Saturday, June 16, 2012

dutch banks downgraded/Holland;s retail sales contract badly/poor usa Empire number/ Poor Michigan consumer confidence number/

Good morning Ladies and Gentlemen;

Before I commence with my commentary, it saddens me to report that we have 3 new entrants who on Friday took their last breath as they succumbed to the wishes of the FDIC and entered our hallowed morgue.

1. Farmers Bank of Lynchburg Tennessee
2.  Security Exchange Bank of Marietta Georgia
3. Putnam State Bank from the great metropolis Palatka Florida.

Gold closed up  on Friday to the tune of $6.60 to $1627.00 whereas silver still seems to be under the banking cartels control with respect to price.  On Friday, the silver price rose 33 cents to $28.73.
The big news from Europe was the big downgrade of the 5  Dutch banks, with the two biggies, Amro and Rabobank included in that list. The Spanish 10 yr yield hit 7% early in the session but later sold off in yield to finish at a yield of 6.88%.  The Italian 10 yr bond crossed below the 6% level finishing at 5.92%.  Retail sales from Holland plummeted by 11% last month in a performance worse than Spain's 9.7%.

In the USA, the Empire Manufacturing Index (NY) which measures the manufacturing activity in the New York area plummeted badly last month as did the Michigan Consumer Confidence number. It looks like we may have our black swan event as all major countries are heading into a recession at exactly the same time:

All European countries, Asian countries like Japan and China, and then the USA.

You will find all of these stories are covered in this commentary  plus others but first let us now head over to the comex and assess trading yesterday.

The total gold comex OI rose on Friday with a final reading at 419,274  up from Thursday's level of 417370. Gold performed reasonably well on Thursday so the rise in OI is understandable.  The front delivery month of June saw its OI fall from 1167 to 879 or a loss of 288 contracts.  We had 216 delivery notices on Thursday so in essence we lost another 72 contracts or 7200 oz of gold standing.  The next delivery month is August and here the OI rose from 224,993 to 226,306 and it is in this month that saw the greatest gain in OI. The estimated volume on Friday, at the gold comex was quite weak today coming in at 121,283.  The confirmed volume on Thursday was a lot better at 165,634.  The continued weaker volumes at the gold comex are quite a concern to our CME folks.

The total silver comex OI again performs exactly opposite to gold as here the final reading came in at 121,162, a drop of 686 contracts from Thursday's level of 121,848. The attempted raids these past few days has its center of attention focused on silver as the longs refuse to leave the silver arena. The delivery month of June saw its  OI fall 2 contracts, from 45 to 43.  We had 2 delivery notices filed on Thursday, so everything is in balance and we neither gained or lost any silver.  We are now less than 2 weeks away from first day notice and here the big delivery month of July saw a minor contraction of 1480 contracts as its resting OI Friday night is 42,064 compared to 40,584 on Thursday.  Most of the loss in longs in July found its way to September as these fellows only wish to play the paper game. The  level of OI in the front month is extremely high as we head into the delivery process.



June 16.2012

gold: 



Gold
Ounces
Withdrawals from Dealers Inventory in oz
not updated
Withdrawals from Customer Inventory in oz
not updated
Deposits to the Dealer Inventory in oz
not updated
Deposits to the Customer Inventory, in
not updated
No of oz served (contracts) today
(15)  1500 oz
No of oz to be served (notices)
  864  (86400) oz
Total monthly oz gold served (contracts) so far this month
(5229)  522,900  oz
Total accumulative withdrawal of gold from the Dealers inventory this month
11,831.86
Total accumulative withdrawal of gold from the Customer inventory this month




28,130.974

This is very weird.  The CME did not update the inventory movements for both gold and silver on Friday.



The CME notified us that we had 15 notices filed on Friday for 1500 oz.  The total number of notices filed so far this month total 5229 for 522900 oz.  To obtain what is left to be served upon our longs, we take the OI standing for June (879) and subtract out today's delivery notices (15) which leaves us with 864 notices or 86,400 oz left to be served upon our patient longs.

Thus the total number of gold ounces standing in this official delivery month of June is as follows;

522900 oz (already served)   +  86,400 oz ( to be served upon )  =  609,300 oz or 18.95 tonnes

we lost 7200 oz of gold standing.

end


June 16.2012
Silver
Ounces
Withdrawals from Dealers Inventorynot updated
Withdrawals from Customer Inventorynot updated
Deposits to the Dealer Inventorynot updated
Deposits to the Customer Inventorynot updated
No of oz served (contracts)4  (20,000)
No of oz to be served (notices) 39 (195,000)
Total monthly oz silver served (contracts)51 (255,000)
Total accumulative withdrawal of silver from the Dealers inventory this monthnil
Total accumulative withdrawal of silver from the Customer inventory this month4,150,872.7

The CME did not update the inventory movements in silver.



The CME notified us that we had only 4 notices filed for 20,000 oz of silver.  The total number of notices filed so far in the month of June is represented by 51 contracts or 255,000 oz.  To obtain what is left to be served upon, we take the OI standing for June (43) and subtract out  Friday's delivery notices (4) which leaves us with 39 notices or 195,000 oz .

Thus the total number of silver ounces standing in this non official delivery month of June is as follows;

255,000 oz (served) +  195,000 oz (to be served) =  450,000 oz
the same as on Thursday.


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.


June 16.2012:





Total Gold in Trust

Tonnes:1,277.39

Ounces:41,069,471.89

Value US$:66,816,893,772.66










June 14.2012




TOTAL GOLD IN TRUST

Tonnes:1,277.39

Ounces:41,069,471.89

Value US$:66,252,918,781.43





We neither gained nor lost any gold at the GLD on Friday.

end

June  16. 2012  for SLV



Ounces of Silver in Trust313,293,210.500
Tonnes of Silver in Trust Tonnes of Silver in Trust9,744.51




June 14.2012


Ounces of Silver in Trust311,741,101.700
Tonnes of Silver in Trust Tonnes of Silver in Trust9,696.23


On Friday, 1.552 million oz were added into the SLV.


And now for our premiums to NAV for the funds I follow:
(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)



1. Central Fund of Canada: traded to a positive 4.2percent to NAV in usa funds and a positive 3.9%  to NAV for Cdn funds. ( June 16.2012)

2. Sprott silver fund (PSLV): Premium to NAV  lowered to  6.98% to NAV  June 16 2012 :
3. Sprott gold fund (PHYS): premium to NAV rose  to    3.35% positive to NAV June16, 2012).



note the rise in premium on the central fund of Canada (equal silver and gold)
and the Sprott silver NAV at 6.98%.  It seems silver is in short supply.

 end


At 3;30 pm we get the COT report which gives positions on our major players.

Let us now head over to the Gold COT:


Gold COT Report - Futures
Large Speculators
Commercial
Total
Long
Short
Spreading
Long
Short
Long
Short
181,259
48,944
30,139
147,076
305,866
358,474
384,949
Change from Prior Reporting Period
-2,703
-6,154
-5
-7,521
-4,853
-10,229
-11,012
Traders
160
63
65
45
42
229
153


Small Speculators




Long
Short
Open Interest



53,770
27,295
412,244



-1,468
-685
-11,697



non reportable positions
Change from the previous reporting period

COT Gold Report - Positions as of
Tuesday, June 12, 2012




Our large speculators:

Those large speculators that are long in gold were certainly fleeced as they pitched 2703 contracts
from their long side.

Those large speculators that have been short in gold used the opportunity to cover a monstrous 6154 contracts.

