for industrial and military applications. The USEconomy and USMilitary will turn into importers on the global market.
23) betrayal of China by USGovt in Gold & Silver leases is a story coming out slowly. The deal was cut in 1999, associated with Most Favored Nation granted to China. But the Wall Street firms broke the deal, betrayed the Chinese, and angered them into highly motivated action. No longer are the Chinese big steady USTBond buyers, part of the deal also.
24) Every single US financial market has been undermined and corrupted from grotesque intervention, constant props, and fraudulent activity. The degradation has occurred under the watchful eyes of compromised regulators. Fraud like the Flash Crash and NYSE front running by Goldman Sachs is protected by the FBI henchmen.
25) The USEconomy operates on a global credit card, enabling it to live beyond its means. The USGovt exploits the compulsory foreign extension of credit in USTBonds, by virtue of the USDollar acting as global reserve currency. Foreign nations are compelled to participate but that is changing.
26) The USMilitary conducts endless war adventures for syndicate profits. They use the USTreasury Bond as a credit card. The wars cost of $1 billion per day is considered so sacred, that it is off the table in USGovt budget call negotiations, debates, and agreements.
27) Narcotics funds have proliferated under the USMilitary aegis. The vertically integrated narcotics industry is the primary plank of nation building in Afghanistan. The funds keep the big US banks alive from vast money laundering.
28) No big US bank liquidations have occurred, despite their deep insolvency. Any restructure toward recovery would have the liquidations are the first step. The USEconomy is stuck in a deteriorating swamp since the Too Big To Fail mantra prevents the urgent but missing step.
29) The unprosecuted multi-$trillion bond fraud over the last decade has harmed the US image, prestige, and leadership. The main perpetrators are the Wall Street bankers and their lieutenants appointed at Fannie Mae and elsewhere. They bankers most culpable remain in charge at the USDept Treasury and other key supporting posts like the FDIC, SEC, and CFTC.
30) The ugly daughters Fannie Mae and AIG are forever entombed in the USGovt. They operate as black hole expenses whose fraud must be contained. The costs involved are in the $trillions, all hidden from view like the fraud. Fannie Mae remains the main clearinghouse for several $trillion fraud programs still in operation.
31) The US banking system cannot serve as an effective credit engine dispenser, an important function within any modern economy. It is deeply insolvent, and growing more insolvent as the property market sinks lower in valuation. The banks lack reserves, and hide their condition by means of the FASB permission to use fraudulent accounting.
32) The big US banks are beneficiary of continuous secret slush fund support from the USGovt and USFed. Their sources and replenishments have been gradually revealed. The TARP Fund event will go down in modern history as the greatest theft the world has ever seen, easily eclipsing the biggest mortgage bond fraud in history.
33) The insolvent big US banks continue to sit at the USGovt teat. The vast umbilical cord of banker welfare has not gone away. Goldman Sachs still is in control of the funding machinery.
34) The shadow banking system based upon credit derivatives keeps interest rates near 0%. The usury cost of money is artificially low near nothing. As money costs nothing, capital is actively and rapidly destroyed.
35) A vast crime syndicate has taken control of the USGovt. A vast crime syndicate has taken control of the USMilitary. A vast crime syndicate has taken control of the USCongress. A vast crime syndicate has taken control of the US press networks.
36) A chronic decline of the US housing sector keeps the USEconomy in a grand decline with constant deterioration. With one million bank owned homes in inventory, a huge unsold overhang of supply prevents any recovery of housing prices. Home equity continues to drain, and bank balance sheets continue to erode.
37) Over 11 million US homes stand in negative equity. The sum equals to 23.1% of households. They will not participate much in the USEconomy, except when given handouts. They have become downtrodden.
38) The USEconomy will not benefit from a export surge. The US industrial base has no critical mass after 30 years of dispatch to the Pacific Rim & China. The industry must contend with rising costs in offset to the falling USDollar, which is cited as providing the mythical benefit. Then can export in droves if they do so at a loss.
39) A global revolt against the USDollar is in its third years. The global players work to avoid the US$ usage in trade settlement. Several bilateral swap facilities flourish, mostly with China. If China supplies products, then the Yuan currency will be elevated to global reserve currency.
40) Global anger and resentment over three decades has spilled over. The World Bank and IMF have been routinely used by the US bankers to safeguard the USDollar and Anglo banker hegemony. Neither financial agency commands the respect of yesteryear.
41) A middle phase has begun in a powerful Global Paradigm Shift. The transfer moves power East where the wealth engines of industry lie, far from the fraudulent banking centers. The next decade will feature the Chinese as bankers, since their war chest contains over $3 trillion.
42) The crumbling global monetary system was built on toxic sovereign debt. Legal tender has been nothing more than denominated debt posing as legitimate by legal decree. That is what word FIAT means. The system is gradually breaking in an irreversible manner.
43) The global central bank franchise system has been discredited. It is a failure, which is not recognized by the bank leaders still in charge. The stepwise process of ruin continues with a new sector falling every few months. Next might be municipal bonds.
44) Witness the final phase of a systemic cycle, as the monetary system has run its course. It is saturated with debt from faulty design. The deception cited in the mainstream media focuses upon the credit cycle which will renew. It will not. It will break of its own weight and lost confidence.
45) The recognition has grown substantially that suppression of the Gold price has been the anchor holding fiat system together. The Chinese realize that Gold, when removed, leads to the collapse of the US financial system. They realize it more than the US public. But the syndicate in control of the USGovt understands the concept very well, as they designed the system.
46) The institution of a high level global barter system might soon take root. Gold will sit at its central core, providing stability. No deadbeat nations will participate. That includes the United States and several European nations. The barter system will be as effective as elegant.
47) The movements spread like wildfire in several US states to reinstitute gold as money. In a few states, led by Utah and Virginia, progress has been made for Gold to satisfy debts, public & private. Consider the movement to be in parallel to the Tenth Amendment movements.
48) Anglo bankers have lost control in global banking politics. The phased out G-7 Meeting is evidence. China has wrested control of G-20 Meeting, and has dictated much of its agenda in the last few meetings. The US has been reduced to a diminutive Bernanke and Geithner being ignored in the corner.
49) New loud stirrings by Saudi Arabia seek a new security protector. If security is no longer provided by the USMilitary, then the entire defacto Petro-Dollar standard is put at risk. Remove the crude oil sales in USDollars exclusively, and the US sinks into the Third World with a USDollar currency that cannot stand on its own wretched wrecked fundamentals.
50) The IMF solution to use SDR basket as global reserve is a final desperate ploy. By fashioning a basket of major currencies in a basket, they attempt to enforce a price fixing regime. It is a hidden FOREX currency exchange rate price fixing gambit that will invite a Gold price advance in uniform manner across the currencies bound together. This ploy is being planned in order to prevent the USDollar from dying a horrible death at the expense of the other major currencies. By that is meant at the expense of the other major economies which would otherwise have to operate at very high exchange rates.
1) USFed is stuck at 0% for over two years and printing $1.7 trillion in Quantitative Easing, otherwise called monetary hyper inflation. They are not finished destroying both money and capital.
2) USFed tripled its balance sheet, with over half of it bonds of exaggerated value, while it gobbled up toxic mortgage bonds as buyer of last resort. The mortgage bonds have turned worthless. The USFed waits for a housing revival to bail itself out, but it will not arrive.
3) Debt monetization has gone haywire, as over 70% of USTBond sales from the USFed printing press. The QE was urgently needed, since legitimate buyers vanished. Even the primary dealers have been reimbursed in open market operations within a few weeks.
4) PIMCO has shed its entire USTreasury Bond holdings, seeing no value. They joined many foreign creditors in an unannounced buyer boycott in disgusted reaction to QE which is essentially a compulsory unilateral debt writedown.
5) Growing USGovt deficits have run over $1.5 trillion annually, with absent cuts, obscene entitlements, endless war. The prevailing short-term 0% interest rates are out of synch with exploding debt supply and rising price inflation.
6) Unfunded USGovt liabilities total nearly $100 trillion for medicare, social security, pensions, and more. The obligations are never included in the official debt. It represents insult to injury within insolvency.
7) Standard & Poors warned that USGovt could lose AAA rating in lousy credit outlook, one chance in three within the next two years. Ironically, the announcement came on the day when the USGovt exceeded its debt limit. The network news missed it.
8) State & Municipal debt have collapsed, as 41 states have huge shortfalls, and four large states are broken. They might receive a federal bailout. It could be called QE3, maybe QE4.
9) Coordinated USTBond purchases from Japanese sales have relieved the USFed, as other major central banks act as global monetarist agents. The sales by Japan are vast and growing. Witness the last phase in unwind of Yen Carry Trade, where 0% borrowed Japanese money funded the USTreasury Bonds and US Stocks.
10) Quantitative Easing, a catch word for extreme monetary inflation and debt monetization, has become engrained into global central bank policy, soon hidden. It is so controversial and deadly to the global financial structures that it will go hidden, and attempt to avoid the furious anger in feedback by global leaders. This is the most important and powerful of all 50 factors in my view.
11) The FedFunds Rate is stuck near 0%, yet the actual CPI is near 10%, for a real rate of interest of minus 9%. Historically a negative real rate of interest has been the primary fuel for a Gold bull. This time the fuel has been applied for a longer period of time, and a bigger negative real rate than ever.
12) The USGovt claims to have 8000 tons of Gold in reserve, but it is all in Deep Storage, as in unmined ore bodies. The collateral for the USDollar and USTreasury debt is vacant. It is in raw form like in the Rocky Mountain range or Sierra Nevada range.
13) Fast rising food prices, fast rising gasoline prices, and fast rising metals, coffee, sugar, and cotton serve as testament to broad price inflation. So far it has shown up on the cost structure. Either the business sector will vanish from a cost squeeze or pass on higher costs as end product and service price increases.
14) The entire world seeks to protect wealth from the ravages of inflation & the American sponsored QE by buying Gold & Silver. The rest of the world can spot price inflation more effectively than the US population. The United States is subjected to the world's broadest and most pervasive propaganda in the industrialized world.
15) The European sovereign debt breakdown with high bond yields in PIIGS nations points out the broken debt foundation to the monetary system. The solutions like with Greece in May 2010 were a sham, nothing but a bandaid and cup of elixir. Spain is next to experience major shocks that destabilize all of Europe again, this time much bigger than Greece. The Portuguese Govt debt rises toward 10% on the 10-year yield, while the Greek Govt debt has risen to reach 20% on the 2-year yield.
16) Germany is pushing for Southern Europe bank climax in their Euro Central Bank rate hike. Europe will be pushed to crisis this year, orchestrated by the impatient and angry Germans. They have no more appetitive for $300 to $400 billion in annual welfare to the broken nations in Southern Europe.
17) Isolation of the USFed and Bank of England and Bank of Japan has come. The small rate hike by the European Central Bank separated them finally. The Anglos with their Japanese lackeys are the only central banks not raising rates. With isolation comes all the earmarks on the path to the Third World.
18) The shortage of gold is acute, as 51 million gold bars have been sold forward versus the 11 million held by the COMEX in inventory. Be sure that hundreds of millions of nonexistent fractionalized gold ounces are polluting the system. Word is getting out that the COMEX is empty of precious metals.
19) Such extreme Silver shortage has befallen the COMEX that the corrupted metals exchange routinely offers cash settlement in silver with a 25% bonus if a non-disclosure agreement is signed. The practice cannot be kept under wraps, as some hedge funds push for fat returns in under two months holding positions with delivery demanded.
20) China has begun grand initiatives to replace its precious metal stockpiles. They are pursuing the Yuan currency to become a global reserve currency. As they build collateral for the Yuan, they are also elevating Silver as reserves asset.
21) A global shortage of Gold & Silver has been realized in national mint production. From the United States to Canada to Australia to Germany, shortages exist. Many interruptions will continue amidst the shortages, which feed the publicity.
22) The Teddy Roosevelt stockpile of 6 billion Silver ounces was depleted in 2003. He saw the strategic importance of Silver for industrial and military applications. The USEconomy and USMilitary will turn into importers on the global market.
23) betrayal of China by USGovt in Gold & Silver leases is a story coming out slowly. The deal was cut in 1999, associated with Most Favored Nation granted to China. But the Wall Street firms broke the deal, betrayed the Chinese, and angered them into highly motivated action. No longer are the Chinese big steady USTBond buyers, part of the deal also.
24) Every single US financial market has been undermined and corrupted from grotesque intervention, constant props, and fraudulent activity. The degradation has occurred under the watchful eyes of compromised regulators. Fraud like the Flash Crash and NYSE front running by Goldman Sachs is protected by the FBI henchmen.
25) The USEconomy operates on a global credit card, enabling it to live beyond its means. The USGovt exploits the compulsory foreign extension of credit in USTBonds, by virtue of the USDollar acting as global reserve currency. Foreign nations are compelled to participate but that is changing.
26) The USMilitary conducts endless war adventures for syndicate profits. They use the USTreasury Bond as a credit card. The wars cost of $1 billion per day is considered so sacred, that it is off the table in USGovt budget call negotiations, debates, and agreements.
27) Narcotics funds have proliferated under the USMilitary aegis. The vertically integrated narcotics industry is the primary plank of nation building in Afghanistan. The funds keep the big US banks alive from vast money laundering.
28) No big US bank liquidations have occurred, despite their deep insolvency. Any restructure toward recovery would have the liquidations are the first step. The USEconomy is stuck in a deteriorating swamp since the Too Big To Fail mantra prevents the urgent but missing step.
29) The unprosecuted multi-$trillion bond fraud over the last decade has harmed the US image, prestige, and leadership. The main perpetrators are the Wall Street bankers and their lieutenants appointed at Fannie Mae and elsewhere. They bankers most culpable remain in charge at the USDept Treasury and other key supporting posts like the FDIC, SEC, and CFTC.
