Daily Digest

Daily Digest 1/10 - Record High for World Food Prices, European Debt Worries, High Prices for Gold

Monday, January 10, 2011, 11:00 AM
  • Debt Default Fears will Spread to US and Japan, Warns Citigroup's Willem Buiter
  • World Food Prices Enter 'Danger Territory' To Reach Record High
  • Rumour of €80bn Bail-Out To Squeeze Portugese Bonds
  • Deepening Crisis Traps America's Have-Nots
  • Massive Silver Withdrawals From The Comex
  • European Debt Worries Again Weigh on Shares
  • Gold Rises A Bit But High Prices Limit Buying

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Debt Default Fears will Spread to US and Japan, Warns Citigroup's Willem Buiter (dejan)

There are likely to be several sovereign debt restructurings in the next few years, the analysts said, with Portugal likely to need to access the emergency funding facilities soon. Against this backdrop, the US and Japan - dubbed the "fiscal sustainability deniers" - cannot keep ignoring the question of how safe their public finances are, the team said.

World Food Prices Enter 'Danger Territory' To Reach Record High (dejan)

Sugar and meat prices are at record levels, while cereal prices are back at the levels last seen in 2008, when riots in Haiti killed four people and riots in Cameroon left 40 dead. Abbassian warned prices could rise higher still, amid fears of droughts in Argentina and floods in Australia and cold weather killing plants in the northern hemisphere.

Rumour of €80bn Bail-Out To Squeeze Portugese Bonds (pinecarr)

Mr Cavaco Silva told Portugal's Público newspaper that he was "surprised" a German magazine is publishing news of such importance to a European Union member state without the issue being discussed by the EU authorities. Still, Portugal's finances appear to be coming under fresh scrutiny over whether it will have to take financial help from the EU and the IMF.

Deepening Crisis Traps America's Have-Nots (pinecarr)

Cartier and Louis Vuitton have helped boost the luxury goods stock index by almost 50pc since October. Yet Best Buy, Target, and Walmart have languished. Such is the blighted fruit of Federal Reserve policy. The Fed no longer even denies that the purpose of its latest blast of bond purchases, or QE2, is to drive up Wall Street, perhaps because it has so signally failed to achieve its other purpose of driving down borrowing costs. Yet surely Ben Bernanke’s `trickle down’ strategy risks corroding America’s ethic of solidarity long before it does much to help America’s poor.

Massive Silver Withdrawals From The Comex (pinecarr)

We witnessed a massive withdrawal of silver unprecedented in the history of the comex. First there was a smallish 6507 oz of silver deposited to two customers, one being 497 oz and the other 6010 oz). But just look at the huge withdrawals: Four customers (not dealers) withdrew a total of 1,019,310 oz from the comex vaults. This is real silver leaving from 4 registered vaults. The individual withdrawals are: 579,081, 30,380, 399,994 and 9855 oz.

European Debt Worries Again Weigh on Shares

Traders also took in another round of mergers and acquisition, including Duke Energy’s $13.7 billion acquisition of Progress Energy, a tie-up that will create the country’s largest utility, and DuPont’s agreement to buy Danisco, a Danish specialty food ingredients maker, for $5.8 billion. In early trading, the Dow Jones industrial average fell 52.15 points, or 0.45 percent, while the broader Standard & Poor’s 500-stock index lost 4.04 points, or 0.3 percent. The technology heavy Nasdaq declined 7.49 points or 0.3 percent.

Gold Rises A Bit But High Prices Limit Buying

The most actively traded contract, for February delivery was recently up $4 at $1,372.90 a troy ounce on the Comex division of the New York Mercantile Exchange. "It's in a holding pattern right now," said Bob Haberkorn, senior market strategist with Lind-Waldock in Chicago. "It's not getting that lift that it has over the previous six weeks." Prices have been fluctuating between the mid $1,300s and record highs in the mid-$1,400s for the past two months amid alternating bouts of market fear or optimism about the global economic recovery.

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."


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Re: Daily Digest 1/10 - Record High for World Food Prices, ...

"BEIJING (Reuters) - China should further diversify its huge foreign exchange reserves away from U.S. government debt to reduce its risk exposure, a central bank official said in comments published on Monday.

"We should change the single-currency focus on buying U.S. Treasuries and adopt a more diversified structure for foreign exchange reserves to reduce risk," Xu Nuojin, deputy-director of the People's Bank of China in Guangzhou, was quoted as saying by the Securities Times."