Our commercials:

Those commercials who have been long in gold and are close to the physical scene pitched an extremely
large 7521 contracts from their long side

Those commercials who have been short in gold covered 4853 contracts from their short side.

Our small specs:

Those small specs that have been long in gold pitched 1468 contracts from their long side

and

those small specs that have been short in gold covered a tiny 685 contracts from their short side.

Conclusion:  the commercials went net short an additional 2668 contracts so it is mildly bearish.

And now for our silver COT:


Silver COT Report: Futures
Large Speculators
Commercial
Long
Short
Spreading
Long
Short
26,716
17,107
26,363
46,701
64,620
-1,093
-908
3,582
1,774
3,168
Traders
58
41
44
36
36
Small Speculators
Open Interest
Total
Long
Short
122,080
Long
Short
22,300
13,990
99,780
108,090
1,008
-571
5,271
4,263
5,842
non reportable positions
Positions as of:
117
103

Tuesday, June 12, 201


Again the silver COT paints a different story than gold.

Our large speculators:  (pretty neutral)

Those large specs that have been long in silver, pitched a tiny 1093 contracts from their long side.

Those large specs that have been short in silver covered a tiny 908 contracts from their short side.

And now for our commercials:

Those commercials that have been long in silver added another 1774 contracts to their long side.

Those commercials that have been short in silver from the beginning of time, added another 3168 contracts to their short side.  It was the commercials supplying the necessary paper.  If they did not supply the non backed paper silver prices would be much higher.

Our small specs:

Those small specs that have been long in silver added another 1008 contracts to their long side.

Those small specs that have been short in silver covered a small 571 contracts.

conclusions;  bearish in silver from the standpoint of the commercials going extremely net short by another
1394 contracts.

Ted Butler talks about our commercials in his commentary today called:  A Few Questions:  One Answer
He has finally come our way in believing that JPM's client is in reality the government.
The OCC Banking Participation report proves that JPMorgan was the sole supplying of the 5,000 additional silver contracts short and adding that figure to the previous report means that they are net short 16,000 to 17,000 contracts or 80 million to 85 million oz short.



(courtesy Ted Butler and a must read)

A Few Questions; One Answer

|
June 15, 2012 - 9:09am
Please read this article carefully because I’m disclosing for the first time that the U.S. government has given JPMorgan the green light to manipulate the silver market. This fact explains the shenanigans in the silver market. It answers all the questions and exposes this tawdry affair for all to see.
The scandal recently became more outrageous. The June Bank Participation Report, as of Tuesday, June 5, along with the COT confirmed that JPMorgan’s silver short position has increased by at least 5,000 contracts in the past two reporting weeks. That is the equivalent of 25 million ounces of silver, truly an enormous amount in a two week period and about equal to all the silver produced and consumed in the world in the same period. I calculate JPMorgan’s net short position in COMEX silver futures to be between 16,000 and 17,000 contracts. JPMorgan has been the sole net commercial silver short seller over the past two weeks. That is the clearest proof yet of manipulation. A market dominated by one buyer or seller is the ultimate definition of manipulation.
Had JPMorgan not sold short 5,000 or more net additional contracts in COMEX silver over the past two weeks, the price of silver would have climbed even higher. Why? Because without JPMorgan selling, someone else would have had to sell in their place. Those sellers would have demanded a higher price. Furthermore, JPM’s short position alone equals the entire 16,500 contract total net commercial short position in COMEX silver. In other words, if JPMorgan did not hold a 16,000 to 17,000 contact net short position, there would be no commercial net short position at all. The additional proof of silver manipulation includes the two massive price takedowns of last year, when the silver price fell more than 30% in a matter of days, benefitting JPMorgan more than any other trader.
How can I continue to get away with accusing JPMorgan, arguably the most powerful bank in the US, of the most serious market crime possible and get no reaction from them? An objective reading of the past four years, since the time I first publicly identified JPMorgan as the big silver short, has resulted in the bank being universally recognized on the Internet as the big silver crook. The reputation of a systemically important financial institution is always of prime concern from the board of director and senior management level on down. Why have I never been threatened by them?
The same question comes to mind when applied to the CME Group, owner and operator of the COMEX, where the silver manipulation is centered. The allegations that the CME is aiding and abetting in the silver manipulation are serious because the CME has been officially designated as a self-regulatory organization (SRO), meaning they have a legal obligation to prevent any attempt at manipulation in their markets. Like JPM, the CME is tough as nails and, presumably, could step on me should they choose to. (Yes, I send everything I write to JPM, the CME and the CFTC).
Unlike JPMorgan and the CME, the Commodity Futures Trading Commission (CFTC) has not remained completely silent. The agency has initiated a number of reviews and investigations into allegations of manipulation in silver over the years (at my prodding), including a current Enforcement Division investigation, now approaching the four-year mark. The allegations of a silver manipulation were always credible, since they were based upon data from the agency itself and compared to how the Commission reacted strongly to past instances of concentration. The CFTC had to at least go through the motions of pretending to care. After all, many thousands of silver investors have consistently petitioned the agency on this matter over the years.
It’s been all talk and no action from the Commission when it comes to the silver manipulation. I can’t tell you how many times I have asked myself after I have just explained another undeniable proof of silver manipulation, “why can’t these regulators see this?” Why is the Commission conducting an expensive and formal silver investigation in the first place, when all it has to do is explain why a US bank holding a silver short position equal to 25% to 30% of both the paper and physical total world market wouldn’t be manipulative to the price (in and of itself)?
To this day, I have been baffled by how CFTC chairman Gary Gensler can preach the Holy Gospel of true regulatory reform of transparency, position limits and no concentration, while ignoring the clear evidence of manipulation in silver. I think what has caused his and the agency’s failure to terminate a highly-visible silver manipulation has nothing to do with a lack of understanding of the silver manipulation. It took me a while to figure it out, but better late than never.
The answer to all the above questions lies with the President’s Working Group on Financial Markets. Largely in response to the great stock market crash in October, 1987, President Ronald Reagan signed an Executive Order in 1988 creating the Working Group to prevent a recurrence of a market crash. http://www.archives.gov/federal-register/codification/executive-order/12631.html
There are four members in the Working Group; the Federal Reserve Chairman, the Treasury Secretary, the Chairman of the Securities and Exchange Commission and the Chairman of the CFTC. The Treasury Secretary is the Chairman of the Working Group. The purpose of the group is to promote market stability and prevent disorderliness by working with the exchanges and major market participants in times of stress.
Such a time for the financial markets existed in March 2008, when the investment bank Bear Stearns failed and, undoubtedly, the Working Group was heavily involved. The Group, along with exchanges and major market participants, oversaw the transfer of Bear Stearns’ giant short positions to JPMorgan, in the process indemnifying JPM from any concerns of dominance and overt control of silver and gold prices. As a result, JPMorgan orchestrated (and was the biggest beneficiary) the more than 50 % decline in silver prices into late 2008 with the Working Group’s permission.
Things then quieted down in silver until the fall of 2010, when prices started to make an historic move into the late-April 2011 price high near $50. At that point, JPMorgan’s giant short position began to hurt and it moved to cover some of the silver shorts into the very top. At that point, it looked like JPMorgan would get crushed by the physical silver shortage and the growing losses on their short positions. Instead, JPM appealed to the Working Group for relief and, working with them and the CME, JPM caused the silver market to crash, starting on Sunday night, May 1. Later, the Working Group teamed with JPMorgan and the CME to smash prices by 35% in 3 days in late September 2011.
The President’s Working Group on Financial Markets answers all my questions. It explains why JPMorgan and the CME remain silent about allegations of manipulation. They have been given legal cover by the Working Group. This also explains why the CFTC says they are conscientiously investigating silver when it is clear they are not. The agency can’t come out and disclose silver was smashed with the full knowledge of the Working Group, so it pretends to go through the motions of investigating. What is going through Gary Gensler’s mind? Is he not tormented by the blatant silver manipulation which runs contrary to all his public utterances? Commodity law is being broken.
If my analysis is correct, what does this mean for silver from here? It will prove to be wildly bullish for the price; maybe not immediately, but on a long term basis. It sets the stage for the really big move in silver. This overt government interference in the silver market will boomerang at some point, just as every attempt at artificial price setting has failed. Just let the word start to spread about Working Group involvement in causing the price of silver to fall and the natural reaction by the world’s investors will be to take advantage of the bargain created.
This is an attempt by the government to influence the price of silver lower by favoring the paper short sellers and not by dumping physical silver on the market. That’s because neither the US Government, nor any other world government has any physical silver to dump. All the Working Group can do is aid the paper silver short sellers by permitting vicious price sell-offs designed to scare existing holders. There is an easy way around that scam and that is buying real silver, not the junk represented by COMEX paper contracts. If, as and when the role of the Working Group in the silver manipulation becomes known, the best reason yet for buying silver will come into focus.
I know that many have long suspected that some type of government involvement was present in gold and silver. But rarely have those suspicions been as clearly documented as they are now in silver. Questions about a silver investigation that never ends, or price moves beyond reason or historical precedent, or why the nation’s most important bank and exchange are up to their eyeballs in the silver manipulation have been explained by the Working Group. Too bad the Working Group took the side of a few short manipulators and not the many silver investors and producers of the world. No doubt someone has sold a bill of goods to the regulators, falsely convincing them that terrible things will happen financially should silver explode to its true market value. Well guess what? The rotten state of world finances has nothing to do with the price of silver currently, nor will it in the future.
Ted Butler


