Daily Digest

Daily Digest 9/27: Monetary Endgame, EU Central Banks Halt Gold Sales, Tracking Bank Failures

Monday, September 27, 2010, 9:52 AM
  • Setting The Stage For The Monetary Endgame
  • Europe's Central Banks Halt Gold Sales
  • Japan Said to Consider Up to $55 Billion Extra Stimulus as Recovery Slows
  • Stocks extend gains on economic recovery hopes
  • Treasuries Advance, Two-Year Yield Near Record, on Economic Growth Concern
  • David Kamm: Let data tell the story, you just draw the conclusions
  • WSJ: 'Mr. Euro' Is Forced to Act
  • Tracking Bank Failures

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Why QE2 + QE Lite Mean The Fed Will Purchase Almost $3 Trillion In Treasurys And Set The Stage For The Monetary Endgame (Davos)

We were stunned to realize that over the next 6 months the Fed may be the net buyer of nearly $3 trillion in Treasurys, an action which will likely set off a chain of events which could result in rates dropping all the way to zero, stocks surging, and gold (and other precious metals) going from current price levels to well in the 5 digit range.

Europe's Central Banks Halt Gold Sales (Claire H.)

The shift away from gold selling comes as European central banks reassess gold amid the financial crisis and Europe's sovereign debt crisis.

In the 1990s and 2000s, central banks swapped their non- yielding bullion for sovereign debt, which gives a steady annual return. But now, central banks and investors are seeking the security of gold.

Japan Said to Consider Up to $55 Billion Extra Stimulus as Recovery Slows

Japan is considering a stimulus package of as much as 4.6 trillion yen ($54.6 billion) that will be funded with existing revenue, a government official said as policy makers seek to shore up the nation’s recovery.

“We will watch how the yen’s strength is affecting the economy and if it becomes a downside risk, we will take action in a timely and appropriate manner,” Shirakawa said. The BOJ board is next scheduled to meet Oct. 4-5.

“They have the difficult task of improving productivity in the economy at the same time they need to take measures to control the budget deficit,” Naoyuki Shinohara, a deputy managing director at the International Monetary Fund

Stocks extend gains on economic recovery hopes (Note: meant to be read in tandem with next headline...)

Stocks in Europe are edging higher, helped by solid gains in Asia, as investors become more optimistic about the economic recovery following supportive data out of the US.

Treasuries Advance, Two-Year Yield Near Record, on Economic Growth Concern  (...no wonder people are confused)

Treasuries advanced, pushing the two-year yield to within about three basis points of a record low, as economists said an industry report this week will show manufacturing growth slowed in September.

David Kamm: Let data tell the story, you just draw the conclusions  (The confusion continues...)

Part of the current problems we face is determining what data is meaningful. Take the following from adjacent paragraphs in the Sept. 15 issue of Peak Oil Review:

"Given that crude inventories are close to a 27-year high and the outlook for increasing economic growth is not good, most oil analysts are talking about further declines in oil prices. Some even talk of substantial declines.

"Goldman Sachs, on the other hand, says world oil demand is up by 2.4 million b/d in August over last year and that rising demand in Asia has led to a 600,000 b/d global supply deficit since May. This deficit is thought to be covered by selling off oil from floating storage. If this analysis is correct, Goldman foresees a substantial rise in energy prices over the next 12 months."

Both statements contain accurate data, but they reach diametrically opposite conclusions!

WSJ: 'Mr. Euro' Is Forced to Act

[A] senior commission official, debating with the German delegation, tried to persuade [German Finance Minister Wolfgang Schäuble's deputy Jörg] Asmussen to let Brussels run the stabilization fund.

"Why don't you let us handle this," he said.

"Because we do not trust you," Mr. Asmussen replied.

Despite Mr. Trichet's assurances that the bond-buying program is a stop-gap, it not only continues but has also increased in recent weeks—with no end in sight.

Tracking Bank Failures

As a follow up to our weekly FDIC bank closing charts, the WSJ has an article with accompanying interactive graphic (below) showing the progress of bank closings over the past 2 years.

