IMF Calls for Huge New Round of Bank Bailouts



QE2: The Ship Is Leaving The Dock

Kyle Bass On Hyperinflation, And Other Less Relevant Things

 

Hinde Capital On China's Stealthy Enforcement Of The Gold Standard And On Wholesale Currency Dumping

Submitted by Tyler Durden on 10/06/2010 13:43 -0500

Combine Kyle Bass's fatalistic outlook on Japan with some simple geology and you get the following thought experiment from Hinde Capital: "Imagine that there was a full-scale exit out of JGBs. There is 900 trillion yen worth of JGBs outstanding that is 10.588 trillion US dollars at 85 yen, today’s rate. At $1,300 per troy ounce gold this is equivalent to 8.14billion ounces or 253,000 tonnes (8.14bn /31250) of gold. Now we are not for one moment saying that this is realistic, as if there was a rush from JGBs they will not be valued at par and not all JGBS will be exited. However it just goes to show how much gold could rise to reduce the amount needed to convert savings. Let’s say gold went to $13,000 then only 25,000 tonnes would need to be found for Japan. Now if you add inflation of the currency and a few noughts you can see how gold can be valued at almost unlimited numbers. Anyone still think $1,300 is too rich?"

Greece Caught Lying AGAIN As Debt And Deficit Figures To "Shoot Up" Post Audit

 

