Saturday, January 28, 2012

Gold and silver rise again/Greece/Italy/Portugal/Spain all in turmoil as Fitch downgrades

Good morning Ladies and Gentlemen:
Before commencing my report, here our Friday's entrants to the banking morgue:
1. Bank East, Knoxville Tennessee
2. Patriot Bank of Minnesota, Forest Lake MN
3. First Guaranty Bank and Trust of Jacksonville Fla,  Jacksonsville FL
3. Tennessee Commerce Bank of Franklin, TN
The price of gold rose on Friday finishing the comex session at $1731.80 up $5.80 on the session.  The price of silver rose by only 5 cents to close at $33.75.  However in the access market both metals shot up considerably.  Here is how they finished the evening:
Gold:  41737.30
Silver:  $33.99
If gold and silver hold up on Monday, this will be the first time in a decade that these metals were not smashed prior to or right after options expiry.  For many years the bankers modus operandi was to raid these precious metals prior to options expiry  as they wanted to preserve as much physical as possible. They would knock the paper price of metal below the level where many options were written whether puts or calls.  For the past several months, the bankers new ploy was to attack right after options expiry but before first day notice to inflict pain on those who exercised.  The plan was to prevent the longs from putting up the entire contract price.  If Monday holds up this will be a massive defeat to our bankers as many options were suddenly "in the money" and  many will stand for metal.  I will report on the progress of these longs for you once the delivery month of February commences for gold, and the non delivery options expiry month of February for silver.
Let us head over to the comex and assess trading, inventory levels, a final amount of silver and gold standing for January and then position levels by our major players with our COT report.
The total gold comex open interest fell by 1287 contracts from 434,997 to 433,710.
This occurred with gold sharply rising on Thursday which generally means that we lost some
of our banker friends. The front options expiry month of January saw its OI fall from 62 to 6
for a loss of 56 contracts.  We had 61 delivery notices on Thursday so we gained 5 contracts
or 500 oz of additional gold standing.  First day notice for the gold contract is this Tuesday.
Here the OI contracted from 110,572 to 75,705 which is a considerable drop.  Monday night
we will receive delivery notices and on Tuesday we should be a good glimpse on how many gold oz will be standing.  As always I will report this to you. The estimated volume on the gold comex on Friday was a very large 310,459 as we had considerable rollovers.  The confirmed volume on Thursday was very high at 358,282.   Now we await to see if we have many determined longs standing for February.
The total silver comex OI continues to trade in a narrow channel.  On Friday, the resting OI for the silver comex rested at 102,006 down 510 contracts from Thursday's level of 102,514. The front options expiry month of January saw its OI drop from 84 to 52 for a loss of 32 contracts. We had 43 delivery notices on Thursday, so we gained another 11 contracts of additional silver or 55,000 oz. The next big delivery month is March and here the OI dropped from 51,142 to 49,576.  Since silver had a great advance on Thursday, this must indicate some banking liquidation as they are probably scared out of their minds with the rapid rise silver.  The estimated volume on the silver comex was an extremely anemic 31,194. The confirmed volume on Thursday came in at 43,149.  If Butler is right, that the comex volume is approaching 100% for the HFT traders, this does not look good for our bankers as our longs are resolute and there is no activity whatsoever that will force the silver leaves to leave the silver tree. However I caution you that volatility in the silver comex will be like a yo-yo.
Inventory Movements and Delivery Notices for Gold: Jan 28 2012:




Gold
Ounces
Withdrawals from Dealers Inventory in oz
298 (Scotia)
Withdrawals from Customer Inventory in oz
96 oz(Manfra)
Deposits to the Dealer Inventory in oz

nil
Deposits to the Customer Inventory, in oz
32,104 (Brinks, HSBC)
No of oz served (contracts) today
6 (600)
No of oz to be served (notices)
zero
Total monthly oz gold served (contracts) so far this month
1191  (119,100)
Total accumulative withdrawal of gold from the Dealers inventory this month
6017
Total accumulative withdrawal of gold from the Customer inventory this month

325,403 oz
 The dealer received no gold today but did have a withdrawal of 298 oz from Scotia. The  customer had all the action on Friday:
Customer Deposit:

1. Into Brinks:  64 oz
2. Into HSBC:  32,040 oz.
total deposit:  32,104 oz.

We had only a tiny customer withdrawal of 96 oz from Manfra.
We had no adjustments
The total dealer inventory gold rests this weekend at 73.93 tonnes of gold.