They note that since WaMu fell, 279 lenders have collapsed; where the closings are concentrated was somewhat unexpected:

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."


saxplayer00o1's picture
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Re: Daily Digest 9/27

"The latest Fed minutes are remarkable. They add a new doctrine, that a fresh monetary blitz – or QE2 – will be used to stop inflation falling much below 1.5pc. Surely the Fed has not become so reckless that it really aims to use emergency measures to create inflation, rather preventing deflation? This must be a cover-story. Ben Bernanke’s real purpose – as he aired in his November 2002 speech on deflation – is to weaken the dollar. "

  • Other news and headlines:

US Is 'Practically Owned' by China: Analyst (CNBC)

Unclaimed corpses raise body counts at Greensboro hospital

Bank of Korea reportedly intervenes to curb won

Moody's downgrades Anglo Irish unguaranteed debt

Belgium Yields Rise More Than Ireland in Parliament Paralysis: Euro Credit

Fernandez Buys Dollars in `Draconian' Bid to Weaken Peso: Argentina Credit

Large Yuan Gain `Not Good for Anybody,' Former PBOC Adviser Fan Gang Says

Credit union fix may cost $US9.2b

Romania Minister Resigns Amid Protests

Bankruptcies soar despite stiffer laws, higher costs (Chicago)

University seeing faculty flight (LSU)

Health benefits cut for adults in Arizona's Medicaid program

Medicaid numbers hit record (Pennsylvania)

Fed Will Boost Balance Sheet by $500 Billion: Survey (CNBC)

Companies Reluctant to Hike Prices Despite Rising Costs

Ahead of the Bell: China imposes tariff on chicken

Foreclosure Starts Hit Highest Level Since January: LPS

Barrick says gold could "easily" exceed $1,500/oz


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Raters and Bankers Ignored Proof of Unsafe Loans

Raters Ignored Proof of Unsafe Loans in Securities, Panel Is Told

From the NY Times (posted link on on Yahoo! Finance):
"The results of the Clayton analyses [showing that 30% to 50% of loans didn't meet the banks' own standards] were not disclosed to investors buying the loan pools. Instead, Wall Street firms used the information to pressure the lenders issuing the most troubled loans to accept a lower price for them, according to prosecutors who have investigated these cases."

"Since Wall Street firms were paying lower prices for the troubled loans, they could have passed along those discounts to customers, reducing investor risk. But Wall Street charged investors the same high prices associated with better-quality loans, thereby increasing their own profits on the problematic securities, according to a law enforcement official and executives with Wall Street companies. To be sure, the prospectuses detailing the types of loans in these pools contained brief warnings that some of the mortgages might not meet stated underwriting standards. But few investors probably realized that huge portions of the pools had failed to meet the benchmarks."

I'd say, sometimes regulation is a bad thing - a horrible thing. Other times, strict regulations are exactly what customers and individual investors need in order to feel confident in the solidity of the market - and without it, markets are far more volatile and dangerous.

But seriously, where are the handcuffs? Where are the bankers in jail?!? We bailed these people out instead. That tells you very clearly where the priorities of government and power lie.


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"Shut Down the Fed - Evans-Pritchard




"I apologise to readers around the world for having defended the emergency stimulus policies of the US Federal Reserve, and for arguing like an imbecile naif that the Fed would not succumb to drug addiction, political abuse, and mad intoxicated debauchery, once it began taking its first shots of quantitative easing.

My pathetic assumption was that Ben Bernanke would deploy further QE only to stave off DEFLATION, not to create INFLATION. If the Federal Open Market Committee cannot see the difference, God help America.

We now learn from last week’s minutes that the Fed is willing “to provide additional accommodation if needed to … return inflation, over time, to levels consistent with its mandate.”

NO, NO, NO, this cannot possibly be true.".................






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Re: Daily Digest 9/27



   Like A Thief In The Night

Submitted by Davos Sherman Okst on Sun, 26 Sep 2010
Gold - Currency status since 2600 BC

To date, the crime syndicate has struck 3,800 times. At the bottom of this article you will find a partial list of the mob hits that have been made by the organized crime syndicate many refer to as: La Cosa Nos(Cen)tra(l) Banksters. The families of the diseased are large - entire nations. They made the unfortunate and common mistake of trusting their late, and once rich Uncle Currency with safeguarding the value stored in their life savings. Those that didn’t take out a life insurance plan suffered. Many, like the little children of Argentina, actually starved to death.

Country Year Old Dollars Needed To Buy New Dollars
Angola 1991-1999 1 New Kwanza = 1,000,000,000 1991 Kwanzas
Argentina 1975-1991 1 New Peso = 100,000,000,000 1983 Pesos
Belarus 1994-2002 50,000 = 100,000,000 2000 Rublei
Brazil 1986-1994 1 Real = 2,700,000,000,000,000,000 1930 Reis
Bosnia-Herzegovina 1993 Massive hyperinflation
Bulgaria 1991-1997 Defaulted on its debt, food shortages, reduced the number of zeros that were added to its currency.
Chile 1971-1973 500%+ Inflation military overthrew the democracy.
China 1939-1950 1937 3.4 Yuan traded $1.00 USD. By May 1949, $1.00 USD = 23,280,000 Yuan
Ecuador 2000 Pegged to USD after 70-80% drop in its dollar



1100s silver in coins fell.
Coins were clipped.
Henry VIII debased the coins to raise money

You go, Davos

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Re: Daily Digest 9/27

Thanks PineCarr

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Re: Daily Digest 9/27

Brazil’s finance minister: World in “international currency war”

From the Financial Times: Brazil warns of ‘currency war’

Guido Mantega, Brazil’s finance minister, said on Monday the world was in an “international currency war” ... Mr Mantega, who has made increasingly aggressive comments recently about the need to control Brazil’s currency, said governments around the world were trying to weaken their currencies to promote competitiveness.