"Jan. 10 (Bloomberg) -- Portugal and Ireland led a surge in the cost of insuring against default on European sovereign debt to record levels on concern government funding costs are becoming unsustainable.

Credit-default swaps on Portugal jumped 11 basis points to a peak of 549, according to CMA. Ireland soared 26.5 basis points to an all-time high 682 and Belgium was 7 higher at a 255. That helped push the Markit iTraxx SovX Western Europe to a record 223 basis points.

Investors are bracing for debt sales this week from Portugal, Spain and Italy. Portuguese bonds fell today amid mounting speculation the nation will have to tap the European Union’s 750 billion-euro ($966 billion) rescue facility if its yields remain above 7 percent.

“As yields rise, markets will get more concerned Portugal will have to tap EU/IMF funding,” said Harpreet Parhar, a credit strategist at Credit Agricole SA in London. "

"Federal Reserve Chairman Ben Bernanke on Friday ruled out a central bank bailout of state and local governments strapped with big municipal debt burdens, saying the Fed had limited legal authority to help and little will to use that authority.

"We have no expectation or intention to get involved in state and local finance," Mr. Bernanke said in testimony before the Senate Budget Committee. The states, he said later, "should not expect loans from the Fed."

The $2.9 trillion municipal-bond market has been stung recently by worries that some cash-strapped cities or states won't be able to pay off or roll over debt. Costs have risen broadly for municipal borrowers. The market also faces challenges from the expiration of the Build America Bonds program, which helped cities and states borrow $165 billion at interest rates held down by federal subsidies.

Some analysts speculate the Fed could jump into the market by purchasing muni debt or lending to struggling borrowers.

The Fed only has legal authority to buy muni debt with maturities of six months or less that is directly backed by tax or other assured revenue, which makes up less than 2% of the overall market. The Dodd-Frank financial-regulation law enacted last year further tied the Fed's hands, Mr. Bernanke noted, by barring the central bank from lending to insolvent borrowers or pursuing bailouts of individual borrowers. "

"Federal Reserve Vice Chairman Janet Yellen presented a possible timeline of about seven years before the Fed’s balance sheet is restored to normal levels, while saying the central bank’s asset purchases will end up creating 3 million jobs by 2012."

"NEW YORK (MarketWatch) -- Brazilian Finance Minister Guido Mantega said on Sunday that the world's top economies are in a currency war that is headed toward a full on trade war and said that his nation would raise the issue of currency manipulation with global authorities. "This is a currency war that is turning into a trade war," Mantega told the Financial Times in an interview that was published Sunday. Last week, Brazil intervened in the markets to restrain short selling of dollar against the real. "You can expect more measures on the futures market," he told the paper. "

"Reuters) - The European Central Bank threw Portugal a temporary lifeline on Monday by buying up its bonds, traders said, as market and peer pressure mounted for Lisbon to seek an international bailout soon.

A senior euro zone source told Reuters on Sunday that Germany, France and other euro zone countries were pushing Portugal to seek an EU-IMF assistance program, following Greece and Ireland, in a bid to prevent contagion spreading to much larger Spain, the fourth biggest economy in the euro area."

"TORONTO, Jan. 10 /CNW/ - Sprott Asset Management LP is pleased to provide investors with an update on the delivery status of silver bullion purchased by the Sprott Physical Silver Trust (NYSE ARCA: PSLV, TSX: PHS.U) ("Trust").

As of November 10, 2010, the Trust had contracted to purchase a total of 22,298,525 ounces of silver bullion. As of December 31, 2010 a total of 20,919,022 ounces of silver bullion had been delivered to the Trust. The Trust expects to take delivery of the final 1,379,503 ounces of silver bullion by January 12, 2011 and will subsequently publish the serial numbers of all bars held by the Trust on its website: www.sprottphysicalsilver.com.

"Frankly, we are concerned about the illiquidity in the physical silver market," said Eric Sprott, Chief Investment Officer of Sprott Asset Management. "We believe the delays involved in the delivery of physical silver to the Trust highlight the disconnect that exists between the paper and physical markets for silver." "

  • Other news:

US Deficit Fixes Needed 'Fairly Soon,' CBO's Elmendorf Says

Christie May Cut Medicaid as $10.5 Billion New Jersey Budget Deficit Looms

San Joaquin Valley's Chowchilla defaults on a bond


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Re: Daily Digest 1/10 - Bangladesh stock market fall . . .

Bangladesh stock market fall . . .

Bangladeshi police have used tear gas and water cannon against angry investors after the stock market incurred huge losses.

Trading on the Dhaka Stock Exchange index was halted after it fell by 660 points, or 9.25%, in less than an hour.