30) The ugly daughters Fannie Mae and AIG are forever entombed in the USGovt. They operate as black hole expenses whose fraud must be contained. The costs involved are in the $trillions, all hidden from view like the fraud. Fannie Mae remains the main clearinghouse for several $trillion fraud programs still in operation.
31) The US banking system cannot serve as an effective credit engine dispenser, an important function within any modern economy. It is deeply insolvent, and growing more insolvent as the property market sinks lower in valuation. The banks lack reserves, and hide their condition by means of the FASB permission to use fraudulent accounting.
32) The big US banks are beneficiary of continuous secret slush fund support from the USGovt and USFed. Their sources and replenishments have been gradually revealed. The TARP Fund event will go down in modern history as the greatest theft the world has ever seen, easily eclipsing the biggest mortgage bond fraud in history.
33) The insolvent big US banks continue to sit at the USGovt teat. The vast umbilical cord of banker welfare has not gone away. Goldman Sachs still is in control of the funding machinery.
34) The shadow banking system based upon credit derivatives keeps interest rates near 0%. The usury cost of money is artificially low near nothing. As money costs nothing, capital is actively and rapidly destroyed.
35) A vast crime syndicate has taken control of the USGovt. A vast crime syndicate has taken control of the USMilitary. A vast crime syndicate has taken control of the USCongress. A vast crime syndicate has taken control of the US press networks.
36) A chronic decline of the US housing sector keeps the USEconomy in a grand decline with constant deterioration. With one million bank owned homes in inventory, a huge unsold overhang of supply prevents any recovery of housing prices. Home equity continues to drain, and bank balance sheets continue to erode.
37) Over 11 million US homes stand in negative equity. The sum equals to 23.1% of households. They will not participate much in the USEconomy, except when given handouts. They have become downtrodden.
38) The USEconomy will not benefit from a export surge. The US industrial base has no critical mass after 30 years of dispatch to the Pacific Rim & China. The industry must contend with rising costs in offset to the falling USDollar, which is cited as providing the mythical benefit. Then can export in droves if they do so at a loss.
39) A global revolt against the USDollar is in its third years. The global players work to avoid the US$ usage in trade settlement. Several bilateral swap facilities flourish, mostly with China. If China supplies products, then the Yuan currency will be elevated to global reserve currency.
40) Global anger and resentment over three decades has spilled over. The World Bank and IMF have been routinely used by the US bankers to safeguard the USDollar and Anglo banker hegemony. Neither financial agency commands the respect of yesteryear.
41) A middle phase has begun in a powerful Global Paradigm Shift. The transfer moves power East where the wealth engines of industry lie, far from the fraudulent banking centers. The next decade will feature the Chinese as bankers, since their war chest contains over $3 trillion.
42) The crumbling global monetary system was built on toxic sovereign debt. Legal tender has been nothing more than denominated debt posing as legitimate by legal decree. That is what word FIAT means. The system is gradually breaking in an irreversible manner.
43) The global central bank franchise system has been discredited. It is a failure, which is not recognized by the bank leaders still in charge. The stepwise process of ruin continues with a new sector falling every few months. Next might be municipal bonds.
44) Witness the final phase of a systemic cycle, as the monetary system has run its course. It is saturated with debt from faulty design. The deception cited in the mainstream media focuses upon the credit cycle which will renew. It will not. It will break of its own weight and lost confidence.
45) The recognition has grown substantially that suppression of the Gold price has been the anchor holding fiat system together. The Chinese realize that Gold, when removed, leads to the collapse of the US financial system. They realize it more than the US public. But the syndicate in control of the USGovt understands the concept very well, as they designed the system.
46) The institution of a high level global barter system might soon take root. Gold will sit at its central core, providing stability. No deadbeat nations will participate. That includes the United States and several European nations. The barter system will be as effective as elegant.
47) The movements spread like wildfire in several US states to reinstitute gold as money. In a few states, led by Utah and Virginia, progress has been made for Gold to satisfy debts, public & private. Consider the movement to be in parallel to the Tenth Amendment movements.
48) Anglo bankers have lost control in global banking politics. The phased out G-7 Meeting is evidence. China has wrested control of G-20 Meeting, and has dictated much of its agenda in the last few meetings. The US has been reduced to a diminutive Bernanke and Geithner being ignored in the corner.
49) New loud stirrings by Saudi Arabia seek a new security protector. If security is no longer provided by the USMilitary, then the entire defacto Petro-Dollar standard is put at risk. Remove the crude oil sales in USDollars exclusively, and the US sinks into the Third World with a USDollar currency that cannot stand on its own wretched wrecked fundamentals.
50) The IMF solution to use SDR basket as global reserve is a final desperate ploy. By fashioning a basket of major currencies in a basket, they attempt to enforce a price fixing regime. It is a hidden FOREX currency exchange rate price fixing gambit that will invite a Gold price advance in uniform manner across the currencies bound together. This ploy is being planned in order to prevent the USDollar from dying a horrible death at the expense of the other major currencies. By that is meant at the expense of the other major economies which would otherwise have to operate at very high exchange rates.
Wednesday, April 20, 2011
It’s Official: China Will Be Dumping US Dollars
Submitted by Phoenix Capital Research on 04/20/2011 09:59 -0400
In case you missed it, earlier this week China announced that its foreign currency reserves are excessive and that they need to return to “reasonable” levels.
In politician speak, this is a clear, “we are sick of the US Dollar and will be taking steps to lower our holdings.” Remember, the US Dollar is China’s largest single holding. And China has already begun dumping Treasuries (US Debt).
This comes on the heels of China deciding (along with Russia) to trade in their own currencies, NOT the US Dollar. Not to mention the numerous warnings Chinese politicians have been issuing to the US over the last 24 months.
In simple terms, China is done playing nice and is now actively moving out of US Dollar denominated assets. This is the beginning of the US Dollar’s end as world reserve currency.
The dimwits in Washington don’t understand this because their advisors are all Wall Street stooges who don’t think debt or deficits matter. After all, why would they? Their entire business model is now based on endless cheap debt from the US Fed. So it’s only logically (in their minds) that the US as a sovereign state engage in the same strategies.
What does this mean? We’re on out own in terms of preparing for what’s coming. The US Dollar has already taken out its 2009 low in the overnight futures session. We now have only one line of support before the US Dollar breaks into the abyss (all time lows).
So if you’re not preparing for mega-inflation already, you need to start doing so NOW. The Fed WILL continue to pump money into the system 24/7 and it’s going to result in the death of the US Dollar.
If you’ve yet to take steps to prepare your portfolio for the coming inflationary disaster, our FREE Special Report, The Inflationary Disaster explains not only why inflation is here now, why the Fed is powerless to stop it, and three investments that absolutely EXPLODE as a result of this.
In case you missed it, earlier this week China announced that its foreign currency reserves are excessive and that they need to return to “reasonable” levels.
In politician speak, this is a clear, “we are sick of the US Dollar and will be taking steps to lower our holdings.” Remember, the US Dollar is China’s largest single holding. And China has already begun dumping Treasuries (US Debt).
This comes on the heels of China deciding (along with Russia) to trade in their own currencies, NOT the US Dollar. Not to mention the numerous warnings Chinese politicians have been issuing to the US over the last 24 months.
In simple terms, China is done playing nice and is now actively moving out of US Dollar denominated assets. This is the beginning of the US Dollar’s end as world reserve currency.
The dimwits in Washington don’t understand this because their advisors are all Wall Street stooges who don’t think debt or deficits matter. After all, why would they? Their entire business model is now based on endless cheap debt from the US Fed. So it’s only logically (in their minds) that the US as a sovereign state engage in the same strategies.
What does this mean? We’re on out own in terms of preparing for what’s coming. The US Dollar has already taken out its 2009 low in the overnight futures session. We now have only one line of support before the US Dollar breaks into the abyss (all time lows).
So if you’re not preparing for mega-inflation already, you need to start doing so NOW. The Fed WILL continue to pump money into the system 24/7 and it’s going to result in the death of the US Dollar.
If you’ve yet to take steps to prepare your portfolio for the coming inflationary disaster, our FREE Special Report, The Inflationary Disaster explains not only why inflation is here now, why the Fed is powerless to stop it, and three investments that absolutely EXPLODE as a result of this.
Options Risk, Manipulation, And The May Silver $40 Calls: An FMX Connect Special - Parts 1 And 2
Francis Soyer: 04/20/11
This is a short but very good article posted on Zero Hedge explaining the market mechanics of options and their impact on underlying securities. In this example they are using silver as the underlying security. In principal the mechanics discussed apply to all securities that have derivatives like stocks and bonds. Definately worth a read over twice for the concepts to gel.
From Vince Lanci of FMX Connect
Options Risk, Manipulation, and the May Silver $40 Calls
The purpose of this series is to help the reader better understand the risks and pitfalls of trading options and having a position at expiration. We will try to describe exactly what happens at expiration. The concepts here apply to all options markets, but we chose to focus on Silver because an interesting expiration is setting up presently. The upcoming expiry gives us an opportunity to discuss all the pieces of the option puzzle: the Greeks, market manipulation, Pin risk, and other factors.
Lesson #1
In futures markets where major participants are absent, options players dictate market movement for short periods of time. During this time the market may flat line, or it may have large, impulsive moves in either direction. What happens is determined by the strong-handed player, and sometimes his inclination to “game” the market.
The Easter Egg
Observe if you will, the 6 days prior to expiration of Comex May Silver options.
April 21st, Holy Thursday: day before a holiday
April 22nd: Good Friday: CME Closed
April 23rd,Easter Saturday: Markets Closed
April 24th,Easter Sunday: Markets Closed
April 26th, Tuesday: May Options Expiration CME
One may ask, what does the above imply? The above implies that normal liquidity will not be present for the last 5 days before expiration. Sunday Evening US time is usually quite liquid during London hours, but will not be this week. Monday will also be a liquidity ghost town, as LME players will be out. It is doubtful that many US futures liquidity providers will be in the day after Easter either. This is a market ripe for an event.
Throughout this week and next, we will attempt to break down the factors influencing the outcome of this expiration as a proxy for understanding commodity options risk in general. It will include:
· The players and their biases
· Option Greeks demystified
How to spot when a market is ripe for “management”, like above.
Part 2: A Zero-Sum Game
In any single trade, the option buyer and seller are fundamentally at odds. Both types of player (referred to as options long and options short) make their money in opposite ways, and at the expense of the other. The long players expect to make more money scalping Gamma than they lose in Theta over the option’s life. The Short players bet that the Theta they collect will outweigh the market movement and the negative Gamma they incur, most poetically described as “wishing for death”.
To understand how and why markets sometimes get “managed” at expiration it would make sense to first understand the Option Greeks. This combined with who the players actually are, and understanding the regulatory inconsistencies will tell the full tale on why markets are ripe for manipulation near options expiration.
Keeping Score
Managing Options risk is a complex task. We are going to focus here on only three of the “Greeks” used to quantify and manage risk, Delta, Gamma, and Theta. These are the most important ones affecting an option trader’s behavior as expiration approaches and the market is hovering near a strike. We’ll attempt to explain them plainly and simply through examples. For these explanations we must assume that all other Greek parameters: like volatility, rho, etc remain static to better isolate the effects of delta, gamma, and theta on risk.
Delta
In physics Delta means rate of change. In calculus Delta is the tangent of the trajectory. But Delta actually has 3 definitions in the practical trading world. These definitions largely overlap but are not necessarily the same for the whole life of the option.
1. Correlation with the underlying: a Call has a 20 delta. The model generating that delta assumes the Call’s value will change by 20% of what the underlying changes. E.g. Crude Oil goes up by $1.00. The Call will go up by $0.20 assuming other Greeks remain the same.
2. Hedge Ratio: The long 20 delta call would be directionally neutralized if it had a hedge of short 0.20 futures per long options contract. E.g. I am long 100 Crude Oil calls with a 20 delta. I will sell 20 futures to hedge myself directionally. Therefore I will (theoretically) neither make nor lose money in either direction due to underlying movement. I am directionally “flat”
3. Probability of Expiring in-the-money: according to the model, said 20 delta call has a 20% chance of expiring in-the-money. e.g. an option with 30 days to expiry at this volatility has an implied probability of a 20% chance of expiring in-the-money.[1]
Gamma:
Gamma is the second derivative of the option. In physics, it is the rate-of-change of the rate-of-change. In calc it is the tangent of the velocity. For our purposes it is simply how much a delta itself will change (Correlation, Hedge ratio, or Probability), given a change in the underlying price.
Using our Crude Oil 20 delta call option again: Crude rallies from $90.00 to $91.00. In our example, the option has a 20 delta and its correlation/hedge ratio/probability all point to a change in the option’s value of $0.20. But that cannot be entirely correct if one measures the option’s value at the end of the $1.00 move in crude.
Because the market has moved higher, the option has an increased probability of going in the money. Therefore its Correlation, Hedge Ratio and In-The-Money Expiration Probability must increase. In our example, we use our model to re-calculate the delta of the call and find that its delta has gone from 20 to 25. This difference of 5 deltas over a $1.00 move is its Gamma.
Therefore we now have the ability to sell 5 more futures against our 100 calls if we wish to rebalance our directional risk. We get to “Sell High”. And if the market drops back down to $90.00, the option’s delta will once again become 20. We will get to “Buy Low”. Such is the virtue of being long Gamma. The ability to sell when something goes up, and buy it back when it comes down. Provided of course your model is right, and as we’ve said multiple times other Greeks don’t change. Gamma however comes with a cost called Theta.