end




Let us now see how Europe and Asia traded prior to opening on the Dow and Comex.
Asian markets were mostly higher.  Europe was higher with news that England was going to supply more stimulus and that sent all of the major bourses higher in Europe.  That provided the green light for the Dow as somehow the world is fixated that more stimulus will solve the global financial mess.  It will not.  We have an insolvency problem and not a liquidity problem.
Strangely Spanish 10 yr bond yields touched 7.% again only to close slightly lower in yield at 6.88%.  Italian 10 yr bond yields finished below the 6.00% level at 5.92%


(Your overnight sentiment courtesy of zero hedge)


Overnight Sentiment: Calm Before The Storm... With A Surprise Twist

Tyler Durden's picture




If yesterday's global intervention rumor was a feeler of market response to the next latest and greatest intervention then we may have big problems: the EURUSD is now unchanged, Spanish bond yields are now unchanged, stocks are doing their quad witching thing which means all stops will be taken out before the day is done, but most importantly the euphoria such an announcement would have created before is now completely gone (as per The Diminishing Returns Of Central Planning). What is actually worse, and how the G-20 rumor may have backfired, is that as we pointed out, suddenly there has been a significant shift in expectations: if Syriza does not have an outright win on Sunday then there will be no immediate central bank response, which was predicted to be "if needed". Remember: for this market, when all that matters is the next 10 minutes of trading, this is the only relevant metric. Which means that suddenly from a Risk On event, Syriza's loss has become Risk Off! Of course, the reality is that Sunday will almost certainly be a replay of the last election, where the parliament continues to be empty, and Greece continues to be "Belgium" - recall from May 3, "Previewing The First Of Many Greek Elections." In either case, as others have suggested holding on to positions over the weekend may not be the most prudent thing.
Full summary of overnight sentiment from BofA:
Market action
Asian equity markets finished mostly higher; the one exception was the Korean Kospi which fell 0.7%. Investors' optimism increased as many now expect central banks to take action to help stimulate economic growth. That should help counter some of the softness in the global economic backdrop due to the recession & debt crisis in Europe and the looming slowdown due to the fiscal cliff in the US. The MSCI Asia Pacific Index advanced 0.8%. This week the index advanced the most in five months. 
Looking at the individual markets, the best performer was the Hang Seng up 2.3%. That was followed by the Indian Sensex up 1.6%. The Shanghai Composite managed to finish 0.5% higher while the Japanese Nikkei finished flat. 
In Europe, equities are climbing for the first time in three days due to the Bank of England announcement of credit easing measures. See overseas data wrap up for more info. In the aggregate, European equities are up 0.8%. Blue chips are outperforming up 1.6%. Surprisingly, shares listed in London are underperforming the broader market up only 0.6%. At home, futures are pointing to another risk in the S&P 500. The index is set to open 0.3% higher building on yesterday's 1.1% increase. 
The risk-on mood in the equity world has not trickled into bondland, Treasuries are actually bid suggesting bond investors are cautious about the global economic backdrop. In particular, they are likely worried about the upcoming Greek elections on Sunday. Late Sunday night we will likely know the outcome of the Greek elections. The 10-year Treasury is 3bp lower at 1.61%. In Europe, we continue to keep a close eye on yields on Spain's 10-year which are down 6bp to 6.79%. 
The dollar is weakening against a basket of other major currencies. The DXY index is 0.2% lower. Commodities are higher. WTI crude oil is trading at $84.48 a barrel while gold is selling for $1,625 an ounce. 
Overseas data wrap-up
The UK is preparing for the worst. Yesterday, the UK unveiled a series of measures that it will take to help insulate the British financial system and economy from the recession and ongoing sovereign debt crisis. As the UK's largest trading partner, the recession or worse (Grexit) in the Eurozone has the potential to drag the UK economy down with it. For more on the measures taken by the UK take a look at this piece by our UK economist. 
The BoJ left its monetary policy rate unchanged at today's monetary policy meeting. The BoJ also left the size of its asset purchase program (ie QE) unchanged. Like many other central banks it is monitoring the global economic backdrop very closely. In particular, it is very worried about the ongoing situation in Europe.

end

Late Thursday night Moody's downgrades 5 Dutch banks by 1 or 2 notches including the biggies, Rabobank and ABN Amro Bank NV

Moody's Downgrades Five Dutch Banks By 1-2 Notches

Tyler Durden's picture



While we await the Moody's downgrade of the Spanish banking system, which we can only attribute to a lack of outsourced Indian talent, since three banks are now rated higher than the sovereign, Moody's decided to give a little present to our Dutch readers by downgrading 5 of their biggest banks: Rabobank Nederland, (2 notches to A2) for ING Bank N.V., (2 notches to A2) for ABN AMRO Bank N.V. (2 notches to A2), and for LeasePlan Corporation N.V. (2 notches to Baa2). The long-term debt and deposit ratings for SNS Bank N.V. were downgraded by one notch to Ba


end




Today, the Netherlands released its retail sales figures and it seems everything collapsed over there.  The April retail sales plummeted by 11 percent even worse than the 9.7% in Spain.

This is a must read as it shows how all of our European countries are falling over a cliff.  Even the good ones like Holland:

(special thanks to Ed Steer for providing the article to us/UKTelegraph/Ambrose Evans Pritchard/)




Dutch Disease: Ambrose Evans Pritchard

by Ambrose Evans Pritchard:


As if matters were not bad enough already in Euroland: Dutch retail sales collapsed by 11pc in April, even worse than the 9.7pc drop in Spain.
Charles Dumas from Lombard says the results of Europe’s "fiscal suicide pact" are becoming all too clear.
This is not contagion from Greece or any such nonsense. It is the result of the eurozone's destructive policy mix.
All three levers of EMU policy are set on contraction simultaneously.
This longish piece [for Ambrose] was posted in The Telegraph yesterday...and is worth skimming. It's another offering from Roy Stephens...and the link is here.

end


As we pointed out early in the European session the Spanish yields soared above 7%.
Spanish 10 yr yields over the German 10 yr bunds are now at their all time high.

