Saturday, October 25, 2008

Oct 25.08 commentary (For Friday Oct 24.08)....extremely extremely important for all to read.

www.lemetropolecafe.com

 

Good morning Ladies and Gentlemen:

 

First of all, the Federal Debt courtesy of the usa Government.  Here is the official link that records the federal debt.

The Debt to the Penny and Who Holds It

( Debt Held by the Public vs. Intragovernmental Holdings )

Current

Debt Held by the Public

Intragovernmental Holdings

Total Public Debt Outstanding

10/23/2008

6,250,228,142,316.10

4,273,884,843,486.77

10,524,112,985,802.87

 

As you can see the Federal debt rose by 30 billion dollars again basis Thursday. (Thursdays figure was 10.494 trillion)  They have started to use  the 700 billion to prop up the 9 banks  (125 billion) and they now are going to spend a further 125 billion to prop up regional banks. The next batch of dollars will need congressional approval and they will get it.  Expect the entire 700 billion to be deployed by Christmas.

 

However the losses from all the subprime, prime etc and the new losses from the collaterized debt  swaps will now total 4 to 5 trillion dollars to the usa banks.  Their retained earnings are no more than 900 billion so it will be impossible  for them to cover these losses and start all over.  The banks are dead.

 

In Europe the losses will probably be around 2.5-3 trillion dollars and it will be difficult for governments to backstop Euro banks.

 

The 700 billion dollars bailout  that the usa government have given to the banking sector is a teacup  in a ocean full of water.

 

The usa economy has ground to a halt.  Europe’s economy is grinding to a halt.  We are witnessing many commodity countries default:

 

  1. Iceland
  2. Hungary
  3. Argentina

 

Many more countries are wavering and cannot pay their interest on their debt.  Countries such as Spain, Greece, Turkey, Italy

and Denmark are all having massive problems.

 

Yesterday, we heard that Icelandic fisherman cannot be paid for their Lobsters from Canada.  Their letters of credit are being dishonoured.  We are seeing the entire credit world seize up.

 

The cascading events started in July 2008 when JPMorgan and one other conspirator shorted massive quantities of silver and gold and other commodities.  That started a downfall in the price of those commodities.  Then hedge funds saw their stock fall as commodity prices fell.  They started to liquidate as massive redemptions commenced, and this started the cascading events.

 

I will illustrate to you the hedge fund trading.  A hedge fund by definition is a fund that offsets a trade with a counter-balance trade.  We now know for the first time their hedging strategy.

 

The dominate trade was this:

 

Buy commodity funds like the Goldman Sachs commodity index,  or buy gold, or  something similar and short a commodity country like Iceland, Canada, New Zealand etc. They would short a Collaterized Debt Swap of a country.  They would then seek the underwriter had happened to be Lehman Brothers and AIG. The trade was denominated in usa dollars.

 

JPMorgan knew that Lehman brothers underwrote billions upon billions of credit default swaps on the health of nations.

When Lehman defaulted, many hedge funds saw themselves with only 1 side of the equation.  They could not collect on defaults on Iceland or Hungary.   Their  credit default swap on New Zealand was worthless because the underwriter had gone bust.

 

By now, commodity prices continued their spiral down and this caused many to liquidate.  This resulted in the usa dollar rising as this was the originating currency that commenced the hedge.  The usa dollar strength is not because of usa activity.  It is basically a death payment and everybody is receiving these as the economy defaults into oblivion.

 

I will now go into the events of yesterday:

 

Yesterday, upon awaking, I heard that the usa was in limit down.  Whenever the futures  go 5% down,  then circuit breakers are initiated and all trading in futures must stop until the Dow opens.  If the Dow falls 10% then the authorities will stop trading.

 

Nouriel Roubini predicted that they will halt markets around the world because of the massive fallout.  Yesterday, there were a plethora of sellers with only one buyer…..ie. the usa government through the ESF.  You could see that after the initial fall of 450 points, the Dow tried to rally many times and every time new sellers came.  Eventually, the Dow fell by 312 points.

