Inflation and Bailouts Go Hand in Hand Posted: May 05 2010 By: Greg Hunter Post Edited: May 5, 2010 at 2:17 pm
Filed under: Greg Hunter
Dear CIGAs,
Pick a financial fire and you can be sure the U.S. government will hose it down with gallons of money. AIG, General Motors, Chrysler, insolvent states, FDIC, Fannie, Freddie and all the banks are just a few of the blazes Uncle Sam has sprayed money on.
Now, the Federal Reserve is printing up another $105 billion to send to Greece to help with its debt problem. Is the bailout cycle getting ready to take another turn bailing out the Banks? You know, the ones we were told had little exposure to sour European debt? Check out this article from Bloomberg last week: JPMorgan Chase & Co., the second- biggest U.S. bank by assets, has a larger exposure than any of its peers to Portugal, Italy,Ireland, Greece and Spain, according to Wells Fargo & Co. JPMorgan’s exposure to the five so-called PIIGS countries is $36.3 billion, equating to 28 percent of the firm’s Tier-1 capital, a measure of financial strength, Wells Fargo analysts including Matthew Burnell wrote today. Morgan Stanley holds $32.4 billion of debt in the region, which equates to 69 percent of its Tier 1 capital, Burnell wrote.”
I guess now we know why Ben Bernanke is supplying Greece with $105 billion in bailout money. It looks like he actually is bailing out U.S. Banks—again! I wrote about the Fed admitting to massive money creation 3 weeks ago in a post called “Bernanke Admits Printing $1.3 Trillion Out Of Thin Air.” It also looks like we are not going to stop this money printing train wreck because the bailouts seem to be never ending. This is the main reason we are facing a head-on collision with very big inflation.
In the latest report from John Williams of shadowstats.com, the inflation picture looks dire and definite. Williams wrote, “My outlook for a hyperinflationary great depression in theUnited States is unchanged; all that is unfolding now is some of the detail that should lead to that ultimate financial/economic disaster. Gold remains the best long-term hedge here, along with some silver, and cash outside the U.S. dollar and theUnited States. I still like the Canadian and Australian dollars and the Swiss franc. Again, the outlook is for the long haul, irrespective of any near-term extreme volatility in the various markets. As to the U.S. stock market, the term “insanity” comes to mind as I watch some of the day-to-day movements.”
Williams also thinks there are “mounting systemic risks.” On that issue, the Global Europe Anticipation Bulletin is in agreement with shadowstats.com. GEAB writes, “The fuss made over Greece by the English and US media in particular tried to hide from the majority of the economic, financial and political players the fact that the Greek problem wasn’t a sign of an upcoming Eurozone crisis (2) but, in fact, an early warning of the next big shock of the global systemic crisis. . . one mustn’t forget that the current crisis has its origin in the collapse of the world order created after 1945, of which the United States was the support, assisted by the United Kingdom.” (Click here for the complete GEAB report.)
I keep trying to find ways to explain the scope of what is going on in the world financial markets to friends and readers of this site. I told an acquaintance at dinner last night the money printing going on “has never happened on this scale in human history.” The guy just looked at me and said that he thought it was a good idea to invest in municipal bonds! How are broke cities and states going to pay the interest, let alone the principal, back. If the cities and states are bailed out, massive inflation will render the bonds worthless or near worthless.
People just do not understand the calamity that is upon us, but what do you expect when the mainstream media keeps broadcasting that we are in a “recovery.” I do not know exactly how this is going to end, but for the unprepared, it will end badly.
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In The News Today Posted: May 05 2010 By: Jim Sinclair Post Edited: May 5, 2010 at 2:23 pm
Filed under: In The News
Jim Sinclair’s Commentary
The demand for gold only increases worldwide as currency after currency falls.
Before 8am in my most recent travels through Dubai I could see very long lines of clients waiting at a very long counter of gold bullion seller stores.
Forget the silly article many of you asked about that said if there were no problems gold would be lower. Duh! That writer is clearly a brain surgeon.
Commercial banks buy gold to meet demands Dealers claim regional banks are stockpiling gold for clients who want their deposits saved in the yellow metal. By Shahsank Shekhar Published Wednesday, May 05, 2010
Commercial banks are buying gold to meet the demand of clients who want their deposits saved in gold, commodity dealers said.
With the currencies in the GCC pegged to the volatile US dollar, local banks have all the more reasons to buy gold, local gold dealers emphasised.
On the other hand, senior Dubai-based bankers affirmed they have been considering meeting the demands of their customers to back the deposits with gold.
The dealers, however, declined to name the banks they have been supplying gold to.
Michael Mesaric, CEO of Valcambi Sa, one of the largest gold refiners in the world, said last year the company supplied 150 tonnes of gold to banks in Switzerland. He said the commercial banks in GCC are buying gold, as well.
"Everyone is buying gold. Customers are demanding that their deposits be kept in gold," Mesaric told Emirates Business on the sidelines of the ‘7th Dubai City of Gold Conference’.
A Dubai-based banker said that banks have been open to the idea of buying gold. "We may not disclose our holdings in gold, but then the bullion is an important proposition for us. Especially with regards to holding the confidence of customers," he said.
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Hourly Action In Gold From Trader Dan Posted: May 05 2010 By: Dan Norcini Post Edited: May 5, 2010 at 4:23 pm
Filed under: Trader Dan Norcini
Dear CIGAs,
