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Alert: QE II Has Lit the Fuse

2010-11-12T06:48:00.001-08:00

Chris Martenson

For a very long time, I have been calling for, expecting, and otherwise anticipating the day that the Federal Reserve would begin openly monetizing government debt. Intellectually knew the day would come, but in my heart I hoped it wouldn't. But with the Fed's recent decision to directly monetize the next eight months of federal deficit spending, that day has finally arrived. I have to confess, while my prediction has proven accurate, I'm still stunned the Fed actually did it.
In this report I examine the risks that this new path presents, what match(es) may finally ignite the decades-old pile of dry fuel, what the outcomes are likely to be, and what we can and should be doing in preparation.
How is this Quantitative Easing (QE) different from the prior QE? There are two main points of departure between the two QE programs:

The level of global support for such efforts
Where the money was/is targeted

Let's take the second point first.
QE I consisted of all sorts of liquidity efforts that went by various acronyms, but the main act was the accumulation of some $1.25 trillion in MBS and agency debt. Some might note that taking MBS paper off the hands of financial institutions, which then bought Treasuries with the cash, is little different than the recently announced QE II program, because at the end of the day, money was printed and Treasuries were bought. In this regard, they're right.
But let's be clear about something: The first QE effort had the specific aim of repairing damaged bank balance sheets. That is, banks and other financial institutions had made some colossally poor and risky financial moves that didn't work out for them. They needed some help, and the Fed was more than happy to oblige by handing them free money to patch up their losses.
Of course they didn't do this outright by saying, "Here take this money!" -- they did it somewhat sneakily. But when the Fed hands you huge piles of money (for your dodgy debt) and then lets you park that very same money in an interest-bearing account at the Fed, there's really no difference between that and just handing you free money. No difference at all. If the Fed ever offers you free money that you can then park in an interest-bearing account with the Fed, you should take them up on it, and you should do it as much as they will allow.
Indeed, that's exactly what happened. These parked funds are called "excess reserves," and this chart clearly displays the massive program undertaken by the banks and the Fed:
Now, it's also true that the Fed does not pay a lot of interest on this money, just 0.25%, but on a trillion dollars that pencils out to some $2.5 billion a year, handed straight over to the banks. I call this program "Stealth QE" because it is nothing more than printing money and handing it over to the banks, with a slight bit of complexity thrown in just to put the dogs off the scent. A couple of billion may not sound like much these days, but I raise it to illustrate the many and creative ways that QE I was about getting the banks back to health, and not much else.
So QE I (and the 'Stealth QE' program) was directly aimed at banks to help them repair their balance sheets and make them whole after their terrible decisions and losses. It turned out, though, that fixing the banks did absolutely nothing for Main Street. The rest of the economy remained mired in a rut, with banks either unable or unwilling to make additional loans. They kept their QE lotto winnings and parked them with the Fed.
QE II, then is about getting thin-air money to the government which, the Fed rightly assumes, will immediately spend and push out into the economy. Here's how the head of the Dallas Fed, Richard Fisher put it in a recent talk he gave:

A Bridge to Fiscal Sanity?
The Federal Reserve will buy $110 billion a month in Treasuries, an amount that, annualized, represents the projected deficit of the federal government for next year. For the next eight months, the nation's central bank will be monetizing the federal debt.
This is risky business. We know that history is littered with the economic carcasses of nations that incorporated this as a regular central bank practice.

There it is in black and white. You might want to read it a couple of times to let it sink in. The Fed is directly monetizing the next eight months of excess(ive) spending by the federal government and is doing it despite being perfectly aware of the extent to which history is littered with the remains of those who have traveled this path before.
Presumably, we are supposed to console ourselves with the idea that the Fed will be successful where others have failed, and sometimes failed miserably. Yes, we are talking about the same Fed that fueled that last two destructive bubbles by keeping interest rates too low for too long; failed to see the housing bubble for what it was as late as 2007, and apparently entirely lacked the capability to foresee any of the current mess. That Fed.
The one run by the gentleman who said this to the House Budget Committee on June 3, 2009,

"Either cuts in spending or increases in taxes will be necessary to stabilize the fiscal situationâ€¦The Federal Reserve will not monetize the debt." ~ Ben Bernanke

In summary, the difference between QE I and QE II is that QE I went primarily to the banks and QE II is going directly to the government. While this may be something of a semantic difference, it shows that the Fed is changing its strategy again. We might ask: Why this shift, and why now?
How is QE II Being Viewed Outside of the US? In a word, poorly.
The German finance minster called the Fed's application of US monetary policy "clueless" and argued that the Fed decision would "increase the insecurity in the world economy."
China was predictably unhappy too, but initially used more diplomatic language:

Xinhua: G-20 Should Set Up Mechanism To Monitor Reserve Currency Issuers
BEIJING (Dow Jones)--China's state-run Xinhua News Agency published a commentary on Tuesday calling for the Group of 20 industrial and developing economies to supervise the issuance of international reserve currencies, and harshly criticized the U.S. Federal Reserve's new round of quantitative easing.
The G-20 should "set up a new mechanism that effectively monitors the issuer of the international reserve currency, especially when it is not able to carry out responsible currency policies," Xinhua said, making an apparent reference to the U.S. as the issuer of the dominant reserve currency.
"Considering the influence of the policy moves in the major international reserve currencies on the global economy, it is necessary for the issuer of the international reserve currency to report to and communicate with the G-20 Group before it makes major policy shifts."

All of the above is loosely coded diplomatic speak for "The US really bummed us out here; it should have stuck to the agreements we thought we had after the Pittsburg meeting. Going off-script like this was really not appreciated. We think an intervention is needed here."
Later, an advisor to the Chinese central bank went further and called the US actions "absurd."

PBOC Academic Adviser Questions Dollar's Global Role
Nov. 9 (Bloomberg) -- Li Daokui, an academic adviser to China's central bank, said it could be seen as "absurd" that the dollar remains a reserve currency after the financial crisis.

Here are a few other selected expressions of dismay from around the world:

United States receive criticism from all sides because the decision to print money
U.S. decision to pump 600 billion dollars into the economy has sparked a wave of strong disapproval. World leaders, who are preparing for the G20 summit in Seoul this week, warns that the move will complicate U.S. global economic recovery.

