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Daily Digest - Feb 19

Wednesday, February 18, 2009, 6:52 PM
  • Hope (Humor)
  • Why Gold Rallying in all currencies
  • The Burning Platform
  • The White House, Homeowner Affordability and Stability "Plan"
  • The Silver Lining (For China, Savings is King)
  • Gold Demand Pushed $US100 Billion Barrier Investors Recognized Store of Value (Hat Tip CM)
  • Supply and demand statistics Gold Supply and Demand - Q4 and Full Year 2008
  • More on eastern Europe
  • More...
  • Zombie banks
  • How Foreclosures Help Banks Conceal Losses (Hat Tip Suzie)
  • "All? of us need to live within our means ---- again"?
  • Depositors turned away from Stanford banks
  • Chairman Bernanke At the National Press Club Luncheon, National Press Club, Washington, D.C.
  • For Release February 18, 2009
  • US Domestic Borrowing (Chart) 
  • Recession Will Change Our Economic Geography (Hat Tip Christopher Peters)
  • Jim Chanos
  • Fox News, Ron Paul & Peter Schiff
  • How the Crash Will Reshape America (Hat Tip Christopher Peters)

Economy 

Hope (Humor)

Why Gold Rallying in all currencies (Picture in Article)

In the latest manifestation of the world financial crisis, gold is rallying strongly now in all major currencies. Gold detached from the usual commodity drivers gradually over the period August 07 to the present, and closely reacted to any major new developments in the credit crisis. Gold now is almost totally dominated by ongoing credit crisis developments, and the massive attempts to bailout the financial system in every country. That is why gold and the USD are rallying together.

As we know, the $trillions the US, ECB, BOE, Japan, Russia and China have thrown at either bailouts or stimulus are causing gold now to rise relentlessly in the major currencies. Obviously, at some point, gold as a central bank reserve asset would reflect what I estimate to be going on $20 trillion worth of stimulus and financial bailouts by the world central banks since August 07. The US alone has now committed over $10 trillion fighting the world financial chaos.

Ironically, the USD rallies along with gold to date. Massive flight to ‘safety' is finding its way to the USD and gold both. The Yen is also strengthening a lot too, but much of that is from Yen carry trade deleveraging, where people sell the stocks and financial assets and then buy Yen and pay off their hundreds of $billions worth of Yen they borrowed in the carry trade.

The Burning Platform

I prefer the wisdom of Thomas Jefferson and Abraham Lincoln.

"Delay is preferable to error." - Jefferson

"Give me six hours to chop down a tree and I will spend the first four sharpening the axe." - Lincoln

The White House, Homeowner Affordability and Stability "Plan"

The Silver Lining (For China, Savings is King)

Gold Demand Pushed $US100 Billion Barrier Investors Turned to Recognized Store of Value (Hat Tip CM) 

NEW YORK & LONDON--(BUSINESS WIRE)--Sustained investor interest in gold over the course of 2008 against a backdrop of the worst year on record for global stock markets and many other asset classes, helped push dollar demand for the safe haven asset to $102bn, a 29% increase on year earlier levels. According to World Gold Council's ("WGC") Gold Demand Trends, identifiable gold demand in tonnage terms rose 4% on previous year levels to 3,659 tonnes. 

Japan's January chip equipment orders fell 80.1% on year, say reports (Hat Tip CM) 

LONDON - Orders from around the world for semiconductor manufacturing equipment made in Japan fell to 25.51 billion yen (about $275 million) in January, down 80.1 percent from a year earlier, according to a Dow Jones report that cited the Semiconductor Equipment Association of Japan as its source.
The book-to-bill ratio was 0.55 for the month down from 0.70 in December the report said. 

Supply and demand statistics Gold Supply and Demand - Q4 and Full Year 2008

more on eastern Europe 

I would offer that ... major European nations face a very real and looming Sophie's (or should I say Nicholas and Alexandra's) choice - either help bail out their troubled EU brethren, and thereby risk burdening their own domestic economies with significant new debt; or let the other nations fail, and risk the collapse of the EU. 

Now, I'm sure there are some reading this who would say there is no choice - the strong must save the weak. But I would offer that, in this environment, that may be too quick a conclusion - one need only look at what's happened to Bank of America (BAC) and Wells Fargo (WFC) in the aftermath of their bailouts of Merrill Lynch and Wachovia, respectively.