The CME reported that we had 6 notices to be filed for 600 oz of gold. The total number of notices filed so far this month total 1191 for 119100 oz. To obtain what is left to be served, I take the OI standing for January (6) and subtract out Friday's deliveries (6) which leaves us with zero notices.  Thus, that should have completed the month of January but lo and behold late Friday night another 6 notices were served as London must be on fire with demand! 
Thus the  number of gold oz standing for January is as follows:

119100 (oz served) +  zero oz to be served upon =  119,100 oz or 3.704 tonnes which is huge for a non delivery month.  If we are to add the delivery month of December to the two non delivery months of November and January we have a total of 74.384 tonnes of gold standing against an inventory of 73.93 or 100.61%.
the silver chart: January 28 2012:

Month of January now commences:


Silver
Ounces
Withdrawals from Dealers Inventorynil
Withdrawals fromCustomer Inventory7,044(Delaware, Brinks)
Deposits to theDealer Inventory596,543 (Brinks)
Deposits to the Customer Inventory655,248 (Delaware, HSBC)
No of oz served (contracts)52 (260,000)
No of oz to be served (notices)zero
Total monthly oz silver served (contracts)1213  (6,065,000)
Total accumulative withdrawal of silver from the Dealersinventory this month1,245,022
Total accumulative withdrawal of silver from the Customer inventory this month 5,350,671
You have to admit we are getting huge numbers of silver oz enter both the dealer and customer this month.
The dealer received 596,543 oz  (into Brinks)
The customer received the following silver:
1. Into Delaware: 55,032 oz
2. Into HSBC:  600,216 oz
total deposit by customer:  655,248 oz
We had the following withdrawals by the customer;
1. Out of Brinks:  6039 oz
2. Out of Delaware: 1005 oz
total withdrawal by customer:  7044 oz
we had one adjustment of 3129 oz whereby a customer leased this silver to a dealer.
The total registered or dealer silver rests this weekend at 36.54 million oz
The total of all silver rests at 128.238 million oz.
The CME reported that we had 52 notices filed for 260,000 oz. The total number of notices filed so far this month total 1213 for a total of 6,065,000 oz.  To obtain what is left to be served upon, I take the OI standing for January (52) and subtract out Friday deliveries (52) and that should have completed the month.  But no, someone or some big entity needed silver badly and served another 30 contracts prior to first day notice.
Thus the total number of silver oz standing in this delivery month is as follows:

6,005,000 (oz served)  +  (zero oz to be served)  =  6,065,000 oz.
We will get the final verdict on amounts standing on Monday night.

Let us now proceed to our ETF's SLV and GLD and then our physical gold and silver funds:

Sprott and Central Fund of Canada.

The two ETF's that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.


Thus a default at either of the LBMA, or Comex will trigger a catastrophic event.



Jan 28. 2012:


Total Gold in Trust

Tonnes:1,271.09

Ounces:40,866,777.14

Value US$:70,513,224,606.52




Jan 27.2012



TOTAL GOLD IN TRUST

Tonnes:1,261.11

Ounces:40,546,014.10

Value US$:70,000,898,214.51








we gained another 9.98   tonnes of gold into the GLD.  The employees of the Bank of England again had a very busy today.



And now for silver Jan 28 2012: 





Ounces of Silver in Trust305,776,244.700
Tonnes of Silver in Trust Tonnes of Silver in Trust9,510.70







Jan 26.2012 

Ounces of Silver in Trust305,776,244.700
Tonnes of Silver in Trust Tonnes of Silver in Trust9,510.70







we neither gained nor lost any silver today in the SLV.
Again very strange with the huge activity in the price of silver last week, then  on all this week and yet no additions whatsoever. Strange!


end.




