(Robert Sinn) “When the economic data and financial markets soften the Fed strikes a more dovish tone, and as we saw yesterday when things improve the Fed Chairman does not mention the idea of additional stimulus and acknowledges the potential for a short term spike in inflation due to higher gasoline prices.”

Bernanke says, “Since these projections were made, gasoline prices have moved up, primarily reflecting higher global oil prices – a development that is likely to push up inflation temporarily while reducing consumers’ purchasing power.” And despite the fact that Bernanke didn’t mention “quantitative” once — here or anywhere else in his testimony — the media was quick to hype the Fed’s mere acknowledgement of “potential inflation” as a change in stance.

Full Story: Bernanke’s Poker Game (RobertSinn)

However, the majority of the mass media conveniently overlooked the real story of the day…

(WSJ) “The European Central Bank handed out €529.5 billion ($712.81 billion) in cheap, three-year loans to 800 lenders, the central bank’s latest effort to arrest a financial crisis now entering its third year.

Wednesday’s loans were on top of the €489.2 billion of similar loans the ECB dispensed to 523 banks in late December. The ECB’s goal is to help struggling banks pay off maturing debts and to coax them to lend to strained governments and customers. The takeup of this week’s loans was roughly consistent with what bankers, investors and analysts had expected.”

Full Story: ECB Gives Banks Big Dollop of Cash (WSJ)

WOW! So the same day Bernanke is noticing some possible inflation, most news sources completely overlooked one of the greatest liquidity injections ever on the very same day… And in hyping up the wrong story to “help” cover it all up, the media also gave these same banks the opportunity to park their free cash right back into the stock markets at a short-lived “NO QE3″ discount.

(Jim Sinclair) “Because of the volatility you experienced in gold today, and the absolute fact that it was an MSM cover operation of today’s covert operation, which was one of the largest injections of QE liquidity into the Euro banking system ever, you must know the facts.”

“If, in fact, what Bernanke attempted to tell the investment world today, that QE may not be necessary because of a modest improvement in the statistics of unemployment, if that was truly to be believed, then the stock market should have been off 800 points while gold was gold was down $100.  Because the same thing moving the stock market is what’s moving the metals and that is pure liquidity.”

Full Story: Today was a Cover-Up By the Fed & Mainstream Media (JimSinclair)

So for those of you worried about an end to quantitative easing, alleviate your fears. QE and cheap easy money for the well-connected kleptocrats is alive and well and not likely to end all that soon…

(BloombergMarketsMagazine) “Cash generates minuscule returns. Commodities, especially gold, can soar or tumble in an instant. In these perplexing times, Bloomberg Markets magazine in its January issue asked 10 billionaires 14 questions covering their views on the global economy, where they see opportunities and who gave them the best advice.”

Some highlights:

John Paul DeJoria (Primary Assets: Stakes in John Paul Mitchell Systems and Patron Spirits Co. Residence: Los Angeles Industry: Retail):

“Influential indicators? Beauty salons. Typically, customers will visit every six weeks; in downturns, that drops to every eight weeks. When the frequency starts to go up again, it indicates the economy is improving.”

“Where to park $1 million in cash?  Twenty-five percent in gold, 25 percent in silver, 25 percent in NYSE blue-chip stocks that pay a dividend and 25 percent between Asian and European blue chips that pay a dividend.”

Eli Broad (Primary Assets: Investments, art Residence: Los Angeles Industries: Banking, real estate):

“Influential indicators? Consumer confidence, unemployment and political gridlock.”

“Best investing advice? Don’t bet the farm.”

“Margin in portfolio? Not in this uncertain world.”

“Where to park $1 million in cash? High-quality multinational consumer companies such as Procter & Gamble Co., Coca-Cola Co., Kraft Foods Inc. and Johnson & Johnson. (JNJ)”

Peter Hargreaves (Primary Asset: 32.2 percent of Hargreaves Lansdown Plc, the U.K.’s biggest retail broker Residence: Bristol, England Industry: Financial services):

“Fixed-income investments? German bonds for the currency play when the euro implodes”

Where to put $1 million in cash? $500,000 in Singapore dollars and $500,000 in Norwegian krone.”

“Is there a money manager you would trust with your entire portfolio? Me.”

