News on the financial system of the world

[stomy]

Official figure of the cia







Source: Cia.gov

[GlassSteagallfan]

Posted by Darla Ken Jensen Pearce (here)
Leaders who actually serve the people and not the few special interests.

Have you heard of the six LaRouche candidates? http://www.larouchepac.com/campaigns

[GlassSteagallfan]

Posted by corson (here)
could you please give me some more information regarding this? is it all posted on line? thanks
regards, corson

In the second Zeitgeist movie, there is a quick reference to a case where the homeowner won against the foreclosing bank using existing laws. The debt is squashed because the bank didn't have the collateral when they made the loan. Therefore, the loan was illegal.

Google search for this ebook: HOW-I-CLOBBERED-EVERY-BUREAUCRATIC-CASHCONFISCATORY-AGENCY-KNOWN-TO-MAN.pdf

[Northern Boy]

HOW-I-CLOBBERED-EVERY-BUREAUCRATIC-CASHCONFISCATORY-AGENCY-KNOWN-TO-MAN.pdf

Mary Elizabeth Croft

this is her site you can find the link to the book there and lots more info
http://spiritualeconomicsnow.net/

[stomy]

Angry electorate coldly voted to liquidate Fianna Fáil

Fianna Fail / Wikipedia

FINALLY, THE tall grass parted. By God, but this was no rush job. It was a long time coming.

When the verdict came, it was crushing. Moreover, it was thoroughly considered.

For this is the new politics; history, tradition, old allegiances and overweening presumption hold no sway anymore.

The Irish people looked back in anger this weekend and then they coldly voted to liquidate the party that plunged their country into liquidation.

After decades of Fianna Fáil dominance, they turned and taught Fianna Fáil a devastating lesson: You call yourselves a national movement? Now, let us show you the real meaning of a national movement . . .

And with that, they emerged from the long grass and gutted the Soldiers of Destiny. Extraordinary.

Unthinkable, once.

The general election of 2011 will be remembered as the one which shattered another of the three great pillars of old Ireland. It was always a proud boast of the faithful multitude that they belonged to the Untouchable Trinity of the Catholic Church, Fianna Fáil and the Gaelic Athletic Association.

No more. Only the GAA remains, standing proud and rightly cherished.

FF big beast after big beast falling, as the ticker-tape pulsing across the bottom of television screens announced the end of political dynasties and shell-shocked household names watched stronghold constituencies desert them. It made for compulsive viewing.

The winners were almost overlooked as the compelling story of Fianna Fáil’s momentous meltdown unfolded.

But not in Co Mayo, where Enda Kenny led from the front, bringing home an unprecedented three running mates.

Fine Gael fought a brilliant election. Kenny, the underestimated man from Mayo, is now taoiseach-designate. He stepped into his new role on Saturday night with a refreshing humility and a pledge to restore public trust in the debased currency of Irish politics.

You could see how much he wanted the job. His energy and passion undeniable; his determination to make a difference an encouraging contrast to the jaded nature of what went before.

Given the level of public expectation surrounding him and the scale of the task facing his new government, it’s hard to know whether to feel happy or sorry for the man.

The Labour Party put in its best electoral performance ever, exceeding the seats won in the Spring Tide of the early 1990s. When Eamon Gilmore ties the knot with Kenny – don’t expect a long engagement – their union will produce a government of well over 100 TDs.

Labour’s campaign was a rollercoaster ride, from the high expectations of the “Gilmore for Taoiseach” days to a worrying slide in the opinion polls and a final-week rally that pulled them back to respectable territory.

Sinn Féin’s Gerry Adams romped home in Louth as his party returned a record number of TDs and post-election Tricolours. They will be a major Opposition force, within touching distance of Fianna Fáil. How the two parties will rub along together on the very much depleted Opposition side of the Dáil will be a fascinating feature of the 31st Dáil. Drawing up the seating arrangements should be an entertainment in itself.

The Green Party won’t figure in those plans, as none of their TDs made it back.

Adding their considerable bulk to the fascinatingly diverse make-up of the Opposition will be a large assortment of Independent deputies from the right, the left and the whatever you’re having yourself wing of Irish politics. The stuffy and prissy powers that be in Leinster House must be having palpitations over the imminent arrival of the flamboyant likes of Luke Ming Flanagan and Mick Wallace.

Whatever else happens in the coming months or years, it won’t be boring in Dáil Éireann.

If it won’t be easy for Kenny and his incoming administration, heaven only knows what it will be like for Micheál Martin and his traumatised little band of Fianna Fáil survivors. No women in their ranks, the much vaunted Ógra generation almost wiped out, the party in a shambles at local level.

Dara Calleary, the only outgoing junior minister to retain a seat, began the fightback on Saturday night in Mayo.