 

Gold for the first time in quite a while broke from the Dow down gold down computer trading.  Gold started down badly to 680 and then immediately reversed course.  Gold ended the day up by 14.60 to 728.60.  Silver fell by 27 cents to 9.28 after hitting 6.87 early in the morning.

 

The open interest in gold climbed by 3700 contracts to 319000.  Looks like a few players wishing to take delivery in December.

 

The open interest in silver comex fell 1947 contracts to 93900 again a new record low. Also, more contracts for silver options for the October contract were filled.  The total volume of silver hit on the October option contract  is now close to 5 million oz.  This is 5 x normal levels for a non delivery month.  The contraction of OI is due to the banks who realize that everyone will stand for delivery…no one will roll to a future month. They are the smaller banks and do not want to witness the carnage at the comex.

 

In  silver, the next delivery month after December is March and nobody thinks there will be any silver by then.  December is the critical month to watch.

 

This came to us from the Rand Refiners.  They are the official makers of the Krugerrands and other official coins of the South African realm.  Here is the passage:

 

 

Mr du Plessis of Rand Refineries tells me that JP Morgan is virtually begging for delivery of all available gold and has been aggressively pushing the South Africans for delivery for a number of weeks already. None of the "non-Cartel" mining houses are willing to sell their stocks stored at the refinery at current prices.

He also advises me that J P Morgan are on an extremely short list of buyers entitled to delivery of any stock available for sale and that all buyers not on the short list are simply turned away, no matter how much cash they have in hand. Non-Cartel holders of bullion will sell only at very high premiums over spot, but they do have stock if anyone is interested.

The South African refinery is convinced that the pog will bounce off a low somewhere in the mid $500’s and track straight back up past $1000.00 and into the mid $1500’s in short order.

Good luck to anyone who can secure delivery at current spot prices.

This squeeze is definitely tightening.  End.

 

Libor continues to remain high.  The world continues to shy away from usa banks and as I pointed out to you above, they are dishonouring their letters of credit. Libor for 3 months was quoted in usa funds 3.51%..almost the same as on Thursday.

 

This is the news that started the world tumbling:

 

 

Fears of deeper recession grow

NEW YORK (Reuters) - Signs of a sharp slowdown in Europe and a barrage of profit warnings and job cut announcements from companies around the world raised fears of a deep global recession to new heights on Friday.

Stocks markets slid from Japan to Moscow, currencies experienced almost unprecedented volatility, and oil and other commodities tumbled on fears of plummeting demand that will accompany a global economic slowdown.

"I would characterize this as a shell-shocked mentality out there," said Thomas di Galoma, head of government bond trading at Jefferies & Co. in New York. "It's all the deleveraging of equities ... It's causing an issue for everyone."

The economic crisis also prompted further U.S. government intervention with officials stepping in to help finance the sale of ailing Cleveland-based National City Corp and preparing to announce 20 more banks will receive capital injections.

Speculation about a bailout of the U.S. auto industry also increased as people familiar with the talks told Reuters that General Motors has intensified negotiations to buy Chrysler's auto operations but that it intends to seek U.S. government aid to support any deal.

Meanwhile, Chrysler said that it was slashing about 5,000 white-collar jobs while industrial conglomerate ITT said it would also cut an unspecified number of positions.

Reports showed the euro zone's private sector economy shrinking at the fastest pace in at least a decade and a much deeper-than-expected contraction in Britain's economy in the third quarter, leading many analysts to declare recession.

Britain's economy shrank 0.5 percent in the third quarter, the government said, and a poll showed that U.K. home prices are expected to slide 15 percent this year and a further 10 percent next year.

China warned the outlook for the world economy was grim…end

 

This report from “Dave”  tells the truth about the declining home prices in the usa:

 

From Dave in Denver...

the TRUTH about today's existing home sales

HOME SALES TUMBLED IN SEPT posting one of their largest one month drops in a year, down 9.6%.