And now for our premiums to NAV for the funds I follow:



1. Central Fund of Canada: traded to a positive 5.1 percent to NAV in usa funds and a positive 5.6% to NAV for Cdn funds. ( Jan 28 2012.).
2. Sprott silver fund (PSLV): Premium to NAV rose  to  7.13.% to NAV  Jan 28 2012:
3. Sprott gold fund (PHYS): premium to NAV remained constant at  5.03% positive to NAV Jan 26. 2012). 


It seems that Sprott funds are being punished as they try and obtain the 8.5 million oz of silver that is in scarce supply. However their premium to NAV rose a bit these past few days.  Very shortly the premium to NAV will return to previous levels with the silver Sprott.  Also notice that finally the Central Fund of Canada has returned to normal premiums to NAV.

end.

Friday night we receive the COT report and here we see position levels by the major players.  Let us see what we can glean from the report.  First the gold COT:


Gold COT Report - Futures
Large Speculators
Commercial
Total
Long
Short
Spreading
Long
Short
Long
Short
173,479
31,256
29,518
164,048
343,816
367,045
404,590
Change from Prior Reporting Period
6,106
-88
-4,543
-8,643
-1,851
-7,080
-6,482
Traders
171
59
82
52
46
263
157


Small Speculators




Long
Short
Open Interest



59,987
22,442
427,032



1,274
676
-5,806



non reportable positions
Change from the previous reporting period

COT Gold Report - Positions as of
Tuesday, January 24, 2012


The Large Speculators:

Those large speculators that have been long in gold guessed correctly as they added a huge 6106 contracts to their long side and are very very happy campers today.

Those large speculators that have been short in gold covered a very tiny 88 contracts.
They are not happy with their high short position.

Our Commercials:

The commercials that are close to the physical scene and are generally long in gold somehow got blindsided with the Fed announcement that ZIRP is to continue to maybe 2015, as they pitched a huge 8643 contracts from their long side.

Those commercials that have been perennially short in gold with the likes of JPMorgan and company, covered only a tiny 1,851 contracts.  They were blindsided also by the speed of gold's rise.

Our small specs:

The small speculators that have been long in gold correctly saw the lay of the land as they added a rather large for them 1274 contracts.

The small speculators that have been short in gold somehow got it wrong and added 676 contracts.

Conclusion:a would say neutral.  The large specs are certainly pouring in but the commercials went more net short.  Remember that this report is from Tuesday the 17th of January to the 24th of January.  The FOMC announcement was on Wednesday.  Thus the more important COT report will be next week.

The Silver COT:

Silver COT Report - Futures
Large Speculators
Commercial
Total
Long
Short
Spreading
Long
Short
Long
Short
27,051
10,934
20,520
35,283
60,304
82,854
91,758
842
-1,882
1,292
-3,746
893
-1,612
303
Traders
68
36
43
35
42
126
101

Small Speculators




Long
Short
Open Interest



20,171
11,267
103,025



969
-946
-643



non reportable positions
Change from the previous reporting period

COT Silver Report - Positions as of
Tuesday, January 24, 2012


Our large speculators:

Those large speculators that have been long in silver for quite some time correctly saw the rise in silver as they added 842 contracts to their long side.

Those large speculators that have been short in silver were certainly spooked by the depth of silver's rise last week as they covered a rather large 1882 contracts from their short side.

Our commercials:

Those commercials that have been close to the silver scene and are long in silver pitched a rather large 3,746 contracts.

Those commercials who have been perennially short in silver and subject to the CFTC probe and class action lawsuits are thoroughly annoyed this weekend as they added another 893 contracts to their short side.

Our small specs:

The small specs that have been long in silver are very happy campers today as they added a rather large for them, 969 contracts.

The small specs that have been short in silver covered a high, 946 contracts.