“This is our darkest hour, but we will rebuild and I will roll up my sleeves and work for our party.” Fianna Fáil will regroup, but things will never be the same.

The shape of Irish politics is changed forever. And it was the people, no longer passive in the tall grass, who did it.

Source: irishtimes.com

[stomy]

Will AIG Implosion 2.0 Lead To QE 3.0?

There was a time when everyone thought CDOs are perfectly safe. That ended up being a tad incorrect. It resulted in AIG blowing up, recording hundreds of billions in losses and almost taking the rest of the financial world with it, leading ultimately to the first iteration of quantitative easing. A few years thereafter, several blogs and fringe elements suggested that munis are the next major cataclysm and will likely require Fed bail outs (some time before Meredith Whitney came on the public scene with her apocalyptic call). It would be only fitting that the same AIG that blew up the world the first time around, end up being the same company that does so in 2011, and with an instrument that just like back then only an occasional voice warned is a weapon of mass destruction: municipal bonds. AIG dropped over 6% today following some very unpleasasnt disclosures about its muni outlook, and corporate liquidity implications arising therefrom: "American International Group Inc., the bailed-out insurer, said it faces increased risk of losses on its $46.6 billion municipal bond portfolio and that defaults could pressure the company’s liquidity." So how long before we discover that Goldman has been lifting every AIG CDS for the past quarter? And how much longer after that until someone leaks a document that the company's muni strategy was orchestrated by one Joe Cassano?

From the Risk Factors section in the company's just issued 10-K:

- The value of our investment portfolio is exposed to the creditworthiness of state and municipal governments. We hold a large portfolio of state and municipal bonds ($46.6 billion at December 31, 2010), primarily in Chartis, and, because of the budget deficits that most states and many municipalities are continuing to incur in the current economic environment, the risks associated with this portfolio have increased. Negative publicity surrounding certain states and municipal issues has negatively affected the value of our portfolio and reduced the liquidity in the state and municipal bond market. Defaults, or the prospect of imminent defaults, by the issuers of state and municipal bonds could cause our portfolio to decline in value and significantly reduce the portfolio’s liquidity, which could also adversely affect AIG Parent’s liquidity if AIG Parent then needed, or was required by its capital maintenance agreements, to provide additional capital support to the insurance subsidiaries holding the affected state and municipal bonds. As with our fixed income security portfolio generally, rising interest rates would also negatively affect the value of our portfolio of state and municipal bonds and could make those instruments more difficult to sell. A decline in the liquidity or market value of these instruments, which are carried at fair value for statutory purposes, could also result in a decline in the Chartis entities’ capital ratios and, in turn, require AIG Parent to provide additional capital to those entities.

Some more gasoline in the fire from Bloomberg:

- AIG said that “several” issuers of bonds it holds have been downgraded, amid budget pressures. As of Dec. 31, the company had more than $700 million of state general-obligation bonds from California, which has the lowest Standard & Poor’s credit rating of any U.S. state. It also held more than $200 million in the bonds from Illinois.

Chartis’s portfolio has been reduced to about $36.3 billion, and 99 percent of the municipal holdings are rated A or better, AIG Chief Financial Officer David Herzog said in a conference call today with analysts.

- And the greatest thing is that like "back then" nobody has any clue how bad the situation truly is:

“The risk is real,” said Phillip Phan, professor at the Johns Hopkins Carey Business School in Baltimore, in an interview today. “They’re going to have to do a lot more homework before they can quantify how bad the situation is.”

- In typical financial fraud fashion (and for a great corollary on this, read Jon Weil's recent expose on how Citigroup, with the assistance of KPMG, lied to everyone about its risk exposure), the company represented that all is well... three short months ago.

The insurer had said in its third-quarter filing in November that it “does not expect any significant defaults in portfolio holdings of municipal issuers over the near term".

- People are shocked. SHOCKED.

Justin Hoogendoorn, a bond strategist with BMO Capital Markets in Chicago, said he was surprised by AIG’s statement. “What are they seeing that we’re not seeing?” he said.

- And yet another confirmation that our capital market is nothing but a mixture of central planning and certified idiocy:

“Since about mid-January, you’ve got a nice rebound in the market,” Hoogendoorn said.

- Some more facts:

AIG’s gross unrealized gains on the municipal bond portfolio narrowed to $1.73 billion on Dec. 31 from $3.32 billion at the end of the third quarter, according to the filing. Rival insurer Travelers Cos., which holds a $39.5 billion municipal portfolio, said last month that gross unrealized gains on the securities narrowed to $1.6 billion from $2.8 billion during the period.

The figures, reflecting market fluctuations that aren’t counted toward earnings, are monitored by investors and rating firms as a gauge of financial strength.

Property-casualty insurers buy municipal bonds with policyholder premiums and hold the securities to pay future claims. Travelers, the only insurer in the Dow Jones Industrial Average, said this month its portfolio may face a higher risk of defaults, which could result in investment losses and reduced income.

