The gold open interest fell 5474 contracts to 460,793. The silver open interest dropped 247 contracts to 118,324.
The big news came after 4 o'clock when the COT report was released and it showed a huge drop in the short position of the commercials. This is always the signal that gold will advance as the market
removed most of the speculative longs who got flushed out again for the umpteenth time by the crooked cartel.
Dan Norcini of Dallas Texas, is perhaps the world's best authority on the COT reporting and on technical analysis on gold trading. His is very accurate in his assessment:
In his commentary this morning, he reveals the mechanics of trading on the comex and how the bankers short first and then cover later, fleecing unsuspecting longs.
Dan Norcini:
Filed under: Trader Dan Norcini
Dear Friends,
A few brief comments on this week’s release of the Commitment of Traders data are in order due the price action of the last few days. Please keep in mind that this data only covers price action through Tuesday of the current week.
I have circled the areas on the chart that I wish to call attention to in white. The specific date that I am interested in is 8/25/2009 within those circles.
If you note, the current data to the far right of the chart shows the lines designating the Managed Money, the Swap Dealers, and the Commercial/Producer/Users category within very close proximity of the area within the white circles, particularly 8/25. That is significant because it is during this time frame that the gold market was still trading within a two-month long broad consolidation pattern bounded by $970 on the top and $930 on the bottom. One week later, specifically on 9-2-2009, gold launched a massive upthrust obliterating overhead resistance centered near the $970 level as it moved up to $982. The very next session, gold tacked on another $22 more barely missing the $1,000 level. It never looked back from that point on carrying all the way to $1,227 in December where it reached a new temporary top. Since then gold has been in retreat with open interest steadily bleeding out as positions were liquidated across the board.
That position liquidation, by both longs and shorts, has resulted in the categories containing the largest traders receding to the same levels at which the last strong upleg in gold commenced. Yet, when we look at the price chart in gold, we see that as of Tuesday this week (the date through which the COT data is current) the price was trading at $1,077, fully $100 higher than the last time the major categories of large traders had net positions of this size. How to explain this?
It really is quite simple but critical to understand this – bullion bank selling caps gold to the upside as they attempt to eat through the plethora of bids in a rising market. They cannot hold back the rise in gold but they attempt to contain it. Once upside momentum begins to wane, the technicals turn and then the fund money begins exiting as longs are liquidating. It is into this long liquidation that the bullion banks do their short covering as they lift the shorts by buying them back. However, and this is the big key to understanding gold, the biggest physical buyers of gold on the planet (including the Eastern Central Banks) who only buy when they believe gold is now “cheap”, step in and actually compete with the bullion bank buying. That forces these perma bears to rapidly cover shorts at a much faster clip than they would prefer. After all, if the speculative crowd is in the process of throwing away their gold, why get in the way? Let them throw away as much as they can and the bullion banks can leisurely continue their short covering letting the market sink lower and lower as they profit all the way down. The problem that they have is the huge physical market in gold prevents them from having the luxury of sitting on their hands while the market drops lower. They are therefore forced to buy back at a much faster clip. That is what drops the open interest down to near the same levels as the last upleg began but leaves the price at a much higher level than the initial breakout run.
This has been the pattern for gold throughout the entirety of its now near decade-long bull market. It runs higher as speculative money flows in, backs off and retreats in price as bullion bank selling eventually succeeds in pushing price lower causing this long side speculative money to begin liquidating, only to then stabilize at a higher price after allowing for this liquidation. The result is that gold forms a new base of support at successively higher and higher levels consolidating its price gains while end users and big buyers of size become acclimated to the new, higher price. The market then eventually gathers steam inducing another wave of speculative buying which takes it on to a new, higher price once again and the cycle then repeats.