Ordinarily, size and reputation would delineate the strong from the weak. But in these turbulent times, a great many lifeguards can be, and are, drowned each year trying to save drowning swimmers. (That's why, here in the US, there will be no more large scale bank mergers.) 

Zombie banks

How Foreclosures Help Banks Conceal Losses (Hat Tip Suzie) 

If a long term downturn were acknowledged, a conservative bank would avoid buying foreclosed houses and prefer to take the losses up-front, letting the outside buyers pick up the home and the downside risk of further price slides. But banks are still long housing, so they keep buying houses and booking them at inflated values. 

"All? of us need to live within our means ---- again"?

Depositors turned away from Stanford banks 

ST. JOHN'S, Antigua - Panicky depositors were turned away from Stanford International Bank and some of its Latin American affiliates Wednesday, unable to withdraw their money after U.S. regulators accused Texas financier R. Allen Stanford of perpetrating an $8 billion fraud against his companies' investors. 

Some customers arrived in Antigua by private jet and were driven up the lushly landscaped driveway of the bank's headquarters, only to be told that all assets have been frozen pending an investigation by Antiguan banking regulators. 

Chairman Bernanke At the National Press Club Luncheon, National Press Club, Washington, D.C. 

For Release February 18, 2009

US Domestic Borrowing (Chart)

Recession Will Change Our Economic Geography (Hat Tip Christopher Peters)

Jim Chanos

Fox News, Ron Paul & Peter Schiff

How the Crash Will Reshape America (Hat Tip Christopher Peters) 

MY FATHER WAS a child of the Great Depression. Born in
Newark, New Jersey, in 1921 to Italian immigrant parents, he
experienced the economic crisis head-on. He took a job working in an
eyeglass factory in the city's Ironbound section in 1934, at age 13,
combining his wages with those of his father, mother, and six siblings
to make a single-family income. When I was growing up, he spoke often
of his memories of breadlines, tent cities, and government-issued
clothing. At Christmas, he would tell my brother and me how his
parents, unable to afford new toys, had wrapped the same toy steam
shovel, year after year, and placed it for him under the tree. In my
extended family, my uncles occupied a pecking order based on who had
grown up in the roughest economic circumstances. My Uncle Walter, who
went on to earn a master's degree in chemical engineering and
eventually became a senior executive at Colgate-Palmolive, came out on
top-not because of his academic or career achievements, but because he
grew up with the 

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15 Comments

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Daily Digest - Feb 19

if-bankers-were.jpg

Vanityfox451's picture
Vanityfox451
Status: Diamond Member (Offline)
Joined: Dec 28 2008
Posts: 1636
Re: UK Government and Money Printing - More 'Funny Business'?

UK Government and Money Printing - More 'Funny Business'?

http://www.peakprosperity.com/forum/uk-government-and-money-printing-more-funny-business/13571

Paul

DavidC's picture
DavidC
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Posts: 243
Re: Daily Digest - Feb 19

Albeit I live in the UK and not the USA, but I can remember living in the only rented accommodation I could afford where, during the Winter, I had to wear a hat in bed because the cold permeating in from outside overnight was enough to keep me awake.

I can remember not taking proper "holidays" for years because I wanted to remove the one big debt first, namely my mortgage, before indulging in luxuries.

I'm not some old person who loved through the Thirties, I'm only in my early fifites, but I took RESPONSIBILITY and had awareness.

And here, in one of the videos, we are presented with the  the sight of a single mother, living in a house many people would only dream of owning, saying she needs help to enable her to stay there!

And the stupidity of  those in power who, STILL, STILL, cannot see that the (partial) issue is NOT to maintain the system, but to allow it to correct.

To say I'm angry is an understatement, both with these stupid people who bought places they couldn't afford and with the powers that be spending responsible peoples' money to try and keep them there (as per Chris's article yesterday). 

 

Malden's picture
Malden
Status: Bronze Member (Offline)
Joined: Jan 31 2009
Posts: 27
Re: Daily Digest - Feb 19

ST. JOHN'S, Antigua - Panicky depositors were turned away
from Stanford International Bank and some of its Latin American
affiliates Wednesday, unable to withdraw their money after U.S.
regulators accused Texas financier R. Allen Stanford of perpetrating an
$8 billion fraud against his companies' investors.