Theta
The rate at which an out-of-the-money option loses its value over time is Theta. In short, it is the rate at which your long lottery ticket wastes away. As time goes to zero, your out-of-the-money option’s chances of expiring in the money go to zero as well. It is not unlike having tickets to an event that you wish to sell. If interest is tepid in the event (Jethro Tull : Bore ‘em at the Forum) and you can’t get face value for them from someone, you are said to be out-of-the-money. You will lower your price as we get closer to the event itself in the hopes of unloading them. That is an imperfect example of Theta.
Using our 20 delta call again: if it has a Theta of .05. That means it will lose 5 cents of value per day from the march of time, again assuming all those other Greeks we are not talking about remain the same. So as a holder of that Crude Oil call with a 20 delta, you are in a race against time. If you cannot make more than 5 cents per day from delta readjustments (aka Gamma) after the underlying moves, you will be a net loser of money. Put another way, you must “scalp your Gamma” to profit by 5 cents daily just to break even on your option investment. More than 5 cents and you profit, less than that and you lose.
Options Yin and Yang
Gamma and Theta are opposite sides of the same coin. These risks and how they are managed by opposing counterparties, combined with the asymmetric setup in the system are the key to the reasons for why so many option expirations get “pinned” at a strike with large open interest. And also why rarely but more sensationally, markets blow through strikes with big open interest.
Tuesday, April 19, 2011
Guest Post: Getting Off The Globalist Chessboard: An Introduction
By Stewart Rhodes of Oath Keepers and Brandon Smith of the Alternative Market Project
Getting Off The Globalist Chessboard: An Introduction
To put it simply, America is nearing a checkmate scenario. Like the final torrid maneuvers of a rigged chess match, we have been pressed, manipulated, and attacked into the last remaining corner of the “grand global chessboard” left to us; centralized control of all social and economic power into the hands of an unworthy elite. If we continue playing the game by their rules, we will lose. There is no doubt. There have been many solutions presented to us in the past to combat this development, but nearly all of them function within the constraints of Federal politics. Working within the system has earned us no quarter, and frankly, no results. Our only recourse (and, frankly, the best recourse all along) is to STOP relying on the rules of their game, and to walk away from the chess board completely.
Globalization is essentially just another word for centralization, and the key to centralizing any system is to remove all options until the masses are completely and utterly dependent upon a single dominant paradigm. Globalists have deceived many Americans into believing that centralization is a “natural” process - that their game is indeed the only one in town. The widespread acceptance of the fiat monetary system is a perfect example of the average person’s unfortunate lack of economic flexibility. Only recently, in the face of dollar devaluation and complete financial collapse have many finally begun to question the legitimacy of a single brittle and corrupt economic structure. American politics are no different.
The elites have conned us into thinking that the only possible “solution” to where we are is federal elections, which only vote in new puppets for the puppet masters to manipulate in an illusory shell game. We have been tricked into thinking we are free because we come together from time to time to select our rulers.
But of course, this country was not founded as a democracy, but as a Constitutional Republic, and in such a Republic as ours, liberty is not just about “kicking the bums out” every few years only to vote a new set of bums into Congress, as the globalists would have us think. Federal elections are just one small part of it. The Founders intended us to be active, sovereign citizens, in strong communities and strong, sovereign states, and that is about far, far more than merely voting.
But because the globalists – with the aid of complicit domestic counterparts - have been able to capture our education system, our media, our political system, and our legal system, they have succeeded in dumbing us down and duping us into thinking that all other mechanisms for constraining power have been removed from the table. In fact, we have been convinced that all of the other fundamental institutions of our republic– aside from voting - are illegitimate, or even criminal.
The Founders gave us a dual sovereignty republic. That means states are as much sovereign within their sphere as the national government is within its sphere, with a national government of limited, enumerated, and divided powers. As our Tenth Amendment makes clear, “[t]he powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
In Federalist 45, James Madison (widely considered the ‘father of the Constitution”) promised the American people that:
The powers delegated by the proposed Constitution to the federal government, are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce; with which last the power of taxation will, for the most part, be connected. The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.
Clearly the design of the Founders’ has been turned on its head. With the aid of complicit judges – which Thomas Jefferson called a “corps of sappers and miners” – who willfully misinterpret the Commerce Clause to grant Congress the power to regulate literally anything, we now have a ruling class who will admit of no restraints on national power with a national government of nearly unlimited de facto powers, grown like a metastasizing cancer far beyond the bounds of anything foreseen by even the most skeptical of Anti-Federalists from the Founding era. All actual, physical and structural powers of any real meaning – legislative, military, legal, law enforcement, and economic – are consolidated in the hands of the federal government. On top of this, they have grafted a hydra-like overlay of international law and international unelected agencies and untouchable international “officials” that are also being imposed up us by means of treaties, executive partnerships (such as the supposedly now defunct Security and Prosperity Partnership of North America, now being revitalized by the Obama Administration) and other constitutionally dubious mechanisms.
While we are distracted with elections, they are planning the destruction of the dollar, the collapse of our economy, the final destruction of our sovereignty, and the total absorption of our entire system into the vapid body of an unaccountable global government.
This is why we must stop playing by their “rules,” must get off of their artificial chess board, and instead play by the rules of our Constitution. This means taking power into our own hands as individuals, communities, counties, and states.
To do this, Neithercorp Press, the Alternative Market Project, and Oath Keepers are working together to focus on concrete solutions that can be applied by the average American in their day-to-day lives, in both the private and public spheres. In the limited time we have left, we urge Americans to focus on the following four key strategies (arranged in order of priority of needs):
1. Food and fuel independence and security – and other essential infrastructure (general preparedness) - as individuals, within local veterans organization chapters, neighborhood mutual aid societies, churches, co-ops, farmers markets, and at the town, county and state levels). In the aftermath of an economic collapse, food is the hardest necessity to improvise, and food scarcity is a serious achiles heel, exploited by oppressive regimes throughout history. To get started on food storage and independence, follow the advice on providentliving.org (you don’t need to be LDS to learn from their experience in food storage and preparedness, or to use their canneries). Likewise, we will need fuel, emergency medical, and resilient communication that can function in a grid-down crisis, devoid of internet communication (or with the internet shut down intentionally by means of a kill-switch).
2. Physical security and Independence - again as individuals, neighborhoods, towns, counties and states, to include forming neighborhood watches, mutual aid associations, a volunteer sheriff’s posse (staffed by volunteers under direct command of the sheriff), and county militias established by county ordinances but staffed by self-supplied and self-funded volunteers (as is done in volunteer fire departments all over this nation), and ultimately, a true state militia capable of “repelling invasions” (using the research and model bills of Dr. Edwin Vieira). Americans have plenty of guns, but not enough organization. See operationsleepinggiant.org for details.
3. Economic security and independence - as individuals and communities, including barter networks, use of silver and gold as real money, the development of valuable trade skills, and sound money bills at the county and state levels (as Utah just passed into law). The localization of community commerce is the only sure way to counter globalization. The more independent and insulated cities and states are from the corrupt and dysfunctional mainstream economy, the more safe and secure they will find themselves when that economy implodes. We must have an alternative to the fiat money system in place to preempt such an event. See alt-market.com for details.
4. State sovereignty and nullification of unconstitutional federal laws and actions. Veterans must support only sheriffs, state legislators and governors who have the guts and integrity to keep their oaths. To vote for an oath breaker, is to become an oath breaker. We must defend the powers reserved to the states and to the people by supporting state sovereignty resolutions and nullification of unconstitutional laws. See tenthamendmentcenter.com. And eventually we must kick the bums out, as GOOOH recommends. See goooh.com.
We will soon be publishing an upcoming series of articles that will provide in-depth details on each of the above four key pillars of action. While we should not turn our backs on the tactics of educating the public, supporting constitutional legislation, voting for honest and principled representatives, or nullifying unconstitutional laws (we should certainly make full use of the soap box, the ballot box, and the jury box) it is now time to dedicate ourselves to much more. The very future of our country, our liberties, and the prosperity of the next generation depends upon this.
Getting Off The Globalist Chessboard: An Introduction
To put it simply, America is nearing a checkmate scenario. Like the final torrid maneuvers of a rigged chess match, we have been pressed, manipulated, and attacked into the last remaining corner of the “grand global chessboard” left to us; centralized control of all social and economic power into the hands of an unworthy elite. If we continue playing the game by their rules, we will lose. There is no doubt. There have been many solutions presented to us in the past to combat this development, but nearly all of them function within the constraints of Federal politics. Working within the system has earned us no quarter, and frankly, no results. Our only recourse (and, frankly, the best recourse all along) is to STOP relying on the rules of their game, and to walk away from the chess board completely.
Globalization is essentially just another word for centralization, and the key to centralizing any system is to remove all options until the masses are completely and utterly dependent upon a single dominant paradigm. Globalists have deceived many Americans into believing that centralization is a “natural” process - that their game is indeed the only one in town. The widespread acceptance of the fiat monetary system is a perfect example of the average person’s unfortunate lack of economic flexibility. Only recently, in the face of dollar devaluation and complete financial collapse have many finally begun to question the legitimacy of a single brittle and corrupt economic structure. American politics are no different.
The elites have conned us into thinking that the only possible “solution” to where we are is federal elections, which only vote in new puppets for the puppet masters to manipulate in an illusory shell game. We have been tricked into thinking we are free because we come together from time to time to select our rulers.
But of course, this country was not founded as a democracy, but as a Constitutional Republic, and in such a Republic as ours, liberty is not just about “kicking the bums out” every few years only to vote a new set of bums into Congress, as the globalists would have us think. Federal elections are just one small part of it. The Founders intended us to be active, sovereign citizens, in strong communities and strong, sovereign states, and that is about far, far more than merely voting.
But because the globalists – with the aid of complicit domestic counterparts - have been able to capture our education system, our media, our political system, and our legal system, they have succeeded in dumbing us down and duping us into thinking that all other mechanisms for constraining power have been removed from the table. In fact, we have been convinced that all of the other fundamental institutions of our republic– aside from voting - are illegitimate, or even criminal.
The Founders gave us a dual sovereignty republic. That means states are as much sovereign within their sphere as the national government is within its sphere, with a national government of limited, enumerated, and divided powers. As our Tenth Amendment makes clear, “[t]he powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
In Federalist 45, James Madison (widely considered the ‘father of the Constitution”) promised the American people that:
The powers delegated by the proposed Constitution to the federal government, are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce; with which last the power of taxation will, for the most part, be connected. The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.
Clearly the design of the Founders’ has been turned on its head. With the aid of complicit judges – which Thomas Jefferson called a “corps of sappers and miners” – who willfully misinterpret the Commerce Clause to grant Congress the power to regulate literally anything, we now have a ruling class who will admit of no restraints on national power with a national government of nearly unlimited de facto powers, grown like a metastasizing cancer far beyond the bounds of anything foreseen by even the most skeptical of Anti-Federalists from the Founding era. All actual, physical and structural powers of any real meaning – legislative, military, legal, law enforcement, and economic – are consolidated in the hands of the federal government. On top of this, they have grafted a hydra-like overlay of international law and international unelected agencies and untouchable international “officials” that are also being imposed up us by means of treaties, executive partnerships (such as the supposedly now defunct Security and Prosperity Partnership of North America, now being revitalized by the Obama Administration) and other constitutionally dubious mechanisms.
While we are distracted with elections, they are planning the destruction of the dollar, the collapse of our economy, the final destruction of our sovereignty, and the total absorption of our entire system into the vapid body of an unaccountable global government.
This is why we must stop playing by their “rules,” must get off of their artificial chess board, and instead play by the rules of our Constitution. This means taking power into our own hands as individuals, communities, counties, and states.
To do this, Neithercorp Press, the Alternative Market Project, and Oath Keepers are working together to focus on concrete solutions that can be applied by the average American in their day-to-day lives, in both the private and public spheres. In the limited time we have left, we urge Americans to focus on the following four key strategies (arranged in order of priority of needs):
1. Food and fuel independence and security – and other essential infrastructure (general preparedness) - as individuals, within local veterans organization chapters, neighborhood mutual aid societies, churches, co-ops, farmers markets, and at the town, county and state levels). In the aftermath of an economic collapse, food is the hardest necessity to improvise, and food scarcity is a serious achiles heel, exploited by oppressive regimes throughout history. To get started on food storage and independence, follow the advice on providentliving.org (you don’t need to be LDS to learn from their experience in food storage and preparedness, or to use their canneries). Likewise, we will need fuel, emergency medical, and resilient communication that can function in a grid-down crisis, devoid of internet communication (or with the internet shut down intentionally by means of a kill-switch).
2. Physical security and Independence - again as individuals, neighborhoods, towns, counties and states, to include forming neighborhood watches, mutual aid associations, a volunteer sheriff’s posse (staffed by volunteers under direct command of the sheriff), and county militias established by county ordinances but staffed by self-supplied and self-funded volunteers (as is done in volunteer fire departments all over this nation), and ultimately, a true state militia capable of “repelling invasions” (using the research and model bills of Dr. Edwin Vieira). Americans have plenty of guns, but not enough organization. See operationsleepinggiant.org for details.
3. Economic security and independence - as individuals and communities, including barter networks, use of silver and gold as real money, the development of valuable trade skills, and sound money bills at the county and state levels (as Utah just passed into law). The localization of community commerce is the only sure way to counter globalization. The more independent and insulated cities and states are from the corrupt and dysfunctional mainstream economy, the more safe and secure they will find themselves when that economy implodes. We must have an alternative to the fiat money system in place to preempt such an event. See alt-market.com for details.
4. State sovereignty and nullification of unconstitutional federal laws and actions. Veterans must support only sheriffs, state legislators and governors who have the guts and integrity to keep their oaths. To vote for an oath breaker, is to become an oath breaker. We must defend the powers reserved to the states and to the people by supporting state sovereignty resolutions and nullification of unconstitutional laws. See tenthamendmentcenter.com. And eventually we must kick the bums out, as GOOOH recommends. See goooh.com.