Full Story: Billionaire Prokhorov Touts Gold as Trump Embraces Foreclosures (BloombergMarketsMagazine)

(MartinArmstrong) “Politicians everywhere are sitting on their hands because they believe that if they do nothing and maintain the status quo mixed with austerity to save the bankers somehow we will grow our way out of this one as before. The problem is they fail to distinguish between a private generated financial crisis and a Sovereign Debt Crisis where they are the problem.

The people are just not to be given a right to vote on any of this and if the system can grow out of it, in two years everyone will forget about it – that’s the plan. To clarify why I have been critical of the austerity in Greece and the property taxes, Schumpeter describes the Business Cycle as a force of Creative Destruction. These are periods of tremendous economic transition. It is one thing to impose property taxes and insist upon government reducing its work force that sound like solid conservative economic advice for Greece. However, that presumes there are private sector jobs waiting in the wings.  What is taking place in Greece is that there is no private sector alternatives at this time. Laying people off is one thing. To impose then property taxes that are due irrespective of income then subjects those same people to massive waves of foreclosures for failure to pay the tax. The US Great Depression was so bad NOT because of the stock market crash, but (1) the sovereign debt crisis that wiped out savings and reduced capital in the USA contributing to over 3000 bank failures, and (2) the Dust Bowl that eliminated agrarian jobs when agriculture accounted for 40% of the civil work force resulting in the ‘hobo’ lifestyle.  It was WWII that provided the  ‘transition’ reducing unemployment and transformed farmers into skilled labor. The Great Depression after the Panic of 1857 was followed 4 years later by the US Civil War, which was also the ‘transition’ at that time relieving unemployment.

Today, there is no plan. There is no transition, only austerity. The politicians are doing NOTHING whatsoever for any reforms they reject because it would change the way they have been doing business since WWII. Italy’s debt is bigger than Spain, Portugal, and Greece combined.  It is too big to be bailed out and there is no PLAN B to even address what happens if sitting on their hands blows up in everyone’s face? Stay away from ALL government debt! This is a wave of Creative Destruction. We are in a transition to a completely new world ahead.”

Full Story: Italian Head of State Pledges to Resign Schumpeter’s Creative Destruction? (MartinArmstrong)

(MartinArmstrong) “Government Is Living in a State of Denial.  They speak, see & hear nothing of a debt crisis. .. Italy is the third largest bond issuer and nobody in government has figured out that this a Sovereign Debt Crisis yet?  What Government FAILS to understand is they are the PROBLEM!

Because government is the PROBLEM, they live in a state of denial and cannot correct the situation for they cannot objectively look at themselves. Instead, they attack the people. Fannie Mae asks for $7.8bn as losses continue. Morgan Stanley has been accused over mortgage bond issues and MF Global goes bust exposing the truth that SEC & CFTC never audit the NY banks and are incapable of detecting that they may be trading with client’s money.

.. the whole theory upon which the banking system has been constructed is unsound. Banks take short-term and demand deposits and lend long-term. When a financial crisis unfolds, a run on banks emerges because people want their money. Since the bank’s obligations are short-term to demand but their assets are loans of medium to long-term, they don’t have the cash and fail.  For you see, banks were not supposed to lend out your money.  ..  Banks began as merely a place to store your assets. They were not intended to lend your money out to someone else. When they realized they could make profit doing so, the scam eventually became the standard operational procedure. Formulae were then devised to calculate at any one time how much ‘reserves’ did they have to retain for normal operations. That was worked out with experience settling on 6%. So if they retained 6% of deposits as cash, they could cover normal business withdrawals with no problem. The problem became during a crisis and everyone wanted their cash and the bank simply does not have that cash and you end up with a bank run. It is ironic that what began as a scam simply became institutionalized. This is WHY the entire financial system is dependent upon CONFIDENCE!

What is unraveling even more quickly is the fear that banks will be hit with panic runs because of their holdings in sovereign debt. After a 50% haircut in Greek bonds, now it has become trendy not only to sell Italian bonds but also to publicly announce they have done so to try to maintain CONFIDENCE of their depositors.  The very reason politicians have suppressed the right of the people to vote and have forced austerity upon the people, has been to maintain the confidence of their bankers. But in the end game, the bankers exist based upon the confidence of the people in their sound management of their deposits.