G20 tensions rise over the future of the global economy
The US last week stoked the simmering tensions by unveiling plans for another $600bn (Â£370bn) of quantitative easing (QE), on top of the $1.7 trillion already in place. The dollar crashed in what is being seen as the latest round of competitive devaluations, as nations seek to debase their currencies to help domestic industry.
Brazil retaliated by buying dollars. Xia Bin, a member of the Chinese central bank's monetary policy committee, branded the US stimulus plan "abusive" and warned it could spark a new global downturn. German finance minister Wolfgang SchÃ¤uble accused the US of breaking the promise made at June's G20 in Toronto, saying he would "speak critically about this at the G20 summit in South Korea."
Just two weeks earlier, G20 finance ministers at the warm-up summit in Gyeongju, South Korea, had pledged to refrain from competitive devaluation and Tim Geithner, the US Treasury Secretary, had promised the US would retain its "strong dollar" policy. At Seoul, the US will be facing accusations of empty rhetoric.
The harmonious language of hope at the Pittsburgh summit has now given way to something brazenly belligerent. The Brazilian President, Luiz InÃ¡cio Lula da Silva, has said he will go to the G20 meeting in Seoul ready "to fight." For President Obama, who has just lost a bruising midterm election battle, it will mean another painful encounter.

Greece Hits Out At Money-Printing Nations
Speaking on Jeff Randall Live, George Papaconstantinou warned quantitative easing only serves to stoke up inflation.
"You get inflation. You get a situation that's out of control. People lose their purchasing power. It doesn't get you very far," he said.

In summary, QE II has been described by several major trading partners as "clueless," "abusive," "absurd," and even resulted in a lecture from Greece on the subject of printing. By the time you are getting lectured by Greece on monetary actions, it might be time for a bit of self-reflection.
It is not too strong to suggest that something of a tipping point has been reached in regards to how the US is perceived as a leader on financial and monetary matters.
Why this is important Okay, so the US's international friends are a little upset with it for deciding to print up the better part of a trillion dollars out of thin air. What's the big deal?
The big deal here is that the OECD countries have a monster borrowing bill set for next year. There needs to be some level of cooperation, and fair play is going to be required in order to pull this off:

$10.2 Trillion in Global Borrowing
Next year, fifteen major developed-country governments, including the U.S., Japan, the U.K., Spain and Greece, will have to raise some $10.2 trillion to repay maturing bonds and finance their budget deficits, according to estimates from the International Monetary Fund. That's up 7% from this year, and equals 27% of their combined annual economic output.

Just ponder those numbers for a bit. The average borrowing across 15 major developed countries is 27 percent of GDP(!) Ask yourself how dependent the entire OECD world is on a smoothly operating financial system in order to merely function next year.
Having the perception out there that the US is being run by clueless (or 'abusive') individuals is not going to help the situation much.
In order for the requisite levels of borrowing to be pulled off in a smooth and uninterrupted fashion, there can't be any hits to confidence and no major disruptions can happen. Everything has to run with clockwork precision. It is against this backdrop that I view the profoundly undiplomatic statements directed at the US as quite a bit more serious than some other observers.
Conclusion By choosing the path of money printing (instead of austerity like the UK), the Fed has decidedly placed the US on a very risky course. I see the outcomes as almost binary: Either this works, or it doesn't.
If this gamble works, business will pick up, unemployment will drop, tax revenues will flow again to the states and federal government, the sun will continue to rise in the east, and roses will bloom in the spring.
If the gamble fails? Then we can envision an enormous devaluation event for the US dollar, with the Fed having to choose between defending the dollar (via rising interest rates) or preventing the federal government from a fiscal emergency brought about as a consequence of rising interest rates. And by "fiscal emergency" I mean being forced to slash expenditures by as much as 50% in order to service rapidly escalating interest-carrying costs on the short-term portion of the fiscal debt load. But that's a death spiral, because cutting government spending is the same as cutting GDP (it's practically 1:1), and every cut to GDP leads to lower revenues, which will necessitate more expenditure cutting, et cetera and so on, until 'the bottom' is reached.
I wish there was some sort of middle ground on this one, but I can't quite see it. Either the Fed's efforts work or they don't. Let's hope for success.
In truth, I've long predicted that the day would arrive when the Fed would monetize government debt, but I hoped that it would never come. Because hope alone is a terrible investment strategy, I prepared for this event years ago by accumulating gold and silver as the core of my portfolio.
But now the rules have changed again, we are on a slippery slope, and gold and silver were always meant to be my "transition elements" put there to help shepherd my wealth through the transition period as the world's fascination shifted from "paper" to "things."
Now that we're "almost there" in terms of the required shift in perception necessary to call an end to one period (the "king dollar" period) and mark the beginning of another, it's time to begin considering the places, timing, and ways that these transition elements can be redeployed to take advantage of the second part of this story.
In particular, concerned minds are looking for answers to questions about what might happen next and how to insulate oneself from monetary madness. These questions are explored in detail in Part 2 of this article (free executive summary; paid enrollment required to access).
Executive summary: Father of three young children; author; obsessive financial observer; trained as a scientist; experienced in business; has made profound changes in his lifestyle because of what he sees coming.
I think it’s important that you understand who I am, how I have arrived at my conclusions and opinions, and why I’ve dedicated my life to communicating the to you.
First of all, I am not an economist. I am trained as a scientist, having completed both a PhD and a post-doctoral program at Duke University, where I specialized in neurotoxicology. I tell you this because my extensive training as a scientist informs and guides how I think. I gather data, I develop hypotheses, and I continually seek to accept or reject my hypotheses based on the evidence at hand. I let the data tell me the story.
It is also important for you to know that I entered the profession of science with the intention of teaching at the college level. I love teaching, and I especially enjoy the challenge of explaining difficult or complicated subjects to people with limited or no background in those subjects. Over the years I’ve gotten pretty good at it.
Once I figured out that most of the (so-called) better colleges place "effective teacher" pretty much near the bottom of their list of characteristics that factor into tenure review, I switched gears, obtained an MBA from Cornell (in Finance), and spent the next ten years working my way through positions in both corporate finance and strategic consulting. From these experiences I gather my comfort with numbers and finance.
So much for the credentials.
The most important thing for you to know is the impact that the information that I’ve now placed on this site had on me. Let’s do this as a Before and After.
Before: I am a 40-year-old professional who has worked his way up to Vice President of a large, international Fortune 300 company and is living in a waterfront, 5 bathroom house in Mystic, CT, which is mostly paid off. My three young children are either in or about to enter public school, and my portfolio of investments is being managed by a broker at a large institution. I do not really know any of my neighbors, and many of my local connections are superficial at best.
After: I am a 45-year-old who has willingly terminated his former high-paying, high-status position because it seemed like an unnecessary diversion from the real tasks at hand. My children are now homeschooled, and the big house in Mystic was sold in July of 2003 in preference for a 1.5 bathroom rental in rural western Massachusetts. In 2002, I discovered that my broker was unable to navigate a bear market, and I’ve been managing our investments ever since. Since that time, my portfolio has gained 166%, which works out to a compounded yearly gain of 27.8% for five years running (whereas my broker, by keeping me in the usual assortment of stocks, would have scored me a 38% return, or 8.39%/yr). I grow a garden every year; preserve food, know how to brew beer & wine, and raise chickens. I’ve carefully examined each support system (food, energy, security, etc), and for each of them I've figured out either a means of being more self-sufficient or a way to do without. But, most importantly, I now know that the most important descriptor of wealth is not my dollar holdings, but the depth and richness of my community.
I hope you find what I have to offer here useful.
All the best,
Chris Martenson

www.chrismartenson.com

Area Euro: Tempesta sui Bond periferici | IntermarketAndMore

2010-11-12T03:48:00.000-08:00

Scritto il 12 novembre 2010 alle 09:15 da Dream Theater

Rischio default PIGS, effetto domino su stati e banche e... G20. Le borse Europee ieri hanno pagato di nuovo dazio. Gli USA sono seguiti a ruota ma in modo più limitato. Il tutto rientra nella logica visto che in questo momento tutta l’attenzione del mercato è rivolta sulla vicenda Irlanda. Il rischio default del paese irlandese ...