“There are a number of things that you can be concerned about at AIG, and this is one of them,” said Cliff Gallant, an analyst at KBW Inc., who has an “underperform” rating on the stock.

We can't wait until it is confirmed that Zero Hedge readers (or at least 36% of them) were right, and the Fed will have no choice but to bail out AIG (again) this time by buying up muni bonds.

The investor presentation can be read here in its entirety, while the earning call transcript is reproduced below, courtesy of Bloomberg.

Read report here

Source: ZeroHedge

[stomy]

Providence plans to pink slip all teachers

PROVIDENCE — The school district plans to send out dismissal notices to every one of its 1,926 teachers, an unprecedented move that has union leaders up in arms.

In a letter sent to all teachers Tuesday, Supt. Tom Brady wrote that the Providence School Board on Thursday will vote on a resolution to dismiss every teacher, effective the last day of school.

In an e-mail sent to all teachers and School Department staff, Brady said, “We are forced to take this precautionary action by the March 1 deadline given the dire budget outline for the 2011-2012 school year in which we are projecting a near $40 million deficit for the district,” Brady wrote. “Since the full extent of the potential cuts to the school budget have yet to be determined, issuing a dismissal letter to all teachers was necessary to give the mayor, the School Board and the district maximum flexibility to consider every cost savings option, including reductions in staff.” State law requires that teachers be notified about potential changes to their employment status by March 1.

“To be clear about what this means,” Brady wrote, “this action gives the School Board the right to dismiss teachers as necessary, but not all teachers will actually be dismissed at the end of the school year.”

“This is beyond insane,” Providence Teachers Union President Steve Smith said Tuesday night. “Let’s create the most chaos and the highest level of anxiety in a district where teachers are already under unbelievable stress. Now I know how the United States State Department felt on Dec. 7 , 1941.” That was the day the Japanese government bombed Pearl Harbor.

Smith, who has forged a groundbreaking collaboration with Brady that has received national recognition, said he believes this move comes directly from Mayor Angel Taveras, not the School Department. In a conversation with Taveras earlier Tuesday, Smith said the mayor also hinted at school closings but didn’t elaborate.

Taveras, in a statement issued Tuesday night, said the uncertainty around the city’s finances, combined with the March 1 deadline, led to this decision. Because it is too early to be certain of all possible changes to the school budget, Taveras said, issuing dismissal notices to all teachers “provides maximum flexibility” going forward.

“As a Providence public school graduate, I understand how great teachers can change lives,” he wrote. “I am sensitive to the uncertainty and anxiety that many teachers felt when they received this notice. My administration will do all it can to support our committed, hardworking teachers during this difficult time.”

Providence is facing a daunting budget crisis. The city had a $57-million deficit last year and expects a higher figure for the year ending June 30. In addition, the city, under then- Mayor David N. Cicilline, nearly depleted its reserves to cover day-to-day expenses. Taveras is currently awaiting completion of a report by an independent panel, which he commissioned to get a better handle on the city’s financial situation.

Meanwhile, Smith said he was caught completely off-guard by the planned dismissals, adding that Brady didn’t inform him of the decision until 5:30 p.m. Tuesday although he had heard rumors over the weekend.

He said it makes no sense to send out dismissal notices to every teacher because the district has a legal obligation to educate all of its students, regardless of budget considerations. “You have so many students,” he said. “You need so many teachers. You have a student-teacher ratio of 26 to 1. Do the math.”

Last year, only about 100 teachers received layoff notices, but in years past, as many as 500 have.

Smith said the dismissals couldn’t come at a worse time. The union is getting close to resolving a lawsuit over seniority-based hiring. The teachers’ contract expires June 30. And both Smith and Brady have staked their careers on a first-ever partnership in which both sides have agreed to make deep reforms in four of the district’s lowest-performing schools.

“We’re at the table with our best ideas,” Smith said. “To take this approach is unconscionable.”

Source: projo.com

¤=[Post Update]=¤

State orders Detroit to close half its schools

(AP)

DETROIT - State education officials have ordered the emergency financial manager for Detroit Public Schools to immediately implement a plan that balances the district's books by closing half its schools.

The Detroit News says the financial restructuring plan will increase high school class sizes to 60 students and consolidate operations.

State superintendent of public instruction Mike Flanagan says in a Feb. 8 letter that the state plans to install another financial manager who must continue to implement Emergency Financial Manager Robert Bobb's plan after he leaves June 30. Flanagan's said approval of Bobb's plan means the district can't declare bankruptcy.

Bobb filed his deficit elimination plan with the state in January, saying it would wipe out the district's $327 million deficit by 2014

Bobb was hired in March 2009 by then-Gov. Jennifer Granholm

Source: CBSNews

[stomy]

The leave only for the time worked.