.. The people may be shut out of the polls denied democracy when it is needed most, but the FREE MARKETS will respond as capital votes in its own self-interest that does not match the political nonsense.

SEQUENCE OF AN ECONOMIC PANDEMIC

At first blush, how capital responds depends entirely upon the (1) monetary system and (2) the freedom of capital movement. In a closed economy, the first reaction is to buy ALL tangible assets. These tend to be everything from durable commodities (metals), art, coins, stamps, and gold (assuming it is not a gold standard of some sort). This is the category I refer to as  ‘moveable assets’. The second tier of assets tend to be real estate that I refer to as ‘fixed non-movable assets’ meaning their value is limited to the territorial jurisdiction of the nation. In a non-communist nation, stocks and corporate bonds will also attract capital as a safe place to park funds.  In an open-economy where capital is free to leave, then the first blush is to FLEE to a different land in which case the local assets, including stocks and corporate bonds, will initially crash. This is typically indicated most pronouncedly in the collapse of the local currency against world currencies or in this case rise in the dollar vs decline in euro. They eventually swing back ONLY after the crisis manifests in a new currency or a debased/devaluation of the local currency takes place. The capital-flows will the swing back in the opposite direction.

Under today’s circumstances, the first blush response will be for capital to flee Europe and run to the United States as a safe port parking in US government paper. This is likely to further the deflationary effects within the United States by ensuring interest rates remain low as they did during the Great Depression for the same reason. However, banks are living off of the largest spreads perhaps in modern history so while rates of interest on cash will decline further and move in real terms NEGATIVE after inflation, banks should NOT be expected to lend money more easily. They will maintain their huge profit margins. Therefore, the first blush of the  Sovereign Debt Crisis in an open society tends to be currency based rather than even movable assets.

During the inflationary boom into 1929, gold declined in purchasing power for assets were rising against gold. During the collapse, the value of money rose (gold) as assets declined. Under a gold standard, the value of gold in fact DECLINES with inflation and RISES with deflation.

So for now, we are in the first blush mode where capital will fee to the dollar rather than assets and that may confuse the hell out of a lot of people. Therefore, under the current conditions, gold need not rise on the first blush for the bulk of capital will flee to the dollar. On the second swing where capital flees all currency, then we will see the Private vs Public assets manifest meaning they will rise as expressed in terms of currency.”

Full Story: Government is Living in a State of Debt Denial (MartinArmstrong)

Click for Nov 11, 2011 Martin Armstrong Radio Interview (FSN)

(Mish) “We will not get to see the precise wording of Prime Minister George Papandreou’s referendum because enough cowards in the Greek parliament in conjunction with blackmail by Merkel and Sarkozy have put an end to Papandreou’s regime. Thus, the on-off on-off Greek referendum is once again set to ‘off’ this time permanently.”

(NYTimes) “Europe’s leaders should have paid more attention to the distress of ordinary Greeks and less to the distress of well-heeled European bankers. Rather than trying to punish the ‘profligate,’ they should have thought about the consequences of condemning Greece to years of negative growth, soaring unemployment and rising taxes with nothing promised in return except that maybe, a decade from now, its ratio of debt to gross domestic product might get back down to the problematic levels of 2008-9.

Greece needs to make serious, painful reforms, including doing away with antiquated labor rules, streamlining a bloated public sector and selling off poorly managed state assets. Mr. Papandreou was already making real progress. But it was becoming impossible to keep laying off thousands of state workers while austerity choked off any realistic possibility of their finding private sector jobs or to keep slashing social benefits and services while the numbers of poor and unemployed surged.

It is late but, we hope, not too late to avert a full meltdown. Europe’s leaders need to renegotiate the pending Greek bailout deal to emphasize reform and growth over unremitting austerity and offer other bailout applicants the same approach. If they want any of the money lent to Greece paid back, Athens needs room to grow and earn.” — Greece on the Brink (NYTimes)

(Mish) “Democracy Dies to Protect Banks – Indeed, resolution of this mess has been 100% about how to bail out banks at taxpayer expense even though banks brought this mess onto themselves by treating sovereign debt as if it had zero risk. Worse yet, banks plowed into sovereign debt trades with massive leverage.”

Notice the tight convergence of all Eurozone country sovereign debt interest rates before 2009. European banks and other investors placed foolish bets anticipating little or no additional risk. They priced in virtually no risk premium holding Greek bonds over German bonds.