We will soon be publishing an upcoming series of articles that will provide in-depth details on each of the above four key pillars of action. While we should not turn our backs on the tactics of educating the public, supporting constitutional legislation, voting for honest and principled representatives, or nullifying unconstitutional laws (we should certainly make full use of the soap box, the ballot box, and the jury box) it is now time to dedicate ourselves to much more. The very future of our country, our liberties, and the prosperity of the next generation depends upon this.
Monday, April 18, 2011
$1 Billion of Gold Bars Taken Delivery Of By Pension Fund Due to Risk of COMEX Default and Shortages
(Not to beat a dead horse even more but, BUY SOME GOLD and SILVER! YES THIS MEANS YOU WILLY!)
From Gold Core
$1 Billion of Gold Bars Taken Delivery Of By Pension Fund Due to Risk of COMEX Default and Shortages
Concerns that the sovereign debt crisis may be entering a new phase and the risk of contagion has seen peripheral eurozone bonds fall sharply and the euro fall against major currencies and gold today.
Sovereign debt risk, global inflation concerns, geopolitical risk, disappointing European earnings and concerns about Japan's coming reporting season have seen equities weaken and new record nominal highs for gold and silver (all time and 31 year).
Greek bond yields have continued their relentless march higher and have risen above 14.07% (10 year) and Portuguese debt (10 year) has risen to a euro era record over 9.27%.Spanish and Irish debt are also under pressure this morning.
Euro gold has been in a range between €900 and €1,070 for nearly a year (since last May – see chart) and this period of consolidation looks set to come to an end as gold pushes higher. Once the technical resistance at the record high of €1,072/oz (12/28/10) is breached, gold will challenge €1,100/oz .
In the current bull market, euro gold has seen many long periods of correction and consolidation prior to rapid gains and sharp moves upwards. The length of the recent correction (almost a year) suggests that the coming move could be very sharp and see gold rise to €1,200/oz in the coming weeks.
Gold is increasingly being seen as the superior currency in a world of trillion dollar and euro deficits and bailouts. Indeed, the printing and electronic creation of billion and trillions of the major paper currencies is increasingly making gold and silver the currencies of last resort.
Governments and central banks are debasing currencies through bailouts, deficit spending and quantitative easing which is leading to a massive increase in the supply of fiat currencies. Precious metals are rare and finite and this is why major currencies are falling in value versus gold and silver.
One of the largest pension funds in the world, the University of Texas Investment Management Co (which manages the endowment for the Texas teachers pension fund), has realized this and has put 5% of the pension fund into gold bullion (see news).
Unusually, but likely to be seen more frequently in the coming weeks and months, the pension fund has opted to own physical bars worth nearly $1 billion dollars in allocated accounts.
The fund has previously expressed concerns about the counter party risk in ETFs. However, the reason given for opting for taking delivery of 100 oz gold bars in a warehouse was that if the holders of just 5 percent of COMEX futures contracts opted to take delivery of the metal, there wouldn’t be enough to cover the demand leading to a COMEX default.
The risk of a COMEX default increases by the day and appears to be moving from the realms of the “conspiracy theory” to that of “of course we knew it would happen, it stands to reason and was inevitable”.
A COMEX default would have serious ramifications for the dollar and all fiat currencies as it would further erode trust in central banks, fiat currencies and today’s monetary system.
NEWS
(Financial Times) -- Euro slides on sovereign debt fears
Reports that Greece had asked for a debt restructuring – subsequently denied by Athens – have rattled the euro and the continent’s bourses.
Markets were initially proving stoic in adjusting to a tighter monetary environment, with traders betting that the global economy can absorb central banks’ moves to drain excess liquidity.
The People’s Bank of China increased its reserve ratio for the country’s banks by half a point to 20.5 per cent over the weekend – the fourth time this year it has used the tool to tighten liquidity – following a 5.4 per cent rise in March consumer prices.
But shortly after European markets opened, Reuters reported a Greek newspaper as saying that Athens had asked the International Monetary Fund and European Union to restructure its sovereign debt.
The euro was already weaker after an anti-euro party gained ground in the Finnish general election, raising questions about whether the bloc will be able to agree a bail-out for Portugal.
The Greek newsflash saw the single currency shed nearly 1 per cent to $1.43, while the FTSE Eurofirst 300 index stumbled as investors sold those banks with high sovereign debt exposure.
Factors to Watch
It’s a light week for US macroeconomic data, so the market is likely to be more focused on the ongoing first-quarter earnings season. On Monday, the highlights include Citigroup, Halliburton and Texas Instruments.
An unattributed official denial of the Greek restructuring story helped brake the slide, and the euro is now down 0.6 per cent to $1.4334, with the Eurofirst off 0.4 per cent. The S&P 500 futures contract points to a 0.3 per cent fall when Wall Street opens and Treasury yields are slightly softer as risk aversion rises a touch.
Nevertheless, the FTSE All-World equity index is lower by just 0.3 per cent, helped by a belief that Beijing’s attempts to rein in lending and cool inflationary pressures is not so aggressive that it will derail growth in the world’s second-biggest economy. Shanghai’s Composite index rose 0.2 per cent.
In keeping with this underlying optimism about the global economy, industrial metals are firmer – copper is up 0.4 per cent to $4.27 a pound. This in spite of the dollar bouncing off last week’s 16-month lows with a 0.4 per cent advance, a move that would usually be considered commodity-negative.
Investors are having to come to terms with the end of the ultra-loose monetary era in big developed economies following the European Central Bank’s move to raise interest rates from 1 per cent to 1.25 per cent earlier this month and amid increasing acceptance that the US Federal Reserve’s quantitative easing programme will finish on time in June.
Major stock benchmarks are close to cyclical highs, suggesting traders feel corporate profitability will not be too severely affected by the economic impact of this policy shift.
However, some investors seem to believe that central banks are not doing enough to combat inflationary pressures and they are continuing to snap up precious metals to hedge against price rises. Worries about the eurozone are also boosting gold’s haven cachet.
Gold has hit a record high of $1,489 an ounce and is currently up 0.1 per cent at $1,486, while silver has hit a fresh 31-year record of $4.35 an ounce, and is now up 0.4 per cent at $43.17.
The additional support for bullion comes despite a small pullback in oil prices, a commodity that has carried the most inflationary concern for analysts. Brent crude is down 0.5 per cent to $122.88 a barrel as Saudi Arabia challenges the bulls with its contention that the market is oversupplied and it has consequently cut output by 800,000 barrels a day.
Another currency move of note is the yen, which has recaptured the sub-Y83 level relative to the dollar as the post-earthquake intervention impact wanes. With the Bank of Japan staying relatively looser-for-longer, because of the need for increased largesse as the country recovers from the tremor and tsunami, the yen’s interest rate differentials are likely to deteriorate.
This would normally put pressure on the yen, so the currency’s current strength may revive talk that it reflects the much muted repatriation of funds – a trend that if continued could call into question the resumption of the yen carry trade.
This is turn could affect some higher yielding or riskier assets, favourite destination of yen carry trade funds. There is little sign of this so far on Monday, however. The only clear casualty of the yen’s strength is the Tokyo stock market, which has slipped 0.4 per cent as the firmer currency hurts the country’s exporters.
(Bloomberg) -- Gold Climbs to Record as Investors Fret Over Rising Inflation
Gold advanced to record as investors seek the metal as a hedge against inflation. Gold for immediate delivery gained 0.1 percent to $1,488.35 an ounce, while bullion futures for June delivery rose 0.2 percent to $1,489.40 an ounce.
(Bloomberg) -- World Gold Council Says Position Limits Could Impair Liquidity
The World Gold Council said in a letter that proposed position limits in the gold market could “reduce or impair liquidity and trade.” The council published the March 28 letter to the Commodity Futures Trading Commision on its website today.
(Bloomberg) -- Shortage Threat Drives Texas Schools Hoarding Bullion at HSBC
Dallas hedge-fund manager J. Kyle Bass helped advise the University of Texas Investment Management Co. on taking delivery of 6,643 gold bars, worth $987 million on April 15, now stored in a bank warehouse in New York.
Bass, who made $500 million with 2006 bets on a U.S. subprime-mortgage market collapse, said managers of the endowment, known as UTIMCO, sought board approval to convert its gold investments into bullion this year. A board member, Bass, 41, said he was asked to help with that process.
While Bass, a managing partner at Hayman Capital Management LP, said in an April 16 e-mail that “the decision to purchase and take delivery of the physical gold” was made by endowment staff members, “I helped where I could.” Gold futures touched a record $1,489.10 an ounce April 15 in New York before closing at $1,486.
The Texas fund’s $19.9 billion in assets ranked it behind only Harvard University’s endowment as of August, according to the National Association of College and University Business Officers. Last year, UTIMCO added about $500 million in gold investments to an existing stake, said Bruce Zimmerman, the endowment’s chief executive officer. The fund’s managers sought to take delivery of bullion to protect against demand for the metal overwhelming supply, according to Bass.
Open interest in gold futures and options traded on the Comex typically exceeds supplies held in its warehouses. If the holders of just 5 percent of those contracts opted to take delivery of the metal, there wouldn’t be enough to cover the demand, Bass said.
Printing Money
“If you own a paper contract where they can only deliver you 10 cents on the dollar or less, you should probably convert it to physical,” said Bass, who isn’t related to Fort Worth’s billionaire Bass family. He said holding cash wasn’t a better choice because the rate of inflation exceeds money-market rates by 2.5 percent to 3 percent, eroding the value of cash.
“Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,” Bass said April 15 in a telephone interview. “I look at gold as just another currency that they can’t print any more of.”
Sovereign-debt concerns also boosted demand for the metal on April 15, driving Comex futures to an all-time high. The price has climbed 28 percent in the past year.
Gold’s 10-year rally has attracted billionaire investors such as George Soros and John Paulson, who seek a store of value as record-low interest rates erode returns on currencies.
Wealthy Buyers
Few investors take physical delivery of bullion. As of April 14, 2,860 contracts this month, about 0.5 percent of total open interest, had been converted to metal, exchange data show.
Physical deliveries have slowed as gold topped records this year, said Blake Robben, a senior market strategist who handles deliveries of Comex metals for clients at Chicago-based broker Lind-Waldock.
“It’s usually wealthy individuals with net worths over $1 million who want to take delivery to diversify away from the dollar,” Robben said. “Generally, it’s a big hassle and not worth it to take delivery.”
Investors can own 100 ounces of gold futures with Lind- Waldock by paying a $100 fee and putting up $6,571 in a margin account to purchase one contract. To take delivery of a 100- ounce bar, investors have to pay the full price of the contract.
Bass, a Texas Christian University graduate who was named to the endowment’s board in August, is a former salesman with Bear Stearns Cos. and Legg Mason Inc. He said about 5 percent of his hedge fund is invested in gold.
The endowment, which oversees funds held by the University of Texas System and Texas A&M University, has 664,300 ounces of bullion in a Comex-registered vault in New York owned by HSBC Holdings Plc, the London-based bank, according to a report distributed at a meeting in Austin.
“I simply voted as a board member to approve the storage facility and concurred with their decisions,” Bass said.
(Bloomberg) -- Texas University Endowment Storing About $1 Billion in Gold Bars
The University of Texas Investment Management Co., the second-largest U.S. academic endowment, took delivery of almost $1 billion in gold bullion and is storing the bars in a New York vault, according to the fund’s board.
The fund, whose $19.9 billion in assets ranked it behind Harvard University’s endowment as of August, according to the National Association of College and University Business Officers, added about $500 million in gold investments to an existing stake last year, said Bruce Zimmerman, the endowment’s chief executive officer. The holdings are worth about $987 million, based on yesterday’s closing price of $1,486 an ounce for Comex futures.
The decision to turn the fund’s investment into gold bars was influenced by Kyle Bass, a Dallas hedge fund manager and member of the endowment’s board, Zimmerman said at its annual meeting on April 14. Bass made $500 million on the U.S. subprime-mortgage collapse.
“Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,” Bass said yesterday in a telephone interview. “I look at gold as just another currency that they can’t print any more of.”
Gold reached an all-time high of $1,489.10 an ounce yesterday in New York as sovereign debt concerns boosted demand for the metal as a store of value. Gold has climbed 28 percent in the past year on Comex.
The endowment, which oversees funds held by the University of Texas System and Texas A&M University, has 6,643 bars of bullion, or 664,300 ounces, in a Comex-registered vault in New York owned by HSBC Holdings Plc, the London-based bank, according to a report distributed at the meeting in Austin.
From Gold Core
$1 Billion of Gold Bars Taken Delivery Of By Pension Fund Due to Risk of COMEX Default and Shortages
Concerns that the sovereign debt crisis may be entering a new phase and the risk of contagion has seen peripheral eurozone bonds fall sharply and the euro fall against major currencies and gold today.
Sovereign debt risk, global inflation concerns, geopolitical risk, disappointing European earnings and concerns about Japan's coming reporting season have seen equities weaken and new record nominal highs for gold and silver (all time and 31 year).
Greek bond yields have continued their relentless march higher and have risen above 14.07% (10 year) and Portuguese debt (10 year) has risen to a euro era record over 9.27%.Spanish and Irish debt are also under pressure this morning.
Euro gold has been in a range between €900 and €1,070 for nearly a year (since last May – see chart) and this period of consolidation looks set to come to an end as gold pushes higher. Once the technical resistance at the record high of €1,072/oz (12/28/10) is breached, gold will challenge €1,100/oz .
In the current bull market, euro gold has seen many long periods of correction and consolidation prior to rapid gains and sharp moves upwards. The length of the recent correction (almost a year) suggests that the coming move could be very sharp and see gold rise to €1,200/oz in the coming weeks.