(courtesy zero hedge)

Spain Bond Drubbing Continues As Stocks Surge

Tyler Durden's picture



Spanish sovereign bonds ended the week at all-time record wide spreads to bunds, pushing back up near 7% yields today before falling back into the close, and +55bps on the week. This is a 50bps underperformance of Italian sovereigns on the week, while Spanish stocks notably outperformed Italian stocks on the week (though faded notably today having been unable to regain Monday's opening highs). German Bunds also deteriorated notably relative to Treasuries on the week (the biggest wekly jump in Bunds-Treasuries in almost 7 months) and while equity and credit markets reconverged into the weekend - with position-squaring evident - as the shifts in Swiss rates suggest all is not well under the surface as repatriation flows drove EURUSD up over 115pips on the week to near its Sunday-night opening highs (amid a 200 pip range).
It seems the end of the week in Europe - just like in the US - was about position-squaring as early-week protection (cheap macro overlays in MAIN - Europe's investment grade index) was sold back and stocks and credit resynced...

with Spanish stocks (pink) rallying the most on the week (though fading today and unable to reach Monday's opening highs) and Italy underperforming (red).


And clearly Spain (red) bonds diverged notably in the last two days from the rest of European sovereigns - especially Italy. Also note the green curve which reflects the almost 18bps decompression of German Bunds over Treasuries this week (as 10Y bunds rose 12bps while 10Y Treasuries are down around 6bps from Europe's close last Friday)...

leaving Spanish 10Y spread to Bunds at an all-time record high...

but Bund 10Y yields rose the most relative to 10Y TSYs in almost 7 months!

Charts: Bloomberg
end


Spanish 10 yr bond yield close:


SPANISH GOVERNMENT GENERIC BONDS - 10 YR NOTE:   6.88%

Add to Portfolio

GSPG10YR:IND

6.87400 0.04200 0.61%

end

Here is the closing of the 10 yr Italian 10 yr bond on Friday:




Italy Govt Bonds 10 Year Gross Yield  5.96%

GBTPGR10:IND

5.92600 0.20500 3.34%
As of 12:00:00 ET on 06/15/2012.


end

As everybody knows, the Greek election will be on Sunday. Mark Grant is warning that Monday will not be the end of the world but it will be the beginning of the process.  As Grant has reiterated on many occasions, the Greeks will not leave the Euro voluntarily, they would have to be forcibly removed. However the costs will be enormous to all the player European zone countries except probably Greece who may enjoy receiving the lavish largess that may be bestowed upon them.
They will leave the Euro zone once the gravy train stops.


(courtesy Mark Grant/Out of the Box and onto Wall Street)

Monday Will Not Be The End Of The World, Sorry

Tyler Durden's picture




Via Mark Grant, author of Out of the Box,
It was January 13, 2010 when I first wrote in my commentary that I thought Greece would go belly up. It was in May 2010 when they first needed to be bailed out. This small country with a giant debt of $1.3 trillion has engaged the markets ever since. Sunday the country votes and whoever wins I expect no massive explosion in the short term. The new Greek government will try to renegotiate the terms and conditions of their bailouts and we shall see just how far anyone is willing to go. It will be a game of chicken with Germany in the end and a solution perhaps will be found but no good one as Greece could not pay back their current debts if Hercules arrived to help; much less any new debts which will be required to keep the country afloat. Any “Big Bang,” if it comes, will not come on Monday morning as that will just be the beginning of the process to scream and shout and dance around like some Opa bar with Ireland, Portugal and Spain demanding equal terms and, oh yes, Spain will be in the hand-out line soon enough along with their banks.

Perhaps that all of this has gone on for so long or perhaps because we keep hearing the cries of “Wolf” each week for the last several years that the markets are impervious to any new cries for help. An odd kind of complacency seems to have set in where nothing matters too much and everything will just be fine. Yesterday’s equity market rally based upon the central banks providing  liquidity is just what any serious observer would expect and yet the stock markets rallied as if this was something out of the ordinary which clearly demonstrates either the market’s lack of understanding of real world events or it represents the hype of some hedge fund that was tossed around in the media like it was a new product at Apple. In any event, don’t wake up on Monday morning and think that Greece will have left the Eurozone and returned to the Drachma. That is not how things will play out.

At some point, in the next few weeks, it will come down to a calculation of just how much money the EU is willing to spend to support Greece and not cause a default and if Greece is to leave the Euro I think it is much more likely that they will be forced out rather than leave on their own decision. In the meantime the situation in Spain will worsen as the needs of their banks and of their Regional debts throw the country past the borderline of self-help. Aid will be called for in increments and it will probably total $350-400 billion by the time the final tally is made. Europe cannot afford this and I would not be surprised to see one of the funding countries saying that is it for them which will throw Europe into a tailspin. Effectively there are bank runs underway in both Greece and Spain currently and while no central bank will talk about it and no politician mentions it there is every indication that this is what is taking place each and every day now. It would not surprise me to see the imposition of capital controls and then a new round of havoc will ensue.

In the final analysis it probably all comes down to what price the Germans are willing to pay for dominating Europe. I suspect that when the Germans find themselves with a lower standard of living for paying off everyone else’s debt that the mood in Berlin will become much more somber as the cost of “living the dream” becomes so burdensome that tempers begin to flare. The French and the troubled nations are all calling for a single standard of living really and I just cannot imagine that Germany is ready to undertake that cost without serious consternation. Due to the recession and to the European methodology of counting debt to GDP ratios and to their allowance of “funny accounting” at their banks the downgrades continue, such is in the Netherlands today, and you can see the financial deterioration that is taking place all across Europe. The European Union is sinking under its own weight and it is not only questionable if the Germans and their partners want to pay but if they have the capacity to pay without all of Europe becoming a BBB+ credit if, to quote Chancellor Merkel, “more Europe” actually takes place.

“Enter Stranger, but take heed

Of what awaits the sin of greed

For those who take but do not earn,

Must pay dearly in their turn.

                                          -The Front Doors of Gringott’s Bank


end:




The following commentary from Dave of Denver/the GoldenTruth mirrors my thoughts on Greece.

The true atomic blast will be due to the derivatives blowing up by all the major underwriters of credit
default swaps.  The major underwriters in the USA:

1. JPMorgan
2. Bank of America
3. Morgan Stanley
4. Citibank
5. Goldman Sachs.

and in Germany:  Deutsche Bank.

this is what will bring the financial system down.... a must read

(Dave from Denver/the Golden Truth)



Friday, June 15, 2012


Someone Is Lying: How Can Greece Bring Down The Global Economy?


It was noteworthy that George Soros, the world's most successful currency speculator, was revealed this week to have tripled his position in gold in the first quarter of this year. That he is a man who knows his currencies is without question. That he chooses gold speaks volumes. - David Galland, Casey Research
I'm confused. I'm not really sure why the world should be in fear of a Greek systemic collapse and exit from the EU/euro LINK . So, while most of the world's hoi polloi chooses to accept news that is fed to them like hungry ducklings with their beaks open waiting to be fed by momma duck (the elitists), I prefer to look under the "hood" of a proposition that, prima facie, seems absurd. Furthermore, unless I'm missing something, the world is being willingly fed a gigantic lie by the elitists.