Think of it this way – you go to the store to find a bag of sugar. You see it normally sells for $2.50. You go in next week and it is now $3.00. Two weeks later it is at $3.50. A month later it is $4.00. What would most people do? Unless they really had to have it, they would probably wait to see if they might buy it cheaper especially if they had been coming in to the store to buy sugar and the last four months it had been trading at $2.50. At $4.00 they experience sticker shock. But then the price begins to drop. Down to $3.75 it goes in two weeks time only to be followed by another drop down to $3.50 during the next two weeks. By this time the buyer is beginning to think of $3.25 sugar as a bargain if they can get it there. If and when it does get there, they buy it. If the price begins to rise once again before it got to $3.25 where they thought it was cheap, they come back in and buy their sugar because they fear that it might start climbing back up to $3.65 – $3.80 or even $4.00 again before they can get it. Through this process, the term “cheap” takes on a new value in the eyes of prospective buyers.
Apply this now to gold – How many of us would have said back in $2005, that $1000 gold was “cheap”? Not many I would dare say. Yet this is precisely how the physical market in gold works and why gold finds support and stabilizes in price at successively higher price levels. Once the market looks as if it is through going down, guys who were looking to buy it “cheap” rush back in out of fear that prices are going to move up too quickly leaving them on the platform as the bull train leaves the station without them. Then the momentum funds move in and up it goes to another new high.
What encourages me as I look at today’s release of the COT data, is this pattern is still intact. One could basically make the argument that nearly all of the speculative long side money flows that took gold from $970 to $1227 over a 3 month period has been washed out yet gold is $100 higher in price than when the move began. In effect, the market has experienced a healthy washout and price correction and is now in the position of having a relatively low level of open interest, especially speculative hot money from the managed money crowd.
If gold can continue to hold above the recent lows and consolidate the gains made during the last few days of this week, it is setting itself up nicely for the next leg higher. The net long position of the Managed Money category could expand significantly before it would be anywhere near the peak made back in late November/early December of last year. There is now a lot of room for the speculative crowd to come rushing back into gold should the technical momentum turn decidedly to the upside. It is not there quite yet but a move above $1130 would probably do the trick. The key is whether or not the bulls can take advantage of their impressive performance this week and keep price from breaking below $1,050 – $1,045 for any length of time. A continued standoff in which further range trading is the order would be a major victory for the bulls short of an upside breakout given the tendency for seasonal weakness in gold during February. The fact that the bears could not break gold lower even with the weaker Euro this week is very significant and should not be underestimated.
Once again, the gold war wages on.
SILVER:
*The large traders decreased longs by 4,486 contracts and increased shorts by 3,026.
*The commercials increased longs by 2,258 contracts and decreased shorts by 6,505.
*The small specs decreased longs by 623 contracts and increased shorts by 628.
GOLD
*The large specs decreased longs by 23,273 contracts and increased shorts by 5,377.
*The commercials increased longs by 7,398 contracts and decreased shorts by 23,754.
*The small specs decreased long by 61 contracts and increased shorts by 2,441.
And so it goes, The Gold Cartel fleeces the public in coordinated activity once again.
This morning The Garman Letter abruptly eliminated its 3 ‘unit" gold position, the first time in several months this influential commentator has held no gold. While the pattern of declining highs since early December is cited, TGL also frustrated that it closed the FX hedge on its gold some weeks ago, which was a mistake. An early return to a FX/gold position is said to be likely.
In fact, TGL is correct that the firming $US has been very influential in gold recently. Using the Eurogold overlay chart available from Thebulliondesk.com, the divergence from the December 2 peak is such that if $US gold were tracking the Euro gold chart it would now be over $1,200.
Now that Gartman is out of gold, this shiny metal will resume its northerly trajectory!!. I would hate to see Gartman finally obtaining a batting average. So far it is .00000! (0 for 100 or so in gold trades)The CEF bullion vehicle closed at a 10.9% premium to NAV, the first double-digit premium in over a month and at a glance the highest since early November. The arrival of very high premiums in this instrument do seem to be associated with important strength in gold.