In reality, home sales FELL considerably from August, down 9.6%. Prices fell as well, putting millions of home owners into a negative equity or deeper negative equity position, exponentially increasing their likelihood of loan default.

http://mrmortgage.ml-implode.com/2008/10/24/no-spin-
existing-home-sales-down-96-from-augnot-good/

Leave it to industry organizations and the Government to spin the truth into lies that make headlines. The headline number is total garbage AND a large portion of the existing sales were foreclosures and short sales, which shows up in the significantly lower median sales price, which is now below $200k.

***end

And now for Government stats;

 

*DJ US Govt Pension Agency Lost $4.89B In Stk Investments In FY08

US INVESTMENT-GRADE CORPORATE DEBT CDS INDEX WIDENS TO RECORD 243.75 BPS AS STOCK FUTURES DIVE, MARKIT SAYS

US INVESTMENT-GRADE CORPORATE DEBT INDEX ABOUT 26 BPS WIDER TO 237 BASIS POINTS-MARKIT

end

The usa does not like this:

13:02 Agency spreads blowing out
Despite recent efforts to highlight the explicit government backing on debt issued by Fannie and Freddie, agency spreads are blowing out today with the heightened risk aversion in the global markets. 10-year agency spreads are trading roughly 12 bp wider at around 113 bp, having widened by more than 65 bp since Fannie and Freddie were nationalized in early September. StreetAccount notes that 10-year agency spreads have averaged roughly 58 bp over the last decade  end.

This came out late yesterday.  There two two newspaper items from China:

 

The first:

U.S. has plundered world wealth with dlr -China paper
Fri Oct 24, 2008 1:59am EDT
BEIJING, Oct 24 (Reuters) - The United States has plundered global wealth by exploiting the dollar's dominance, and the world urgently needs other currencies to take its place, a leading Chinese statenewspaper said on Friday.

The front-page commentary in the overseas edition of the People's Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies.

A meeting between Asian and European leaders, starting on Friday in Beijing, presented the perfect opportunity to begin building a new international financial order, the newspaper said.

The People's Daily is the official newspaper of China's ruling Communist Party. The Chinese-language overseas edition is a small circulation offshoot of the main paper.

Its pronouncements do not necessarily directly voice leadership views. But the commentary, as well as recent comments, amount to a growing chorus of Chinese disdain for Washington's economic policies and global financial dominance in the wake of the credit crisis.

"The grim reality has led people, amidst the panic, to realise that the United States has used the U.S. dollar's hegemony to plunder the world's wealth," said the commentator, Shi Jianxun, a professor at Shanghai's Tongji University….

http://www.reuters.com/articlePrint?arti
cleId=INPEK466920081024
end.

Please note that this came from the official newspaper in Beijing, China.

 

 

And now the second:    From Jim Sinclair’s website:

Jim,
Central bank warns of risks in illegal gold futures speculation
www.chinaview.cn

This is an interesting bit of news-speak from China as the gold market gets hammered even as the US Treasury and Europe issue debt and print money like there's no tomorrow.

This manner of speaking strikes me as China's way of indirectly telling the Western entities that are working the manipulation in the paper gold market to knock it off. They won't come out and speak to this directly; they'll make these cryptic remarks about some oddball thing they say is going on in their own domestic market.

"Extremely high risk of illegal futures trading..." That's sounds to me like Sino-speak for we will slam you if you keep up the coordinated attacks on gold via London. The rest about the local players is their way of saying to anyone in their own yard who's part of it that they need to watch themselves as well (I'd say Hong Kong in the mix that way).

China opened its markets to outside exchanges this summer. Chinese institutions and individuals can buy into ETFs and gold funds like anyone else now, if I recall correctly, so whatever this local thing they're talking about it seems to be some smoke they've blown in there.

That's how they operate. You can pretty much guarantee that the westerners won't pick up on it and the next "message" will be sterner.

The same thing happened in Korea. They dropped all these hints that they were uncomfortable with US forces getting up to the Yalu River. Westerners accustomed to more direct methods of speaking didn't get it and we got the whole saga of the Chosin Reservoir for our trouble. We're still sitting on the 38th parallel 50 years later. (See "Enter the dragon" for a good dialogue on how Chinese diplomacy works in that way).