It was the biggest one-day fall in its 55-year history.

It is estimated that over three million people - many of them small-scale individual investors - have lost money because of the plunging share prices.

The benchmark index had climbed by 80% in 2010 but has lost more than 27% since early December.


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Re: Daily Digest 1/10 - Record High for World Food Prices, ...

Oil Rises to Near $89 After Alaska Pipeline Leak

http://www.npr.org/templates/story/story.php?storyId=91268386 et al

"The 95 percent drop in output from Alaska is bullish," energy consultant The Schork Report said. "Such high levels of uncertainty will have traders scrambling."

"The jump in crude prices will likely be temporary unless the pipeline is down for an extended period, The Schork Report said."

"We don't believe the news as it stands is enough to push crude oil above the $100 barrier," The Schork Report said. "If production is reduced to 5 percent until March or April, then we'll change our mind."

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More flooding in QLD Australia...

This flooding is fast becoming a really serious issue here...  the area hit as per article below is the food bowl of an area of at least 400 miles in diameter.  I doubt any coal is coming out of the mines yet to head to China, and these disruptions are going to have an impact on Australia's GDP for certain....

On a personal basis, we are fine, high and dry, but we have been cut off from "civilisation" for two and a half days, which is fine by me... :)

However......  the garden is drowning.  Last month, we had two feet of rain, and so far THIS month... a foot and a half; That's more than half the yearly rainfall in under six weeks.  All the tomatoes and cucumbers have drowned, onions are rotting, and we had to bring the goats up to our front verandah to keep them dry, there is now absolutely nowhere that isn't sodden for them to sleep on.  And to think this time last year we were just coming out of a drought!

The power's off right now...... so thank goodness we have some decent batteries, there's still cold beer in the fridge. It already feels like the collapse has started...


Toowoomba swamped by deadly 'inland tsunami'


A desperate situation is unfolding in Queensland's south-east, after flash flooding claimed the lives of at least seven people on Monday.

Heavy rain created a deadly torrent of water that swept people off their feet, cars down city streets and houses off their foundations in the Darling Downs city of Toowoomba.

Four deaths have been confirmed, while the ABC understands three others have died.

The raging waters are headed towards Lowood, east of Toowoomba and about 65km from Brisbane, and could affect expected flood levels in Brisbane and at Ipswich.

A severe weather warning has been issued for several parts of the state, and people are being evacuated from homes at Condamine, Chinchilla and Dalby, west of Toowoomba.

Queensland Premier Anna Bligh says the flash floods are without doubt Queensland's "darkest hour" since the state's flood crisis began.

"The event that started in Toowoomba can only be described as a complete freak of nature, an extraordinary deluge that almost came out of nowhere," she said.

"What we have here in Queensland tonight is a very grim and desperate situation. There are many Queenslanders tonight in critical and dire circumstances.

"Many people are facing a very terrifying night. I think we can all say that our thoughts are with them over the coming hours and we pray and hope that they will be safe when first light comes tomorrow morning."

Police say a woman and child died in Toowoomba when their car was swept away in floodwaters in the CBD.

A man and a boy also died at Murphy's Creek in the Lockyer Valley when they were swept from a house.

The ABC understands two women and a child have died at Grantham.

At Postman's Ridge just outside Toowoomba, a man is believed to have drowned after he was swept away in floodwaters.

There is also an unconfirmed report of three children missing in nearby Gatton, in the Lockyer Valley, where flash flooding has also caused widespread damage.

A search and rescue operation is continuing for the people who have yet to be accounted for, but is being hindered by the weather.

Ms Bligh says there have been 43 rooftop rescues so far and authorities are trying to establish how many people are missing.

"We will be getting out at first light to continue the search for those who have been notified as missing and to continue the rescue efforts for those who have been stranded on rooftops," she said.

Toowoomba's nursing home, library and shopping centre have been evacuated, while a landslide has blocked the up section of the Toowoomba Range.

Resident Joanne Kruger says it was like being in a disaster movie.

"It was like the tide had come in dramatically, like rolling waves across the road," she said.

'Wall of water'

Police Commissioner Bob Atkinson says it has been a grim day for the state's south-east.

"This has been a terrible day, a terrible day. Early reports would indicate that what hit Toowoomba could best be described as an inland instant tsunami, with a massive wall of water that's gone down through the Lockyer Valley," he said.

Mr Atkinson said emergency crews were trying to reach every vehicle that was swept away.