COMEX Warehouse Stocks Feb 11, 2010
SILVER
ZERO ozs withdrawn from the dealer’s (registered) inventory
50,295 ozs withdrawn from the customer (eligible) inventory
Total dealer inventory 47.37 Mozs
Total customer inventory 61.98 Mozs
Combined Total 109.35 Mozs
GOLD
6,600 ozs deposited in the dealers (registered) category
ZERO ozs withdrawn from the customer (eligible) category
Total dealer inventory 1.64 Mozs
Total customer inventory 8.29 Mozs
Combined Total 9.93 Mozs
There was no silver that moved into or out of the dealer inventory…are we surprised? In fact there were only paltry movements of gold and silver today.
There were 170 delivery notices issued in the FEB gold contract. The FEB gold contract total for the month is 4,937 notices or 493,700 ozs. Deutche Bank issued none and stopped 71. BNS issued none and stopped 65 while JPM issued 104 and stopped none.
There were a stunning 275 delivery notices issued in the FEB silver contract. The total delivery notices for the month in silver stand at 792 or 3.96 Mozs.
SILVER CLOSED IN BACKWARDATION AGAIN TODAY. The backwardation FEB/MAR in silver is +0.2 cents ($15.592/$15.590). FEB/MAY contracts are in contango of only 2.4 cents.
The contango in gold is $0.1 for FEB/MAR and $0.5 for FEB/APR. Gold is still knocking on the door of backwardation. This means that the physical market is tight for both silver and gold.
The Open Interest in FEB gold reduced to 892 contracts. The open interest in FEB silver INCREASED to 300 contracts. Someone wants physical silver desperately.
I-Net Bridge | Thu, 04 Feb 2010 16:34
[miningmx.com] --GOLD FIELDS, South Africa's largest gold producer, said it was "deeply concerned" about the power situation in South Africa.
"Our power has already doubled in two years," said Gold Fields CEO Nick Holland.
Now, Eskom's proposed tariff hikes would increase the company's power costs by a further 146% over the next three years…
http://www.miningmx.com/news/energy/Power-Gold-Fields-deeply-concerned.htm
China surprises by raising banks' required reserves
BEIJING (Reuters) - China sprung a surprise on global markets on the eve of its New Year's holiday with an increase in banks' reserve requirements, a move that can slow bank lending and tamp down on rising inflation.
Although investors had been expecting the People's Bank of China to push the reserve requirement ratio higher after an increase last month, few thought the second rise would come so soon.
Markets were rattled by fears that the pace of monetary tightening in China would be more aggressive than had been reckoned on, potentially denting global growth.
Investors pulled back from riskier assets, buoying the dollar which rose 0.7 percent against a basket of currencies. Stocks fell, while European and U.S. bonds jumped.
"The central bank is sending clear messages to banks that it wants more reasonable bank lending and it is paying close attention to inflation," Xie Xuecheng, an economist with Southwest Securities in Beijing, said. The 50 basis point increase comes into force on February 25.
The surprise was all the greater since China on Thursday had reported an unexpected slowdown in consumer price inflation in January to 1.5 percent.
Analysts had cautioned that the dip in inflation was only likely to be temporary because of seasonal factors, but markets had still interpreted it as a sign that the central bank could proceed more gradually with its normalization of monetary conditions after last year's ultra-loose pro-growth policies.
But the January data also showed that, for all the government's insistence that banks control their pace of lending, Beijing was still struggling to rein in credit. Banks lent 1.39 trillion yuan ($203.4 billion), the third-largest monthly total on record.
After Friday's reserve requirement increase, China's biggest banks will now have to put 16.5 percent of their deposits on hold at the central bank, crimping their ability to lend.
"Even though the inflation threat is mild, the central bank has huge pressures to mop up excessive funds from commercial banks to reduce their urge to extend corporate loans," Shi Lei, an analyst at Bank of China in Beijing, said.
"But the hike will still not fundamentally tighten liquidity too much and there will be more reserve ratio hikes upcoming," Shi said.
Each reserve increase drains about 300 billion yuan ($43.9 billion) of liquidity. The Chinese economy remains awash in cash after a record surge of 9.6 trillion yuan in bank lending last year.