It was interesting to see it in action when I studied their defense philosophy back in 2001 when I was there through George Mason Univ."
CIGA Jim B

Dear CIGA Jim B,
Of course you are right. I have spent more than a year negotiating with various Chinese companies, so your mention of Sino Speak is dead on target. You are so far the only person who read, understood and communicated that to me. What was being said is a direct and angry comment on the US manipulative stabilization. Well done.

Respectfully,
Jim S.   end

Looks like China is telling the usa to knock off all the illegal trading that Bush and allies have been orchestrating over these past 8 years.   They have had enough.  This news came at 3 pm Friday.

 

OK what do we expect in the coming days:

 

Expect the market to tank a few thousand points as it will be impossible for the government to continue to prop up the markets.  The government will approach its debt ceiling pretty rapidly.

 

The deficit on the usa is rising as Europe and Asia fall.  The usa is on a collision course with the  budgetary deficit rising to 2 trillion dollars and no foreigners buying their debt.  The printing of massive dollars with a credit default spiral will be catastrophic.

 

The question to me is can we have a hyperinflationary depression?   Answer :  yes.

And it is coming.

 

Speak to you on Monday.

 

Harvey.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thursday, October 23, 2008

Oct 23.08 commentary.

www.lemetropolecafe.com

 

Good evening Ladies and Gentlemen:

 

Gold was down 20.00 today to finish at 713.50. Silver rose one cent to 9.48.  The open interest on silver continues to remain flat which is causing cartel members big headaches.  Today, the options on silver contracts for October continue to rise.  As of tonight a total 0f 822 contracts or 4.2 million oz of silver have been hit and removed from the comex.  At this rate, over 5 million oz will have stood for delivery in a non delivery month.  This is 5 x normal levels.  It sure looks like a comex default in silver in December.  The OI for gold continues to contract.  The new OI is 315000 and pretty close to an all time low.

 

Sprott Asset Management's chief investment strategist, John Embry, went on Business News Network in Canada this morning and, interviewed by Amanda Lang, discussed, among other things, the suppression of the gold price on the New York Commodities Exchange. Embry speculated that long contract holders may call for delivery of enough December contracts as to prompt a claim of force majeure when the exchange cannot delivery enough real metal. The interview with Embry begins at the 11-minute mark and continues for about 6 1/2 minutes at the BNN Internet site here:

 

http://watch.bnn.ca/tuesday/#clip104603

 

The Dow was all over the board today.  At 3:30 the Dow was down 330 and then the PPT rallied the boys by juicing the various index vehicles.  The Dow ended the day up by 150 points or so.

 

In other economic news, I would like to report on a few new reports:

 

  1. Foreclosures hit an all time high.  Here is the highlighted passage:

 

Foreclosure filings surge 71 percent in third quarter as mortgage crisis worsens

Thursday October 23, 5:44 am ET
By Alan Zibel, AP Business Writer

WASHINGTON (AP) -- The number of homeowners ensnared in the foreclosure crisis grew by more than 70 percent in the third quarter of this year compared with the same period in 2007, according to data released Thursday.

Nationwide, nearly 766,000 homes received at least one foreclosure-related notice from July through September, up 71 percent from a year earlier, said foreclosure listing service RealtyTrac Inc.By the end of the year, RealtyTrac expects more than a million bank-owned properties to have piled up on the market, representing around a third of all properties for sale in the U.S. That's bad news for anyone who lives nearby and wants to sell their home. While foreclosure sales are booming in many areas, those properties are commanding deep discounts and pulling down neighboring property values. "It has a pretty significant impact in terms of pricing," said Rick Sharga…end

  1. Noted economist, Noriel Roubini is speculating that panic will set into markets and that may force the markets to have a one week holiday.  Here is the passage

Roubini Says `Panic' May Force Market Shutdown, Fund Failures

Oct. 23 (Bloomberg) -- Hundreds of hedge funds will fail and policy makers may need to shut financial markets for a week or more as the crisis forces investors to dump assets, New York University Professor Nouriel Roubini said.