Gold is increasingly being seen as the superior currency in a world of trillion dollar and euro deficits and bailouts. Indeed, the printing and electronic creation of billion and trillions of the major paper currencies is increasingly making gold and silver the currencies of last resort.
Governments and central banks are debasing currencies through bailouts, deficit spending and quantitative easing which is leading to a massive increase in the supply of fiat currencies. Precious metals are rare and finite and this is why major currencies are falling in value versus gold and silver.
One of the largest pension funds in the world, the University of Texas Investment Management Co (which manages the endowment for the Texas teachers pension fund), has realized this and has put 5% of the pension fund into gold bullion (see news).
Unusually, but likely to be seen more frequently in the coming weeks and months, the pension fund has opted to own physical bars worth nearly $1 billion dollars in allocated accounts.
The fund has previously expressed concerns about the counter party risk in ETFs. However, the reason given for opting for taking delivery of 100 oz gold bars in a warehouse was that if the holders of just 5 percent of COMEX futures contracts opted to take delivery of the metal, there wouldn’t be enough to cover the demand leading to a COMEX default.
The risk of a COMEX default increases by the day and appears to be moving from the realms of the “conspiracy theory” to that of “of course we knew it would happen, it stands to reason and was inevitable”.
A COMEX default would have serious ramifications for the dollar and all fiat currencies as it would further erode trust in central banks, fiat currencies and today’s monetary system.
NEWS
(Financial Times) -- Euro slides on sovereign debt fears
Reports that Greece had asked for a debt restructuring – subsequently denied by Athens – have rattled the euro and the continent’s bourses.
Markets were initially proving stoic in adjusting to a tighter monetary environment, with traders betting that the global economy can absorb central banks’ moves to drain excess liquidity.
The People’s Bank of China increased its reserve ratio for the country’s banks by half a point to 20.5 per cent over the weekend – the fourth time this year it has used the tool to tighten liquidity – following a 5.4 per cent rise in March consumer prices.
But shortly after European markets opened, Reuters reported a Greek newspaper as saying that Athens had asked the International Monetary Fund and European Union to restructure its sovereign debt.
The euro was already weaker after an anti-euro party gained ground in the Finnish general election, raising questions about whether the bloc will be able to agree a bail-out for Portugal.
The Greek newsflash saw the single currency shed nearly 1 per cent to $1.43, while the FTSE Eurofirst 300 index stumbled as investors sold those banks with high sovereign debt exposure.
Factors to Watch
It’s a light week for US macroeconomic data, so the market is likely to be more focused on the ongoing first-quarter earnings season. On Monday, the highlights include Citigroup, Halliburton and Texas Instruments.
An unattributed official denial of the Greek restructuring story helped brake the slide, and the euro is now down 0.6 per cent to $1.4334, with the Eurofirst off 0.4 per cent. The S&P 500 futures contract points to a 0.3 per cent fall when Wall Street opens and Treasury yields are slightly softer as risk aversion rises a touch.
Nevertheless, the FTSE All-World equity index is lower by just 0.3 per cent, helped by a belief that Beijing’s attempts to rein in lending and cool inflationary pressures is not so aggressive that it will derail growth in the world’s second-biggest economy. Shanghai’s Composite index rose 0.2 per cent.
In keeping with this underlying optimism about the global economy, industrial metals are firmer – copper is up 0.4 per cent to $4.27 a pound. This in spite of the dollar bouncing off last week’s 16-month lows with a 0.4 per cent advance, a move that would usually be considered commodity-negative.
Investors are having to come to terms with the end of the ultra-loose monetary era in big developed economies following the European Central Bank’s move to raise interest rates from 1 per cent to 1.25 per cent earlier this month and amid increasing acceptance that the US Federal Reserve’s quantitative easing programme will finish on time in June.
Major stock benchmarks are close to cyclical highs, suggesting traders feel corporate profitability will not be too severely affected by the economic impact of this policy shift.
However, some investors seem to believe that central banks are not doing enough to combat inflationary pressures and they are continuing to snap up precious metals to hedge against price rises. Worries about the eurozone are also boosting gold’s haven cachet.
Gold has hit a record high of $1,489 an ounce and is currently up 0.1 per cent at $1,486, while silver has hit a fresh 31-year record of $4.35 an ounce, and is now up 0.4 per cent at $43.17.
The additional support for bullion comes despite a small pullback in oil prices, a commodity that has carried the most inflationary concern for analysts. Brent crude is down 0.5 per cent to $122.88 a barrel as Saudi Arabia challenges the bulls with its contention that the market is oversupplied and it has consequently cut output by 800,000 barrels a day.
Another currency move of note is the yen, which has recaptured the sub-Y83 level relative to the dollar as the post-earthquake intervention impact wanes. With the Bank of Japan staying relatively looser-for-longer, because of the need for increased largesse as the country recovers from the tremor and tsunami, the yen’s interest rate differentials are likely to deteriorate.
This would normally put pressure on the yen, so the currency’s current strength may revive talk that it reflects the much muted repatriation of funds – a trend that if continued could call into question the resumption of the yen carry trade.
This is turn could affect some higher yielding or riskier assets, favourite destination of yen carry trade funds. There is little sign of this so far on Monday, however. The only clear casualty of the yen’s strength is the Tokyo stock market, which has slipped 0.4 per cent as the firmer currency hurts the country’s exporters.
(Bloomberg) -- Gold Climbs to Record as Investors Fret Over Rising Inflation
Gold advanced to record as investors seek the metal as a hedge against inflation. Gold for immediate delivery gained 0.1 percent to $1,488.35 an ounce, while bullion futures for June delivery rose 0.2 percent to $1,489.40 an ounce.
(Bloomberg) -- World Gold Council Says Position Limits Could Impair Liquidity
The World Gold Council said in a letter that proposed position limits in the gold market could “reduce or impair liquidity and trade.” The council published the March 28 letter to the Commodity Futures Trading Commision on its website today.
(Bloomberg) -- Shortage Threat Drives Texas Schools Hoarding Bullion at HSBC
Dallas hedge-fund manager J. Kyle Bass helped advise the University of Texas Investment Management Co. on taking delivery of 6,643 gold bars, worth $987 million on April 15, now stored in a bank warehouse in New York.
Bass, who made $500 million with 2006 bets on a U.S. subprime-mortgage market collapse, said managers of the endowment, known as UTIMCO, sought board approval to convert its gold investments into bullion this year. A board member, Bass, 41, said he was asked to help with that process.
While Bass, a managing partner at Hayman Capital Management LP, said in an April 16 e-mail that “the decision to purchase and take delivery of the physical gold” was made by endowment staff members, “I helped where I could.” Gold futures touched a record $1,489.10 an ounce April 15 in New York before closing at $1,486.
The Texas fund’s $19.9 billion in assets ranked it behind only Harvard University’s endowment as of August, according to the National Association of College and University Business Officers. Last year, UTIMCO added about $500 million in gold investments to an existing stake, said Bruce Zimmerman, the endowment’s chief executive officer. The fund’s managers sought to take delivery of bullion to protect against demand for the metal overwhelming supply, according to Bass.
Open interest in gold futures and options traded on the Comex typically exceeds supplies held in its warehouses. If the holders of just 5 percent of those contracts opted to take delivery of the metal, there wouldn’t be enough to cover the demand, Bass said.
Printing Money
“If you own a paper contract where they can only deliver you 10 cents on the dollar or less, you should probably convert it to physical,” said Bass, who isn’t related to Fort Worth’s billionaire Bass family. He said holding cash wasn’t a better choice because the rate of inflation exceeds money-market rates by 2.5 percent to 3 percent, eroding the value of cash.
“Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,” Bass said April 15 in a telephone interview. “I look at gold as just another currency that they can’t print any more of.”
Sovereign-debt concerns also boosted demand for the metal on April 15, driving Comex futures to an all-time high. The price has climbed 28 percent in the past year.
Gold’s 10-year rally has attracted billionaire investors such as George Soros and John Paulson, who seek a store of value as record-low interest rates erode returns on currencies.
Wealthy Buyers
Few investors take physical delivery of bullion. As of April 14, 2,860 contracts this month, about 0.5 percent of total open interest, had been converted to metal, exchange data show.
Physical deliveries have slowed as gold topped records this year, said Blake Robben, a senior market strategist who handles deliveries of Comex metals for clients at Chicago-based broker Lind-Waldock.
“It’s usually wealthy individuals with net worths over $1 million who want to take delivery to diversify away from the dollar,” Robben said. “Generally, it’s a big hassle and not worth it to take delivery.”
Investors can own 100 ounces of gold futures with Lind- Waldock by paying a $100 fee and putting up $6,571 in a margin account to purchase one contract. To take delivery of a 100- ounce bar, investors have to pay the full price of the contract.
Bass, a Texas Christian University graduate who was named to the endowment’s board in August, is a former salesman with Bear Stearns Cos. and Legg Mason Inc. He said about 5 percent of his hedge fund is invested in gold.
The endowment, which oversees funds held by the University of Texas System and Texas A&M University, has 664,300 ounces of bullion in a Comex-registered vault in New York owned by HSBC Holdings Plc, the London-based bank, according to a report distributed at a meeting in Austin.
“I simply voted as a board member to approve the storage facility and concurred with their decisions,” Bass said.
(Bloomberg) -- Texas University Endowment Storing About $1 Billion in Gold Bars
The University of Texas Investment Management Co., the second-largest U.S. academic endowment, took delivery of almost $1 billion in gold bullion and is storing the bars in a New York vault, according to the fund’s board.
The fund, whose $19.9 billion in assets ranked it behind Harvard University’s endowment as of August, according to the National Association of College and University Business Officers, added about $500 million in gold investments to an existing stake last year, said Bruce Zimmerman, the endowment’s chief executive officer. The holdings are worth about $987 million, based on yesterday’s closing price of $1,486 an ounce for Comex futures.
The decision to turn the fund’s investment into gold bars was influenced by Kyle Bass, a Dallas hedge fund manager and member of the endowment’s board, Zimmerman said at its annual meeting on April 14. Bass made $500 million on the U.S. subprime-mortgage collapse.
“Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,” Bass said yesterday in a telephone interview. “I look at gold as just another currency that they can’t print any more of.”
Gold reached an all-time high of $1,489.10 an ounce yesterday in New York as sovereign debt concerns boosted demand for the metal as a store of value. Gold has climbed 28 percent in the past year on Comex.
The endowment, which oversees funds held by the University of Texas System and Texas A&M University, has 6,643 bars of bullion, or 664,300 ounces, in a Comex-registered vault in New York owned by HSBC Holdings Plc, the London-based bank, according to a report distributed at the meeting in Austin.
S&P Revises US Outlook To Negative (Thanks for Telling us What Everyone Has Already Known For The Past Three Years)
(These people really are the dumbest guys in the room)
From S&P:
Overview
We have affirmed our 'AAA/A-1+' sovereign credit rating on the United States of America.
•The economy of the U.S. is flexible and highly diversified, the country's effective monetary policies have supported output growth while containing inflationary pressures, and a consistent global preference for the U.S. dollar over all other currencies gives the country unique external liquidity.
•Because the U.S. has, relative to its 'AAA' peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable.
•We believe there is a material risk that U.S. policymakers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013; if an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer 'AAA' sovereigns.
Rating Action
On April 18, 2011, Standard & Poor's Ratings Services affirmed its 'AAA' long-term and 'A-1+' short-term sovereign credit ratings on the United States of America and revised its outlook on the long-term rating to negative from stable.
Rationale
Our ratings on the U.S. rest on its high-income, highly diversified, and flexible economy, backed by a strong track record of prudent and credible monetary policy. The ratings also reflect our view of the unique advantages stemming from the dollar's preeminent place among world currencies. Although we believe these strengths currently outweigh what we consider to be the
U.S.'s meaningful economic and fiscal risks and large external debtor position, we now believe that they might not fully offset the credit risks over the next two years at the 'AAA' level.
The U.S. is among the most flexible high-income nations, with both adaptable labor markets and a long track record of openness to capital flows. In addition, its public sector uses a smaller share of national income than those of most 'AAA' rated countries--including its closest peers, the U.K., France, Germany, and Canada (all AAA/Stable/A-1+)--which implies greater
revenue flexibility.
Furthermore, the U.S. dollar is the world's most used currency, which provides the U.S. with unique external flexibility; the vast majority of U.S. trade flows and external liabilities are denominated in its own dollars. Recent depreciation of the currency has not materially affected this position, and we do not expect this to change in the medium term (see "Après Le Déluge, The U.S. Dollar Remains The Key International Currency," March 10, 2010, RatingsDirect).
Despite these exceptional strengths, we note the U.S.'s fiscal profile has deteriorated steadily during the past decade and, in our view, has worsened further as a result of the recent financial crisis and ensuing recession. Moreover, more than two years after the beginning of the recent crisis, U.S. policymakers have still not agreed on a strategy to reverse recent fiscal deterioration or address longer-term fiscal pressures.
In 2003-2008, the U.S.'s general (total) government deficit fluctuated between 2% and 5% of GDP. Already noticeably larger than that of most 'AAA' rated sovereigns, it ballooned to more than 11% in 2009 and has yet to recover.
On April 13, President Barack Obama laid out his Administration's medium-term fiscal consolidation plan, aimed at reducing the cumulative unified federal deficit by US$4 trillion in 12 years or less. A key component of the Administration's strategy is to work with Congressional leaders over the next two months to develop a commonly agreed upon program to reach this target. The President's proposals envision reducing the deficit via both spending cuts and revenue increases, and the adoption of a "debt failsafe" legislative mechanism that would trigger an across-the-board spending reduction if, by 2014, budget projections show that federal debt to GDP has not yet stabilized and is not expected to decline in the second half of the current decade.