The proposition is that if the Syriza party wins Sunday's elections, the Greek austerity programs required for and EU bailout of Greece would be abandoned, Greece would exit the EU and reinstate the drachma as its currency. The sum of these events would cause global systemic chaos.

Let's examince the situation. According to wikipedia, Greece is the 32nd largest economy in the world based on GDP and the 37th largest based on purchasing power. Seems somewhat insignificant so far. Greece's nominal GDP is $312 billion. As a percent of total EU economic output - $12.6 trillion in 2011 - Greece represents a miniscule 2.4%. As a percent of total EU+US economic output, Greece represents 1%. 80% of Greece's economy is service based, the rest is agriculture, fishing and industry. Greek sovereign debt is around $450 billion. The U.S. stated Treasury debt outstanding is close to $16 trillion. The U.S. Government issues an additional $450 billion in debt every 3 1/2 months.

Now I'm even more confused. How could the collapse of such a seemingly economically insignifant country in comparison to the rest of the world cause global systemic/financial turmoil? Before you read on, please see this report regarding Greek derivatives: 
LINK

The Truth of the matter is that the situation with Greece is being used as the cover-job to mask the truth about the catastrophic derivatives exposure of the world's biggest banks. I demonstrated a couple days ago how looking at just Greece in isolation could lead to tens of billions in losses for the biggest banks - primarily JP Morgan - if Greece leaves the EU and reinstates the drachma as its currency.

The fact of the matter is that if proper OTC derivatives regulations and oversight had been in place - more importantly, properly enforced - then the situation in Greece would barely be newsworthy. Zimbabwe went through a financial/monetary collapse a few years ago which culminated in a "do-over" for its curency and most people in the world probably never even heard of Zimbabwe or could tell you where it is. What's the difference between Greece and Zimbabwe? Off-balance-sheet OTC derivatives.

Once again - just like the 2008 bailout of the U.S. Too Big To Fail Banks - we are being fed a gigantic lie by the political and banking elitists. The global financial system is in extreme peril because of the catastrophic loss-exposure embedded in the near-quadrillion OTC derivatives positions of the world's biggest banks, which are primarily U.S.-based. JP Morgan, Citibank, Goldman Sachs, Morgan Stanley, Bank of America, Deutche Bank, HSBC, Credit Suisse, Barclays and Society Generale. Those are your culprits - not Greece.

And the Greek situation - just like the Lehman collapse provided a cover-story for the massive mult-trillion dollar bailout of Wall Street's finest in 2008 - is nothing more than an insidious cover-story to enable the Fed/ECB/BOE to print up and inject several more trillion in paper fiat currency in order to bail out the big banks listed above out of their catastrophic insolvency, rendered largely by moral hazard-enabled investment failures made worse by the layering of 10's of trillions in derivatives over the bad investments.

That's the bottom line and that's the Truth that you will never hear about from any politician or any mainstream media source. And here's what the non-western Central Banks are doing about the political/financial disaster over which they have no control: 
LINK You'll note that since 2008, the BRIC Central Banks and other peripheral Asian/South American countries have become big net buyers of physical gold (not GLD and not CEF/GTU). The charts in that article do not include China. China not only does not allow the export of the 300+ tonnes of gold internally mined, it is now the world's largest importer of physical gold bullion. In other words, China is aggressively and voraciously accumulating physical gold.

I think the message in that link and the message conveyed by China's actions pretty much tells us all we need to know about the future of the U.S. dollar as the world's reserve currency and the future direction of the price of gold. As the article mentions, gold represents less than 15% of the listed countries' Central Banking reserves. What it does not mention is that one way to make that number a lot larger is for the price of gold to rise substantially in price. Please note that in 1933 the U.S. - with its currency backed by gold - revalued the price of gold by 75% from $20/oz to $35/oz for the specific purpose of instantaneously increasing value of its gold reserves and increasing the ratio of gold as percentage of its total reserves.

I would suggest that eventually we will see a globally coordinated event (which may or may not include the U.S.) that will accomplish the same purpose as was undertaken by FDR in 1933, but on a much larger scale. Please take another look at the opening quote to put my comment in proper context. Have a great weekend everyone.

***



end


The 10 yr Greek bond yield:



Greece Govt Bond 10 Year Acting as Benchmark

Add to Portfolio

GGGB10YR:IND

27.126001.43100 5.01%
As of 12:00:00 ET on 06/15/2012.


end



From the SilverDoctor's website we see the following central banks  ready to print money:

1. Draghi of the ECB
2. the Bank of Japan
3. Mervyn King of the Bank of England.

the world is getting ready for the big imploding events starting  Monday morning!!

(courtesy the Silver Doctors)




Super Mario: ECB Ready to Provide Liquidity Where Needed

ECB Head Mario Draghi said Friday that the ECB is ready to print to Infinity…AND BEYOND!!!

Draghi stated that ‘the ECB stands ready to provide liquidity to solvent banks where needed‘.
The Bank of Japan’s governor also stated that the BOJ is ‘prepared to take all possible measures to ensure the financial system does not come under threat‘.

On Thursday night, the BOE’s Mervyn King also stated that the BOE stands ready to provide whatever liquidity is required.

The Western Central banks seem to be genuinely panicking this weekend.

No sign of The Bernank publicly yet (where do you think Super Mario will come up with unlimited funds for European banks? Perhaps from UNLIMITED SWAPS with The Fed??), but trust us, PUBLICLY ADMITTED QE to Infinity…AND BEYOND!!! will be implemented in Europe and in the US, and SOON!


From the NY Times:
Central Bank Chief Says He’s Set to Step In After Greek Vote
PARIS — The head of the European Central Bank said Friday that central banks were ready to step in to address any financial market turmoil that might result from elections in Greece this weekend that could help to decide the future of the euro.
“The Eurosystem will continue to supply liquidity to solvent banks where needed,”Mario Draghi told a group of economists in Frankfurt.
His remarks were a reminder that European officials are increasingly intent on putting in place long-term structures that would make emergencies like Greece and Spain less likely to occur in the future.
Central banks in non-euro countries are also making contingency plans and reinforcing their defenses against spillover from the crisis in currency zone.
In Tokyo, the Bank of Japan governor, Masaaki Shirakawa, said the central bank was “prepared to take all possible measures to ensure the financial system does not come under threat,” calling the European debt crisis “the biggest risk factor we are paying attention to.”
Read more:



end

Sean Egan of Egan-Jones talks to Tom Keene and relates to him that  the debt problems in Europe is due to the " debt to GDP in the periphery has been increasing as though there is no end."
Please take note of why Egan Jones is always first to downgrade:

"Our business model is different. We're paid by investors, we have to earn our keep every single year. Basically we have to provide value to those investors or else they're not going to sign up again.
S&P and Moody's are being paid by the issuers of debt, and they don't have the pressures to be as timely and as accurate as we do with our ratings"

(courtesy Sean Egan/Tom Keene/zero hedge)


Sean Egan on Europe, and Why They Are Always Out in Front of the Other Ratings Agencies

CrownThomas's picture





Stunningly he didn't tout fixing a debt problem with adding more debt
"the problem to date, has been debt to gdp for most of the periphery countries has been increasing and it seems as though there's no end in sight for that"
On the real economy
"what you want to do is get a handle on how weak the banking sector is"
"History has shown that the banks & sovereign credit risk have been joined at the hip"
"as the banking sectors go, the countries go"
On the ECB helping
"All these injections effectively subordinate all the other creditors"
On how it all will end
"we're looking for a savior, and we haven't found one yet"
"you have to solve the underlying problem, and that is the fact that you have a heightened debt to gdp. Basically you have to figure out how to write down the debt to a manageable level"
And the punchline, which is priceless - Keene asks why Egan Jones is so far out in front of the other rating agencies
"Our business model is different. We're paid by investors, we have to earn our keep every single year. Basically we have to provide value to those investors or else they're not going to sign up again. S&P and Moody's are being paid by the issuers of debt, and they don't have the pressures to be as timely and as accurate as we do with our ratings"
"our initial positions seem crazy, over time the market came around. I think in the case of the EU, the same thing appears to be happening"
end

Now let us head over to this side of the pond and see how things are shaping up economically in the USA.  Today we got the New York Manufacturing Index  (Empire index) and it was awful. It plunged from 17.09 to 2.29.  Expectations were 12.5 or so. This is the lowest reading for the last 7 months.
Confirming the crash in the economy were lower figures on:

1. new orders
2. shipments sent
3. unfilled orders
plus other subcomponents all lower than May.