Conclusion:  a little bearish as the commercials dug in their heals and provided the silver paper.  However the more important COT report will be next week.



end






Now let us see some of the big news which shape the paper price of gold and silver.
First, let's see what is happening inside Greece.  Wolf Richter of www.testosteronepit.com gives a good account as to which group have been buying the Greek bonds now.  Interestingly it is the "dumb money"..the retail investor who generally get it wrong as the banks are selling like crazy.  Thus it looks like Greece will go into a disorderly default:






Abysmal news for Greek Bonds and Debt Swap Negotiations

testosteronepit's picture





Once again, hope is pervading the media that an agreement might be reached between the Greek government and private sector investors on a debt swap, maybe even this weekend, though everyone is hobnobbing at the World Economic Forum in Davos where all sorts of things have already been said and leaked between drinks. EU Finance Commissioner Olli Rehn was the bearer of the good news: the 50% haircut, though now judged insufficient by practically everyone, appears to be in the can, and the only remaining thing left to fight over is everything else, including the trivial matters of coupon rate and maturity.
So we follow Rehn into hopefulness. We've been hearing forever that large vulture hedge funds, which were holding these bonds by the shipload, essentially blocked the debt swap negotiations as they were hoping to push Greece into default, which would then finally be declared a “credit event” that would trigger CDS payouts. Then more recently we read practically everywherethat almost the opposite was true, that the largest such funds actually spurned Greek bonds, and that some had gone through the unusual trouble of outright denying involvement. And now the Frankfurter Allgemeine suddenly, coup de théâtreknowsthat hedge funds aren't even at the negotiating table because their participation is so inconsequential.
It appears they have figured out that waiting for a "credit event" that would trigger a CDS payout is like waiting for Godot. So then, who are these private investors who hold about €206 billion of these crappy bonds? Well, the usual banks and financial institutions, and ... German retail investors. The dumb money is moving in.
The Stuttgart bourse is Germany's leading exchange for derivative products and bonds, including euro sovereign bonds. It handles 60% of the transactions by individual German investors. And Greek sovereign bonds are suddenly trading like there is no tomorrow. Oh, wait.... There is no tomorrow? At any rate, trading volume in these bonds has more than doubled since mid-December and is now second among all European sovereign bonds. Only German Bunds trade at a higher volume.
Bonds due in March make up 80% of the trading volume. The lure: they’re “cheap.” They go for 39 cents on the euro, down from 50 cents on the euro at the end of December, after a spike. So they’re volatile, and volatility leaves room for hope. Bonds due in May are trading below 30 cents on the euro.
These investors are throwing the dice. Left to its own devices, Greece will not be able to redeem these bonds when they mature in March or May. Whatever they're worth afterwards will be significantly less than what they are worth now, if Argentina is any guide.
If there is an agreement with private sector bondholders, and if there is sufficient participation, and if the debt swap actually takes place, then these bonds may turn into a profitable investment. But those are big ifs. One thing is for sure, which leaves little room for hope: the smart money was selling them those bonds.


end





Early on Friday morning, Wolf Richter describes the Greek and Portuguese scene:

Here he describes the holders of bonds with credit default swaps will likely hold onto their bonds and cash out with par.  The short dated owners will also hold on, hoping to score better by getting par equal to the ECB who will not partake in the deal as they are not part of the PSI.  The anger that the private bond holders are put in a subordinate position is not weighing too good on the deal .

For those who think that only Greece will fail guess again.  Yesterday night, the Portuguese  5 yr bond yield closed at 16.7%.  The two yr yield is also rising even though LTRO exists for it.

Thus Portugal will fail as well:

(courtesy Wolf Richter/www.testosteronepit.com)