The Obama Administration's proposed spending cuts include reducing non-security discretionary spending to levels similar to those proposed by the Fiscal Commission in December 2010, holding growth in base security (excluding war expenditure) spending below inflation, and further cost-control measures related to health care programs. Revenue would be increased via both tax reform and allowing the 2001 and 2003 income and estate tax cuts to expire in 2012 as currently scheduled--though only for high-income households. We note that the President advocated the latter proposal last year before agreeing with Republicans to extend the cuts beyond their previously scheduled 2011 expiration. The compromise agreed upon in December likely provides short-term support for the economic recovery, but we believe it also weakens the U.S.'s fiscal outlook and, in our view, reduces the likelihood that Congress will allow these tax cuts to expire in the near future. We also note that previously enacted legislative mechanisms meant to enforce budgetary discipline on future Congresses have not always succeeded.
Key members in the U.S. House of Representatives have also advocated fiscal tightening of a similar magnitude, US$4.4 trillion, during the coming 10 years, but via different methods. House Budget Committee Chairman Paul Ryan's plan seeks to balance the federal budget by 2040, in part by cutting non-defense spending. The plan also includes significantly reducing the scope
of Medicare and Medicaid, while bringing top individual and corporate tax rates lower than those under the 2001 and 2003 tax cuts.
We view President Obama's and Congressman Ryan's proposals as the starting point of a process aimed at broader engagement, which could result in substantial and lasting U.S. government fiscal consolidation. That said, we see the path to agreement as challenging because the gap between the parties remains wide. We believe there is a significant risk that Congressional negotiations could result in no agreement on a medium-term fiscal strategy until after the fall 2012 Congressional and Presidential elections. If so, the first budget proposal that could include related measures would be Budget 2014 (for the fiscal year beginning Oct. 1, 2013), and we believe a delay beyond that time is possible.
Standard & Poor's takes no position on the mix of spending and revenue measures the Congress and the Administration might conclude are appropriate. But for any plan to be credible, we believe that it would need to secure support from a cross-section of leaders in both political parties.
If U.S. policymakers do agree on a fiscal consolidation strategy, we believe the experience of other countries highlights that implementation could take time. It could also generate significant political controversy, not just within Congress or between Congress and the Administration, but throughout the country. We therefore think that, assuming an agreement between Congress and the President, there is a reasonable chance that it would still take a number of years before the government reaches a fiscal position that stabilizes its debt burden. In addition, even if such measures are eventually put in place, the initiating policymakers or subsequently elected ones could decide to at least partially reverse fiscal consolidation.
In our baseline macroeconomic scenario of near 3% annual real growth, we expect the general government deficit to decline gradually but remain slightly higher than 6% of GDP in 2013. As a result, net general government debt would reach 84% of GDP by 2013. In our macroeconomic forecast's optimistic scenario (assuming near 4% annual real growth), the fiscal deficit would fall to 4.6% of GDP by 2013, but the U.S.'s net general government debt would still rise to almost 80% of GDP by 2013. In our pessimistic scenario (a mild, one-year double-dip recession in 2012), the deficit would be 9.1%, while net debt would surpass 90% by 2013. Even in our optimistic scenario, we believe the U.S.'s fiscal profile would be less robust than those of other 'AAA' rated sovereigns by 2013. (For all of the assumptions underpinning our three forecast scenarios, see "U.S. Risks To The Forecast: Oil We Have to Fear Is…," March 15, 2011, RatingsDirect.
Additional fiscal risks we see for the U.S. include the potential for further extraordinary official assistance to large players in the U.S. financial or other sectors, along with outlays related to various federal credit programs. We estimate that it could cost the U.S. government as much as 3.5% of GDP to appropriately capitalize and relaunch Fannie Mae and Freddie Mac, two financial institutions now under federal control, in addition to the 1% of GDP already invested (see "U.S. Government Cost To Resolve And Relaunch Fannie Mae And Freddie Mac Could Approach $700 Billion," Nov. 4, 2010, RatingsDirect). The potential for losses on federal direct and guaranteed loans (such as student loans) is another material fiscal risk, in our view. Most importantly, we believe the risks from the U.S. financial sector are higher than we considered them to be before 2008, as our downward revisions of our Banking Industry Country Risk Assessment (BICRA) on the U.S. to Group 3 from Group 2 in December 2009 and to Group 2 from Group 1 in December 2008 reflect (see "Banking Industry Country Risk Assessments," March 8, 2011, and "Banking Industry Country Risk Assessment: United States of America," Feb. 1, 2010, both on RatingsDirect). In line with these views, we now estimate the maximum aggregate, up-front fiscal cost to the U.S. government of resolving potential financial sector asset impairment in a stress scenario at 34% of GDP compared with our estimate of 26% in 2007.
Beyond the short- and medium-term fiscal challenges, we view the U.S.'s unfunded entitlement programs (such as Social Security, Medicare, and Medicaid) to be the main source of long-term fiscal pressure. These entitlements already account for almost half of federal spending (an estimated 42% in fiscal-year 2011), and we project that percentage to continue increasing as long as these entitlement programs remain as they currently exist (see "Global Aging 2010: In The U.S., Going Gray Will Cost A Lot More Green," Oct. 25, 2010, RatingsDirect). In addition, the U.S.'s net external debt level (as we narrowly define it), approaching 300% of current account receipts in 2011, demonstrates a high reliance on foreign financing. The U.S.'s external indebtedness by this measure is one of the highest of all the sovereigns we rate.
While thus far U.S. policymakers have been unable to agree on a fiscal consolidation strategy, the U.S.'s closest 'AAA' rated peers have already begun implementing theirs. The U.K., for example, suffered a recession almost twice as severe as that in the U.S. (U.K. GDP declined 4.9% in real terms in 2009, while the U.S.'s dropped 2.6%). In addition, the U.K.'s net general government indebtedness has risen in tandem with that of the U.S. since 2007. In June 2010, the U.K. began to implement a fiscal consolidation plan that we believe credibly sets the country's general government deficit on a medium-term downward path, retreating below 5% of GDP by 2013.
We also expect that by 2013, France's austerity program, which it is already implementing, will reduce that country's deficit, which never rose to the levels of the U.S. or U.K. during the recent recession, to slightly below the U.K. deficit. Germany, which suffered a recession of similar magnitude to that in the U.K. (but has enjoyed a much stronger recovery), enacted a constitutional limit on fiscal deficits in 2009 and we believe its general government deficit was already at 3% of GDP last year and will likely decrease further. Meanwhile, Canada, the only sovereign of the peer group to suffer no major financial institution failures requiring direct government assistance during the crisis, enjoys by far the lowest net general government debt of the five peers (we estimate it at 34% of GDP this year), largely because of an unbroken string of balanced-or-better general government budgetary outturns from 1997 through 2008. Canada's general government deficit never exceeded 4% of GDP during the recent recession, and we believe it will likely return to less than 0.5% of GDP by 2013.
Outlook
The negative outlook on our rating on the U.S. sovereign signals that we believe there is at least a one-in-three likelihood that we could lower our long-term rating on the U.S. within two years. The outlook reflects our view of the increased risk that the political negotiations over when and how to address both the medium- and long-term fiscal challenges will persist until at least after national elections in 2012.
Some compromise that achieves agreement on a comprehensive budgetary consolidation program--containing deficit reduction measures in amounts near those recently proposed, and combined with meaningful steps toward implementation by 2013--is our baseline assumption and could lead us to revise the outlook back to stable. Alternatively, the lack of such an agreement or a significant further fiscal deterioration for any reason could lead us to lower the rating.
Standard & Poor's will hold a global teleconference call and Web cast today--April 18, 2011--at 11:30 a.m. New York time (4:30 p.m. London time). For dial-in and streaming audio details, please go to www.standardandpoors.com/cmlive.
From S&P:
Overview
We have affirmed our 'AAA/A-1+' sovereign credit rating on the United States of America.
•The economy of the U.S. is flexible and highly diversified, the country's effective monetary policies have supported output growth while containing inflationary pressures, and a consistent global preference for the U.S. dollar over all other currencies gives the country unique external liquidity.
•Because the U.S. has, relative to its 'AAA' peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable.
•We believe there is a material risk that U.S. policymakers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013; if an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer 'AAA' sovereigns.
Rating Action
On April 18, 2011, Standard & Poor's Ratings Services affirmed its 'AAA' long-term and 'A-1+' short-term sovereign credit ratings on the United States of America and revised its outlook on the long-term rating to negative from stable.
Rationale
Our ratings on the U.S. rest on its high-income, highly diversified, and flexible economy, backed by a strong track record of prudent and credible monetary policy. The ratings also reflect our view of the unique advantages stemming from the dollar's preeminent place among world currencies. Although we believe these strengths currently outweigh what we consider to be the
U.S.'s meaningful economic and fiscal risks and large external debtor position, we now believe that they might not fully offset the credit risks over the next two years at the 'AAA' level.
The U.S. is among the most flexible high-income nations, with both adaptable labor markets and a long track record of openness to capital flows. In addition, its public sector uses a smaller share of national income than those of most 'AAA' rated countries--including its closest peers, the U.K., France, Germany, and Canada (all AAA/Stable/A-1+)--which implies greater
revenue flexibility.
Furthermore, the U.S. dollar is the world's most used currency, which provides the U.S. with unique external flexibility; the vast majority of U.S. trade flows and external liabilities are denominated in its own dollars. Recent depreciation of the currency has not materially affected this position, and we do not expect this to change in the medium term (see "Après Le Déluge, The U.S. Dollar Remains The Key International Currency," March 10, 2010, RatingsDirect).
Despite these exceptional strengths, we note the U.S.'s fiscal profile has deteriorated steadily during the past decade and, in our view, has worsened further as a result of the recent financial crisis and ensuing recession. Moreover, more than two years after the beginning of the recent crisis, U.S. policymakers have still not agreed on a strategy to reverse recent fiscal deterioration or address longer-term fiscal pressures.
In 2003-2008, the U.S.'s general (total) government deficit fluctuated between 2% and 5% of GDP. Already noticeably larger than that of most 'AAA' rated sovereigns, it ballooned to more than 11% in 2009 and has yet to recover.
On April 13, President Barack Obama laid out his Administration's medium-term fiscal consolidation plan, aimed at reducing the cumulative unified federal deficit by US$4 trillion in 12 years or less. A key component of the Administration's strategy is to work with Congressional leaders over the next two months to develop a commonly agreed upon program to reach this target. The President's proposals envision reducing the deficit via both spending cuts and revenue increases, and the adoption of a "debt failsafe" legislative mechanism that would trigger an across-the-board spending reduction if, by 2014, budget projections show that federal debt to GDP has not yet stabilized and is not expected to decline in the second half of the current decade.
The Obama Administration's proposed spending cuts include reducing non-security discretionary spending to levels similar to those proposed by the Fiscal Commission in December 2010, holding growth in base security (excluding war expenditure) spending below inflation, and further cost-control measures related to health care programs. Revenue would be increased via both tax reform and allowing the 2001 and 2003 income and estate tax cuts to expire in 2012 as currently scheduled--though only for high-income households. We note that the President advocated the latter proposal last year before agreeing with Republicans to extend the cuts beyond their previously scheduled 2011 expiration. The compromise agreed upon in December likely provides short-term support for the economic recovery, but we believe it also weakens the U.S.'s fiscal outlook and, in our view, reduces the likelihood that Congress will allow these tax cuts to expire in the near future. We also note that previously enacted legislative mechanisms meant to enforce budgetary discipline on future Congresses have not always succeeded.
Key members in the U.S. House of Representatives have also advocated fiscal tightening of a similar magnitude, US$4.4 trillion, during the coming 10 years, but via different methods. House Budget Committee Chairman Paul Ryan's plan seeks to balance the federal budget by 2040, in part by cutting non-defense spending. The plan also includes significantly reducing the scope
of Medicare and Medicaid, while bringing top individual and corporate tax rates lower than those under the 2001 and 2003 tax cuts.
We view President Obama's and Congressman Ryan's proposals as the starting point of a process aimed at broader engagement, which could result in substantial and lasting U.S. government fiscal consolidation. That said, we see the path to agreement as challenging because the gap between the parties remains wide. We believe there is a significant risk that Congressional negotiations could result in no agreement on a medium-term fiscal strategy until after the fall 2012 Congressional and Presidential elections. If so, the first budget proposal that could include related measures would be Budget 2014 (for the fiscal year beginning Oct. 1, 2013), and we believe a delay beyond that time is possible.
Standard & Poor's takes no position on the mix of spending and revenue measures the Congress and the Administration might conclude are appropriate. But for any plan to be credible, we believe that it would need to secure support from a cross-section of leaders in both political parties.
If U.S. policymakers do agree on a fiscal consolidation strategy, we believe the experience of other countries highlights that implementation could take time. It could also generate significant political controversy, not just within Congress or between Congress and the Administration, but throughout the country. We therefore think that, assuming an agreement between Congress and the President, there is a reasonable chance that it would still take a number of years before the government reaches a fiscal position that stabilizes its debt burden. In addition, even if such measures are eventually put in place, the initiating policymakers or subsequently elected ones could decide to at least partially reverse fiscal consolidation.
In our baseline macroeconomic scenario of near 3% annual real growth, we expect the general government deficit to decline gradually but remain slightly higher than 6% of GDP in 2013. As a result, net general government debt would reach 84% of GDP by 2013. In our macroeconomic forecast's optimistic scenario (assuming near 4% annual real growth), the fiscal deficit would fall to 4.6% of GDP by 2013, but the U.S.'s net general government debt would still rise to almost 80% of GDP by 2013. In our pessimistic scenario (a mild, one-year double-dip recession in 2012), the deficit would be 9.1%, while net debt would surpass 90% by 2013. Even in our optimistic scenario, we believe the U.S.'s fiscal profile would be less robust than those of other 'AAA' rated sovereigns by 2013. (For all of the assumptions underpinning our three forecast scenarios, see "U.S. Risks To The Forecast: Oil We Have to Fear Is…," March 15, 2011, RatingsDirect.