The Dow rose because the markets are now expecting QEIII.  As Yogi Berra once stated:

"it is deja vu all over again"






Plunging Empire Manufacturing Index Confirms Ongoing Economic Slide, Imminent Central Planner Intervention

Tyler Durden's picture
Confirming the crash in the economy, New Orders, Shipments, Unfilled Orders, Inventory, Prices Paid, Prices Received, Employees and Workweek, or all the subcomponents were lower in June than in May



Recall last month's soaring Empire Manufacturing Index which jumped far above all expectations, and was the last of the "baffle them with bullshit" series? Well no more need for baffling: we are in NEW QE mode. In June the Empire Manufacturing plunged from 17.09 to 2.29, on expectations of a 12.5 print: the lowest in 7 months. Confirming the crash in the economy, New Orders, Shipments, Unfilled Orders, Inventory, Prices Paid, Prices Received, Employees and Workweek, or all the subcomponents were lower in June than in May. Gold soars as the NEW QE becomes more and more obvious on the horizon, as there has now not been an economic indicator beat in weeks. So much for the 2012 recovery. Without the central banking CTRL-P'ing, the US, or any other country, continues to be in free-fall mode. Hopefully that can kill any debate about a "virtuous cycle" once and for all.
Chart:

And from the report:
The June Empire State Manufacturing Survey indicates that manufacturing activity expanded slightly over the month. The general business conditions index fell fifteen points, but remained positive at 2.3. The new orders index declined six points to 2.2, and the shipments index fell a steep nineteen points to 4.8. Price indexes were markedly lower, with the prices paid index falling eighteen points to 19.6 and the prices received index dropping eleven points to 1.0. Employment indexes also retreated, though they still indicated a small increase in employment levels and a slightly longer average workweek. Indexes for the six-month outlook were generally lower than last month’s levels, suggesting that optimism was waning somewhat, with the future general business conditions index falling to 23.1, its fifth consecutive monthly decline.
In a series of supplementary questions, manufacturers were asked about their capital spending plans: 43 percent said that they expected to increase capital spending over the next six to twelve months, while just 16 percent planned reductions—a somewhat more positive balance than in the August 2010 survey, when the same questions had been asked. In the current survey, high  capacity utilization emerged as the most widely cited factor contributing to higher capital spending; it had not been identified as a  leading factor in 2010. High expected sales growth and a need to replace existing capital equipment (especially non-IT equipment)  were also widely cited in the current survey as reasons for the increase in capital spending.

end

The big Michigan Consumer Confidence number plunged last month with its worst reading since February 2006.  The reading came in at 74.1 on expectations of 77.5.  In May which was also low came in at 79.3.



  (courtesy zero hedge)

Consumer Confidence Plunges, Biggest Miss Since February 2006

Tyler Durden's picture





Following misses to expectations in every single economic data point for the past week, not to mention today's Empire Index, Industrial Production, and Capacity Utilization we just got the latest June University of Michigan Consumer Confidence number which, lo and behold, printed at 74.1 on expectations of 77.5, and a plunge from May's 79.3. In brief, this was the biggest miss to expectations since February of 2006. If this latest economic datapoint abortion does not send the market soaring, nothing will.


end

Here is the all important TIC report which measures flow of cash into or out off
the USA.  Lately it has been an net outflow every month as China is cashing some
of their bonds and buying gold:




09:00 Apr TIC Flows ($20.5B) vs. revised ($48.6B) in Mar
Mar Total Net TIC Flows were revised from ($49.9B) 
* * * * *



This makes me boil:

(courtesy zero hedge)

Four Bullet Points Explaining How JPMorgan Doubled Its Money From MF Global's Corpse In Seven Months



Submitted by Tyler Durden on 06/15/2012 14:57 -0400
Don't read this if you have high blood pressure or if you are a client of MF Global's, whose money is still held by JP Morgan.

  • JPMorgan is put on MF Global bankruptcy committee on November 7, 2011
  • Two weeks later, JPMorgan buys MF Global's 4.7% in LME for 39 million in a "competitive bidding" process
  • 7 months later, on June 15 2012 the LME gets an offer for $2.2 billion from China's HKEX, making JPM's stake worth $103 million
  • JPMorgan makes over 100% cash on cash return in 7 months while MFGlobal money is still stuck at JPM.
In the meantime, Jon Corzine was, is and will always be a free man.
* * *


end/

Rob Kirby published his paper on the huge interest rate swaps underwritten by our major players.
Today he focused in on Morgan Stanley with respect to their massive increase in interest rate swaps.
Kirby concludes that there could only be one counterparty to that trade and that would be the ESF
of the USA.

( a must read)