"We’re in the midst of an international currency war, a general weakening of currency. This threatens us because it takes away our competitiveness,” he said

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Re: Daily Digest 9/27: Monetary Endgame, EU Central Banks ...


+ 10.

Your writing style and clarity of content is great.  The flow of facts is well connected. I've been looking for an article that I can send to "others" that might be the flexion point or catalyst for them to consider some of the points that are daily "reads" on this forum.

While there is still time to make great strides in preparation, it is articles like this one that will be used to convince others of some of the merits of our "cause".

Thanks for sharing.  Thank you to PineCarr.



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Re: Daily Digest 9/27: Monetary Endgame, EU Central Banks ...

pinecarr's picture
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Re: Daily Digest 9/27: Monetary Endgame, EU Central Banks ...

OMG!!  I just spotted this on the Telegraph when looking for articles...seems like something you'd find on The Onion!!  It'd be funny if it wasn't real.  It's at: http://www.telegraph.co.uk/finance/personalfinance/savings/8028884/Savers-told-to-stop-moaning-and-start-spending.html.

"Savers told to stop moaning and start spending

Savers should stop complaining about poor returns and start spending to help the economy, a senior Bank of England official warned today.


By Robert Winnett and Myra Butterworth
Published: 10:03PM BST 27 Sep 2010


Charles Bean and Mervyn King - Savers told to stop moaning and start spending
Mr Bean said low returns on savings were part of the Bank of England's strategy Photo: PA

Older households could afford to suffer because they had benefited from previous property price rises, Charles Bean, the deputy governor, suggested.

They should "not expect" to live off interest, he added, admitting that low returns were part of a strategy.

His remarks are likely to infuriate savers, who are among the biggest victims of the recession."

Ya think?!

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Re: Daily Digest 9/27: Monetary Endgame, EU Central Banks ...

They should "not expect" to live off interest, he added, admitting that low returns were part of a strategy.

His remarks are likely to infuriate savers, who are among the biggest victims of the recession."

Whoa.  That has to be an Onion article.  No way did they say that out loud.

Certainly many a blogger (*ahem*) has pointed out that the CBs are waging a war on savers in a dual attempt to get them to either spend their money on things they don't really need or toss up their hands and chuck their savings back into the stock market where the big banks can vacuum it up for their private gain.  But for the CB to admit this?

Okay, let's run with it.

The admission, lurking right beneath this statement, is that the system the CBs are now defending is one where everyone has no money saved and instead relies on credit as their buffer.  You know, the patently unsustainable system where ever increasing levels of debt ensure ever-increasing flows of interest 'earnings' to the banking system and the extremely wealthy.  You know, the system that requires exponential growth in debt in order to maintain a critical level of stability.

If ever you wanted a certain moment of clarity to be sure that the system will someday crash into a heap this was it; an outright admission by a leading central bank that their strategy consists of creating conditions hostile to savers in order to reward borrowers (and banks, obviously).  That is, they will defend the status quo of assuring non-labor based money flows to banks and the already wealthy by pinching off similar flows to savers who, it should be noted, came by their saved wealth through productive labor.

If ever there was an admission that the economy does not have enough productive flows to both support savers and bankers this was it.  When confronted with a choice between recipients, the CBs have made it utterly and completely clear: What productive flows remain shall flow in ways that support institutions over individuals and debtors over savers. 

If this sounds like a form of sociological warfare, don't blame me, I didn't invent it and put it into motion.

While I can appreciate how they came to this ideologically bankrupt position, I score it very poorly in terms of its sustainability and thoughtfulness.  Anybody can quickly reason out how this all ends in ruin; savings are the path to capital formation, borrowing for the sake of consumption is the path to capital erosion.

Are you sure this wasn't an Onion article??

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Re: Daily Digest 9/27: Monetary Endgame, EU Central Banks ...


cmartenson's picture
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Re: Daily Digest 9/27: Monetary Endgame, EU Central Banks ...

Yep - somethings' wrong with the 9/28 link.  Working on it!

Hope to have it fixed soon.

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