``We've reached a situation of sheer panic,' Roubini, who predicted the financial crisis in 2006, said at a conference in London today. ``There will be massive dumping of assets,' and ``hundreds of hedge funds are going to go bust,' he said…

http://www.bloomberg.com/apps/news?pid=20601087&sid=appqOCRR4JMU&refer=home

-END-

 

 

   3.  Libor today rose for overnight loans from 1.12 percent to 1.18 per cent.  The three month Libor remains flat.  This is very ominous for the market which I will explain below.

 

 

4.More crooked events coming from NY.  Now we see non deliveries of Treasuries as bankrupt banks are kiting.  Here is the passage:

 

 

A Record Number of Buyers Cannot Take Delivery of US Treasuries They Have Purchased

Naked short selling and float and reserve plays are causing a record 'failures to deliver' in the US Treasuries markets. Some of this may be a 'kiting' scheme in which the sellers are playing a time float against the slight fees and penalties versus returns on volatility.

The Fed cannot even regulate its own products among its own dealer circles. What could possibly possess anyone to believe that they can do this with any other product in any less larger, less exclusive market?

Who are the responsible parties? Let's have a list of the prime offenders of this market. We might *not* be surprised at who is failing to deliver what they sell.

We suspect the Fed is turning a 'blind eye' to this activity. But more transparency would be helpful to alleviate that concern.

And do not be surprised when other things that you think that you are buying or own fail to show up from these same privileged parties.

http://jessescrossroadscafe.blogspot.com/2008/10/buyers-of-treasuries-cannot-take.ht

 

I have received many calls asking me how this thing will end.  I will try and give you my feelings.  My son Lenny and I concur on all aspects on this.

 

The Libor continues to remain high and will always be high as the usa banks owe more than 3-4 trillion dollars due to losses on subprime, ARMS, Alt-A. credit cards, and credit default swaps.  European banks are loathe to loan to usa banks because of the skeletons in their closet.  They do not wish to get burned.  The risk for overnight loan is extremely low.  The risk for 3 months is an eternity in the banking world.

 

The non borrowings from the banks is causing a debt deflation spiral.  Credit is seizing trade and causing the liquidation of many hedge funds.  As hedge funds unwind, the dollar is repatriated and thus the dollar continues to strengthen. 

 

Commodity countries are now getting killed because of the debt deflation.  Big commodity countries like Canada, Brazil, NZealand and  Argentina are getting pummelled.  The Cdn dollar fell today at one point to 1.272

 

However, if you were to look at the Fed debt of the usa it is rising exponentially.  Today the Federal Debt is 10.5 trillion a rise of 70 billion in 1 day.  This is very inflationary and I can assure you, the bond vigilantes are watching.   The Fed also saw its balance sheet rise by 800 billion dollars.  The total assets of the Fed is now 1.7 trillion dollars.

 

Also because Asia is slowing down, they do not have the dollars to buy usa debt.  This will force the usa to print its way out of its mess.  The usa is projected to have a deficit of 2 trillion dollars this year and my bet is that all of this money will be printed and not purchased by China.

 

This will cause long term interest rates to rise and this will blow up JPMorgan. If the long term bond lowers in price to around 108 should be enough.

 

Gold and gold shares are now tracking the Dow in perfect harmony.  If the Dow falls, gold falls.  If the Dow rises, then the cartel take their foot off the throat of gold.

 

This will continue until after the election.  I think the PPT will dispand after Nov 4.08.  Lets see.

 

If Asia has a bad day, then expect the Dow to soften and thus gold and its gold shares will again be hit.  The cartel do not wish to have any safe haven present.  Eventually, the physical market will overwhelm the paper market.

 

We are seeing this in silver now as the world is basically out of physical silver.  The cartel  will do everything in their power to lower silver but they cannot.  Simply because there is no above ground silver left.  The paper market  is meaningless.