Hourly Action In Gold From Trader Dan

Posted: Oct 06 2010     By: Dan Norcini      Post Edited: October 6, 2010 at 1:47 pm
Filed under: Trader Dan Norcini
Dear CIGAs,
The “78” floor on the USDX has now given way with the Dollar sinking into a handle of “77” in today’s session. The results are becoming almost robotic – commodity prices move higher, gold and silver shoot north, bonds levitate upward and funny money pours into the US equities market as the stars line up in favor of further Quantitative Easing. I hope our monetary lords are pleased with their offspring for this little suckling baby will soon grow into a roaring beast devouring all the substance in the land.
I do not believe history will be kind to Mr. Bernanke and company with the lone exception of Fed governor Thomas Hoenig, who has consistently been opposed to current FOMC policy and will be vindicated in his opposition to this madness. The Fed in its arrogance believes that is can somehow induce inflationary pressures into the economy and yet control it. This is akin to a 180 pound man grabbing a wild grizzly bear, slapping a leash around its neck and taking it for a walk past a meat counter. “Don’t worry, I am in complete control of this animal” were the last words that were heard from the poor dupe.
It is what it is however and the fact is that the debauchment of the US Dollar seems set in stone and with it an unprecedented rise in the price of gold and its cousin silver. Both metals shot up to resistance levels, gold hitting some light selling at $1,350 and silver seeing some near $23. The mining shares followed suit leaving the critical resistance level of 520 in the dust. The fact that they are moving away so quickly from that major resistance point and have not looked back is signaling that an upside acceleration is a very strong possibility. I would still prefer a set back towards 520 to see how the shares act there but we may not get it. As in yesterday’s post, a move back down there and a bounce up and away would confirm an upside breakout with a new higher plateau for the mining sector shares.
Even the Yen seemed immune to any potential concerns over Bank of Japan intervention and it too shot up into yet another yearly high, having now completely erased all losses from the 2 week old intervention bout conducted by the impotent BOJ. How does one say “goodbye” in Japanese – “Sayounara”. The Bank of Japan is history. Bernanke won – they lost. He is OUT Quantitative Easing the former kings of QE, the Bank of Japan. “Here’s your trillion, I’ll raise you another Trillion!”
Maybe they will beg and plead at this weekend’s upcoming meeting with their foreign counterparts and be allowed to drop one more whammy on the speculative yen longs as their final swan song, just for old time’s sake and to save some face. If not, like I said yesterday, speculators are going to take their revenge on them and shove the yen higher just to rub dirt in their faces. Was it the Klingon proverb: “revenge is a dish best served cold”? I suspect that the BOJ is more than EXTREMELY  mindful of this. I still am in a mild state of shock seeing them neutered like this. Is this for real?
The fact that even the Yen is participating in the Dollar’s demise is compounding the speed at which the US Dollar is crashing through chart support levels and is aggravating the meltdown in the greenback fueling more fire into the precious metals’ move higher.
Bonds are now back at a 5 week high and look as if they want to make another run towards the recent peak near 137. It is absolutely fascinating watching a near relentless climb higher in the long end all the while the price of commodities in general as evidenced by the rising CCI are back near a two year high. Here we have a situation in which currency induced cost push inflation is right in front of our eyes to behold yet the long bond is going up instead of down. I never imaged in my wildest or most vivid imagination that such a thing would be possible and yet here it is. QE is the one and only factor that the bond market is currently engaged with. Nothing else matters for now. Indeed it seems as if the only thing than ANY of the markets care about right now is the QE.
Which brings me to crude oil – yesterday we mentioned that it appeared to be making an effort to take out $83 and if it did, a push towards $87 would be possible. It smashed through $83 today running all the way to $84 in the process as it now appears that crude, which had hitherto been exempt from the effects of the falling Dollar, is no longer able to ignore the plummeting currency. The consequences of a rise in energy prices are going to be devastating to this economy. It could not have come at a worst time for cash strapped consumers. (see the previous story posted on the web site earlier this AM). We already have a Food Stamp program, what’s next – an Energy Stamp program? Keep up the great work Ben – you’re doing a swell job helping us all out. Let’s see if crude can close above $83 for a clue as to what awaits us all on the energy front.
Back to gold’s technical picture – it ran up to psychological resistance near $1,350 before seeing a bit of light selling pressure as it once again set another record high price. Open interest continues to build which is friendly as we have yet to see any wholesale short covering by the strong shorts in this market. There are a lot of longs crowded into the market but the fundamentals are still arrayed in their favor. I continue to look for any shift AWAY from expectations of significant QE on the part of the Fed which would take some pressure off of the Dollar but so far it does not seem to be occurring. We will have to monitor fresh data releases for any signs that the economy is stabilizing on its own in order to defuse the current psychology. QE, QE and QE is the fixation of the entire investing world. As long as it is, gold will be supported on dips in price.
Light chart support in gold remains near the $1315 level although a bit of buying could be seen near $1330 in the event of a price dip here.
Silver is attempting to post a chart close over the $23 level. If it can post two such closes consecutively, it will be in good position to make a run towards $25. Chart support in silver lies first near $22 – $21.90.
The Euro is approaching the 1.40 level – expect to begin hearing rumblings out of Euro land over the level of the currency. The Dollar has support near 77; if that fails, it head to 76. The Aussie continues grinding higher in a march that looks almost certain to reach parity with the US Dollar.
Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

 

Delaware AG Joins Cries For Foreclosure Freeze, As Mortgage Meltdown Moves Away From Just Judicial States

 

Visualizing 4th Degree Leverage

Submitted by Tyler Durden on 10/06/2010 16:40 -0500

It is sometimes remarkable that 3 years into the biggest crisis of all time, some people are still unclear as to how some of the most degenerate gamblers, also known as Wall Street workers, took an asset, and added leverage up to the 4th (and even 5th) degree to it. Hopefully the attached chart will explain clearly why even with world GDP at about $50 trillion, the total leverage associated with it is estimated at around one quadrillion. What is surprising is that it is only $1 quadrillion. The chart below can easily be extended by one more level, to include such Frankenstein monsters as CDOs Cubed. Furthermore, when using a leverage "creep" model such as the one below, it is easy to see why when the underlying asset's cash flows either stop or are severely impaired, how tens if not hundreds of billions of associated debt become worthless. And at the end of the day, the person holding the leverage⁴ or leverage⁵ basically bets the house (bought with other people's money) on the smallest incremental moves higher, and prays these continue as every underlying change in values is magnified by 4-5 orders of magnitude. The second they end it is game over, and the system collapses.

 

Ohio AG Cordray To Sue GMAC Mortgage And Ally Financial, May Sue Chase And BofA