" Europ wants to reduce the annual leave of workers in sick leave of long duration, as well as for the young mothers. The final proposals for changes will be ready before the summer. The new rules -if they come into force- will concentrate on the persons having a L-4 (sick leave) a period few months, between those having other serious illnesses, injuries requiring a pardon and young mothers who, during the pregnancy took leave long diseases. According to the preliminary proposals for each month of sick leave, the usual leave should be reduced to two days. The European Commission has already sent to employers and unions, all the member countries of the Union of questionnaire at random. The final proposal will be ready in approximately four months".

Source: gazeta.pl

[buckminster fuller]

Posted by GlassSteagallfan (here)

Posted by Darla Ken Jensen Pearce (here)
Leaders who actually serve the people and not the few special interests.

Have you heard of the six LaRouche candidates? http://www.larouchepac.com/campaigns

In france we too have a LaRouche candidate : Jacques Cheminade. His party name is "Solidarité et progrès" . Unfortunately, the medias here are doing a really good job at keeping his voice down.

Where are you from exactly Stomy ?

[stomy]

The IMF was in favor a dollar depreciation

In a note to the ministers of finance of the G20 published Wednesday 23 February, the International Monetary Fund (IMF) calls for a depreciation of the dollar, which according to him would assist the United States to reduce their deficits vis-à-vis the other countries of the world and would the world economy. In this document, the institution of Washington indicates that, according to its calculations, the exchange rate of the dollar is rather overstated, those of the euro and the yen "globally consistent" with economic fundamentals, and that several currencies of emerging countries Asians are "sub-evaluated". Therefore, he felt, G20 should permit a reduction of the dollar.

CONCERN ON PUBLIC FINANCES In his diagnosis AMERICAN

on the world economy (PDF) to the intention of the ministers meeting saturday and sunday in Paris, the IMF has made a growing concern. "The risk of slowdown remain high in the advanced economies, while the risks of overheating increase in emerging economies," he warned. Among the dangers that threaten the global growth, the IMF has noted "the tensions in the outskirts of the euro area" (of heavily indebted countries such as Greece, Ireland or the Portugal) and "progress insufficient to design plans for consolidation of public finances in the United States and Japan". The IMF has felt, in particular 'highly unlikely" that the United States to respect their commitment to divide by two their budgetary deficit between 2010-2013, taken at a summit of the rich countries the G20 and emerging in Toronto in june 2010.

Source: Lemonde.fr

[jjl]

Posted by stomy (here)

Will AIG Implosion 2.0 Lead To QE 3.0?

There was a time when everyone thought CDOs are perfectly safe. That ended up being a tad incorrect. It resulted in AIG blowing up, recording hundreds of billions in losses and almost taking the rest of the financial world with it, leading ultimately to the first iteration of quantitative easing. A few years thereafter, several blogs and fringe elements suggested that munis are the next major cataclysm and will likely require Fed bail outs (some time before Meredith Whitney came on the public scene with her apocalyptic call). It would be only fitting that the same AIG that blew up the world the first time around, end up being the same company that does so in 2011, and with an instrument that just like back then only an occasional voice warned is a weapon of mass destruction: municipal bonds. AIG dropped over 6% today following some very unpleasasnt disclosures about its muni outlook, and corporate liquidity implications arising therefrom: "American International Group Inc., the bailed-out insurer, said it faces increased risk of losses on its $46.6 billion municipal bond portfolio and that defaults could pressure the company’s liquidity." So how long before we discover that Goldman has been lifting every AIG CDS for the past quarter? And how much longer after that until someone leaks a document that the company's muni strategy was orchestrated by one Joe Cassano?

From the Risk Factors section in the company's just issued 10-K:

- The value of our investment portfolio is exposed to the creditworthiness of state and municipal governments. We hold a large portfolio of state and municipal bonds ($46.6 billion at December 31, 2010), primarily in Chartis, and, because of the budget deficits that most states and many municipalities are continuing to incur in the current economic environment, the risks associated with this portfolio have increased. Negative publicity surrounding certain states and municipal issues has negatively affected the value of our portfolio and reduced the liquidity in the state and municipal bond market. Defaults, or the prospect of imminent defaults, by the issuers of state and municipal bonds could cause our portfolio to decline in value and significantly reduce the portfolio’s liquidity, which could also adversely affect AIG Parent’s liquidity if AIG Parent then needed, or was required by its capital maintenance agreements, to provide additional capital support to the insurance subsidiaries holding the affected state and municipal bonds. As with our fixed income security portfolio generally, rising interest rates would also negatively affect the value of our portfolio of state and municipal bonds and could make those instruments more difficult to sell. A decline in the liquidity or market value of these instruments, which are carried at fair value for statutory purposes, could also result in a decline in the Chartis entities’ capital ratios and, in turn, require AIG Parent to provide additional capital to those entities.