 

Have a great day

Harvey

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wednesday, October 22, 2008

Oct 22.08 commentary.

www.lemetropolecafe.com

 

 Good evening Ladies and Gentlemen:

 

Today gold was bombed and it is still going down in Asia.  It is now trading around 723.00.  The  Euro has collapsed.  It is now trading at 1.2753.  The Canadian dollar is .7995 to the dollar or the usa is 1.256 over the cdn.

 

Commodity prices continue to collapse as the usa dollar index rises exponentially.  Europeans are getting squeezed as they exit their long commodity short dollar trade.  Basically, we are getting huge margin calls throughout the world.

 

The Libor rate for overnight night collapsed finally to 1.12%.  It is now well below the 1.5% parity. It is the 3 month libor that is high at 3.54% or a good 2.04% higher than par.   The world still thinks the usa banks are a credit risk.  Europe just will not lend or honour usa letters of credit.

 

This caused the stock market to tank today.  Also earnings were dismal. The Dow collapsed down 521 points.

 

Moodys appeared on the hill today and they were grilled.

Then this came out:

 

Credit-Rating Companies `Sold Our Soul' for Pay, Employees Said

Oct. 22 (Bloomberg) -- Employees at Moody's Investors Service told executives that issuing dubious creditworthy ratings to mortgage-backed securities made it appear they were incompetent or ``sold our soul to the devil for revenue,' according to e-mails obtained by U.S. House investigators.

The e-mail was one of several documents made public today at a hearing of the House Oversight and Government Reform Committee in Washington, which is reviewing the role played by Moody's, Standard & Poor's and Fitch Ratings in the global credit freeze.

``The story of the credit rating agencies is a story of colossal failure,' Committee Chairman Henry Waxman, a California Democrat, said at the hearing. ``The result is that our entire financial system is now at risk.'..

http://bloomberg.com/apps/news?pid.  End

 

So, Moody`s decided to give AAA ratings to garbage bonds.  They `sold our soul to the devil for revenue`` which was in one email.

 

The entire usa bond, stock market etc is nothing but a fraud.  The regulators are nothing but fraudsters as well as they are now turning a blind eye to all of these shaninagins.

The open interest on both gold and silver continue to decline.  Gold comex is now 319000 and silver is a really low 95000.

 

See you tomorrow

Harvey.

 

 

Tuesday, October 21, 2008

the Federal Debt.

 

I clicked on the Federal debt and got this:

 

The Debt to the Penny and Who Holds It

( Debt Held by the Public vs. Intragovernmental Holdings )

Current

Debt Held by the Public

Intragovernmental Holdings

Total Public Debt Outstanding

10/20/2008

6,189,647,424,005.11

4,275,242,220,547.07

10,464,889,644,552.18

Daily History Search Application

To find the total public debt outstanding on a specific day or days, simply select a single date or date range and click on the 'Find History' button.

The data on total public debt outstanding is available daily from 01/04/1993 through 10/20/2008. The debt held by the public versus intragovernmental holdings data is available:

  • Yearly (on a fiscal basis) from 09/30/1997 through 10/20/2008.
  • Monthly from 09/30/01 through 03/31/05
  • Daily from 03/31/05 through 10/20/2008



Enter Beginning Date

Enter Ending Date (optional)

  end.

 

 

Yesterday, the total was 10.334 trillion.  Today it is 10.464 trillion.  The usa just increased the federal debt today by 130 billion dollars. 

 

Ladies and gentlemen:   the usa has not used any of the 700 billion that it is authorized to use.

If you add the 700 billion plus to 10.464 trillion you get 11.164 trillion or  only 146 billion away from the debt ceiling.

 

And the new 600 billion in not even in these figures.  The usa is in some serious problems.

 

 

Oct 21.08 commentary.

www.lemetropolecafe.com

 

 

Good evening Ladies and Gentlemen;

 

Gold was trashed today, down by 21.00 to 766.00.  Strangely silver rose by 38 cents to 10.05.  The open interest on silver continues to contract. It is now down to its historical low of 96900.

 

Two strange events have occurred in silver.  The silver  lease rate rose to 2% today as silver was climbing.  However, the other noteworthy situation was the 822 contracts of silver options exercised already this month.   October is a non delivery month and generally activity is very limited.  In all previous non delivery months, total silver exercised have been around 800,000 oz to 1 million oz at best.  The 822 contracts represent 4,100,000 oz of silver and we are not through with the month yet.