dilemma inflazione-commodity | IntermarketAndMore

2010-11-12T03:47:00.000-08:00

Scritto il 12 novembre 2010 alle 11:09 da Dream Theater

Grafico petrolio, scenario inflazione e intermarket intraday Il mercato si fa molto interessante ed i nodi vengono al pettine. Come detto più volte, era solo una questione di tempo. La crisi dei PIGS è esplosa scatenando un bel putiferio sul mercato dei bonds, il quantitative easing è stato annunciato ed è venuto meno l’effetto sorpresa, motivo ...

Stiglitz: dobbiamo mettere in galera i banchieri, o l’economia non si riprender�

2010-11-12T03:46:00.000-08:00

Fantastica CARMEN GALLUS, un ringraziamento per le sue traduzioni!!!!!

zio

12 novembre 2010 | Autore: Carmen Gallus

11/11/10

fonte: Mercato Libero News

Come hanno ripetutamente detto economisti come William Black e James Galbraith, non possiamo risolvere la crisi economica se non chiudiamo in galera i criminali che hanno commesso le frodi.
E l’economista premio Nobel George Akerlof ha dimostrato che la mancata punizione dei criminali dai colletti bianchi – ma invece il loro salvataggio – crea incentivi a commettere ancora altri reati economici in futuro, e all’ulteriore distruzione della economia.

Anche Stiglitz, premio Nobel per l’economia, dichiara a Yahoo Daily Finanza il 20 ottobre:
“Questo è un punto veramente importante da capire, dal punto di vista della nostra società.

L’ordinamento giuridico si suppone essere la codificazione delle nostre norme e credenze, cose di cui abbiamo bisogno per far sì che il nostro sistema possa funzionare. Se questo ordinamento viene considerato come una forma di sfruttamento, allora la fiducia nell’intero sistema comincia a mancare. E questo è proprio il problema che si sta verificando.

Leggi il resto di questo articolo »

L’impero di carta

2010-11-12T03:43:00.000-08:00

Venerdì 12 Novembre 2010 00:00

di Ilvio Pannullo

Sono state diverse, ultimamente, le giornate difficili per i mercati. Piazza Affari di umore nero, perde nettamente più delle altre Borse continentali, complici alcuni spunti negativi e la debacle del comparto bancario, afflitto da alcune trimestrali non entusiasmanti e da rinnovati timori sul debito sovrano di alcuni paesi periferici. L'indice Ftse Mib cede il 2,41%, l'All Share il 2,15%. Ad innescare nuovamente la speculazione è la sua eccezionale redditività: sparare a zero sugli Stati e scommettere sul disastro è troppo vantaggioso. Chi può specula e vince, mentre il resto del mondo assiste impotente a questo gioco al massacro.

La storia è sempre la stessa: i mercati sono stati scoraggiati dalla speculazione sui titoli di Stato di alcuni paesi il cui debito pubblico è considerato troppo alto, come Portogallo, Grecia e Irlanda. A contribuire al clima da fine impero sono le politiche monetarie statunitensi. Le parole, infatti, sono importanti, soprattutto quando a pronunciarle sono i banchieri centrali..........................................

Nuovediscussioni: L'economia dell'Est da segni di risveglio

2010-11-12T03:42:00.000-08:00

Polonia, Repubblica Ceca e Slovacchia sono tornate ad esportare i loro prodotti nell’Europa occidentale. Romania, Bulgaria e Paesi Baltici sono invece ancora impigliati nelle secche della crisi. La tempesta finanziaria degli ultimi due anni ha cambiato la geografia dei paesi dell’Europa centro-orientale e un’approfondita analisi del Financial Times Deutschland ne ridisegna confini e paesaggi: a vent’anni dalla caduta dei muri, le vecchie ferite della guerra fredda sono ormai sanate e le grandi differenze economiche non corrono più tra est e ovest ma fra centro e periferia.

Fra un centro che sulla tradizione mercantile mitteleuropea ha saputo costruire un moderno cuore industriale e una periferia che si dibatte fra debiti pubblici e privati e debolezze competitive. Negli Stati definiti «periferici», la crescita registrata fra la seconda metà degli anni Novanta e la prima metà del Duemila è stata determinata principalmente dai crediti, divenuti poi indigesti per i mercati finanziari. In alcuni casi si è sfiorata la bancarotta con l’intervento degli istituti internazionali e la conseguente adozione da parte dei governi di severe politiche di risparmio. Esattamente l’opposto è avvenuto nell’area «centrale», dove la creazione di valore aggiunto dell’economia è legato per una percentuale che oscilla tra il 20 e il 30 per cento al settore industriale. Più che in Germania.

Bankitalia: debito record settembre, 1.844,8 miliardi

2010-11-12T03:40:00.000-08:00

venerdì 12 novembre 2010

Diffondi il Link a questo articolo

(ANSA) - ROMA, 12 NOV - Nuovo record del debito delle pubbliche amministrazioni a settembre che raggiunge quota 1.844,8 miliardi contro gli 1.842,9 miliardi registrati in agosto. Lo riporta il bollettino Finanza Pubblica di Bankitalia. Per quanto riguarda le entrate tributarie, nel periodo gennaio-settembre del 2010, riferisce Bankitalia, sono state pari a 266,077 miliardi di euro, in calo dell'1,8% rispetto ai primi nove mesi del 2009. Il dato e' al netto dei fondi speciali della riscossione.

FINANZA/ Irlanda spacciata, ora tocca a Spagna e Portogallo? | Pagina 1

2010-11-12T03:39:00.000-08:00

Mercoledì il bagno di sangue, con Allied Irish Bank -5,6 per cento e Bank of Ireland -8,9 per cento. Ora, afferma MAURO BOTTARELLI si fa più reale l’ipotesi di un piano di salvataggio....................

Milano, Roma e Napoli, fratelli d'Italia. - Petrolio

2010-11-12T03:37:00.000-08:00

Una volta mi capitò di scrivere: "Siamo pronti a combattere il sistema a fianco di un impiegato statale, o di un commerciante, o di un pensionato?". Adesso mi chiedo: sono pronti un milanese e una mamma di Terzigno a combattere fianco a fianco senza darsi del terrone o del leghista a vicenda?