Some more gasoline in the fire from Bloomberg:

- AIG said that “several” issuers of bonds it holds have been downgraded, amid budget pressures. As of Dec. 31, the company had more than $700 million of state general-obligation bonds from California, which has the lowest Standard & Poor’s credit rating of any U.S. state. It also held more than $200 million in the bonds from Illinois.

Chartis’s portfolio has been reduced to about $36.3 billion, and 99 percent of the municipal holdings are rated A or better, AIG Chief Financial Officer David Herzog said in a conference call today with analysts.

- And the greatest thing is that like "back then" nobody has any clue how bad the situation truly is:

“The risk is real,” said Phillip Phan, professor at the Johns Hopkins Carey Business School in Baltimore, in an interview today. “They’re going to have to do a lot more homework before they can quantify how bad the situation is.”

- In typical financial fraud fashion (and for a great corollary on this, read Jon Weil's recent expose on how Citigroup, with the assistance of KPMG, lied to everyone about its risk exposure), the company represented that all is well... three short months ago.

The insurer had said in its third-quarter filing in November that it “does not expect any significant defaults in portfolio holdings of municipal issuers over the near term".

- People are shocked. SHOCKED.

Justin Hoogendoorn, a bond strategist with BMO Capital Markets in Chicago, said he was surprised by AIG’s statement. “What are they seeing that we’re not seeing?” he said.

- And yet another confirmation that our capital market is nothing but a mixture of central planning and certified idiocy:

“Since about mid-January, you’ve got a nice rebound in the market,” Hoogendoorn said.

- Some more facts:

AIG’s gross unrealized gains on the municipal bond portfolio narrowed to $1.73 billion on Dec. 31 from $3.32 billion at the end of the third quarter, according to the filing. Rival insurer Travelers Cos., which holds a $39.5 billion municipal portfolio, said last month that gross unrealized gains on the securities narrowed to $1.6 billion from $2.8 billion during the period.

The figures, reflecting market fluctuations that aren’t counted toward earnings, are monitored by investors and rating firms as a gauge of financial strength.

Property-casualty insurers buy municipal bonds with policyholder premiums and hold the securities to pay future claims. Travelers, the only insurer in the Dow Jones Industrial Average, said this month its portfolio may face a higher risk of defaults, which could result in investment losses and reduced income.

“There are a number of things that you can be concerned about at AIG, and this is one of them,” said Cliff Gallant, an analyst at KBW Inc., who has an “underperform” rating on the stock.

We can't wait until it is confirmed that Zero Hedge readers (or at least 36% of them) were right, and the Fed will have no choice but to bail out AIG (again) this time by buying up muni bonds.

The investor presentation can be read here in its entirety, while the earning call transcript is reproduced below, courtesy of Bloomberg.

Read report here

Source: ZeroHedge

It's already happened, watched a teacher crying on the news, I live one state over. If you look at it from a positive prospective, it's time the old system is brought down. I'm sure these brave people will be on the front lines. A week and half ago it was Cops in New Haven CT the guardian angels came in for the duration. The cops are back at the table, but not for long I expect. Next week our fed gov shuts down.

[stomy]

Source: http://www.youtube.com/watch?v=T2w7wGwUZ9Y

Speaking at the Casey Research Gold and Resource Summit, Eric Sprott told investors that there is no more silver left to go around, "There's $22 billion of silver available in the world, of which the ETFs already own half, and between you guys and us we probably own the other half... Which means there's nothing left."

[stomy]

I found this video very funny!

Corporations must think we are all stupid.

"Let's just change the size little by little and consumers will never notice it" If this is what they think then take a look at this video.

Source: http://www.youtube.com/watch?v=2Tg-KkRgiGI

[stomy]

Posted by buckminster fuller (here)

Posted by GlassSteagallfan (here)

Posted by Darla Ken Jensen Pearce (here)
Leaders who actually serve the people and not the few special interests.

Have you heard of the six LaRouche candidates? http://www.larouchepac.com/campaigns

In france we too have a LaRouche candidate : Jacques Cheminade. His party name is "Solidarité et progrès" . Unfortunately, the medias here are doing a really good job at keeping his voice down.

Where are you from exactly Stomy ?

I don't known Jacques Chemnade. Thank you for information
My logo speaks of itself

[buckminster fuller]

Posted by stomy (here)

Posted by buckminster fuller (here)

Posted by GlassSteagallfan (here)

Posted by Darla Ken Jensen Pearce (here)
Leaders who actually serve the people and not the few special interests.

Have you heard of the six LaRouche candidates? http://www.larouchepac.com/campaigns

In france we too have a LaRouche candidate : Jacques Cheminade. His party name is "Solidarité et progrès" . Unfortunately, the medias here are doing a really good job at keeping his voice down.