(Mish) “Merkozy and the EMU ought to be spending time on developing a full blown Euro exit strategy for nations because there has never been a currency union in history that has survived without a fiscal union in place at the same time.”

Full Story: Eurozone’s Waterloo; Papandreou Forced to Cancel Referendum; Democracy Dies to Protect Banks; Germany’s Dilemma: The Eurocratic Nanny Zone Vote (Mish)

(MartinArmstrong) “The most important aspect is the economy. Screw that up and you get war, depression, and starvation. We then elect a whole bunch of people to posts and automatically assume these people have the (1) real intelligence ABOVE average to comprehend such complex subjects, and (2) they understand the right thing to do. Where did we ever get these ideas? Most of the staff members employed by politicians are smarter than the people they work for. But unless they believe an economic crisis is possible, they will not even look at the issue.” — Martin Armstrong, Happy Days Are Here Again

(Mish) Great article by Mike Shedlock on the Greek/Euro Dilemma – “Is there any reason Greek voters should not be given a choice? I think not. They may not make a wise choice but what is the likelihood that political hacks and political opportunists will?”

“Take a good look at Iceland. In repeated attempts, political hacks (with banker’s interests in mind) attempted to sell Icelandic citizens into debt slavery. A referendum saved the day. Sadly, voters were forced to repeat the referendum, and once again voters made the correct decision. .. Iceland is now in full recovery simply because it told the EU and IMF to go to hell.”

“Greece does not have an easy way out. However, its problems are no doubt far worse than if it told the EU and the IMF to go to hell two years ago.  Greece should have gone bankrupt long ago. Heck, it should not be in the EU in the first place, and the EU is primarily to blame even though Greece lied to get in.”

“(PeterTchir) If a leader in the Middle East finally gave into months of protest and decided to give the people a real say on an important issue, the Western leaders would be rejoicing. .. But if a fellow Western leader dares let his people express their wishes more directly than via “their representatives” they are all shocked and outraged. In the meantime other Greek politicians are busy taking advantage to gain power rather than helping their citizens.”

“(PaterTenebrarum) The eurocracy is at its heart deeply undemocratic – if it were up to the ‘technocrats’ leading it, national subsidiarity would have long ago become a relic of the past and democratic interference with their plan to erect a socialist super-state would be kept to a bare minimum. .. This can be seen by the fate suffered by previous referendums: when the Irish and French e.g. said ‘no’ and ‘non’ respectively to the Lisbon treaty, the referendums were simply repeated to get the ‘right’ result. As Stalin once sagely remarked, it doesn’t matter who votes for what anyway – what matters is who counts the votes. So far, the eurocrats have always gotten the results that they wanted, by hook or by crook.

Shall I tell you the truly terrifying thing about the EU? It’s not the absence of democracy in Brussels, or the ease with which Eurocrats swat aside referendum results. It’s the way in which the internal democracy of the member states is subverted in order to sustain the requirements of membership. ..

I wish I could convey the sheer horror that his proposal provoked in Brussels. The first rule of the Eurocracy is “no referendums”. Brussels functionaries believe that their work is too important to be subject to the prejudices of hoi polloi (for once, the Greek phrase seems apposite). Referendums are always seen as irresponsible; but, at a time when the euro is teetering on the brink, Papandreou’s proposal was seen as an act of ingratitude bordering on treason. ..

Eurocrats are prepared to pay any price rather than admit that the single currency was a mistake – or, more precisely, to expect their peoples to pay, since EU officials are exempt from national taxation. The peripheral countries are to suffer poverty, unemployment and emigration, the core countries perpetual tax rises, so that supporters of the euro can save face.”

“(DanielHannan) Euro-enthusiasts in Brussels and in Athens are ready to bring down an elected government rather than allow a referendum. Yet the funny thing is that Papandreou is a Euro-enthusiast. He fervently wants to remain in the euro, and had been planning to campaign for a Yes vote. His sin, in the eyes of Brussels, was not to hold the wrong opinions, but to be too keen on democracy. ..”

“Whose Skin Are We Saving? No eurocrat or politician outside of Greece gives a rat’s ass about helping Greece. The only skin they want to save is their own.  That realization coupled with my earlier proposal that Papandreou was tired of beatings, meetings, and riots is by far the most likely reason Papandreou decided to “walk away” from the mess via referendum.”