Sarebbe un miracolo. Ma sarebbe contemporaneamente quanto di più ovvio e logico aspettarsi. Nello stesso giorno infatti, arriva la medesima notizia da Milano da Roma e da Napoli, quasi in fotocopia: contaminate le falde acquifere a Terzigno, contaminata la falda acquifera sotto l'enorme discarica di Malagrotta a Roma, contaminata la falda acquifera e terreni tossici a Milano. L'ha notato nessuno?

Qui bisogna ficcarsi in testa al più presto che abbiamo tutti gli stessi problemi. Che la divisione tra sudici sudisti, nordici razzisti, romani fancazzisti è una stronzata colossale che serve solo a portare voti a chi ................

La produzione e le riserve agricole mondiali calano ad un ritmo allarmante

2010-11-12T03:36:00.001-08:00

11 novembre 2010 (MoviSol) - Dal 2008, quando si verificarono disordini per il cibo in circa 40 paesi a causa dell'incredibile aumento dei prezzi, le misure di emergenza necessarie ad alleviare la crisi sono state bloccate dal sistema della globalizzazione. Invece, il numero di esseri umani "gravemente malnutriti" è aumentato di 75 milioni, e la produzione annuale degli alimenti di base più consumati non è aumentata rispetto alla popolazione, persino agli attuali, inadeguati livelli di consumo.

Secondo le stime del Dipartimento dell'Agricoltura statunitense pubblicate nel bollettino di ottobre, la produzione mondiale di cereali è scesa da 2,241 (cifre per il 2008/2009) a 2,183 miliardi di tonnellate (proiezioni per il 2010/2011), mentre la popolazione è cresciuta. Forse ancora più allarmante è il fatto che ......................................

La ristrutturazione del debito diventa un tema in Europa

2010-11-12T03:36:00.000-08:00

11 novembre 2010 (MoviSol) - Il nuovo "meccanismo permanente" lanciato da Germania e Francia all'ultimo vertice UE (cfr. EIR Strategic Alert 44/10) contiene la proposta di ristrutturazione del debito, un aspetto che è diventato oggetto di conflitto con le istituzioni sovrannazionali europee. Il conflitto rappresenta una divisione tra gli interessi che rappresentano la comunità finanziaria internazionale e le nazioni individuali che fanno parte del sistema Euro dominato da quegli interessi finanziari. All'interno del sistema non c'è soluzione: una volta che viene introdotto il principio della ristrutturazione del debito – e cioè il creditore non viene salvato a prescindere ma viene cancellata una parte del debito – la cosa non si ferma lì. Non si può cancellare una parte del debito e mantenere in funzione lo.............................

Gli ordini di marcia di LaRouche ai patrioti: ora occorre la terza rivoluzione americana!

2010-11-12T03:35:00.001-08:00

11 novembre 2010 (MoviSol) - "Partiamo dalla storia, la storia americana in particolare". Così ha esordito LaRouche, aprendo la tanto attesa webcast quattro giorni dopo le elezioni di metà mandato negli Stati Uniti. Ha quindi delineato la battaglia centennale per sviluppare quelli che divennero gli Stati Uniti, la prima vera repubblica al mondo. Questo è cruciale, ha sottolineato, perché molti congressisti e senatori non comprendono più che cosa rappresenta unicamente il Sistema Americano, e si sono venduti al sistema britannico.

LaRouche ha elencato i tentativi in Europa, a partire dalla Grecia classica, poi con Carlo Magno, Niccolò Cusano ecc, per stabilire società basate sul bene comune, tentativi ostacolati costantemente dalle oligarchie dominanti. A un certo punto "quegli europei riconobbero che le aspirazioni dell'umanità non potevano venire realizzate in ............................

Risposta ad un lettore su Barack Obama e Hillary Clinton

2010-11-12T03:35:00.000-08:00

11 novembre 2009 (MoviSol) - Riceviamo e pubblichiamo la lettera di un lettore sulla caduta di Barack Obama e sul ruolo di Hillary Clinton.

Segue la nostra risposta.

Oggetto: Una domanda su Obama e Hillary Clinton

Salve

Egregi signori, visto che Obama ha subito una sonora sconfitta volevo chiedervi se corrisponde al vero che il vostro maggiore desiderio è quello di sostituire Obama con Hillary Clinton? Tutti i nostri e vostri problemi sarebbero nelle mani della moglie dell'ex presidente Clinton, cioè quello che fece bombardare la Serbia? Ma veramente avete detto ciò su radiopadania? allora non ci siamo proprio capiti..distinti saluti

LA NOSTRA RISPOSTA

Caro lettore,

Quello che ho detto durante l'intervista a Radio Padania sulle elezioni americane di metà mandato è che c'è un gruppo, sempre più consistente, di leader democratici che preferirebbe la candidatura di Hillary Clinton nel 2012, ad un secondo mandato di ............................

CRISI EUROPA: IL RITORNO DEL MONELLO! | icebergfinanza

2010-11-12T03:32:00.000-08:00

Come scrissi alcuni mesi fa non sarebbe passato poi molto tempo prima che qualche monello avesse ripreso a lanciare sassate contro la fragili vetrate gonfiate dal debito della comunità europea, monelli decisamente interessati a seminare il panico per distogliere l'attenzione da quello che in realtà sta accadendo all' America. Come abbiamo visto a Modena, all'improvviso quando l'estinzione e la fine del dollaro è data per certa, ecco che tutti si precipitano a comprare questo insignificante biglietto di colore verde, bene rifugio per eccellenza.

(...) Il differenziale di rendimento tra i decennali tedeschi e gli analoghi titoli irlandesi sale di 10 punti e tocca i 665 punti base o livello record. Per vendere bond il Tesoro irlandese deve pagare il 6,5% in più rispetto alla Germania. Anche gli spread di Portogallo e Grecia s'impennano rispettivamente a 485 e 930 punti. A livelli record anche i credit default swap di Spagna, Portogallo e Irlanda.

Finiscono sotto pressione anche i titoli di stato italiani. Il premio di rendimento pagato dai Btp decennali italiani rispetto ai ........................................

North Dakota, il miracolo fatto in casa

2010-11-12T03:31:00.000-08:00

Il Giornale 12 Novembre 2010

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Qual è lo Stato che può vantare una disoccupazione al 4,4%? E aumenti del Pil a due cifre con incrementi dei redditi delle persone fisiche pari al 23% tra il 2006 e il 2009? Uno pensa: non può essere che la Cina. Sbagliato. Anche nell’ansimante America c’è chi va alla grande. L’autore di questo miracolo è il North Dakota, ovvero uno dei piccoli e in apparenza marginali tra i 50 che compongono la federazione statunitense.