 Some customers arrived in Antigua by private jet and were driven
up the lushly landscaped driveway of the bank's headquarters, only to
be told that all assets have been frozen
pending an investigation by
Antiguan banking regulators. 

 

What money?  They`ve got credit (debt) or non-existence money in the first place! That`s how usury... sorry, "banking business" works. And now they expect to be paid in cash! It ain`t gonna happen.

 

 

Ruhh's picture
Ruhh
Status: Gold Member (Offline)
Joined: Nov 12 2008
Posts: 259
Re: Daily Digest - Feb 19

Not sure if you've seen this interesting article on Phase 5 of global meltdown

GEAB N°32 is available! 4th quarter 2009 - Beginning of Phase 5 of the global systemic crisis: phase of global geopolitical dislocation - Public announcement GEAB N°32 (February 16, 2009)

I wouldn't mind reading the full report but I'm not a paid subscriber. I found the link posted elsewhere.

gregroberts's picture
gregroberts
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Posts: 1024
Re: Daily Digest - Feb 19

Your bonuses are safe

http://www.brasschecktv.com/page/565.html

Greg

RubberRims's picture
RubberRims
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Posts: 145
Re: Daily Digest - Feb 19

The mood is strong people are finally speaking out against the insane policies of the obama administration and his socialist oligarchy.

 

emdiaz's picture
emdiaz
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Joined: Oct 23 2008
Posts: 25
Re: Daily Digest - Feb 19

 THANK YOU, Davos and Christopher Peters for How the Crash Will Reshape America article.  I can see a light in the dark tunnel.

john50's picture
john50
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Posts: 74
Re: Daily Digest - Feb 19

Gold may have peaked near $970 in a counter-trend B wave rally
as the setup for the next leg lower to test the $650 range this spring
.

more....http://vault.bz/2009/02/gold-peak-reached-next-move-lower/

fujisan's picture
fujisan
Status: Gold Member (Offline)
Joined: Nov 5 2008
Posts: 296
Re: Daily Digest - Feb 19

FT : The Short View

Quote:

With quantitative easing under way in the US and on the way in the UK and eurozone, the interbank lending markets face a quandary. Money market tensions are again on the rise. 


This is a strong signal of an alarming financial loop. 

The spread, or difference, between market overnight interest rates (as distinct from central bank base rates) and the interbank lending rates, or Libors, has been increasing in all currencies over the past couple of weeks. 

The rises have been marked for forward rates, or those predicting what the spread will be, at the end of each quarter over the rest of this year. And in the sterling markets, the recent rise has been especially sharp. 

These pressures are now leaching through into higher three-month Libors, the key rates for the cost of loans to ordinary people and companies. 

What is driving this renewed increase in tensions when liquidity is in plentiful supply? According to Morgan Stanley and elsewhere, Libor-related spreads have been pushed higher as the costs of protecting the debt of banks against default have risen in the credit derivatives markets. 

A number of leading banks in the US, UK and eurozone have seen their costs of protection leap sharply. But how has that happened with all the government support banks are getting via capital injections, funding guarantees and - in principle at least - asset purchases or loss insurance? 

The most worrying difference between now and the tensions of last October is that banks' credit protection increasingly takes its cue from the cost of protecting the debt of their backstop country. The UK, US and even Germany have all seen sharp rises recently. 

So, central banks and their governments appear stuck on Escher's infinite staircase. It is baffling that more action to cut Libors might only lift them. 

 

fujisan's picture
fujisan
Status: Gold Member (Offline)
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Posts: 296
Re: Daily Digest - Feb 19

CAUTION: October 87 Re-Run On Deck? - The Market Ticker

Quote:


Anyone remember October 1987?

The market had been drifting downward for a couple of weeks prior.  The 16th of October was Options Expiration, and the DOW closed down about 100 points - after being down about 75 the day before - a lot back then, with the index at roughly 2250.  It was a bloody day.

The next day it would close down 500.


At the time we had a new Fed President (Greenspan) who was untested and untrusted.  We had other things going on in the markets in general, none of them particularly good.

We have no trust in the markets today.  None.

I cannot value anything in this market.  Absolutely nothing.  And this sort of lie is part of the reason:

Feb. 19 (Bloomberg) -- U.S., U.K., and European regulators are in talks to jointly regulate the $28 trillion credit-default swap market, the Federal Reserve said today.