"Every vehicle that was swept away, no matter what the circumstances or where that vehicle may be, we're endeavouring to get into those vehicles and see if there is anyone trapped," he said.

"We are doing all we can tonight, but it is just impossible to complete this tonight."

More rain forecast

Flood waters are reaching record levels in rivers and creeks west of Brisbane.

Police are urging people in low-lying areas to leave their homes from Gatton to Ipswich.

David Grant from the weather bureau says more rain is on the way.

"There was a brief reprieve around Toowoomba, however there has been further rainfall push across the area that may last for the next hour or so, probably return to more patchier rain before we probably see a redevelopment later on in the afternoon into the evening," he said.

Rain is bucketing down in the southern inland town of St George, adding to the flood crisis there.

And heavy rainfall has also caused flash flooding at Esk in the Brisbane Valley. Many roads in the area are closed because of landslips and the council office has been flooded.

Residents are also evacuating homes in low-lying areas of Stanthorpe on the Granite Belt.

As well as Toowoomba, emergency services in Queensland are focused on Dalby and Gympie in the state's south-east, which are both on flood alert.

Meanwhile, thousands of residents in flood-affected areas of south-east Queensland are likely to remain without power until at least Tuesday.

Energex says about 6,000 homes are blacked-out. About half of those are in the Lockyer Valley, while Gympie and the Sunshine Coast hinterland are also affected.

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Australian Flooding, Indian Onions, Russian Wheat/Barley, etc.


It sounds to me like weather has become more and more out-of-the-ordinary in the past several years.

I know climate change and global warming is considered a controversial issue here, but for me it is not. Most people think it means temperatures will get warmer. While that is true, it's more that weather will get more chaotic.

However, whether you believe it or not, it seems to me that with global food supplies strained as they are due to just-in-time deliveries, commodities futures trading/speculation, increased human population putting demands on supplies, certain countries (China, South Korea, Japan, etc. having locked up farm production in some Third World countries  with land leases, development contracts and multi-national agreements), top-soil loss, desertification, peak phosphorus, etc., food availability will likely continue to see disruptions and food prices will likely continue to rise.

Even more reason to set aside reserves and "grow your own" if possible. However, supplies will always be a better off for us in the U.S. than for the poor masses a-few-meals-from-starvation-and-with-only-a-few-dollars in other countries.


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Fed pays US Treasury record $78.4B last year

"WASHINGTON (AP) -- The Federal Reserve is paying a record $78.4 billion in earnings to the U.S. government, reflecting gains from the central bank's unconventional efforts to lift the economy.

The payment to the Treasury Department for 2010 is the largest since the Fed began operating in 1914. It surpasses the previous record $47.4 billion paid in 2009, the Fed said Monday.

The bigger payment mostly came from more income generated by the Fed's massive portfolio of securities, which includes Treasury debt and mortgage securities.

Critics in Congress have expressed concerns that the Fed's purchases could put taxpayers at risk by reducing the amount turned over to Treasury. The Fed is funded from interest earned on its portfolio of securities. It is not funded by Congress. After covering its expenses, the Fed gives what is left over to the Treasury Department.

Income from the Fed's portfolio of securities came to $76.2 billion last year, up from $48.8 billion in 2009, Federal Reserve officials said. Such income rose largely because the Fed bought a greater number of securities. Increases in the value of securities also played a role."

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Re: Daily Digest 1/10 - Record High for World Food Prices, ...
DTM wrote:

On a personal basis, we are fine, high and dry, but we have been cut off from "civilisation" for two and a half days, which is fine by me... :)

However......  the garden is drowning.  Last month, we had two feet of rain, and so far THIS month... a foot and a half; That's more than half the yearly rainfall in under six weeks.  All the tomatoes and cucumbers have drowned, onions are rotting, and we had to bring the goats up to our front verandah to keep them dry, there is now absolutely nowhere that isn't sodden for them to sleep on.  And to think this time last year we were just coming out of a drought!

The power's off right now...... so thank goodness we have some decent batteries, there's still cold beer in the fridge. It already feels like the collapse has started...


Glad you're ok, Mike!  Holy crap that's a lot of rain!!  Hmmmm.....lesson learned/note to self: stock up on emergency batteries and beer!

Sax, EGP, interesting goings-on!