US retail sales stronger than expected in January
WASHINGTON, Feb 12 (Reuters) - Sales at U.S. retailers rose more than expected in January as strong receipts from sporting goods, general merchandise, electronic and appliance stores offset flat purchases of motor vehicles, government data showed on Friday.
The Commerce Department said total retail sales increased 0.5 percent after falling by a revised 0.1 percent in December. Sales in December were previously reported to have dropped 0.3 percent.
Analysts polled by Reuters had forecast retail sales increasing 0.3 percent last month. Compared to January last year, sales were up 4.7 percent.
Retail sales are being closely watched for signs whether consumers are healthy enough to sustain the economy's recovery once government stimulus and the boost from restocking by businesses wanes.
Motor vehicle and parts purchases were flat last month, after rising 0.1 percent in December.
Excluding motor vehicles and parts, retail sales rose 0.6 percent in January after slipping 0.2 percent the prior month.
Economists had expected a 0.5 percent gain. Sales were boosted by electronics and appliance stores, where sales rose 1.2 percent after declining 3.5 percent in December. Sporting goods, hobby and books sales rose 1 percent last month, adding to December's 1.9 percent increase.
Sales at general merchandise stores rose 1.5 percent in January, the biggest gain since February 2009.
Core retail sales, which exclude autos, gasoline and building materials, rose 0.8 percent after falling 0.3 percent in December.
Jim Sinclair’s Commentary
More smoke and mirrors revealed by www.ShadowStats.com.
"No. 279: January Retail Sales"
- January Retail Sales Gain Reflected Inflation and Seasonals
http://www.shadowstats.com
09:55 Feb University of Michigan Confidence preliminary reading 73.7 vs. consensus 75.0
The final January reading was 74.4.
* * * * *
U.S. consumer sentiment slips in early Feb -survey
NEW YORK, Feb 12 (Reuters) - U.S. consumer sentiment slipped in early February, with high unemployment expected to continue and with most looking for no gain in income or home values in the year ahead, a survey released on Friday showed.
The Reuters/University of Michigan Surveys of Consumers said its preliminary index of sentiment for February was 73.7, down from 74.4 in late January but up from 56.3 a year ago.
The reading fell short of analysts' median expectation of a reading of 75.0, according to a recent Reuters poll.
The survey's gauge of current economic conditions was 84.1 in early February, the highest since March 2008. It was up from 81.1 in late January and above the 81.4 predicted by analysts polled by Reuters.
But the survey's barometer of consumer expectations dipped to 66.9, down from 70.1 in late January and short of the 70.9 forecast by analysts.
"Few consumers anticipated any significant declines in the jobless rate any time soon, and the majority expected recurrent economic weaknesses over the next several years," Richard Curtin, director of the surveys, said in a statement.
"The cumulative financial strain during the past few years, coupled with the fact that the majority still expect no gains in their incomes, work hours or home values in the year ahead, has meant that consumers have remained extremely cautious spenders," Curtin said…
from the Feb. 3rd Chicago Sun-Times
"BIG DEPOSIT: This could end up as one of the largest suburban leases of the year, but it can't be good. The Federal Deposit Insurance Corp. has leased 150,000 square feet, the entire building, at the Woodfield Corporate Center, 200 N. Martingale in Schaumburg. The federal guarantor of bank accounts needs what it calls a "temporary Midwest satellite office" as it processes receiverships and asset sales involving Midwestern banks. The FDIC said it will move in beginning in March and that the office will have up to 500 workers."
For what can they need all that space?
By Ian Katz and Robert Schmidt
Bloomberg News
Friday, February 12, 2010http://www.bloomberg.com/apps/news?pid=20601109&sid=a3OkrdITAZtA&pos=10WASHINGTON -- Gary Gensler, chairman of the Commodity Futures Trading Commission, is shattering any illusions that his 18 years at Goldman Sachs Group Inc. would make him sympathetic to Wall Street's effort to weaken derivatives legislation.
Over a private lunch at the Waldorf Astoria hotel on Jan. 6, Gensler, 52, told bank executives that while he once shared their goals -- to boost revenue and increase their bonuses -- his responsibility now was to American taxpayers. And if he gets his way, Gensler said, their firms will be less profitable, according to three people familiar with the discussion.