Additional fiscal risks we see for the U.S. include the potential for further extraordinary official assistance to large players in the U.S. financial or other sectors, along with outlays related to various federal credit programs. We estimate that it could cost the U.S. government as much as 3.5% of GDP to appropriately capitalize and relaunch Fannie Mae and Freddie Mac, two financial institutions now under federal control, in addition to the 1% of GDP already invested (see "U.S. Government Cost To Resolve And Relaunch Fannie Mae And Freddie Mac Could Approach $700 Billion," Nov. 4, 2010, RatingsDirect). The potential for losses on federal direct and guaranteed loans (such as student loans) is another material fiscal risk, in our view. Most importantly, we believe the risks from the U.S. financial sector are higher than we considered them to be before 2008, as our downward revisions of our Banking Industry Country Risk Assessment (BICRA) on the U.S. to Group 3 from Group 2 in December 2009 and to Group 2 from Group 1 in December 2008 reflect (see "Banking Industry Country Risk Assessments," March 8, 2011, and "Banking Industry Country Risk Assessment: United States of America," Feb. 1, 2010, both on RatingsDirect). In line with these views, we now estimate the maximum aggregate, up-front fiscal cost to the U.S. government of resolving potential financial sector asset impairment in a stress scenario at 34% of GDP compared with our estimate of 26% in 2007.
Beyond the short- and medium-term fiscal challenges, we view the U.S.'s unfunded entitlement programs (such as Social Security, Medicare, and Medicaid) to be the main source of long-term fiscal pressure. These entitlements already account for almost half of federal spending (an estimated 42% in fiscal-year 2011), and we project that percentage to continue increasing as long as these entitlement programs remain as they currently exist (see "Global Aging 2010: In The U.S., Going Gray Will Cost A Lot More Green," Oct. 25, 2010, RatingsDirect). In addition, the U.S.'s net external debt level (as we narrowly define it), approaching 300% of current account receipts in 2011, demonstrates a high reliance on foreign financing. The U.S.'s external indebtedness by this measure is one of the highest of all the sovereigns we rate.
While thus far U.S. policymakers have been unable to agree on a fiscal consolidation strategy, the U.S.'s closest 'AAA' rated peers have already begun implementing theirs. The U.K., for example, suffered a recession almost twice as severe as that in the U.S. (U.K. GDP declined 4.9% in real terms in 2009, while the U.S.'s dropped 2.6%). In addition, the U.K.'s net general government indebtedness has risen in tandem with that of the U.S. since 2007. In June 2010, the U.K. began to implement a fiscal consolidation plan that we believe credibly sets the country's general government deficit on a medium-term downward path, retreating below 5% of GDP by 2013.
We also expect that by 2013, France's austerity program, which it is already implementing, will reduce that country's deficit, which never rose to the levels of the U.S. or U.K. during the recent recession, to slightly below the U.K. deficit. Germany, which suffered a recession of similar magnitude to that in the U.K. (but has enjoyed a much stronger recovery), enacted a constitutional limit on fiscal deficits in 2009 and we believe its general government deficit was already at 3% of GDP last year and will likely decrease further. Meanwhile, Canada, the only sovereign of the peer group to suffer no major financial institution failures requiring direct government assistance during the crisis, enjoys by far the lowest net general government debt of the five peers (we estimate it at 34% of GDP this year), largely because of an unbroken string of balanced-or-better general government budgetary outturns from 1997 through 2008. Canada's general government deficit never exceeded 4% of GDP during the recent recession, and we believe it will likely return to less than 0.5% of GDP by 2013.
Outlook
The negative outlook on our rating on the U.S. sovereign signals that we believe there is at least a one-in-three likelihood that we could lower our long-term rating on the U.S. within two years. The outlook reflects our view of the increased risk that the political negotiations over when and how to address both the medium- and long-term fiscal challenges will persist until at least after national elections in 2012.
Some compromise that achieves agreement on a comprehensive budgetary consolidation program--containing deficit reduction measures in amounts near those recently proposed, and combined with meaningful steps toward implementation by 2013--is our baseline assumption and could lead us to revise the outlook back to stable. Alternatively, the lack of such an agreement or a significant further fiscal deterioration for any reason could lead us to lower the rating.
Standard & Poor's will hold a global teleconference call and Web cast today--April 18, 2011--at 11:30 a.m. New York time (4:30 p.m. London time). For dial-in and streaming audio details, please go to www.standardandpoors.com/cmlive.
Saturday, April 16, 2011
And now for some more Humor Probably one of the Better Jokes of ALL TIME
Obama: 'American people will feel that I deserve a second term'
President Obama said Friday that he's convinced that voters will come to see him as the candidate best prepared to serve as president by next fall's elections.
The president said he thinks that he can make the case for a second term, though he acknowledged that the state of the economy could be his biggest hurdle to clear in winning reelection.
"I think the economy's going to continue to improve, and I think I'm going to be able to make an effective case that ... I am the person who is best prepared to finish the job so that we are on track to succeed in the 21st century," Obama said in a video interview this morning with The Associated Press.
"I think I can make that case, and I think that, in the debates that take place over the next 18 months, the American people will feel that I deserve a second term," Obama added.
The president launched his campaign earlier this month by filing paperwork with the Federal Election Commission (FEC) to formally indicate he would seek a second term. Obama advanced that effort with a trio of fundraisers last night in his adoptive hometown of Chicago, the city where his reelection effort will be headquartered.
Obama enjoys an early advantage over most of the Republicans vying for the nomination to challenge him in 2012, but polls suggest that the president doesn't enjoy broad support on the issue he says is most important: the economy. In a poll released on Friday, Gallup found Obama's approval rating stood at 41 percent, an all time low. Gallup said the figure was fueled by economic dissatisfaction.
"I think that my biggest concern, when it comes to reelection, is my biggest concern as president of the United States, which is our economy moving fast enough to give people the kind of relief that they need," Obama said.
As for the biggest strength Obama believes he has heading into 2012? He said it was his "confidence in the American people."
President Obama said Friday that he's convinced that voters will come to see him as the candidate best prepared to serve as president by next fall's elections.
The president said he thinks that he can make the case for a second term, though he acknowledged that the state of the economy could be his biggest hurdle to clear in winning reelection.
"I think the economy's going to continue to improve, and I think I'm going to be able to make an effective case that ... I am the person who is best prepared to finish the job so that we are on track to succeed in the 21st century," Obama said in a video interview this morning with The Associated Press.
"I think I can make that case, and I think that, in the debates that take place over the next 18 months, the American people will feel that I deserve a second term," Obama added.
The president launched his campaign earlier this month by filing paperwork with the Federal Election Commission (FEC) to formally indicate he would seek a second term. Obama advanced that effort with a trio of fundraisers last night in his adoptive hometown of Chicago, the city where his reelection effort will be headquartered.
Obama enjoys an early advantage over most of the Republicans vying for the nomination to challenge him in 2012, but polls suggest that the president doesn't enjoy broad support on the issue he says is most important: the economy. In a poll released on Friday, Gallup found Obama's approval rating stood at 41 percent, an all time low. Gallup said the figure was fueled by economic dissatisfaction.
"I think that my biggest concern, when it comes to reelection, is my biggest concern as president of the United States, which is our economy moving fast enough to give people the kind of relief that they need," Obama said.
As for the biggest strength Obama believes he has heading into 2012? He said it was his "confidence in the American people."
Friday, April 15, 2011
Gold And Silver Reach New Record Nominal Highs – Little Coverage, Bearish And Superficial Analysis
From GoldCore
Gold and Silver Reach New Record Nominal Highs – Little Coverage, Bearish and Superficial Analysis
Gold and silver have reached new all time and 31 year record highs in trading in London this morning.
Silver is particularly strong and the euro particularly week on sovereign debt contagion concerns.
Inflation and sovereign debt fears are leading to continued safe haven demand. It is import as ever to note that the record highs are nominal highs and inflation adjusted gold and silver remain a long way from their respective highs of $2,400/oz and $140/oz in 1980. These inflation adjusted highs remain viable long term price targets.
Gold and Silver Reach New Record Nominal Highs – Little Coverage, Bearish and Superficial Analysis
Gold and silver have reached new all time and 31 year record highs in trading in London this morning.
Silver is particularly strong and the euro particularly week on sovereign debt contagion concerns.
Inflation and sovereign debt fears are leading to continued safe haven demand. It is import as ever to note that the record highs are nominal highs and inflation adjusted gold and silver remain a long way from their respective highs of $2,400/oz and $140/oz in 1980. These inflation adjusted highs remain viable long term price targets.
Thursday, April 14, 2011
Silver Update 4/14/11
Submitted by: Francis Soyer
Good morning, it appears that we owe a thank you to Goldman (the sack) for giving us another chance to leg into silver after they put out their bearish call on silver (and Oil) a few days ago. As you will see in the chart below with MACD measurement on the decline, volume on the incline and a new up trend forming. This is just a small window Goldman provided for itself by telling their clients to sell so that the sacks proprietary trading desk could get long.
Remember whenever you hear a recomendation from a large bank, or large media or research company CNBC, MSN, Wall St. Journal, Financial Times. After reading what they have to say stop and take note of what the article makes you want to do. If the article makes you think you should Sell, then you should buy. If the article makes you think you should buy, then you should sell. Thats it folks, do that and you will not need to work a normal job any more.
Jim Grant - US Will Resolve Debt by Returning to Gold Standard
With so much turmoil going on around the globe, King World News interviewed one of the legends in the business, Jim Grant, Founder of Grant’s Interest Rate Observer. When asked about the Fed’s arrogance Grant responded, “I think there’s an intellectual cock-sureness that has no grounding. When you listen to Ben Bernanke as he held forth on Sixty Minutes at the end of last year assuring the journalist doing the interview that he, Bernanke, was 100% sure, 100% certain of what he could do, you cringe because nobody is 100% sure of anything in this world.”
April 14, 2011
Jim Grant continues:
“Nobody who’s been around the block once or twice is sure of anything except perhaps the date of the week and even that, some days one wonders is it really Wednesday? So Bernanke he has I think the professional economist’s self confidence that somehow these people imbibe in graduate school. I think the pseudo scientific nature of quantitative economics empowers them in a way that other mortals could never fully appreciate. But whatever it is they think they know, I know one thing, and that is they know less.”
When asked about the Great Recession and how it has left its mark Grant replied, “It is notable. Not so many months passed from the depths of our sorrows in 2008 and 2009 before people seemed to be reverting to much the same kind of financial conduct that was much in evidence in 2005, 2006, 2007. The cycles are getting shorter. Then again the government is now in the business of, so it declares, of restoring financial prosperity through main force.
So after the Great Depression there was nothing like the policy that Ben Bernanke and company have been implementing now. I don’t think that human beings are much different than they were way back when, but certainly the government’s response to crises is vastly different.”
When asked about gold specifically Grant stated, “To me the gold price takes the form of a very uncomplicated formula, and all you have to do is divide one by ‘n.’ And ‘n’, I’m glad you ask, ‘n’ is the world’s trust in the institution of paper money and in the capacity of people like Ben Bernanke to manage it. So the smaller ‘n’, the bigger the price. One divided by a receding number is the definition of a bull market.
You’ll notice that this had nothing to do with security analysis. This is conceptualizing, brainstorming, nothing to do with price/earnings ratios, other valuation methods like cash flows. It is a proposition or a hypothesis on what is driving the gold market. So the gold market is necessarily a speculative piece of business. It’s not to be confused with the kind of investment that Ben Graham wrote about. Anyway, I happen to be bullish on it, but not for reasons that I can readily defend before a member of the fraternity of chartered financial analysts.”
When asked how the United States will resolve its debt and deficit problems, Grant remarked, “Well, in my mind it will resolve them necessarily by undertaking the step of restoring the dollar to convertibility into gold.”
Jim Grant has become legendary for having one of the top financial publications in the world. This comment from the Financial Times points out one of the many reasons for Grant’s success, “If Grant could see what was happening this clearly,” wrote John Authors of the staff of the FT, “and warn of it in a well-circulated publication, how did the world’s financial regulators fail to avert the crisis before it became deadly, and how did the rest of us continue to make the irrational investing decisions that make Mr. Market behave the way he does?”
April 14, 2011
Jim Grant continues:
“Nobody who’s been around the block once or twice is sure of anything except perhaps the date of the week and even that, some days one wonders is it really Wednesday? So Bernanke he has I think the professional economist’s self confidence that somehow these people imbibe in graduate school. I think the pseudo scientific nature of quantitative economics empowers them in a way that other mortals could never fully appreciate. But whatever it is they think they know, I know one thing, and that is they know less.”
When asked about the Great Recession and how it has left its mark Grant replied, “It is notable. Not so many months passed from the depths of our sorrows in 2008 and 2009 before people seemed to be reverting to much the same kind of financial conduct that was much in evidence in 2005, 2006, 2007. The cycles are getting shorter. Then again the government is now in the business of, so it declares, of restoring financial prosperity through main force.
So after the Great Depression there was nothing like the policy that Ben Bernanke and company have been implementing now. I don’t think that human beings are much different than they were way back when, but certainly the government’s response to crises is vastly different.”
When asked about gold specifically Grant stated, “To me the gold price takes the form of a very uncomplicated formula, and all you have to do is divide one by ‘n.’ And ‘n’, I’m glad you ask, ‘n’ is the world’s trust in the institution of paper money and in the capacity of people like Ben Bernanke to manage it. So the smaller ‘n’, the bigger the price. One divided by a receding number is the definition of a bull market.