Where are you from exactly Stomy ?

I don't known Jacques Chemnade. Thank you for information
My logo speaks of itself

Where about in france then ? (sorry for off-topic)

[stomy]

Gold price loves a crisis

If there is one thing that gold loves, it's a crisis - and once again the commodity has started to outperform.



"Gold is likely to move to record highs if trouble continues," said Adrian Ash, head of research at Bullion Vault, which holds more than $1bn (£621m) of gold for clients.

At $1,405, the price is already closing in on its all-time high of $1,423.75, hit on December 6 last year.

"Gold is a form of crisis insurance, one that just keeps paying," Mr Ash said. "If you bought when Northern Rock started to crumble you would have doubled your money by now. It has kept paying out as crisis insurance for the past four years."

Indeed, the last big gold spike shares some similarities with the situation in which the world finds itself now.

"There are interesting historical comparisons with 1980 when tanks were going into Afghanistan and there was weak leadership in the US," said Mr Ash.


"Back then we also saw soaring oil prices and runaway inflation, making events today sound very similar to the last time gold really outperformed.

But there is still scope for outperformance, as the inflation-adjusted price is still way off its highs 30 years ago. It hit $850 an ounce in January 1980, which is something in the order of $2,250 when adjusted for inflation. If the 1980s really are back, gold has much further to run.

Capital Economics, led by economist and Telegraph columnist Roger Bootle, predicted in December that gold could hit $1,600 in 2011 and reach $2,000 by the end of 2012.

"We are increasingly positive on gold. A firmer dollar, fading inflation fears and greater risk appetite may limit upside in the next few months. But the price of gold should continue to be supported by demand for a safe haven from other potential economic and financial shocks," Capital Economics said.

However, it is political turmoil driving the price higher at the moment – gold is a very political metal. "Buying gold is always a political investment because you are essentially opting out of the world's monetary system," Mr Ash said.

With continued money printing via quantitative easing in the US, many are losing faith with global currencies. It's not just investors who are spooked by rampant money printing by the US Fed or savers concerned by inflation who are turning to gold. Central bankers are, too.

Earlier this month the World Gold Council revealed that central banks had become net buyers of the metal in 2010 for the first time since 1988. Until 2009, central banks had been unloading their gold reserves, believing it could go no higher, but things have changed.

Historically, Western governments had been holders of gold, but now central bankers in emerging markets are increasingly buying into the gold story.

"Emerging nations that have not historically backed their currencies by gold and therefore have not acquired enormous holdings of the metal are redressing the situation," said Daniel Major, a metals analyst at RBS. "The trend is characterised in Russia, where purchases are scheduled to continue at 100 tonnes per annum, having purchased 135 tonnes last year."

China has started buying because its massive holdings of dollar-denominated debt have given the country substantial currency risk in its reserves. Latest figures from the US Treasury show that China held almost $892bn of US bonds.

"China's gold reserves of 1,054 tonnes at end 2010 accounted for just 1.7pc of total forex reserves," Mr Major said. It would be surprising if the Chinese did not wish to diversify their reserves further.

There are many ways to play the gold price – from holding the physical metal to exchange traded funds to equities. The price is likely to remain volatile but high, so equities are a good way to play the commodity. You should invest in gold companies that have production but also the potential to increase their output or reserves.

Every time you switch on the TV you can find another reason to buy gold. It appears that crises just won't go away.

Source: Telegraph

[stomy]

Here's Why France And Germany Are More Screwed Than Greece

Risk analysis firm Maplecroft just released its new fiscal risk index ranking of 163 countries. Europe trumps all other regions with 11 out of twelve courtiers rated as "extreme risk." However, quite surprisingly, only one PIIGS country--Italy which takes the top spot--is in the top 12. The others include many big economies in Europe - Belgium (2), France (3), Sweden (4), Germany (5), Hungary (6), Denmark (7), Austria (8), United Kingdom (10), Finland (11) and Greece (12). Japan at No. 9 is the only other country not in Europe within the highest risk category (See map below).

Aging Demographic
While high national debt and public spending are two common denominators, the study finds it is the aging demographic that puts these countries at extreme fiscal risk. An aging population will place increasing pressure on public expenditure such as pension and health care, while a shrinking working-age population means less productivity and less tax revenues to support public spending and debt payments.

High Dependency Ratio
Aging population also means high dependency ratio, or the number of people 65 and older to every 100 people of traditional working ages. For example, according to Maplecroft, the dependency ratio in France is 1 to 47 (i.e. 47%), Germany at 59%, Italy with 62%, and Japan at the very top with 74%, while the ratio in UK is currently 25%, and is forecast to rise to 38% by 2050.