Europe’s Recovery Almost Stalls as Germany Stagnates
Feb. 12 (Bloomberg) -- Europe’s recovery almost stalled in the fourth quarter as waning spending and investment in Germany unexpectedly brought growth in the region’s largest economy to a halt.
Gross domestic product in the 16-nation euro region rose 0.1 percent from the third quarter, when it gained 0.4 percent, the European Union’s statistics office in Luxembourg said today. Economists forecast expansion of 0.3 percent, the median of 34 estimates in a Bloomberg survey showed. The recession in Greece deepened, with GDP falling 0.8 percent in the fourth quarter after a 0.5 percent slump in the previous three months…
http://www.bloomberg.com/apps/news?
pid=20601087&sid=akPchh4Ed0Vo&pos=2
-END-
Greece Distracting from Real Debt Crisis in U.S.
The current sovereign debt crisis in Greece and the potential for euro-zone countries to bailout the nation, has created a rush out of the Euro, which in October became the currency of choice for foreign central banks adding to their reserves. The declining Euro has added fuel to the strengthening U.S. dollar, and the ill-conceived notion that as bad as things are in the U.S., it's worse everywhere else and with the U.S. economy beginning to recover, Europe will be next to experience the financial crisis we experienced in 2008.
Unlike the U.S., the nation of Greece doesn't have their own printing press and the ability to create Euros out of thin air, in order to avoid default on their debt. While Greece's debt rating is currently an A2 with a negative outlook, the U.S.'s debt rating remains at AAA, despite the fact that the U.S.'s national debt (including unfunded liabilities) is currently 600% of GDP. If the U.S. was a corporation instead of a nation, its credit rating would be junk.
We hope that Greece doesn't get bailed out, because a bailout would cause foreign investors to become more irresponsible than ever and create even greater moral hazards. Unfortunately, not only is it likely that Greece will get bailed out, it's possible our own Federal Reserve will get involved. The U.S. Federal Reserve has the ability to make loans to foreign central banks without disclosure to the U.S. public. European banks have already benefited $50 billion from the U.S.'s bailouts of AIG, so it's not out of the realm of possibility that the Federal Reserve will intervene due to euro-zone countries being key U.S. trading partners.
Greece's budget deficit is currently 12.8% of their GDP, only slightly higher than the U.S.'s projected deficit as a percentage of GDP this year of 10.64%. Greece's economy is roughly 1/5 the size of California's economy and while Greece makes up just 3% of the total euro-zone GDP, California makes up 13.5% of the U.S. GDP. If the potential default of Greece is causing a flight from the Euro, imagine what is going to happen to the U.S. dollar later in 2010 if the state of California nears default. Just like Greece, California can't print money on their own.
We believe the U.S. dollar will ultimately win a race to the bottom with the Euro, but the only real winners (as far as retaining purchasing power) will be gold and silver. Although precious metals have declined during the recent weeks with a weakening Euro and strengthening U.S. dollar, gold and silver will soon benefit from a complete loss of confidence in western fiat currencies.
Many economists are beginning to call the Euro a failed experiment, because of the problems in Greece. A fiat U.S. dollar has only been around for 28 more years than the Euro. Fiat currencies are the root cause of all the economic problems in the U.S. and Europe. NIA believes all fiat currencies will be looked back at as failed experiments.
Please spread the word about NIA and have your friends and family subscribe for free at:http://inflation.us
Friday, February 12, 2010
Greece is Irrelevant Compared to What's Unfolding in the U.S.
It just boggles my mind that the whole world, especially the mainstream media in this country, is completely - no, tragically - focused on the possible collapse of tiny Greece, when the real story is unfolding right under our nose in the U.S. Keep in mind as you read this that Greece's GDP is roughly 3% of total EU GDP.