There was continued pressure on equities overnight and into today’s session as fears spread that the situation in Greece is going to spread further into the Euro Zone. Portugal, Spain, and Italy are now the prime candidates. Some are going as far as saying that the Euro zone is going to break up. Such thinking will bring safe haven buying into gold especially in Europe which is exactly what we saw. Gold in euro terms remains very strong coming in at the PM fix above the 906 level. Clearly, investors on the Continent are very worried about the health of the Euro and are buying large amounts of gold. This safe haven buying is also going to continue to support Dollar priced gold which is why the gold bears at the Comex cannot crack the market lower as they have done in the past even as the entirety of the commodity sector is getting sold off by hedge funds and the US Dollar is floating ever higher.
About mid-morning the US equity markets staged a bit of a recovery upwards which brought about a round of short covering as well as some fresh buying in the commodity sector. That allowed gold, which had already begun coming off its worst levels and moving back towards unchanged to come firmly into the plus column.
Open interest readings indicate that fresh shorts were put on in gold yesterday. Today some of those are getting squeezed out almost immediately as they are underwater. I find that quite astonishing because you have to ask who in their right mind would be so eager to establish fresh shorts in gold when it is making all time highs or very new all time highs in terms of the European currencies. At a time when fear of currency stability is foremost in traders/investors’ minds, who is so anxious to sell the safest haven of all? The answer to the question is its own explanation because no one “in their right mind” would do so. Yes, there is the computer algorithm reflex selling occurring but that alone is insufficient to explain the rise in open interest for the total would have fallen were it only long liquidation that was occurring. There are clearly sellers present whose intent is to discredit gold in times of crisis as a reliable safe haven. They will fail.
Please see the chart for the technical support and resistance levels.
The rebound in the equities also brought the Dollar down somewhat off its best levels of the day as some traders decided to step back and evaluate where the wild action of the last two days has taken things. That pause in the Forex arena did not last long however as fresh sellers of the Euro emerged after lunch and crushed it lower once again. The ECB is going to regret getting their wish for a weaker Euro responding to complaints from exporters on the Continent. Currency events can quickly get out of hand to the point where they threaten the very stability of a nation. In this case we might even see some half-hearted attempt by the ECB to intervene to attempt to slow the decline in the Euro and prevent a collapse. Such an event might not be that far off if the selling accelerates. The alternative to doing nothing is that remaining confidence in the currency begins to erode further which engenders a vicious wave of unstoppable selling. By then, only drastic measures can save the unit but at the cost of wrecking the entire economy.
The flip side to all of the Euro’s woes is that the Dollar has broken out to the upside on the technical charts as the weekly now shows that there is little between it and a run towards 86.60 – 87. Once again, the Dollar is not moving higher due to any inherent strength in its fundamentals but merely because it is not the Euro. Markets are funny things – they can willingly choose to overlook many things at times and seemingly become tunnel vision oriented but there is one certainty in the marketplace that no amount of self imposed ignorance can change – that is the fact that the US government is continuing to issue trillions of the little things out of thin air and that the problems many of the individual US states are facing are every bit as severe as Greece’s or Spain for that matter. For now, and I wish to emphasis, the “for now” bit, the Dollar is the safe haven currency of choice along with the Yen to some extent although that currency draws its strength not because of anything related to the Japanese economy but because the majority of Japanese government debt is held by its own citizens allowing them to perhaps weather a credit crisis much better than others who are not as wedded to it as the average Japanese citizen is to theirs.
The HUI closed fairly well yesterday all things considered and seemed to separate itself somewhat from the selling frenzy as that session came to a close. Today, it was back down once again as early morning weakness in the global equity markets pulled the shares lower but it too managed to work higher and come into the plus column around mid-morning. When the equities got hit by another barrage of selling in the afternoon, the HUI surrendered its gains and moved back into the negative column. So far it is managing to bounce off the rising 20 day moving average but it needs to close above 460 again to firmly turn the tide back in favor of the bulls. The bears will try to force it down below the 444 level on a close if they are to gain the advantage.
Crude oil could not hold the $80 level (motorists, airlines and trucking industry folks are all celebrating its failure do so so) although the bulls are certainly trying to get it back over that line. Technically if it cannot recapture $80.50 and soon, it will have turned the daily chart decidedly negative and engender a sell the rally mentality unless or until it can close over $84.
Bonds continue to be the recipient of safe haven flows although they have come well off their best levels at this point in the session. They keep easily reaching the upside resistance levels I have mentioned in my recent comments with relative ease although today’s fade from the best print might be signaling that some guys want no part of them at current yields. Personally I wouldn’t want any part of them at current yields seeing that the government is busier than a one-legged man in a butt kicking contest manufacturing more of them out of thin air.
Let’s see if the stock market can manage a move well up off the lows going into the closing bell. If it does not get itself above the 50 day moving average, equity bulls are going to find themselves in serious trouble technically. If it does, bulls will be cackling that a bottom has been found and the market can now begin to consolidate before making another leg higher.
Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini







CMBS Delinquencies Hit Fresh Record, Now at $51 Billion, 268% Increase.


Still No Credit Where It's Due (Commercial and industrial loans have contracted 19% in the past 12 months. Consumer credit is down 6% in the year to February, when it stood at the same level as June 2007.)


article in Der Spiegel: The Mother of All Bubbles Could Push Euro Zone into Bankruptcy.


China May ‘Crash’ in Next 9 to 12 Months, Faber Says


Greece's Costs Seen Exceeding EU-IMF Help


Trickle of Nonsense (The Mogambo Guru)


Frugality Among Consumers Outliving Recession. (Could it be, because people realize that the "recovery" is a fraud?)


Government Debt Explosion Hits Turning Point


Stocks Extend Decline On European Debt Worries


Gold Hits 5-Month High on Greek Aid Uncertainty


No Guarantees at the Pension Benefit Guaranty Corporation



Jim's Quote of the Day:
Permalink
"As the dollar breaks down, you’ll also likely see disruptions in supply chains, including shipments of food to grocery stores. People should consider maintaining stockpiles of basic goods needed for living, much as they would for a natural disaster. I sit on the Hayward fault in California. I have a supply of goods and basic necessities in case something terrible happens—natural or man-made—that will carry me for a couple of months. It may take that long for a barter system to evolve, which I think is what you’re going to end up with; at least until a new currency system is reorganized and you get a government that’s able to bring its fiscal house into order. No currency system in the U.S. is going to work unless the fiscal conditions that drove it into oblivion are also addressed."
- John Williams of ShadowStats, by way of Jim Sinclair's JSMineset web site