Low Senior Labor Participation Rate

Another problem within Europe is that it has the low labor participation rate in the 65+ age bracket. In fact, the labor market participation of age 65+ amongst the ‘extreme risk’ nations range from 1.4% in France, 7.71% in UK, to 11.7% in Sweden, vs. a 28% average across all countries ranked in the index.

U.S. – High Fiscal Risk

Although the United States is not ranked among the "extreme fiscal risk," the nation is nevertheless classified as high risk, along with Spain, another PIIGS country, Turkey, Iraq, Australia, Canada and Russia.
Let's take a look at the two metrics mentioned here.
The dependency ratio in the U.S. is 22 in 2010, but is projected to climb rapidly to 35 in 2030, according to the U.S. Census Bureau, mainly due to baby boomers moving up into the 65+ age bracket. The ratio then will rise more slowly to 37 in 2050.
The labor participation for age 65 and over in the U.S. is at 17.5 according to data at Bureau of Labor Statistics (BLS). This is better than most of the European countries, but below the overall average of 28%.

U.S. in Wave 2

Most people typically associate a country’s fiscal risk to its government’s monetary and fiscal policies, and Lehman Brothers has taught us that banking and housing crisis could push the entire world into the Great Recession.

While these are all definite risk factors, a highly productive labor force and relatively young population makeup tend ensure more sustainable prosperity and better odds at digging out of a hole.
The Maplecroft study concludes

"...in high risk countries, it is increasingly likely that the private sector will be called upon to contribute in the form of pensions and private health care.... Without significant adjustments, such as raising taxes or reducing spending, countries risk going bankrupt."

So, while Europe is being forced to do all that amid sovereign debt crisis in the middle of widespread protests over raised pension age and austerity measures, the U.S. and other "high fiscal risk” countries seem be set up as the wave 2 of this global fiscal chain of events.

Source: Businessinsider

[stomy]

China "Attacks The Dollar" - Moves To Further Cement Renminbi Reserve Currency Status

In a surprising turn of events, today's biggest piece of news received a mere two paragraph blurb on Reuters, and was thoroughly ignored by the broader media. An announcement appeared shortly after midnight on the website of the People's Bank of China.

The statement, google translated as "Pragmatic and pioneering spirit to promote cross-border renminbi business cum on monitoring and analysis to a new level" is presented below:

Reuters provides a simple translation and summary of the announcement: "China hopes to allow all exporters and importers to settle their cross-border trades in the yuan by this year, the central bank said on Wednesday, as part of plans to grow the currency's international role. In a statement on its website www.pbc.gov.cn, the central bank said it would respond to overseas demand for the yuan to be used as a reserve currency. It added it would also allow the yuan to flow back into China more easily." To all those who claim that China is perfectly happy with the status quo, in which it is willing to peg the Renmibni to the Dollar in perpetuity, this may come as a rather unpleasant surprise, as it indicates that suddenly China is far more vocal about its intention to convert its currency to reserve status, and in the process make the dollar even more insignificant.

International Business Times provides further insight:

This is all part of China’s plan for the internationalization of its currency, which may, in the decades to come, threaten the global ‘market share’ of other currencies like the US dollar.

Previously, China also announced that bilateral trades with Russia and Malaysia will begin to be conducted with the yuan and the ruble and ringgit, respectively.

Other moves on the part of China to internationalize its currency include allowing foreign companies to issue yuan-denominated bonds and relaxing rules for foreign financial institutions to access the yuan.

Aside from the efforts of the Chinese government, fundamentals also point to the increasing international popularity of the Chinese currency.

China is already the leading trade partner with Australia and Japan. It’s also the leading or a large trade partner with many of its smaller neighbors. The purpose of having foreign currencies is to conduct foreign trade and investment, so the yuan is expected to become a more attractive currency for China’s trade partners, espeically as the government continues to relax restrictions.

The reason for this dramatic move may be found in what Stephen Roach wrote a few days ago in Project Syndicate:

In early March, China’s National People’s Congress will approve its 12th Five-Year Plan. This Plan is likely to go down in history as one of China’s boldest strategic initiatives.

In essence, it will change the character of China’s economic model – moving from the export- and investment-led structure of the past 30 years toward a pattern of growth that is driven increasingly by Chinese consumers. This shift will have profound implications for China, the rest of Asia, and the broader global economy.

Like the Fifth Five-Year Plan, which set the stage for the “reforms and opening up” of the late 1970’s, and the Ninth Five-Year Plan, which triggered the marketization of state-owned enterprises in the mid-1990’s, the upcoming Plan will force China to rethink the core value propositions of its economy. Premier Wen Jiabao laid the groundwork four years ago, when he first articulated the paradox of the “Four ‘Uns’” – an economy whose strength on the surface masked a structure that was increasingly “unstable, unbalanced, uncoordinated, and ultimately unsustainable.”