We all know about California's problems. Right now that State is staring at a $21 billion budget deficit - that forecast is probably too optimistic - and California already is over $6 billion in the hole on its unemployment insurance fund and is borrowing from the Feds to fund payments. Many States are now borrowing from the Government to fund unemployment claims. California represents 13% of total U.S. GDP, is the seventh largest economy in the world and has well over $500 billion in total debt outstanding (largely muni paper). Compare that to Greece, which has a little over $400 billion in debt and is insignificant in terms of global economic output. Yes,. Greece will default on its debt if it isn't bailed out, but what about California?
How about this piece of news which hit the wires yesterday afternoon after the stock market was safely closed: the New Jersey Governor declared a "fiscal emergency" because the latest budget proposal now has an $11 billion deficit, up from an $8 billion forecast deficit as recently as November, and up from the deficit in the current year which is projected to be $2.2 billion. Here's the Reuters link: NJ To Take a Dirt Nap? Last year New Jersey ranked 7th in relative economic output by State.
How about Pennsylvania? In a little-reported event last week, the State Government of PA is contemplating a Chapter 9 bankruptcy filing. Pennsylvania ranks 6th in economic output. New York is running toward the brick wall of insolvency. NY ranks 3rd in economic output. Ditto Illinois, which ranks 5th. Same for North Carolina, which ranks 9th. Michigan, Ohio, Nevada...
Anyone now think Greece looks problematic in the grand scheme of economic problems? And this analysis does not address the Federal Government debt swamp. Let me just say that anyone who believes Obama's forecast of $1.6 trillion for the next fiscal year is doing way too many bong hits. That budget deficit projection does not include an accounting calculation of the Government guaranteed entitlement payouts from all of the long term legacy psuedo-welfare programs like Social Security, Medicare, etc. From a financial accounting standpoint, that calculation needs to be taken into account annually, similar to the way it is required for all businesses. It also does not include several $100 billion in "off-budget" military expenditures. And the amount of total Treasury debt outstanding currently should include, but does not, some calculation that takes into account all of the recent guarantees issued by the Treasury in the last year which back trillions in banking system liabilities. Included in this number would be the $6 trillion of FNM/FRE debt being guaranteed, $600 billion in FHA mortgage paper, and the $1.25 trillion in mortgage paper purchased by the Fed. There are several other financial guarantee programs that will require billions in funding this year, like FDIC.
Anyone see any problems here? When you stack all of the above up against Greece, or even an aggregate of the so-called PIIGS + the UK, I think I'd rather have the EU problems than the catastrophic Debt Bubble getting ready to explode in the U.S. Make no mistake about it, Bernanke will soon be forced to seriously crank up his electronic printing press and dispatch a whole fleet of B-52 bombers to implement his infamous cash drop on a collapsing empire. It's exactly this predicament that is causing gold to move inexorably higher, making all those who forecast gold's price demise and lack of value look like complete idiots.
***
This Time Is Different, It’s Global!
The recently published book called “This Time Is Different” makes the case that this financial crisis has the same basic elements as every other financial crisis since the 1300’s. Economists Kenneth Rogoff and Carmen Reinhart do a great job of researching various financial meltdowns in places like South America, Asia, Europe and the U.S. In every crisis, no matter where it took place in the last 8 centuries, people thought a big debt buildup could not end badly. The authors say “arrogance and ignorance” always pave the way to financial hell, no matter what country or what century.
But I wonder if this time really is “different?” Could this be the biggest financial crisis ever? Former Federal Reserve Chief Paul Volker called this financial meltdown the “mother of all crises.” How could he say that? Well for one, the pool of unregulated over-the-counter derivatives is enormous. There are $600 trillion worth of derivative contracts worldwide according to the Bank of International Settlements. In simple terms, derivatives are debt bets between two parties that are very hard to collect on. Most derivatives have no standards, no regulation and no guarantee; and there is no public market for them. They are popular because bankers make insane profits selling them. I wrote about this phenomenon in a post called“Can The Financial System Really Be Fixed? Some Say No.” Warren Buffet called derivatives “time bombs.” Buffet also said, “…derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.” Today, the entire world is financially interconnected like never before because of derivatives.