La sua fortuna? Aver dato retta, tra il 1915 e il 1920, alla Nonpartisan League, un movimento locale che l’establishment tentò di fermare bollandolo come populista, ma che in realtà era lungimirante. Quel movimento indipendente propose agli elettori del North Dakota di non aderire al Federal Reserve System ovvero al circuito finanziario imperniato sulla Fed, la Banca centrale americana. Pensavano, i contadini dello Stato, che non ci si potesse fidare dei banchieri di Wall Street e che fosse più saggio avvalersi di un Istituto indipendente. Il tempo ha dato loro ragione.

Il successo del North Dakota è tutto qui: pur usando il dollaro come valuta di scambio, oggi è l’unico Stato americano che non dipende dalla Federal Reserve. A garantire le sue riserve sono i cittadini, i quali, in caso di dissesti finanziari non potrebbero avvalersi dell’assicurazione federale sui depositi. Lo Stato corre un rischio, ma ipotetico: in oltre 90 anni di vita l’istituto non è mai stato in difficoltà ed è.......................................

Il mondo aggrappato alla debolezza Usa - LASTAMPA.it

2010-11-12T03:28:00.000-08:00




	condividi


FRANCESCO GUERRERA

La scena è da film western con Ben Bernanke, il capo della Federal Reserve, nei panni del generale Custer. Accerchiato dai nemici e abbandonato dagli alleati, il banchiere centrale si è trovato con un solo colpo in canna, che ha sparato la settimana scorsa: stampare 600 miliardi di dollari per comprare obbligazioni del Tesoro americano. A differenza di Custer, la cui fine era certa sin dall’inizio dello scontro con gli indiani a Little Big Horn, non sappiamo ancora se Bernanke - un signore all’antica che la giubba blu della cavalleria americana non la porterebbe male - uscirà vittorioso da quest’ultima battaglia. Ci vorranno parecchi mesi per capire se quest’iniezione di capitale riuscirà ad abbassare ancora i

.................................

LA FED ALL’ISOLA DI JEKYLL: SONO TORNATI, 100 ANNI DOPO !

2010-11-12T03:27:00.000-08:00

Argomento: Usa

DI ROBERT WENZEL
economicpolicyjournal.com

Beh, non è fantastico?

Soltanto alcuni giorni dopo aver annunciato il lancio del QE2, la Fed terrà ora un’importante conferenza sull’isola di Jekyll per celebrare gli incontri segreti che si tennero là 100 anni or sono e che ebbero come risultato la creazione della Fed.

L’isola si trova nell’Atlantico, al largo delle coste della Georgia.

Nel novembre 1910, il senatore Nelson W. Aldrich, il vicesegretario al Tesoro A. P. Andrews ed altri personaggi di spicco della finanza arrivarono al Jekyll Island Club per discutere di................................

Uno sguardo indipendente sul mondo dell'economia e della finanza | Bimbo Alieno

2010-11-11T15:02:00.000-08:00

La Francia si schiera apertamente con la Germania nell’ambito della definizione delle regole del nuovo Dispositivo Permanente di cui abbiamo già parlato.

“gli investitori devono essere pronti a subire le conseguenze della ristrutturazioni dei debiti governativi, così come partecipano ai frutti che derivano dai loro investimenti devono subirne gli sviluppi negativi”

Il così palese appoggio della Francia all’iniziativa tedesca, e l’esplicito riferimento alla “ristrutturazione del debito” hanno allontanato ulteriormente gli investitori dal debito dei Paesi periferici, evidentemente ancora molti non avevano sufficientemente pesato quanto reale sia il rischio di una riduzione dei valori nominali di molte obbligazioni:
I titoli di Stato Irlandesi decennali sono balzati ulteriormente ad un rendimento record: 8,95%, i titoli portoghesi al 7,27% e anche i rendimenti degli altri tre Paesi PIIGS sono cresciuti…
Insomma, per tenersi in tasca il rischio crescente di questi titoli, il mercato pretende rendimenti sempre più elevati.
E Trichet, nel frattempo, si indispettisce facendo notare che ................................

2010-11-11T13:38:00.001-08:00

It's amazing to me how often events manage to defy the odds of them happening.

Some of these events are mundane, others have more relative importance; but they all hold the same against-the-odds fascination.

Here's one I recently came across in an otherwise normal day. It really takes the cake -- as in, the birthday cake. My wife and I stopped by a restaurant to order a take-out, and met the couple who ran the restaurant. We also met their three triplet daughters. Get this: The girls will turn 11 on 11/11/11.

And here's one from Yahoo! TV Blog (11/8):

"One woman's amazing feat of word game mastery on Friday's episode of 'Wheel of Fortune' left audiences amazed -- and maybe a little suspicious.

"Contestant Caitlin Burke somehow managed to solve a 27-letter, 7-word puzzle with only the letter 'L' and an apostrophe to go on."

The puzzle she solved read: "I've Got A Good Feeling About This."

So events in real life really can indeed defy the odds. And this includes financial markets.

The example of Long Term Capital Management (LTCM) comes to mind. You may recall that this hedge fund employed a staff of geniuses, including two economists who shared the Nobel Prize in economics in 1997. Less than a year later LTCM became famous in another way -- by losing $4.6 billion. The scale of LTCM's collapse threatened the entire financial system; the New York branch of the Federal Reserve had to directly intervene and organize a bailout. The fund's managing partners amounted to a financial "dream team." The outcome was the last thing the financial world expected. But it happened.

And who would expect a 600-point implosion in the Dow Jones Industrials within about five minutes? Yet that is what happened during the May 6 "flash crash."

So the question is: Will most people expect the next major move/trend in the stock market?

If history means anything, the answer is a loud and decisive "No."

Financial markets catch most participants flat-footed at tops and bottoms. The majority of investors see the future in linear terms: the trend tomorrow will be pretty much like the trend today.

Yet our independent analysis shows that markets simply do not unfold that way. Change -- often dramatic change -- is the rule and not the exception.

What do we see as the most likely change ahead? Our November Financial Forecast lays out our analysis. Moreover, recent chart action is pointing toward a critical juncture in key markets. Your risk-free read of our Financial Forecast Service begins by following this link.

Paul Farrell On The One Thing Buffett, Gross, Grantham, Faber, And Stiglitz All Agree On: "Bernanke Plan A Disaster"

2010-11-03T03:51:00.000-07:00

Tyler Durden

As for America, the vampires have, unfortunately, taken over.

By now it is more than obvious except to a few economists (yes, we realize this is a NC-17 term) that QE2 will be an absolute and unmitigated disaster, which will likely kill the dollar, send risk assets vertical (at least as a knee jerk reaction), and result in a surge in inflation even as deflation on leveraged purchases continues to ravage Bernanke's feudal fiefdom. So all the rational, and very much powerless, observers can do is sit back and be amused as the kleptogarchy with each passing day brings this country to final economic and social ruin. Oddly enough, as Paul Farrell highlights, the list of objectors has grown from just fringe blogs (which have been on Bernanke's case for almost two years), to such names as Buffett, Gross, Grantham, Faber and Stiglitz. And that the opinion of all these respected (for the most part) investors is broadly ignored demonstrates just how unwavering is the iron grip on America's by its economist overlords. Which brings us back to the amusement part. Here are Farrell's always witty views on the object which very soon 99% of American society will demand be put into exile: the genocidal Ph.D. holders of the Marriner Eccles building.
From Paul Farrell's latest: Sell bonds now, Fed's QE2 is doomed to fail.