Greece, Portugal, And LTRO

Tyler Durden's picture





Via Peter Tchir of TF Market Advisors,
While we wait to see what happens with the Greek debt negotiations, here is a useful update from Bloomberg.
There are a couple of things about the article I find most useful.  The first is that they seem less afraid of triggering a Credit Event and some even think it could be a good thing.  We have been arguing that for months and months.
This article estimates that only about €100 billion of Greek bonds are actually in hands that will follow the IIF recommendations.  It is only an estimate, and doesn’t mean that some non IIF members won’t go along, but it also doesn’t ensure that even all the IIF members will.
The negotiations are getting tricky (actually they have always been tricky, it’s just that until recently no one was actually negotiating).  The IMF seems insistent that they won’t provide new money without a high participation rate in an exchange with worse terms than many thought.  There are questions about whether the ECB should participate or not.
I have seen a range of estimates of what price the “new bonds” would trade at.  Even assuming 100% participation for the €206 billion of bonds held by non-priority entities the Greek debt situation will be bad.  The goal of 120% Debt to GDP in 2020 seems a long way off especially as the economy seems to be getting worse rather than better.  Even with the plan, debt to gdp would rise again to well above 120% before it begins the theoretical decline to 120%.  About the highest price estimate I’ve seen for new bonds (with principal protection from the EFSF) is about 75% of par.  The lowest is about 25%.  The more bonds that are exchanged, the higher the value should be, but realistically I think something around 50% to 60% of par is about right.
So, if you own €100 million of Greek bonds, you will exchange them for €50 million of new bonds, that will likely have a value of about €25 million.  Depending on which bonds you own, you could sell those bonds in the market today for about €25 million.  What you are getting if you agree to the deal is becoming clear, so investors need to compare that to what they might get if they don’t agree.
Basis package holders will continue to want to hold out.  This is a small group, I’m guessing only about $2 billion (total Net CDS is down to only $3.2 billion).  The value of the CDS contract (currently 63 points up front) will decrease with a high participation rate.  The basis package holders will want to hold onto their bonds, as deciding to exchange and holding on to the CDS is likely a losing proposition.
Short dated bond holders (next 6 months) will be tempted not to exchange.  If a deal gets announced and the IMF gives the next slug of money, it will be awkward for them to go ahead with “selective default” where they pay the ECB and other “public” holders out at par but not banks, insurance companies, and hedge funds.
The ECB’s Greek bond holdings are very interesting.  They are adamant that they won’t participate.  That has been the line all along, but I’m sure they aren’t happy that the IMF is pushing.  It does raise some questions about the SMP.  Bonds held by the ECB as part of the SMP have no special protections and are not legally nor structurally senior, yet they are being treated that way.  This effective subordination of non ECB holders may weigh on the back of investor minds.  Until now, the ECB’s purchases of bonds have been rewarded by the market with increased risk taking, but if every purchase is subordinating non ECB held debt, the enthusiasm may decrease as you have to balance the benefits of the ECB purchases with the fact that you are being crammed down.  If the ECB takes a loss it could be done in a constructive way (immediate support from Germany, France, and others, to provide fresh injections into the ECB with no complaints), or the losses could be taken in some bizarre fashion with off-market trades to the EFSF or a lot of bickering from politicians about why they shouldn’t provide support for ECB losses.
Portugal and the LTRO
The Portuguese debt problem is much smaller than that of Greece, but it should be attracting more attention.  The entire EU community has stated over and over that Portugal is not Greece, and PSI is going to be unique to Greece.  They can say that, but clearly the market doesn’t believe it.
There are a couple of key points that this graph highlights.  The fact that the 5 year bonds hit a new low is important.  The market is clearly not buying into the rhetoric that only Greece will default (or haircut, or PSI, or restructure, or whatever euphemism they want to use).
Separately, this graph may be the best example of what LTRO has done.  There were 3 earlier summits or announcements or grand plans.  In each case, the 2 year bonds and 5 year bonds moved relatively in line.  They both jumped higher, then leaked lower.  That seems to have changed with LTRO.  The 2 year bonds (covered by the LTRO maturity) performed much better than the 5 year bond.  We didn’t see the 5 year bond participate in the rally to the same extent that the 2 year did.  That would make sense as there was less selling pressure if not outright purchases on the back of LTRO.  But now, the 2 year is starting to follow the 5 year down.  Even LTRO is not enough to keep the 2 year bonds propped up.
The 5 year Portuguese bond shows that the market has no faith that Greece will be a unique situation, and the 2 year bond is showing that LTRO may be useful, but it doesn’t trump actual risk.  Watch both of these closely.



end


Portuguese 10 yr bond yield:

Snapshot

SUMMARYONE-YEAR CHART INTERACTIVE CHART
Value15.22One-Year Chart for PORTUGUESE GOVERNMENT BONDS 10YR NOTE PORTUGAL PL (GSPT10YR:IND)
Change(%)
Open15.26
High15.41
Low14.80


end




And to confirm the above we get the following from the UK  "Foreign office sources" which state that Merkel believes Greece will default on its debt:

(courtesy zero hedge/BBC?Andrew Bell)






Endgame Begins - UK "Foreign Office Sources Say Merkel Now Thinks Greece Will Default"