The Greatest Hoax Ever Perpetrated on Mankind



-- Posted Friday, 15 June 2012 | Share this article | Source: GoldSeek.com


By Rob Kirby
A few years ago, when J.P. Morgan grew their derivatives book by 12 Trillion in one quarter [Q3/07] – I did some back of the napkin math – and figured out how many 5 and 10 year bonds the Morgue would have necessarily had to transact on their swaps alone – if they are hedged.  The bonds required to hedge the growth in Morgan’s Swap book were 1.4 billion more in one day than what was mathematically available to the entire domestic bond market for a whole quarter?
Put simply, interest rate swaps create more settlement demand for bonds than the U.S. issues.
This is why U.S. bonds “appear” to be “scarce” – which the bought-and-paid-for mainstream financial press explains to us is “a flight to quality”.  Better stated, it’s a “FORCED FLIGHT [or sleight, perhaps?] TO FRAUD”.
Assertions that netting “explains” this incongruity are a NON-STARTER.  Netting generally occurs at day’s end – the math simply does not even work intra-day.
Further Evidence of Gross Malfeasance in the U.S. Bond Market
Back in 2008, at the height of the financial crisis, folks are reminded how the Fed and U.S. Treasury were unsuccessful in finding a financial institution to either acquire or merge with Morgan Stanley.  Unfortunately, Morgan Stanley’s financial condition has continued to deteriorate:
REUTERS | June 1, 2012 at 5:45 pm |
(Reuters) – The bond markets are treating Morgan Stanley like a junk-rated company, and the investment bank’s higher borrowing costs could already be putting it at a disadvantage even before an expected ratings downgrade this month.
Bond rating agency Moody’s Investors Service has said it may cut Morgan Stanley by at least two notches in June, to just two or three steps above junk status. Many investors see such a cut as all but certain.
Many U.S. banks are at risk of a downgrade, but ratings cuts could affect Morgan Stanley most because of the severity of the cut and because of its relatively large trading business…..
The “take-away” from the article above is that Morgan Stanley is not a particularly good credit and the trajectory of their “credit” has been “negative” for some time – particularly since the financial crisis of 2008 when the Fed/U.S. Treasury could not find anyone willing to acquire them.  The Reuter’s scribe also pointed out something highly relevant when she said Morgan Stanley has a “relatively large trading business”.  Let’s explore this a little bit deeper.  According to the U.S. Office of the Comptroller of the Currency [OCC] Morgan Stanley’s derivatives book stood at 52.2 TRILLION at Dec. 31/2011.  So to say that Stanley’s trading business is “relatively large” is perhaps a gross understatement [or maybe an intentionally misleading statement?] – since it is currently the third largest “known” derivatives book in the world:
Source:  OCC
Swaps Require/Consume Credit
In the chart above, I’d like to draw your attention to the category SWAPS (OTC) – with are interest rate swaps traded over-the-counter, or, not on an exchange.  What is important for people to realize is that interest rate swaps have two-way counterparty risk – meaning both sides of the trade must have adequate/available credit lines for each other before they can transact. 
Now, with Morgan Stanley’s deteriorating credit condition in mind – let’s take a look at how they grew their swap position in a six month period - from Dec. 31/2010 to Jun. 30/2011:
Source:  OCC
To Jun. 30/2011 – An increase of 8 TRILLION in 6 months:
Source: OCC
Ladies and gentlemen, the ENTIRE GLOBAL BANKING COMMUNITY DOES NOT HAVE SUFFICIENT CREDIT LINES, FOR MS, TO ALLOW MORGAN STANLEY TO GROW THEIR SWAP BOOK BY 8 TRILLION IN 6 MONTHS.  Do remember, the Federal Reserve has purview over Bank Holding Companies – so the Fed necessarily knows “who” the other side of these trades really is – and they are implicitly “comfortable” with the counter-party risk.
Ergo, Morgan Stanley necessarily had a NON-BANK counterparty for this 8 Trillion increase in the SWAPS component of their book.  The counter-party for Morgan Stanley’s swaps book is, by-and-large, the same counter-party as J.P. Morgan, Citi, B of A and Goldman.
Now, you have to think about “WHO” or “WHAT” would have the motivation to do this business with Morgan Stanley et al?   In light of the psychedelic, incomprehensibly large amounts of swaps being consummated between Morgan Stanley and this “unidentified” counterparty – it is most likely that the counterparty is none other than the U.S. Treasury’s Exchange Stabilization Fund [ESF] – an entity that is accountable to NO ONE, has absolutely ZERO oversight and operates above ALL LAWS.  It is HIGHLY probable that these trades are being used as a means of undeclared stealth bailout / recapitalization of Morgan Stanley on the public teat in conjunction with arbitrarily controlling the long end of the interest rate curve.
It’s all about national security/preservation of U.S. Dollar Standard.  The following underscores what lengths the governing apparatus will go to – to ensure the perpetuation of actual/perceived U.S. Dollar hegemony:
First reported by Dawn Kopecki back in 2006 when she reported in BusinessWeek Online in a piece titled, Intelligence Czar Can Waive SEC Rules,
"President George W. Bush has bestowed on his [then] intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations. Notice of the development came in a brief entry in the Federal Register, dated May 5, 2006, that was opaque to the untrained eye."
What this means folks, if institutions like J.P. Morgan, Citi, B of A, Goldman or Morgan Stanley are deemed to be integral to U.S. National Security - can be "legally" excused from reporting their true financial condition – including KEEPING TWO SETS OF BOOKS.  The entry in the Federal Register is described as follows:
The memo Bush signed on May 5, which was published seven days later in the Federal Register, had the unrevealing title "Assignment of Function Relating to Granting of Authority for Issuance of Certain Directives: Memorandum for the Director of National Intelligence." In the document, Bush addressed Negroponte, saying: "I hereby assign to you the function of the President under section 13(b)(3)(A) of the Securities Exchange Act of 1934, as amended."
A trip to the statute books showed that the amended version of the 1934 act states that "with respect to matters concerning the national security of the United States," the President or the head of an Executive Branch agency may exempt companies from certain critical legal obligations. These obligations include keeping accurate "books, records, and accounts" and maintaining "a system of internal accounting controls sufficient" to ensure the propriety of financial transactions and the preparation of financial statements in compliance with "generally accepted accounting principles."
Conclusion: 
The U.S. Bond market has been “gamed” beyond belief and the only institution in the world with the means and motive to conduct this business is the U.S. Treasury [ESF] in conjunction with/acting through the New York Federal Reserve.  As such, U.S. bond pricing and interest rates are set 100 % arbitrarily and today represent the BIGGEST FINANCIAL HOAX ever perpetrated on mankind. 
Rob Kirby
Subscribe here.

-- Posted Friday, 15 June 2012 | Digg This Article | Source: GoldSeek.com

end

Here are pictures of Zimbabwe a few years ago as they ran into a massive hyperinflation.


Here is what you can expect in a hyperinflationary world.  I own one of those 100 trillion Zimbabwe notes.  I paid 8 dollars for the bill, it's intrinsic value is 2 cents. I show it as a reminder of what can happen to all of us:

(courtesy zero hedge)








end


I will conclude this morning's commentary with two fine offerings from Wolf Richter:

the first deals with the Greek problems prior to the Sunday election,  and the second one deals with Germany.

I know you will enjoy them:

(courtesy Wolf Richter/www.testosteronepit.com)


Greece In Panic ... Um, Wait!