Warning, Fed Chairman Ben Bernanke’s foolish gamble to stimulate the economy will backfire, triggering a new double-dip recession. Bernanke is "medding" too much in the economy, say Marc Faber, Bill Gross, Jeremy Grantham, Joseph Stiglitz and others.

The Fed is making the same kind of mistakes Japan made that resulted in its 20-year recession. The Washington Post says Larry Mayer, a former Fed governor, estimates that to work it would take QE2 bond purchases of "more than $5 trillion ...10 times what analysts are expecting."

Bernanke’s plan is designed to fail. And, unfortunately, that will make life far more dangerous for American investors, consumers, taxpayers and voters.

"I’m ultrabearish on everything, but I believe you’ll be better off owning shares than government bonds," said Hong Kong economist Marc Faber at a recent forum in Seoul. He sees a repeat of dot-com-bubble insanity today. Faber publishes the Gloom, Boom & Doom Report.

And Warren Buffett agrees, warning that anyone buying bonds now is "making a mistake." Don’t buy. Sell.

Here’s how Bloomberg News reported Faber’s warning: "Global markets are heading for an ‘important turning point’ with interest rates beginning to rise within about three months and the U.S. dollar gaining strength ... Instead of interest rates going down, they could start to go up. Instead of the dollar being weak, it could strengthen."
Is Faber reliable? You bet: One week before Black Monday 1987 Faber warned investors to dump stocks. Then in early 2006 he warned of a "correction coming." Again in mid-2007 Faber said U.S. stocks were "entering a bear market." After that, Wall Street lost over half of America’s retirement money in its subprime disaster ...and Wall Street’s about to do it again. So when Faber says sell bonds, buy stocks, please listen.

Just who is this Ben Shalom Bernanke?

Lately Bernanke’s acting like an egomaniacal politician, a savior trying to manipulate the economy in the wake of the failures of Congress, Obama and the GOP Tea Party of No-No to get results. That’s not the Fed’s job, and still Bernanke’s pulling out all the stops, repurchasing government bonds, printing too much money, flooding the currency markets. Fed zombies hungry for quantitative easing.

The egomaniacal politician is trying and succeeding in creating the greatest asset bubble ever, dwarfing anything created by his even more demented predecessor.

All so predictable: This has been building since said he wanted to buy back more bonds. The Wall Street Journal’s Jason Zweig warned earlier this month of a "Bond Bubble," noting that while many are blaming "small investors for taking big bets," the truths is, "it isn’t Joe Schmoe, it’s Uncle Sam."

Nobel economist Stiglitz predicts it will fail: "Easy money won’t work ... the Fed risks fueling a destructive bubble."

It’s an old game: Since the 2008 meltdown the Fed has been Wall Street’s secret conspirator, stealing from Main Street (by keeping money market interest rates low) and giving that cheap money to a failing Wall Street (so their quant-speculators can keep gambling on derivatives, to justify paying themselves mega-bonuses).

Warning, this is all part of the Fed’s ongoing Ponzi scheme to bail Wall Street out of the destructive subprime decisions that sank the economy in 2008. Bernanke’s latest Ponzi scheme will soon backfire, this time bringing down the economy again, further reducing the retirement savings of America’s 95 million investors.

How Bernanke hypnotized the president:

When Obama reappointed Bernanke, "Black Swan" author Nassim Nicholas Taleb was "stunned" by Obama’s failure to "change" the direction of America’s misguided monetary policies. I called Bernanke’s reappointment "Obama’s biggest domestic policy blunder ... Obama’s black swan."

Unfortunately Bernanke is just one of Obama’s many capitulations to the failed Reaganomics of the past generation.

So here we are on Election Day stuck with the failures of the Bush-Paulson team, aggravated by the failing of their replacements, Obama, Summers, Geithner and Bernanke. Two failed teams that set the stage for the GOP’s lethal return and the creation of the Tea Party, a new team high on hollow rhetoric with no interest in compromising.

Warning, "gridlock" is the sole policy-making rule in Washington for the next two years.

The bigger problem will arrieve in 2012, when Obama is most certainly replaced with someone who actually respects Bernanke.

And beyond: Because odds are Obama will be replaced by an ultra-conservative president whose brain will be driven by the discredited ideologies of Milton Friedman, Ayn Rand and Reaganomics ... a political scenario guaranteed to trigger another, bigger economic meltdown that will push America into a long Japan-style recession.

Gross and Grantham's take on the biggest ponzi scheme ever created

Today we have two of America’s most respected investment managers angry and worried about Bernanke’s irrational s dangerous meddling were shared by Jeremy Grantham GMO chief investment strategist, managers of $95 billion in retirement assets.

The Fed’s plan to "buy government bonds, intending to lower interest rates and stimulate demand won’t work, Gross and Grantham say in letters to investors: They actually make things worse."

Gross says Bernanke’s plan is a "brazen Ponzi scheme." Instead of a rational plan to pay for "maturing debt with receipts from financial sector creditors, the Fed" is acting as a speculator, a high-risk gambler."The government will be its own investor, feeding its own Ponzi machine." Bernanke’s extreme "meddling" is a disaster waiting to happen. QE2 a Ponzi scheme, says Pimco's Gross.

Grantham’s hostility toward Bernanke is oozing from in his Halloween letter to investors. In "Night of the Living Fed," he warns that Bernanke’s plan is just a short-lived "adrenaline injection" that will backfire: "If I were a benevolent dictator, I would strip the Fed of its obligation to worry about the economy and ask it to limit its meddling to attempting to manage inflation ... force it to swear off manipulating asset prices through artificially low rates and asymmetric promises of help in tough times. ... It would be a better, simpler, and less dangerous world." Send in the vampires!

Who's to blame for having a madman in charge? Why, you are, America...

Gross’s outrage also oozed like the bloody bite of a vampire: "I call it a Sammy scheme, in honor of Uncle Sam and the politicians (as well as its citizens) who have brought us to this critical moment in time ... It is not a Bernanke scheme ... It is a Sammy scheme. You and I and the politicians that we elect every two years ... deserve all the blame."