Tyler Durden's picture





Courtesy of the BBC's Andrew Neil, on the back of the previously noted formal annexation demand of Greece by Germany:
Of course, this is what we, and everyone else whose frontal lobe has not bee hijacked by the status quo, said back in January 2010...
JP Morgan and Morgan Stanley better pray they are right when they say they are 100% insulated from contagion, because we are all about to find out.

end


Late last night we got this from Greek newspapers and Reuters:

(courtesy zero hedge/Reuters)







The Silent Anschluss: Germany Formally Requests That Greece Hand Over Its Fiscal Independence

Tyler Durden's picture





Update 2: the first local headlines are coming in now, from Spiegel: Griechenland soll Kontrolle über Haushalt abgeben(loosely Greece must give up domestic control), andKathimerini: Germany proposes Greece relinquish some fiscal powers, sources say
Update: Formal Greek annexation order attached.
It was tried previously (several times) under "slightly different" circumstances, and failed. Yet when it comes to taking over a country without spilling even one drop of blood, and converting its citizens into debt slaves, Germany's Merkel may have just succeeded where so many of her predecessors failed. According to a Reuters exclusive, "Germany is pushing for Greece to relinquish control over its budget policy to European institutions [ZH: read ze Germans] as part of discussions over a second rescue package, a European source told Reuters on Friday." Reuters add: "There are internal discussions within the Euro group and proposals, one of which comes from Germany, on how to constructively treat country aid programs that are continuously off track, whether this can simply be ignored or whether we say that's enough," the source said.' So while the great distraction that is the Charles Dallara "negotiation" with Hedge Funds continues (as its outcome is irrelevant: a Greece default is assured at this point), the real development once again was behind the scenes where Germany was cleanly and clinically taking over Greece. Because while today it is the fiscal apparatus, tomorrow it is the legislative. As for the executive: who cares. At that point Goldman will merely appoint one of its retired partners as Greek president and Greece will become the first 21st century German, pardon, European colony. But at least it will have its precious euro. We can't wait until Greek citizens find out about this quiet coup.
More from Reuters:
The source added that under the proposals European institutions already operating in Greece should be given "certain decision-making powers" over fiscal policy.

"This could be carried out even more stringently through external expertise," the source said.

The German demands for greater control over Greek budget policy comes amid intense talks to finalize a second 130-billion euro rescue package for Greece, which has repeatedly failed to meet the fiscal targets set out for it by its international lenders.

It is likely to spark a strong reaction in Athens ahead of elections expected to take place in April.
"Strong reaction?" Is that the politically correct parlance for "civil war" these days? We must be out of the loop on that one...
The specific language that strips Greece of its sovereignty and which will be plastered over every front page in the Greek media tomorrow:
Budget consolidation has to be put under a strict steering and control system. Given the disappointing compliance so far, Greece has to accept shifting budgetary sovereignty to the European level for a certain period of time. A budget commissioner has to be appointed by the Eurogroup with the task of ensuring budgetary control. He must have the power a) to implement a centralized reporting and surveillance system covering all major blocks of expenditure in the Greek budget, b) to veto decisions not in line with the budgetary targets set by the Troika and c) will be tasked to ensure compliance with the above mentioned rule to prioritize debt service.

The new surveillance and institutional approach should be formulated in the MoU as follows: “In the case of non-compliance, confirmed by the ECB, IMF and EU COM, a new budget commissioner appointed by the Eurogroup would help implementing reforms. The commissioner will have broad surveillance competences over public expenditure and a veto right against budget decisions not in line with the set budgetary targets and the rule giving priority to debt service.” Greece has to ensure that the new surveillance mechanism is fully enshrined in national law, preferably through constitutional amendment.
And here is the full formal pre-annexation order:


Bruce Krasting does a great commentary on the LTRO using interviews with Joseph Ackermann
chairman and CEO of Deutsche Bank to explain its perils:

(courtesy Bruce Krasting/zero hedge)






Deutche Bank's Ackermann on the LTRO

Bruce Krasting's picture






4.833335


Over in Italy it seems that this nation does not like austerity as disruptions in trade arrive in Sicily:



Courtesy, the Dollar Vigilante:
Italy On the Verge of a Full Revolt
[Editor's Note: The following is from TDV's Correspondent in Italy, Alexander Jousse]
This past week has been a very turbulent time for Italy.  And it wasn't just the grounding of the Concordia cruise ship by a playboy captain; but the grounding of the country by Euro-technocrat usurper Darth Monti, trying to impress his Keynesian buddies with his latest attempts to ‘Save Italy’!
This week saw the launch of a popular uprising in Sicily, by a group known as the‘Movimento dei Forconi’ or ‘Pitchfork Movement’. This is not an uprising of self absorbed youth who want more government handouts; but of producers who are being pushed into poverty by government taxes and regulation. The organizers are middle aged and older; this is significant, as most power and wealth is held by this generation and they have now drawn a line in the sand.
On the 16th of January these protesters began "Operazione Vespri Siciliani", a blockade  of the Island of Sicily. Within two days the transportation of all goods was stopped. Over the next week, nothing entered or exited Sicily.  This was no mean feat given that Sicily is not a small Island; it has a population of over five million people and a surface area of 25,711 km2.
These are some of their demands:
  • The arrest of all corrupt politicians.
  • To reduce the number of parliamentarians
  • To remove the provincial bureaucracy, as most of these politicians have been there for over forty years.
  • To drastically cut the salaries and privileges of parliamentarians and senators
  • To restrict politicians two only two terms in office
Not one of Darth Monti’s “austerity” measures has touched the political caste; in fact in classic Italian style, the press has dug up some very dirty scandals concerning two of his fellow tax-feeders.
The trigger for these events was the vampire state sinking it’s fangs deeper into the already hampered Italian economy; a vicious tax was added to petrol, diesel and other energy sources in December.
Though agriculture contributes only 2.5% of GDP, in the southern regions of Basilicata, Calabria, and Molise, agriculture accounts for just over 20 percent of local employment. Many goods are transported by road, and as the cost of transport went through the roof within the time frame of just a few weeks, it destroyed the farmer's tight margins. Why work when the state steals most of your profits?
To further understand the rage, despair and humiliation it is necessary to know some Sicilian history. As Jeff says, it’s all been done before.
In the year 1282 the War of the Sicilian Vespers was fought by the Sicilians against the French aristocracy that ruled Sicily at the time. This uprising was ignited by excessive taxation and mismanagement by the French.  Fast forward to 1859; Sicily was part of the Kingdom of Two Sicilies. At the time it was the richest kingdom in the Mediterranean and its capitol Napoli was one of the most renowned and cultured cities in the world. Then in 1860, The House of Savoy, rulers of the Kingdom of Italy, decided to liberate the south from their ‘brutal’ oppressors. The newly “liberated” soon realized that they were tax slaves to yet another foreign power. This necessitated the stationing of 200,000 troops in the south to prevent further rebellions. One could say that this occupation still exists today, as no Italian troops are ever garrisoned in their home regions. 
After a hundred and fifty years the south is still suffering the effects of this occupation, but now the roles have been reversed; the wealth of the north is confiscated by Rome to bribe subsidise the corrupt politicians of the south. This is one of the reasons why Lega Nord is so popular in the North.
It will be interesting to see what happens next, as the protests are soon moving to Rome. This is not necessarily a positive move, as every political movement (eg. Lega Nord) that has gone onto Rome, has been bought off and betrayed their ideals. Over the past week, the establishment, including the unions have been deeply humiliated and lost a lot of credibility. There has been very little media coverage; the news still has to breach the international mainstream media (MSM)  ‘Firewall’. 
As Italy falls deeper into depression, the establishment will lose further credibility; regional movements such as the Forconi will multiply, putting further pressure on the State. This could well be the beginning of the end for the Italian state as Darth Monti’s taxes push more people unto the street.
For those who want to follow this story, you can use #Forconi hashtag on twitter. There are a few English speaking writers who are reporting from Sicily.

Alexander JousseBio: Alexander Jousse has been an anarcho-capitalist for eight years, learning through Lew Rockwell, Murray Rothbard, Ludwig von Mises and Stefan Molyneux.  But most importantly thinking, observing and asking questions. Alexander has lived in Italy for the last six years.

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