Regulators including the Fed, U.K.’s Financial Services Authority, German Federal Financial Services Authority and European Central Bank met today to discuss a possible information sharing agreement, the Fed said in a statement on its Web site. The goal would be to apply consistent standards to the market and provide support across jurisdictions, the Fed said. "

This was supposed to be done last year, remember?  By the end of the year we were supposed to have an implementation plan to get this done with the infrastructure in build-out going on right now.

Instead we have The Fed lying again about the issue.

Why?

Because Bernanke knows - these contracts cannot be covered as the people who wrote them have ZERO, or close to it, in capital!

...


there is very strong support of stock prices at zero


 

cybernytrix's picture
cybernytrix
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Posts: 18
Re: Daily Digest - Feb 19

@john50

Thanks for the contrary view on gold! Every other blog I have seen is so bullish on gold that no one talks about the downside. They all sound like the home salesperson of yesterday who thought that the only way to go is up.

When all this mess ends, people will get out of gold and it will fall. So my thinking is that since I didn't get on the gold bandwagon 2 years ago, it is too late to do so now. I am holding on to cash (and hope inflation is low in the short term)

 

gregroberts's picture
gregroberts
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mainecooncat's picture
mainecooncat
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Posts: 488
Re: Daily Digest - Feb 19

Thanks for the heads-up on this Denninger piece, Fujisan.

Just wanted to jot down some quick thoughts on him, and this is in no way being critical of you, Fujisan, just for the record.

After reading this man for several months now it’s hard not to think of him as being just like the boy who cried wolf. He’s always issuing the most dire warnings, but worse yet, he’s always issuing them in his now-formulaic melodramatic, churlish and bombastic style; and his overuse/abuse of all-caps, bold, and underlined text is both silly and unserious. Perhaps if every fifth piece or so were to be written in this manner then it might be effective, but his never-ceasing bold and spicy proclamations have wilted for me.

His weakness as an analyst is his overly-wonkishness with a voodoo like reliance on charts and graphs and what is “supposed to happen.” For the most part throughout the study of the economy and money systems, economic and other data is retroactively structured to jive with various theories and to create patterns that we humans then lend credence to.

He also relies too heavily on economic orthodoxy that holds ideas of self-correction, equilibrium, price mechanism theory, and market wisdom to be scripture.

Yet another mistake he makes (sorry for the laundry list) is to concretely attribute every up and down of the market to specific events -- and, of course, his interpretation of them. People are irrational and, therefore, so are the markets.

Now I’m not saying that Denninger is never right, insightful or worth the read, just that for the most part I can’t take him anymore.

Davos's picture
Davos
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Posts: 3620
Re: Daily Digest - Feb 19

I read every point of view I possibly can, and I respect all thoughts. I do have some questions for your posts above: Inflation, I think we all agree, is created by the increase of the money supply. It is a supply and demand thing, fly too many seashells onto an island and they become a worthless form of money.

That said why would you hope "inflation" (Asset inflation or the cost of stuff and services) would remain "contained"? "(and hope inflation is low in the short term)"

The banks are insolvent, we are talking now of nationalizing them Soros says 2.6 trillion, don't know where he gets that number from but lets forget derivatives for a second and use it. So now we have the U.S. of A. coming in (another definition of insolvent, GDP before things got bad was about 12 trillion less 40% for the cooked Enron way of figuring it puts you down to 8 trillion now knock off a few more trillion that Americans borrowing (9billion borrowed to buy 4 dollar coffees at Starbucks) and your probably at 6 trillion pre downturn.

Lets use that number 6 trillion income.

And we have about 11 trillion on debt and another 53 trillion in liabilities

6 trillion to 64 trillion.

Makes Citi look solvent.

So we have the insolvent bailing out the insolvent. Of course, the first insolvent can stomp all over on of the only two crimes listed by name in the Constitution (counterfieting) and print money out of thin air, which I would argue would make money worthless (or has) and stuff will cost more (what many call inflation). Which by doing so ruins the country financially and likely causing chaos/unrest (sounds like the other crime listed by name (treason) to me.)

Then you have the other countries and the other banks in the other countries who are in equally bad or worse fiscal shape.

Fiat money? 

I may be nuts, but I'd say I see a door slamming shut and I don't want to be inside. 

I'm not a financial planner or an economist - I have no college for that matter, but if you don't like PM I'd at the  very least buy some stuff you can use for the next few years.... Take care 

 

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