I have noticed that the number of contracts have been rising daily.

 

There is good reason to believe that cartel members are starting to exit as they are afraid that the majority of comex silver will take delivery in December.  Many physical dealers cannot get physical silver at all.  The physical silver at auction is going for around 16.00 per oz or better.  Many are searching for private refiners to break the 1000 oz bar into 100 oz or lower.   Cartel members are thus scared of a default and what it will mean.  Since many are bank members, it is identical to a bank run.

 

In economic news, the libor rate for the 3 month usa  fell to 3.8%. Not only that but the overnight rate fell to 1.28% and that is below the standard 1.5%.

 

It is clear that rates are coming down and not fast enough.  Why?  The usa banks have their arteries clogged with Collaterized Debt Swaps and other junk.  The losses are in the trillions yet Paulson`s mandate is only $700 billion.  It is OK for one bank in Europe to lend to another as the ECB guarantees the notes.  A loan to a usa bank is not guaranteed and that is why libor is still high.

 

This one takes the cake:

 

The Fed has decided to intervene in the commercial paper market once again to the tune of 600 billion dollars:

Here are the two press releases:

 

09:02 Fed announces creation of Money Market Investor Funding Facility
The Federal Reserve Board on Tuesday announced the creation of the Money Market Investor Funding Facility (MMIFF), which will support a private-sector initiative designed to provide liquidity to U.S. money market investors. Under the MMIFF, the Federal Reserve Bank of New York (FRBNY) will provide senior secured funding to a series of special purpose vehicles to facilitate an industry-supported private-sector initiative to finance the purchase of eligible assets from eligible investors. Eligible assets will include U.S. dollar-denominated certificates of deposit and commercial paper issued by highly rated financial institutions and having remaining maturities of 90 days or less. Eligible investors will include U.S. money market mutual funds and over time may include other U.S. money market investors.
* * * * *

10:14 Follow-up: Fed to provide up to $540B for new Money Market Investor Funding Facility - Bloomberg
Headlines. JPMorgan will run 5 units backed by the Fed to buy money-fund assets and will buy up to $600B of money fund paper. Fed officials say $500B has prime money funds since Aug. The Fed will provide a start date for the facility by the end of the week.  end

It seems that the commercial paper is laced with garbage and the Feds are concerned about big losses in the money markets.  This is why they are coming in and supplying 600 billion dollars.  

This money goes directly to the end user and thus  inflationary.

 

The other big news came from Argentina.  Two months ago, I pointed out to you that Argentina has done a defacto default for non payment of interest.   Today those bonds are trading at 28 cents on the dollar with a yield of 28%.  Here is a link to the article:

http://www.bloomberg.com/apps/news?pid=20601087&sid=anix2bfAIyC0&refer=home.

 

Christina Kirchner, the President of Argentina decided today to confiscate all private pension plans to the tune of 29 billion dollars.  There will be rioting on the streets tonight.  Christina is the wife of former President  Neville Kirchner who was a factor in the great Argentinian default of  2001 and 2005. 

 

We now have 3 countries in default:

1.      Argentina

2.      Iceland

3.      Hungary

The following countries will default in short order:

1,  Spain

2.  Greece

3.  Turkey

4. Italy

5. Brazil

Most commodity countries are in deep trouble tonight as all commodities have fallen off a cliff.

Brazil, which led the world in growth these past 2 years, looks like it may default on debt.

 

The plunge in Platinum and Palladium will have a devastating attack on the economy in South Africa.  This country is experiencing brown outs and their gold production has fallen to below 260 tonnes from 300 tonnes last year.  Two decades ago they were producing 1000 tonnes per year.

Today, Canada lowered its discount rate by .25% and the market  swallowed the dollar.  The usa dollar exchange closed at 1.213.  Yet Canada has the safest banks on the planet.

 

See you tomorrow

Harvey.

 

 
* * * *
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