Full Story: In Praise of Papandreou’s Referendum Decision; Eurocrats Terrified of Democracy; Parade of Cowards (Mish)

As usual, this is more about bailing out the banks and protecting those who made foolish investments above all else.  It’s also interesting to note that while private bond holders of Greek debt was expected to take a 50% haircut, my understanding is that the ECB (who currently owns about half of all outstanding Greek bonds) would still be holding their Greek bonds at par.

This is not to say Greece is not also at fault.  There’s plenty of blame to go around.  However, to this day the War Reparations forced upon Germany after World War I are still largely blamed for leading Germany into hyperinflation and the eventual rise of Hitler.  And perhaps Germany eventually owning and/or controlling most of Greece’s key assets to pay back its debts is not something those “pesky” Greek citizens are willing to accept quite that easily.

Regarding Papandreou’s recent changes to his top military staff, while only Papandreou and his closest confidants know exactly what’s going on, given he called a referendum to offer the people a “say”, it would seem unlikely he is considering a “military coup”.  I would speculate his motive would more likely be to assure that the military will remain loyal to the “best interests of Greece”, as opposed to the “best interests of the European Union”.

(MartinArmstrong) “The most important aspect is the economy. Screw that up and you get war, depression, and starvation. We then elect a whole bunch of people to posts and automatically assume these people have the (1) real intelligence ABOVE average to comprehend such complex subjects, and (2) they understand the right thing to do. Where did we ever get these ideas? Most of the staff members employed by politicians are smarter than the people they work for. But unless they believe an economic crisis is possible, they will not even look at the issue.” — Martin Armstrong, Happy Days Are Here Again

(RobertSinn) “Notice that bullish sentiment in the AAII survey tends to serve as a leading indicator, however, it should be noted that the last time bearish sentiment was as low as it is now the S&P 500 ($SPY) suffered a 4-5% pullback in mid-July..”

“I can honestly state that one of my biggest mistakes during the past month was not paying enough attention to the record low net long exposure of hedge funds and the record bearish sentiment of active managers as seen below..”

“Sentiment is just one tool among many in a market participant’s arsenal, however, it increases in importance at market extremes/inflection points..”

Full Story: Bullish Sentiment Reaches Highest Level Since April (RobertSinn)

Other sentiment readings to keep an eye on include COT (Commitment of Traders) exposure – where Large Speculators (ie. hedge funds). I’ve often noticed that when Large Speculators on the COT reports are heavily bullishly or bearishly positioned, it tends to lead to sharp reversals in the not-to-distant future. Last year’s Euro crisis was another great example of this.

One more great site for Daily Sentiment Data is Market Harmonics. They offer free proprietary NASDAQ Daily Sentiment Index, Rydex Nova/Ursa Sentiment Indicator (S&P 500 Sentiment), and Option Buyers Sentiment Gauge (OBSG) charts, to name just a few.

Very nice interactive visual guide by NYTimes charting the web of debt exposure among sagging economies, and showing how much each European country owes and to whom.

(NYTimes) “Arrows show imbalances of debt exposure between borrowers in one country and banks in another; arrows point from debtors to their bank creditors.  Arrow widths are proportional to the balance of money owed.  For example, French borrowers owe Italian banks $50.6B; Italian borrowers ower French banks $416.4B.  The difference – their imbalance – shows France’s banking system more exposed to Italian debtors by about $365.8B.”

Full Interactive Chart: It’s All Connected: An Overview of the Euro Crisis (NYTimes)

(Spiegel) “In the middle of this year, two rating agencies, Standard & Poor’s and Fitch, upgraded Estonia’s credit rating. The country had a budget surplus of €115 million in the first two quarters, and it is expected to virtually balance its budget for the entire year. Government debt is about 6.6 percent of the gross domestic product, as compared with 120 percent in Italy, 160 percent in Greece and 80 percent in Germany. In the first two quarters of 2011, the Estonian economy grew at an annualized rate of 8 percent.”

“The record for establishing a company, he adds, is only 18 minutes. In other words, the government doesn’t say: Hey, Peral, who do you think you are, starting a company, just like that? No, he says, the state actually encourages entrepreneurship, and says things like: So you have an idea, Peral! Go for it! And then he says that it takes him 20 minutes to prepare his semi-annual tax return, and that when it was time to slash the government budget, Estonia’s cabinet ministers started with their own salaries.”