One deficit record after another is being set on a regular basis in the U.S. The debt load now stands at about $12 trillion. With the recently passed debt ceiling, it will be at least $14.3 trillion by the end of the year. (There are also more than $6.2 trillion in liabilities with failed mortgage giants Fannie and Freddie that are not accounted for in the U.S. budget) America’s total debt and unfunded liabilities are in the neighborhood of $63 trillion. Many experts say America will address this huge debt problem by printing money. This will continue to devalue the dollar which is the world’s reserve currency. This could cause inflation and calamity on a global scale.
The news gets worse because just about every other industrialized country in the world is facing record deficits and liabilities. Those countries will also print money to pay off debt.
According to Yale Economics Professor Robert Shiller, we had the biggest housing boom in history in the first part of the new century. It was a first time global phenomenon. Now, the U.S. and much of the rest of the industrialized world are working through the biggest housing meltdown in history, and it’s not yet at the bottom.
Commercial real estate is also in the process of a record setting meltdown.
Public pensions in the U.S. are a record $2 trillion in the red.
Nearly every state in the U.S. is facing record budget shortfalls.
Sovereign debt is being called into question with talk of national defaults on a scale unheard of before. Just this week, economist Dr. Mark Faber said, “…I am not interested in government or sovereign debt because all governments will eventually default, including the U.S.” Faber thinks governments will default, in part, by printing money to pay for their liabilities and debt. That prediction spells I-N-F-L-A-T-I-O-N on a global level. It is no surprise that Dr. Faber thinks gold will continue to outperform stocks.
So, the things that got us in this financial crisis are no different than the things that caused other financial meltdowns throughout history. I think what is different this time is the size of the debt buildup. It is on a scale never before seen in human history. Debt is overwhelming individuals, corporations and countries. This global debt will likely produce the biggest financial meltdown in history, deserving of the Volker expression “mother of all financial crises.”
Jim Sinclair’s Commentary
I would add but one thing to this excellent article by Greg Hunter. That item is the fact that the drop from a total amount of nominal value outstanding for OTC derivatives from 1.44 quadrillion to the present level of slightly above six hundred trillion was a product of the BIS simply changing their means of computer valuation to "Value to Maturity," another total computer value cartoon.
That means the problem that started this disaster is wholly unattended to. The situation, although papered over, is wholly unattended to.
Credit Suisse Declares the U.S. a Riskier Investment Than Indonesia
By Megan Carpentier 2/12/10 1:47 PM
Amid fears that Switzerland might come to an agreement with the United States on banking privacy and tax evasion disclosures, Credit Suisse issued a report identifying those countries it determined to have the highest risks of default on their sovereign debts. Number 16 on the list was the United States, based primarily on its 2009 budget deficits and government debt.
Countries ranked less likely to default include corruptocracy Kazakhstan, less-than-reform-minded Indonesia, the debt-ridden Philippines and violence-ridden Colombia. By comparison, U.S. Treasuries prices are up today despite a new issuance this week.
Friday, February 12, 2010
Greek slump threatens debt plan, EU aid elusive
A European Union government source said meetings of the region's finance ministers next week were unlikely to put together an aid package for Greece, suggesting governments were still unable to decide how to prevent the crisis from hurting financial markets' faith in the euro zone
Classic example of damned if you do, damned if you don't.
The bailout of Greece, when it happens, either transparent or opaque, inevitably means the bailouts of other weak EU members. The market is smart enough to anticipate which ones. In other words, the market participants will sense fresh meat - trading opportunities for organized pools of money at the expense of the taxpayer-sponsored printing press.
Of course, the disaster in Greece, compares with that of California, New York, and so on, but bias prevents anything more than token and cursory comparison. Rest assured that organized money will always circle fresh meat. Watch for similar beat downs in California, New York, Illinois, that will ratchet up the calls for bailouts within the U.S. Union. If the above is deemed bad for the Euro, the realization that the U.S. Union and EU share a common leg within a three-legged race, it won't be long before the same logic applies to the U.S. dollar.
U.S. Union and EU share a common leg:
Source: finance.yahoo.com