Yes, you and I are to blame, not "them" ... we voted for Reagan, Clinton, Bush, then Obama ... we let them pick the Paulsons, Cheneys, Geithners and Summers, addicts who believe in living high on borrowed money ... we created China to replace us as the world’s next superpower ... we created the Tea Party ... we are to blame for appointing a Supreme Court that’s unleashed billions destroying democracy, from within ... we are to blame for an insatiable Wall Street that stole trillions from the Treasury in 2008 and keeps stealing in Wall Street’s derivatives casino ... and in these midterm elections, we’ll vote to make things even worse ... then we’ll do it again in 2012.

Yes, we will ... you and me ... we will keep doing it ... setting up the mother-of-all-meltdowns. And like all addicts, we just don’t get it, can’t stop our self-destructive behavior

Gross is right, don’t blame "them." We’re to blame for what’s happening ... we are responsible ... you and me, we’re doing this to ourselves ... we are killing the golden goose.

Yet the good old partisan bickering will never end: so predictable is human stupidity and the attraction of the "us against them" model. Which is why the only good trade these days is going long unrestricted one way tickets to a place warm and sunny (preferably in the one carrier that doesn't have more than 5x adjusted debt/EBITDAR). As for America, the vampires have, unfortunately, taken over.

www.zerohedge.com

Why Is Indiana Putting Armed Security Guards Into 36 Unemployment Offices Across The State?

2010-11-01T11:58:00.001-07:00

The Economic Collapse

Did you ever think that things in America would get so bad that we would need to put armed guards into our unemployment offices? Well, that is exactly what is happening in Indiana. Armed security guards will now be posted at all 36 full-service unemployment offices in the state of Indiana. So why is this happening now? Well, Indiana Department of Workforce Development spokesman Marc Lotter says that the agency is bringing in the extra security in anticipation of an upcoming deadline when thousands upon thousands of Indiana residents could have their unemployment benefits cut off. But it is not just the state of Indiana that could have a problem. In fact, one recent study found that approximately 2 million Americans will lose their unemployment insurance benefits during this upcoming holiday season unless Congress authorizes another emergency extension of benefits by the end of November. At this point, however, that is looking less and less likely.
So perhaps all the states will have to start putting armed security guards in their unemployment offices. The truth is that frustration among unemployed Americans is growing by the day.
Could we soon see economic riots similar to what we have seen in Greece and France?
Let's hope not.
The following is a video news report about the armed guards that are going into Indiana unemployment offices....

So could things really get out of hand when thousands of unemployed workers in Indiana find out that they aren't going to get checks any longer?
Indiana Department of Workforce Development spokesman Marc Lotter makes it sound like that is very much on his mind....

"Given the upcoming expiration of the federal extensions and the increased stress on some of the unemployed, we thought added security would provide an extra level of protection for our employees and clients."

So who is paying for all of this extra security?
The Feds of course.
The additional cost of the new security will be approximately $1 million, and it will be paid for with U.S. government funds designated for the administration of the unemployment system according to Lotter.
This is not a good trend. As you go through your daily life, just start taking note of the places that now have armed security that did not have armed security five or ten years ago.
Unfortunately, as the U.S. economy goes downhill even further, the amount of security that people feel is "necessary" is likely to go up even more.
So is America going to become an armed camp where the people and institutions with money are protected by armed guards from the hordes of frustrated unemployed workers that can't feed themselves or their families?
Americans are certainly not in a good mood about the economy. According to a recent poll conducted by CNBC, 92 percent of Americans believe that the performance of the U.S. economy is either "fair" or "poor".
The lack of jobs is the main thing that the American people are so mad about. In fact, it is hard for even highly educated people to find work in 2010. In America today, 317,000 waiters and waitresses have college degrees.
People are really hurting and they are getting to the end of their ropes. Over 41 million Americans are now on food stamps, and one out of every six Americans is enrolled in at least one federal anti-poverty program. It is getting hard to believe that this is even America anymore. For many more statistics that reveal the economic horror we are now facing as a nation, please see my previous article entitled "30 Reasons Why People Should Be Getting Really Nervous About The State Of The U.S. Economy".
But it is not just unemployment that is the problem. In recent years, millions upon millions of Americans have been forced to take reduced hours or a cut in pay due to the economy. Millions of others have had to take jobs that barely enable them to survive. In fact, the number of Americans working part-time jobs "for economic reasons" is now the highest it has been in at least five decades.
So why aren't there even close to enough jobs for everyone? Well, there are a number of contributing factors, including the fact that we have been "offshoring" and "outsourcing" millions of our jobs and now it is really starting to catch up with us. I have discussed this so many times now that I am starting to sound like a broken record.
But instead of fixing the fundamental problems with our economy, the Federal Reserve wants to print yet another gigantic pile of paper money and throw it at the problem. It is called "quantitative easing", and it may help smooth things over for a few months, but it is also going to make our long-term problems even worse.
Unfortunately, the Federal Reserve does not really seem concerned about protecting the value of the U.S. dollar at this point. Not that they ever did, but it would be nice to see Fed officials paying at least some lip service to the dangers of inflation.
Instead, various Fed officials have been publicly making statements about the need for more quantitative easing for weeks. Right now they seem desperate to put the American people back to work - even if it ends up crashing the value of the dollar.
But now even the IMF seems supportive of a dollar devaluation. On Thursday, the IMF actually said that the U.S. dollar is "overvalued" and that adjustments need to be made.
We'll see what the Fed decides to do next week. Most analysts believe that they will announce a quantitative easing program of some sort or another.
But what have we come to as a nation when those who control our economy believe that the best solution to our economic problems is to print another big pile of paper money and chuck it into the system?
We've got an absolutely gigantic economic mess on our hands, and none of our "leaders" seem to have any idea about how to fix it.
Meanwhile, millions of unemployed Americans are just going to become more and more frustrated - especially when it gets to the point when they aren't receiving unemployment checks anymore.

theeconomiccollapseblog.com

The Future Of Quantitative Easing

2010-11-01T11:53:00.000-07:00

Posted: Oct 31 2010 By: Jim Sinclair Post Edited: October 31, 2010 at 9:36 pm
Filed under: General Editorial
My Dear Friends,
Tomes have been written this week about quantitative easing, many written by those who didn’t know what QE meant twelve months ago. Tomes are silly as very few actually read them. Those that do read are comatose by the end. We do not do tomes here. We present conclusions.
QE to infinity means the economic can gets kicked down the road again at the cost of the dollar’s value and therefore sparks the event of accelerated currency induced cost push inflation.
No QE means a violent collapse of general business within 90 days. That takes the camouflage off of the following:
1. False balance sheets of financial entities, thanks to the sale of the FASB’s soul to political pressure, are exposed.
2. Further collapse of tax revenue to states brings about a financial crisis much larger than anyone presently anticipates.
3. The malaise in the US destroys what little is left of general confidence in the austere Euro region.
4. The rape of pension funds is exposed.
Gold will go to a figure equal to all foreign debt of the USA divided by the number of ounces that the US is assumed to have. This is how you can calculate the potential price.
If moderate levels of QE are utilized, that means the can gets kicked down the road once again at the cost of the dollar and therefore the event of accelerated currency induced cost push inflation. It might in this case take a few days before the markets figure it out. If moderate QE is announced that means QE to infinity but only revealed a little at a time or not revealed at all. To do QE to infinity without revealing it violates the tool of communication recently discuss by the Fed which means MOPE. It will be revealed.