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VA to study $ Alternatives in case of Terminal Fed "Breakdown"

Interesting news on ZH: "Virginia Creates Subcommittee To Study Monetary Alternatives In Case Of Terminal Fed "Breakdown", Considers Gold As Option", at  http://www.zerohedge.com/article/virginia-creates-subcommittee-study-monetary-alternatives-case-terminal-fed-breakdown-consid 

In what may one day be heralded as the formal proposal that proverbially started it all, the Commonwealth of Virginia introduced House Resolution No. 557 to establish a joint subcommittee to "to study whether the Commonwealth should adopt a currency to serve as an alternative to the currency distributed by the Federal Reserve System in the event of a major  breakdown of the Federal Reserve System." In other words, Virginia will study the fallback plan of a "timely adoption of an alternative sound currency that the Commonwealth's government and citizens may employ without delay in the event of the destruction of the Federal Reserve System's currency" and avoid or "at least mitigate many of the economic, social, and political shocks to be expected to arise from hyperinflation, depression, or other economic calamity related to the breakdown of the Federal Reserve System." Most importantly as pertain to the currency in question, "Americans may employ whatever currency they choose to stipulate as the medium for payment of their private debts, including gold or silver, or both, to the exclusion of a currency not redeemable in gold or silver that Congress may have designated 'legal tender'." Whether this resolution will ever get off the ground, and actually find that the world is at great risk should gold not be instituted as a backstop currency, is irrelevant. The mere fact that it is out there, should provide sufficient impetus to other states to consider the ultimate Plan B.

We urge all legislators to carefully read this resolution.

Wow!  It;s going to be interesting to see what reactions this triggers!

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Judge orders Fed to deliver gold records for her review

From Harvey Organ and GATA:


At 2:30 pm today, we got news that the judge wants to see the documentation from the Fed on the gold trading, gold swaps etc.  If you thought that the bankers were upset with the high open interest, this news is devastating to the Fed, JPMorgan and all bankers.

They may be burning up the phone lines seeking counsel from criminal defence attornies.  (they may be taking some aspirin tonight as they are not feeling too good knowing that real gold data is to be released!!)

Here is the big news released by GATA.  This is a great organization that spends millions of dollars trying to expose the criminal banks and the Fed.  I feel that everyone should join their membership and give them support.



Judge orders Fed to deliver gold records for her review

Submitted by cpowell on 11:05AM ET Monday, January 10, 2011. Section: Daily Dispatches

2:18p ET Monday, January 10, 2011

Dear Friend of GATA and Gold:

GATA today scored a small but perhaps auspicious victory over the Federal Reserve in our lawsuit seeking access to the Fed's secret gold files. The judge presiding over GATA's federal freedom-of-information lawsuit in U.S. District Court for the District of Columbia, Ellen Segal Huvelle, granted GATA's motion to order the Fed to produce in complete form for the judge's private review 20 gold-related documents the Fed has sought to keep secret. The judge ordered the Fed to deliver the documents by Friday.

Through its lawyers, William J. Olson P.C. of Vienna, Virginia -- www.LawAndFreedom.com -- GATA has argued that the Fed's production of gold-related documents has been so inadequate and the Fed's arguments for keeping them secret so weak that the court should review the documents acknowledged by the Fed and order the Fed to answer 25 questions from GATA about the Fed's search for relevant information.

While Judge Huvelle still could grant at any time the Fed's motion to dismiss GATA's lawsuit, her ruling today at least implies a little skepticism about the Fed and its tactics. Combined with today's statement by U.S. Rep. Ron Paul, the new chairman of the House Financial Services Committee's Subcommittee on Monetary Policy (http://www.gata.org/node/9495), Judge Huvelle's ruling gives hope that the Fed's enormous secret power to rig markets and bestow the most fantastic patronage on a parasitic financial elite can be brought to account eventually.

The judge's order to the Fed to produce documents for her private review can be found at GATA's Internet site here:


Those who are skeptical of GATA's complaint that the Federal Reserve is part of an international gold-price rigging scheme should reflect on the meaning of the Fed's refusal to disclose all its gold-related records, records that include gold swap arrangements with foreign banks:


If the U.S. gold reserves are just sitting somewhere, inert, unencumbered, and unused for surreptitious market intervention, what's the problem with full disclosure?

Financial journalists unafraid of aggravating the world's financial powers should start putting gold-related questions to the Fed and other central banks and stop simply assuming that secrecy should be the normal order of things with central banks and gold.

And people everywhere who believe in free markets in the monetary metals and who have not already supported GATA financially can join our struggle here:


This struggle could have been undertaken easily and likely more effectively by the World Gold Council, which aims to represent gold mining companies and gold investors. But the council's indifference to questions of surreptitious central bank intervention in the gold market has left the struggle to GATA. We need your help to pursue this struggle to victory for free markets, limited government, and a better, fairer world.

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

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