You’ll notice that this had nothing to do with security analysis. This is conceptualizing, brainstorming, nothing to do with price/earnings ratios, other valuation methods like cash flows. It is a proposition or a hypothesis on what is driving the gold market. So the gold market is necessarily a speculative piece of business. It’s not to be confused with the kind of investment that Ben Graham wrote about. Anyway, I happen to be bullish on it, but not for reasons that I can readily defend before a member of the fraternity of chartered financial analysts.”
When asked how the United States will resolve its debt and deficit problems, Grant remarked, “Well, in my mind it will resolve them necessarily by undertaking the step of restoring the dollar to convertibility into gold.”
Jim Grant has become legendary for having one of the top financial publications in the world. This comment from the Financial Times points out one of the many reasons for Grant’s success, “If Grant could see what was happening this clearly,” wrote John Authors of the staff of the FT, “and warn of it in a well-circulated publication, how did the world’s financial regulators fail to avert the crisis before it became deadly, and how did the rest of us continue to make the irrational investing decisions that make Mr. Market behave the way he does?”
Why Congress Should Vote No On Raising Debt Ceiling by: Chris Whalen
By Christopher Whalen
The opinions expressed are his own.
“A spectre is haunting Europe — the spectre of communism. All the powers of old Europe have entered into a holy alliance to exorcise this spectre: Pope and Tsar, Metternich and Guizot, French Radicals and German police-spies.”
–Karl Marx – Friedrich Engels
The Communist Manifesto
There is a specter haunting the industrial nations, too — the specter of debt default and deflation. All of the powers of the post-WWII regime of neo-Keynesian economic management have entered into a holy alliance to exorcise this specter: Fed Chairman Bernanke, European Central Bank Head Jean-Claude Trichet, Democrats in the American Congress and the German centrist tendency under Angela Merkel.
All of these champions of the status quo ante are, ironically enough, serving as agents for the bond holders of the largest US and EU banks, the clients of PIMCO, Black Rock and even my friend David Kotok at Cumberland Advisors. These agents of the global creditor class are betting on the likes of Bernanke, Trichet and Merkel to collect their debts for them like so many China gunboats — and thereby plunge hundreds of millions of people into penury for decades to come.
It is no small irony that the interests of the banks and bond holders in the US are being protected by a Democrat from Chicago named Barack Obama. Far from being a leftist, Obama is a global technocrat who turned out to be the most perfectly compliant stooge for the interests of the large banks and institutional investors. With Timothy Geithner at Treasury and former JPMorgan banker William Daley at the White House, the only decision Obama needs to make every day is what shirt to wear.
On Capitol Hill, however, the long slumbering Republicans are starting to discover the political power of fiscal sobriety. In the negotiations with the White House over the budget for fiscal 2011, House Speaker John Boehner (R-OH) managed to win some significant concessions from the White House on spending issues — even if entitlements and military spending were off the table this time around. The next and more important fight comes over the question of raising the US debt ceiling. Once again, President Obama is not even in the game.
Secretary Geithner and his boss, JP Morgan Chase CEO Jaime Dimon, have made clear their distaste for a fight over extending the debt ceiling, in part because a debt default by the US would end the pretense of “too big to fail.” If Washington is willing to contemplate a default by the US Treasury, who cares about the fortress balance sheet of JP Morgan and other US zombie banks? But for a number of reasons, democratically elected governments from Lisbon to Dublin to Washington need to begin the process of financial restructuring whether the banks like it or not. And all of the political servants of the banksters are doing their best to avoid debt write downs.
In Ireland, for example, the new government of Fine Gael leader Enda Kenny is in a struggle with Trichet and his vile contemporaries at the ECB. The Euro central bank is essentially trying to keep together an under-funded bailout of the continent’s corporate and bank debts at the expense of public taxpayers. So muted is the political discourse in Western Europe that people are barely protesting — at least not yet. But offering Ireland the choice of default or decades of deflation and unemployment to repay its foreign obligations at par is untenable and risks comparisons with the German war reparations after WWI.
The Kenny government should reject the self-serving advice of the German-dominated ECB as well as the technocrats inside Ireland’s finance ministry, and tell Angela Merkel and French President Nicholas Sarkozy to try harder. Specifically, if the ECB and the core nations of the EU are not willing to offer Ireland more generous terms to bail out the private debts of EU banks, then the Kenny government should take the example of the people of Iceland and tell the technocrats in Brussels an emphatic “no” to bailing in the Irish bank debt at public expense.
Frankly, if you weigh the trade off between the immediate cash flow benefit to Ireland of walking away from its foreign debt and being cut off from the global capital markets, as Trichet has threatened to Kenny, a default seems the obvious choice. And with Portugal and other “peripheral” states of the EU tottering, the Kenny government has more leverage than it knows. Putting a gun to the head of Trichet right about now and daring him to blink might prove a very satisfying experience for any Irish officials with the guts to play the hand God has dealt to them.
In Washington as well, some Republicans are starting to appreciate that saying no to more debt and devaluation a la the Paul Krugman school of economic mismanagement is good politics. It is wrong to call Krugman and his ilk “Keynesians.” Lord Keynes was neither an apologist for debt or inflation, nor was he a free trader. He valued strong national industry and financial markets that were only supplemented by global capital and trade flows. What would Keynes tell Ireland today?
For the same reasons that the Kenny government needs to impose haircuts on Ireland’s creditors, the US Congress needs to vote no on the debt ceiling increase as part of a larger shift in thinking on debt and spending in Congress. Just as the people of Iceland have done the right thing by saying no to repaying corporate debts of UK and Dutch banks (all of which are now nationalized naturally), Americans need to take a page from the history books and begin the actual process of default on all manner of debt and entitlements obligations.
The only way we can force our citizens and also our trading partners to talk about the economic issues that are driving America’s growing mountain of debt is to stop adding to the pile. The role of the dollar as the primary means of exchange for global commerce and finance are the twin evils at the heart of the US fiscal disease. The role of the dollar as the world’s “reserve currency” is likewise a terrible millstone around the necks of American workers.
Saying “no” on raising the debt ceiling is the way for deficit hawks in Congress in both parties to seize the fiscal agenda and start a long overdue conversation about America’s place in the world. As I wrote in my book, Inflated: How Money and Debt Built the American Dream, this discussion must include an end to the dollar as the primary global means of exchange. When the dollar ceases to be the global currency, then the Fed can no longer monetize deficits with impunity as today.
One way of forcing this adjustment process is to start imposing losses on holders of dollar debt. Painful as it will be, helping the world to readjust the level of debt in the industrial nations back to realistic levels and rebalance the global currency markets into a peer-to-peer framework is a necessary process if America is ever to achieve a sustainable economic model. The only question is when and where will emerge the political leadership to do the right thing and begin to actively restructure debts.
Barack Obama has already failed that test of leadership by studiously avoiding any response to the US real estate meltdown, but new leaders in many heavily indebted nations will face the same issues — chronic levels of debt that will only grow heavier as and when global interest rates rise. If the ECB manages to bully Prime Minister Kenny in Ireland, do they really expect a more malleable regime after the next election?
The looming threat of debt is why we should expect to see a majority of Republicans and perhaps more than a few Democrats in Congress seek to block any increase in the US debt ceiling unless the measure includes a balanced budget amendment to the US Constitution.
My view is that Congress should vote down any debt ceiling measure unless President Obama agrees to sign the balanced budget amendment. Even if Secretary Geithner has to run the US government on cash, like the good people of Iceland and Ireland today, it will be a good thing for America’s political debate to default — at least for a few weeks. Then people will know that the once unthinkable is very possible.
The opinions expressed are his own.
“A spectre is haunting Europe — the spectre of communism. All the powers of old Europe have entered into a holy alliance to exorcise this spectre: Pope and Tsar, Metternich and Guizot, French Radicals and German police-spies.”
–Karl Marx – Friedrich Engels
The Communist Manifesto
There is a specter haunting the industrial nations, too — the specter of debt default and deflation. All of the powers of the post-WWII regime of neo-Keynesian economic management have entered into a holy alliance to exorcise this specter: Fed Chairman Bernanke, European Central Bank Head Jean-Claude Trichet, Democrats in the American Congress and the German centrist tendency under Angela Merkel.
All of these champions of the status quo ante are, ironically enough, serving as agents for the bond holders of the largest US and EU banks, the clients of PIMCO, Black Rock and even my friend David Kotok at Cumberland Advisors. These agents of the global creditor class are betting on the likes of Bernanke, Trichet and Merkel to collect their debts for them like so many China gunboats — and thereby plunge hundreds of millions of people into penury for decades to come.
It is no small irony that the interests of the banks and bond holders in the US are being protected by a Democrat from Chicago named Barack Obama. Far from being a leftist, Obama is a global technocrat who turned out to be the most perfectly compliant stooge for the interests of the large banks and institutional investors. With Timothy Geithner at Treasury and former JPMorgan banker William Daley at the White House, the only decision Obama needs to make every day is what shirt to wear.
On Capitol Hill, however, the long slumbering Republicans are starting to discover the political power of fiscal sobriety. In the negotiations with the White House over the budget for fiscal 2011, House Speaker John Boehner (R-OH) managed to win some significant concessions from the White House on spending issues — even if entitlements and military spending were off the table this time around. The next and more important fight comes over the question of raising the US debt ceiling. Once again, President Obama is not even in the game.
Secretary Geithner and his boss, JP Morgan Chase CEO Jaime Dimon, have made clear their distaste for a fight over extending the debt ceiling, in part because a debt default by the US would end the pretense of “too big to fail.” If Washington is willing to contemplate a default by the US Treasury, who cares about the fortress balance sheet of JP Morgan and other US zombie banks? But for a number of reasons, democratically elected governments from Lisbon to Dublin to Washington need to begin the process of financial restructuring whether the banks like it or not. And all of the political servants of the banksters are doing their best to avoid debt write downs.
In Ireland, for example, the new government of Fine Gael leader Enda Kenny is in a struggle with Trichet and his vile contemporaries at the ECB. The Euro central bank is essentially trying to keep together an under-funded bailout of the continent’s corporate and bank debts at the expense of public taxpayers. So muted is the political discourse in Western Europe that people are barely protesting — at least not yet. But offering Ireland the choice of default or decades of deflation and unemployment to repay its foreign obligations at par is untenable and risks comparisons with the German war reparations after WWI.
The Kenny government should reject the self-serving advice of the German-dominated ECB as well as the technocrats inside Ireland’s finance ministry, and tell Angela Merkel and French President Nicholas Sarkozy to try harder. Specifically, if the ECB and the core nations of the EU are not willing to offer Ireland more generous terms to bail out the private debts of EU banks, then the Kenny government should take the example of the people of Iceland and tell the technocrats in Brussels an emphatic “no” to bailing in the Irish bank debt at public expense.
Frankly, if you weigh the trade off between the immediate cash flow benefit to Ireland of walking away from its foreign debt and being cut off from the global capital markets, as Trichet has threatened to Kenny, a default seems the obvious choice. And with Portugal and other “peripheral” states of the EU tottering, the Kenny government has more leverage than it knows. Putting a gun to the head of Trichet right about now and daring him to blink might prove a very satisfying experience for any Irish officials with the guts to play the hand God has dealt to them.
In Washington as well, some Republicans are starting to appreciate that saying no to more debt and devaluation a la the Paul Krugman school of economic mismanagement is good politics. It is wrong to call Krugman and his ilk “Keynesians.” Lord Keynes was neither an apologist for debt or inflation, nor was he a free trader. He valued strong national industry and financial markets that were only supplemented by global capital and trade flows. What would Keynes tell Ireland today?
For the same reasons that the Kenny government needs to impose haircuts on Ireland’s creditors, the US Congress needs to vote no on the debt ceiling increase as part of a larger shift in thinking on debt and spending in Congress. Just as the people of Iceland have done the right thing by saying no to repaying corporate debts of UK and Dutch banks (all of which are now nationalized naturally), Americans need to take a page from the history books and begin the actual process of default on all manner of debt and entitlements obligations.
The only way we can force our citizens and also our trading partners to talk about the economic issues that are driving America’s growing mountain of debt is to stop adding to the pile. The role of the dollar as the primary means of exchange for global commerce and finance are the twin evils at the heart of the US fiscal disease. The role of the dollar as the world’s “reserve currency” is likewise a terrible millstone around the necks of American workers.
Saying “no” on raising the debt ceiling is the way for deficit hawks in Congress in both parties to seize the fiscal agenda and start a long overdue conversation about America’s place in the world. As I wrote in my book, Inflated: How Money and Debt Built the American Dream, this discussion must include an end to the dollar as the primary global means of exchange. When the dollar ceases to be the global currency, then the Fed can no longer monetize deficits with impunity as today.
One way of forcing this adjustment process is to start imposing losses on holders of dollar debt. Painful as it will be, helping the world to readjust the level of debt in the industrial nations back to realistic levels and rebalance the global currency markets into a peer-to-peer framework is a necessary process if America is ever to achieve a sustainable economic model. The only question is when and where will emerge the political leadership to do the right thing and begin to actively restructure debts.
Barack Obama has already failed that test of leadership by studiously avoiding any response to the US real estate meltdown, but new leaders in many heavily indebted nations will face the same issues — chronic levels of debt that will only grow heavier as and when global interest rates rise. If the ECB manages to bully Prime Minister Kenny in Ireland, do they really expect a more malleable regime after the next election?
The looming threat of debt is why we should expect to see a majority of Republicans and perhaps more than a few Democrats in Congress seek to block any increase in the US debt ceiling unless the measure includes a balanced budget amendment to the US Constitution.
My view is that Congress should vote down any debt ceiling measure unless President Obama agrees to sign the balanced budget amendment. Even if Secretary Geithner has to run the US government on cash, like the good people of Iceland and Ireland today, it will be a good thing for America’s political debate to default — at least for a few weeks. Then people will know that the once unthinkable is very possible.
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