Last Gasp of the Fiat Money Regime

2010-10-15T03:51:00.001-07:00

King World News 14 Ottobre 2010

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In yesterday’s FT piece from Edwin Truman, he suggested America sell all of its gold, and listed reasons as to why gold was in a bubble. King World News reached out to Jim Rickards to get his thoughts, after yesterday speaking with the legendary Jim Sinclair regarding the same subject. Jim Rickards put together this piece exclusively for the KWN blog which deconstructs the arguments in the FT article from Edwin Truman with remarkable precision.

October 13 (King World News) - One of the most famous and widely published essays of all time was A Message to Garcia by E. Hubbard. Written in 1899, it recounts the effort of the President of the United States to reach out to a foreign insurgent who was incommunicado. For this mission impossible, the President relied on U.S. Army Lieutenant Andrew S. Rowan who delivered the message against enormous odds but without hesitation and with complete loyalty and devotion to duty.

Lt. Rowan, meet Ted Truman.

Today’s FT carries a column entitled “America should open its vaults and sell gold” by Edwin “Ted” Truman of the Peterson Institute. Truman’s thesis, in a nutshell, is that the gold price is a bubble and the U.S. Treasury should take advantage of this by selling “high” and using the proceeds to reduce the national debt by about 2.25% of GDP. Furthermore, the interest savings on the debt reduction would amount to about $15 billion annually thus helping reduce our deficit even more. And the appeal of Truman’s idea goes even further because the gold sales would give anxious citizens, “…something to hang around their necks…” How thoughtful.

The intellectual flaws in Truman’s piece are too numerous to review in detail but here are a few highlights: He says that the price action in gold is driven by the “…hype of the bullion dealers (holding large inventories)…” Really? My wholesale bullion dealer constantly complains about shortages and occasionally puts his best customers on allocation because he’s short of supply. Truman also says that the market is accompanied by “…the normal amount of fraud and misinformation accompanying asset price bubbles…”. Apart from a few sleazy coin dealers, the only fraud and misinformation I’ve seen comes from the Treasury and the Fed who refuse to allow a proper audit of official holdings and who cover-up and deny their gold discussions held at BIS and other nearly impenetrable venues. More to the point, the price action does not reveal a bubble in gold, it shows the collapse of the paper dollar. The issue here is understanding the importance of the numerarie or unit of account. If you make the dollar the numerarie, and think in terms of “dollars per ounce” then the price action may look to some like a bubble. But if you make gold the numerarie and think about how many ounces your get for a single dollar (now about 0.00075; was 0.00400 in 1999) you can see that the real problem is the dollar is rapidly shrinking to a vanishing point.

Truman’s idea that gold sales and debt reduction would reduce U.S. interest expense by $15 billion per year is the kind of nonsense one gets from static, linear analysis. In dynamic, nonlinear analysis, such gold sales would so undermine confidence in the dollar as to cause a skyrocketing of interest rates and an explosion of the U.S. deficit easily submerging the savings that Truman posits. Truman says that the gold standard was associated with “…unstable, prices, output and employment…”. If by unstable, he means cyclical, yes that’s true (and necessary) but gold was also associated with some of the longest and strongest periods of sustained real growth in U.S. history from 1865 to 1912 until gold’s function was derailed by the creation of the Fed in 1913. Truman says the U.S. “…has been sitting on [gold] since the Great Depression, receiving no return…” Actually, gold went from $20.67 per ounce to $1,350 per ounce in that time period; seems like a 6,500% return to me.

Truman says that the gold standard “…has not existed for a century…”. This is highly revealing. In fact, the U.S. went off domestic gold convertibility 76 years ago, within living memory to many, and only went off international gold convertibility 39 years ago. But if Truman dates the end of the gold standard not from 1971 or 1933 but from the creation of the Fed in 1913 then he’s right; it has been a century. That tells you something about how establishment intellectuals like Truman view the real purpose of the Fed regardless of the existence of any formal systemic role for gold. Nevertheless, gold is not quite the musty relic Truman would like it to be although it is true that an entire generation of finance scholars have come of age since 1971 with no formal analytic training in gold.

We could go on but you get the point. No amount of analysis will reach the right conclusion if you get the paradigm wrong. Truman’s paradigm is anchored in a perpetually sound fiat dollar and he is intellectually unable to see the world any other way. Sadly, he’s not alone.

This leads me to Truman’s most revealing remark of all. He writes, “Official discussions of the reform of the international monetary system do not include any advocates of a return to gold…” (emphasis added). The problem with this observation is that he is almost certainly right. And this is scary. I have maintained for some time that the return to gold is inevitable and the only issue is whether it would happen through a rigorous and studied process led by the United States or by a chaotic process in which the United States is caught off guard to its disadvantage. Learning from an insider like Truman that none of the power elite are thinking seriously about gold increases the odds that the dollar dénouement will be chaotic not orderly.

The reaction of the gold community and various bloggers to Truman’s op-ed was swift and predictable. He was ridiculed as espousing the “dumbest idea we have ever heard” by zerohedge.com. Others were simply incredulous and assumed that Truman must have wandered onto the FT op-ed pages after decades alone on a deserted island. While I might not disagree with zerohedge, there is one problem with this response. Ted Truman is not a nobody. He’s one of the most seasoned, experienced and highly respected international monetary experts in the world. His academic, government, scholarly and think-tank credentials are nonpareil. He speaks to finance ministers, sovereign wealth funds, IMF officials, and Wall Street CEO’s on a daily basis. Importantly, he was a staff economist to the FOMC. I have personally worked with many of his colleagues at the Peterson Institute on matters relating to international finance and national security and they are uniformly of the highest intellectual calibre and operate with a truly warm and collegial demeanor.

And that is the point. Ted Truman is not a fringe figure or a minor intellectual; he is a giant in the field. He is not just close to the establishment. He is the establishment. An op-ed by Truman appearing one day after the IMF semi-annual meeting ended with no effective solutions on the currency wars is no coincidence. It is a metaphorical Message to Garcia, to the gold insurgents, from the President and the powers that be. It is price suppression without having to engage in actual sales. It is a warning to gold bugs that they may get crushed. It is meant to induce fear into those newly interested in gold that it’s a rough game with no holds barred. It is a show of bravado by the fiat money crowd. But it is also a sign of desperation; the last gasp of the ancien régime of fiat money. If a smart guy like Ted Truman is reduced to the old canard about gold being good only for hanging around your neck, then what else is there to say? The intellectual opponents of gold are now as exhausted as the mines.

By James G. Rickards

Source > KingWorldNews.com

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