“.. when we had finally escaped from Soviet socialism, we were sick and tired of government centralism. We wanted precisely the opposite in all respects: We wanted a transparent state. A country that isn’t constantly intervening, nationalizing businesses, placing a bureaucracy above everything and imposing rules on people in every respect.”

“Of course, he says, it’s important to help a society’s losers, the ones who are left behind. It would be wonderful, he adds, to have a fantastic healthcare system and offer social guarantees for every emergency. ‘But you have to have the money. We don’t have it. Our average monthly income is €800. So we have to reflect on what’s important for a society’s development. It’s the top performers, the successful ones. Ideas! Companies! Products! If all you do is administer, nothing comes of it. The state must clear the way for those who want to achieve something. That’s the function of the state.‘ ”

“Estonia finally joined the euro zone this January. The euro had always been the country’s declared goal. In the last few years, starting in 2008, the Estonians had fought their way through the worst economic crisis they had ever seen, triggered by the global financial crisis and the bursting of the local real estate bubble. The economy shrank by 14 percent in 2009.

Then three things happened. First, the government announced a harsh austerity program. The government bureaucracy was thinned out, healthcare and social services were cut back, and even the streetlights in Tallinn were switched off at 3:30 in the morning. Businesses reduced wages by up to 40 percent, with the promise they would be increased as soon as the economy improved. The government did not pump borrowed funds into the economic cycle. Instead, it did what economists call internal devaluation.

The second — and oddest — development here was that the Estonians stoically accepted these measures. There was no unrest and no protests.

The third thing that happened was the positive outcome of this blood, sweat and tears strategy. Last year, Estonia easily satisfied the Maastricht criteria. In fact, its government finances were sounder than anywhere else in the European Union.”

‘Europe Has Too Many Restrictions’ – “Skype”, Estonia’s Success Story…

“We had no money, so we had to come up with something. We built our concept on three pillars: communication in networks, the idea of limitlessness, and the future. We started small and built up from there. The more people participate, the more powerful the network becomes.”

“.. in many European countries we have too many restrictions, prohibitions, lobbyists and people protecting vested rights. Countries must act as simply as people think, using the same principles, ..”

Full Story: Estonia Lives the European Dream (Spiegel)

With the U.S. dollar’s horrendous decline in value this video gives new meaning to disposable income and going green… At least we finally know what the pyramid on our bills represents, just another ponzi / pyramid scheme managed and operated by the Federal Reserve, and fueled by our government’s incessant bailouts and deficit spending.

]]> http://www.vlogolution.com/hot/2008-03-28-im-out-of-toilet-paper/feed/ 1319 http://www.vlogolution.com/hot/2007-10-29-the-us-dollar-connection-to-inflation-the-economy-and-boatloads-of-debt/ http://www.vlogolution.com/hot/2007-10-29-the-us-dollar-connection-to-inflation-the-economy-and-boatloads-of-debt/#comments Sun, 28 Oct 2007 22:00:00 +0000 http://www.vlogolution.com/hot/?page_id=140

An interesting interview with Daryl Montgomery of the New York Investing Meetup (http://investing.meetup.com/21), discussing how foreign markets such as China have fared since the Fed’s last rate cut, along with the potential global repercussions to come.
]]> http://www.vlogolution.com/hot/2007-10-25-global-perspectives-on-the-decline-and-fall-of-the-us-dollar/feed/ 0 http://www.vlogolution.com/hot/2007-10-18-saving-our-economy-by-destroying-the-dollar-the-absurdity-of-federal-reserve-policy/ http://www.vlogolution.com/hot/2007-10-18-saving-our-economy-by-destroying-the-dollar-the-absurdity-of-federal-reserve-policy/#comments Wed, 17 Oct 2007 22:00:00 +0000 http://www.vlogolution.com/hot/?page_id=136

Forget the Iran and Iraq worries, Iran’s new oil-euro exchange, shortages, increased demand, the OPEC cartel, inflation, and high taxes. Let’s just blame the oil companies for high gasoline prices!
]]> http://www.vlogolution.com/hot/2006-05-08-are-the-oil-companies-really-to-blame-for-high-oil-prices/feed/ 0