The Great Recession of 2008-2009 suggests that China can no longer afford to treat the Four Uns as theoretical conjecture. The post-crisis era is likely to be characterized by lasting aftershocks in the developed world – undermining the external demand upon which China has long relied. That leaves China’s government with little choice other than to turn to internal demand and tackle the Four Uns head on.

The 12th Five-Year Plan will do precisely that, focusing on major pro-consumption initiatives. China will begin to wean itself from the manufacturing model that has underpinned export- and investment-led growth. While the manufacturing approach served China well for 30 years, its dependence on capital-intensive, labor-saving productivity enhancement makes it incapable of absorbing the country’s massive labor surplus.

Instead, under the new Plan, China will adopt a more labor-intensive services model. It will, one hopes, provide a detailed blueprint for the development of large-scale transactions-intensive industries such as wholesale and retail trade, domestic transport and supply-chain logistics, health care, and leisure and hospitality.

Obviously, a reserve currency would be not only extremely useful, but quite critical in achieving the goal of China's conversion to an inwardly focused, middle-class reliant society. And even that would not guarantee a smooth transition. However, should China really be on a path to a step function in its evolution, the shocks to the system will be massive. Roach puts this diplomatically as follows:

But there is a catch: in shifting to a more consumption-led dynamic, China will reduce its surplus saving and have less left over to fund the ongoing saving deficits of countries like the US. The possibility of such an asymmetrical global rebalancing – with China taking the lead and the developed world dragging its feet – could be the key unintended consequence of China’s 12th Five-Year Plan.

A less diplomatic version implies that the relationship between China and the US would suffer a seismic shift in which the game theoretical model of Mutual Assured Destruction, and symbiotic monetary and fiscal policies, would no longer exist, allowing China to pursue its fate completely independent of any economic shocks that the increasingly distressed United States may be going through.

And confirming that the PBoC announcement is far more serious than the amount of airtime allotted to it by the mainstream media, is the just released article in Spiegel "China Attacked the Dollar" (google translated):

The Chinese central bank surprised with a spectacular announcement: The would-be superpower wants to handle their entire future foreign trade in yuan, not in dollars. Beijing shakes America's claim to represent the key currency - with serious consequences for the U.S..

The announcement was inconspicuous , but it has the potential, to permanently change the balance of power on the world currency market: China strengthens the international role of the yuan. All exporters and importers will, this year, be allowed to settle their business with their foreign partners in Yuan, the central bank said on Wednesday in Beijing.

This will respond to the growing importance of the yuan as a global reserve currency. "The market demand for cross-border use of the yuan rises," said the central bank. The PBoC had previously tested this plan by allowing 67 000 enterprises in 20 provinces to run their business abroad in yuan. The trade volume amounted to the equivalent of €56 billion.

Now the amount of yuan to be extended, it should be handled much more business in Chinese currency - and less in the U.S. Chinese companies trade at present often in dollars, they are thus dependent on the decisions of the U.S. Federal Reserve to pay on it in a rising oil price and will have pay higher transaction fees than necessary. That should change now.

Currently, the People's Republic can hardly take yuan out of the country and even that is monitored within the boundary of all legitimate capital flows. Chinese exporters have to change a large part of their euro, yen or dollars at a fixed rate revenue in yuan. Foreign companies wishing to do business in China must do so in Yuan, they can exchange their money in the People's Republic. Tourists are allowed a maximum of 20,000 yuan and exporting. Yuan an international market can not occur - and not on supply and demand-based exchange rate.

Needless to say, should the yuan be seen increasingly as a reserve currency, all of this, and virtually everything else is about to change.

The only question is whether or not the Yuan will cement its status at the top of the currency pyramid by allowing the backing of the currency with individual or a basket of commodities. If that were to happen, it would be the last nail in the coffin of the already terminally ill dollar.

Source: Zerohedge

[stomy]

THIS PROVES IT: The Obama Administration Is Still Clueless About House Prices
Shiller House Prices

Long-term real house prices (inflation adjusted) -- blue line

The NYT implied that the Obama administration, which includes not a single economist who recognized the danger of the housing bubble, still does not understand the bubble.

According to the NYT:

"the Obama administration, as well as the F.D.I.C., sees any broad settlement with the servicers [over improper foreclosure actions] as an opportunity to do more than just fix the foreclosure process. They want to stabilize the housing market, where prices are continuing to decline, and try to help bolster the economic recovery."

Actually nationwide house prices are still 10-15 percent above their trend levels. The housing vacancy rate, while down somewhat from its peak, is still far higher than any pre-bubble level. In other words, the Obama administration should fully anticipate that house prices will continue to fall. There is no obvious reason to want to prevent house prices from returning to more affordable levels.

Unfortunately the piece does not point out the absurdity of the position attributed to the Obama administration. Nor does it identify any of the officials holding this view so that they can be subjected to the ridicule they deserve.

Source: businessinsider.com