“If Greece doesn’t get its next loan installment, the Eurozone will collapse the following day,” scowled Alexis Tsipras, leader of the left-wing SYRIZA, on Thursday morning. By threatening the entire Eurozone with its demise, he ratcheted up the bailout extortion racket a few more notches.
Yet, he and his party, if they were to win the June 17 election, promised to do precisely what would cause the bailout Troika to withhold payment: they’d repudiate the memorandum that the prior government had agreed to in order to get the second bailout. The “worthless piece of paper,” as he described it, spelled out structural reforms, privatizations, budget cuts, minimum wage cuts, etc. that would make the Greek economy competitive again through internal devaluation.
And it has been happening: draconian cuts in pay, benefits, and pensions; tax hikes, layoffs, spiking bankruptcies of small businesses; record unemployment; failing hospitals; pharmacies that refuse to sell medication to insured patients because they haven’t been paid by the out-of-money state insurer. The middle-class standard of living—it had defied gravity ever since Greece joined the Eurozone—has been crushed. Read.... Everything is Getting Gummed up in Greece.
Tsipras wants to reverse all this. He wants to hire civil servants, nationalize companies, raise the minimum wage to where it was before, and throw borrowed euros in every direction—but he’s prepared to dialogue with the Troika. And... “If they say ‘no’ to everything, it means they want the end of the Greek people and the euro.”
But patience is running thin in the Eurozone. Politicians are on edge. Spain needs a bailout for its banks. And then for itself. And Italy is hobbling towards a bailout though it’s too big to get bailed out.
“If the Greeks don’t meet the commitments they have made,” Slovak Prime Minister Robert Fico told parliament on Thursday, “if they don’t honor their financial commitments and don’t repay their loans, Slovakia will demand that Greece leave the Eurozone.”
French President and socialist François Hollande had set the tone during an interview on Greek TV on Wednesday. “But I have to warn them because I am a friend of Greece,” he said, setting himself apart from German Chancellor Angela Merkel, who’d been depicted as Nazi occupier. “If the impression is given that Greece wants to distance itself from its commitments and abandon all prospect of recovery, there will be countries in the Eurozone that will prefer to finish with the presence of Greece in the Eurozone.”
And so the run on the banks has turned into panic—for fear of a forced conversion of all bank accounts into drachmas, followed by devaluation. And the numbers have beenoozing to the surface on a daily basis. A total of €1.2 billion were yanked out of Greek banks in the chaotic week after the May 6 election. Every working day since, another €100 to €500 million were yanked out, with peaks on Fridays; a drachma conversion would occur over a weekend. This week, it jumped to €500 to €800 million per day. Cash withdrawals at the counter, bank transfers to foreign accounts, by individuals, by businesses. What keeps banks from toppling is the €18 billion they’d received from the Troika last week and the Emergency Liquidity Assistance from the ECB via the Bank of Greece.
But, but, wait.... the Athens stock exchange index, the ATHEX,  jumped 10.1% on Thursday though it seemed for the longest time that it would head towards zero. The bank index skyrocket 23.4%. Over the last seven days, it was up 43.7%. Alpha Bank was the blue-chip star: up 29.7% in a single day. Yes, the very banks that are hearing the giant sucking sound of money leaving through a million holes are rallying in a death-defying manner.
And construction company Ellaktor was the second-best performing blue chip with a 27.5% gain. Perhaps speculators were counting on big fat German-funded construction boondoggles. It was a glorious day of euphoria, stirred up by ... rumors.
Rumors that the conservative New Democracy would win enough votes to form a coalition government and make peace with the Troika to keep the euro. Rumors that the Troika would relax its requirements and give Greece some leeway. Unnamed “EU officials” were talking to Reuters. “The headline targets cannot be changed,” one of them said. “But there could be some tweaks to the path to get there.” And an unnamed “German EU official” said that there would be “a very clear 100-day plan for a new government.” But—stock market speculators must have missed that one: “If it’s not implemented in full, then the game is over.”
And retail is suddenly booming; people are stocking up on supplies and food, preparing for upheaval and shortages, should the euro be ditched. So, on June 17, Greeks will decide their country’s fate—or not. One thing is for sure: whoever wins will push for more bailout billions, but forget the conditions, the structural reforms, and austerity. Just the money. They’d watched the Spanish Prime Minister proclaim victory. Read.... Greece’s Scams, Extortion, and the “Suicidal” Possibility.

end

And the second Wolf Richter piece on Germany:



Relying on Fake German Strength

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Wolf Richter   www.testosteronepit.com
While we’re sitting on the edge of our chairs, waiting breathlessly for the Greek election, or for Fate to swallow Greece and send financial Armageddon over the Eurozone, stock markets rallied. Not because of a sudden plethora of good economic news, but in anticipation of how central banks might react to the Greek vote—that’s how far this farce has come! As if sheer artificial liquidity could wash away the putrid odor of decomposing debt.
They lined up on Friday to give their spiel. ECB President Mario Draghi would “continue to supply liquidity to solvent banks where needed.” Bank of Japan governor Masaaki Shirakawa was “prepared to take all possible measures” but denied rumors that central banks around the globe would take coordinated action. The Bank of England spoke up. The Swiss National Bank confirmed its iron determination to keep the flood of euros at bay, with capital controls, if it had to; its currency peg would hold, come hell or high water.
To calm the credit markets, it was leaked earlier that Draghi, European Council President Herman van Rompuy, European Commission President José Manuel Barroso, and Euro Group President Jean-Claude Juncker were feverishly bent over a grand plan to convert the beleaguered monetary union into some sort of federal state governed by unelected EU bureaucrats.
So, while waiting for the vision to appear, I skyped with a friend in Germany who owns two restaurants. They’re doing well, he said. 2011 was a record year, and this year looks good too. He’d redecorated, his new menu was a hit, and he was excited, though it was a day-to-day struggle, in a jungle of regulations, with taxes out the wazoo. And what about the debt crisis? He didn’t pay much attention to it, he said.
Indeed. The debt crisis has been good to Germany, formerly the “sick man of Europe.” After Reunification, Germany was marked by high unemployment, stagnation, and lacking innovation. The dotcom euphoria bypassed it. Inflation surged and real wages declined. Industry restructured, ditched unprofitable operations, axed workers. But countries around it boomed. Spain and Greece were riding high. The Celtic Tiger was cleaning everyone’s clock. And Germans became morose. Eventually, the internal devaluation, insidious as it was on the middle class, paid off for industry. Exports took off, and Germany was showing signs of growth.
Then the financial crisis hit. Export orders fell off a cliff, causing GDP to plunge 2.1% in the fourth quarter of 2008 and a horrid 3.8% in the first quarter of 2009. Annualized, those two quarters printed a double-digit decline in GDP. The worst two quarters in the history of the Federal Republic. The German economy lives and dies by its exports.
But as the financial crisis morphed into the Eurozone debt crisis and began infecting the periphery, Germany recovered. Exports to Asia skyrocketed, exports to European countries did well, and a good part of the US stimulus money made its way to German enterprises, such as Siemens and its suppliers. They produced and hired. Exports last year exceeded €1 trillion for the first time ever. Unemployment dropped to a two-decade low. Its budget is nearly balanced, and yields on its debt probed zero. Euphoria set in.
Short lived, it seems. According to a slew of recent data, Germany is backsliding. Its banks are highly leveraged and packed with who knows what kinds of decomposing assets. Its debt, at 81% of GDP, is high for a country that can’t print its own money, and is higher than that of Spain. If China implodes and the US enters a recession, while the Eurozone continues to teeter, German exports will once again collapse. The savior of Europe will find itself in a deep recession, with large deficits, rising unemployment, spiking yields....
“Germany’s strength is not unlimited,” Chancellor Angela Merkel told the Bundestag on Thursday. She was committed to the euro, she said, but would eschew counterproductive quick fixes, such as Eurobonds and other forms of debt sharing. She was addressing President Obama, French President François Hollande, and her European counterparts who have been demanding that the German taxpayer pick up the tab for the profligacy of others.
The same day, the French government drove a wedge into the rift between the two countries, the core of the Eurozone. Without it, nothing will work. Hollande, while in Rome to form an anti-Merkel triumvirate with Italy and Spain, presented his plan to save the Eurozone: institute “euro-bills” (his word for Eurobonds) and use ECB funds to recapitalize banks (via the ESM).
Panic attack, it was called in Germany: the French mega banks, chock full with rotten assets, were teetering, and to avoid having to beg Germany to help bail them out, Hollande wanted to change the rules so that he could ask the ECB instead.
Then, Prime Minister Jean-Marc Ayrault suggested that Merkel shouldn’t “sink into simplistic formulas.” And Arnaud Montebourg, Minister of Industrial Renewal, accused her of “ideological blindness.”
Friday, Merkel hit back. “Pooling the debt may be of interest to some, but in Germany, it would lead to mediocrity,” she said. “And mediocrity must not become the standard in the Eurozone”—thus slapping the M-word on the French.
“If Greece doesn’t get its next loan installment, the Eurozone will collapse the following day,” scowled Alexis Tsipras, leader of the left-wing SYRIZA. By threatening the entire Eurozone with its demise, if he won the election, he ratcheted up the bailout extortion racket a few more notches. The run on Greek banks turned into panic. Eurozone heads of state, already on edge, threatened Greece in return. Everything is coming to a head. Read.... Greece in Panic ... um, Wait!
I hope you all have a grand weekend.

I would like to wish all of our fathers out there
a very special father's day and please let us
not forgot the hard work that all of our mothers
did to make our special day a reality

I will see you on Monday.

Harvey 

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