Another Paper silver/gold raid orchestrated by our bankers

Harvey Organ, Tuesday, May 17, 2011

Another Paper silver/gold raid orchestrated by our bankers

 

 

IMF chief Strauss-Kahn placed on suicide watch in his Rikers Island cell, source tells NBC

Richard Koo Explains Why An Unwind Of QE2, With Nothing To Replace It, Could Lead To The Biggest Depression Yet 

Submitted by Tyler Durden on 05/17/2011 18:09 -0400

Over the past several days, quite a few readers have been asking us why we are so confident that QE3 (in some format: it does not and likely will not be in the form of the Large Scale Asset Purchases that defined QE1 and 2 - the Fed could easily disclose that it will henceforth sell Treasury puts, a topic discussed previously, or engage any of the other proposals from Vince Reinhart disclosed in June of 2003) will eventually be implemented by the Fed. Luckily, instead of engaging in a lengthy explanation of the logical, Nomura's Richard Koo comes to our rescue with his latest research piece. While we disagree with Koo on various interpretations of his about monetary theory (namely that the Fed is not in effect "printing" money and thus creating inflation - this is semantics and leads to a paradoxical binary outcome, whereby if there Fed was successful in boosting the economy, the economy would indeed be flooded with the nearly $2 trillion in excess reserves held with reserve banks. And good luck trying to contain this surge by changing the IOER - if the Fed indeed pushed the IOER to the required 5%+ level it would immediately destroy money markets, leading to the same liquidity freeze that marked the post-Lehman days, confirming the "Catch 22" nature of Quantitative Easing that we have observed since its beginning) we do agree with his analysis of what would happen to the economy if either stocks or commodities are in a bubble (and judging by the violent opinions out there, most investors believe that either one or the other has indeed reached bubble territory), should QE2 end cold turkey: "Viewed objectively, the central banks are trying to push up asset prices using quantitative easing and the portfolio rebalancing effect. The resultant rise in asset prices based on this effect represented a potential bubble—or at least a liquidity-driven event—from the start. The question is whether the real economy can keep pace with asset prices formed in those liquidity-driven markets. If it cannot, higher asset prices will be considered a bubble and will collapse at some point. The resulting situation could be much more severe than if quantitative easing had never been implemented to begin with." Bingo. "In other words, if stock and commodity prices are in fact in a bubble and if those bubbles were to collapse, the balance sheets of the financial institutions and hedge funds making investments with the expectation of higher asset prices could suffer heavy damage, exacerbating the balance sheet recession in the broader economy. an increase in DCF values, either." And there you have it: Bernanke's all in gamble that QE2 would have been sufficient to restore the virtuous circle of the economy has failed with less than 2 months to go under the QE2 regime. As such, and with fiscal stimulus a dead end, the Fed has two choices: watch as the economy collapses in flames to a state far worse than its pre-QE1 outset, or do more of the same. That's all there is. The rest is irrelevant. And since the Fed will choose the latter option, the market would be wise to start pricing in precisely the same reaction as what happened following the Jackson Hole speech...although to the n^th degree.

Protest At JPMorgan Annual Meeting In Ohio Leads To The Handcuffing Of At Least One Person, Eight Arrests 

Submitted by Tyler Durden on 05/17/2011 17:02 -0400

Some time ago it was primarily the G7 meetings that drew the Molotov cocktails and the anarchists crowds. Now it is the annual meetings of the big banks as increasingly more people realize that it is not the toothless developed countries but the banks backing them that actually pull the strings. The Washington Post reports that "at least one person was handcuffed after a group of about 400 protestors marched up Chase’s property and placed a sign on a raft floating in a pond in the bank’s premises. The sign read: “Foreclosed: Chase sinks our economy. Annual shareholder meetings of large banks routinely draw protesters. However, security this year has been especially tight after Wells Fargo & Co.’s annual meeting on May 4 in San Francisco became a rowdy scene after hundreds protested outside. Inside the meeting, a group of shareholders demanded that the bank immediately stop foreclosures and waive principal for troubled home owners. The shareholders were escorted out of the meeting by police. Eight people were arrested for blocking entrances to the building." Perhaps it is too late for Dimon to use the Blankfein "doing god's work" excuse at this point. Or not. However it is unlikely that any such proclamation will be met with any more success than its first iteration.

Libya Strikes Back, Hits NATO Warship 

Submitted by Tyler Durden on 05/17/2011 16:38 -0400

Apparently even Libya has had enough of the toothless and impotent NATO offense and is hoping for some sort of escalation. Reuters reports: "Libya said on Tuesday its forces had hit a NATO warship while it was shelling areas in the western parts of the rebel-held Libyan city of Misrata. Libyan state television said "our forces fired (at warships) and hit one directly and severely". It gave no further details. It was not immediately possible to verify the report." It remains to be seen if Nicholas "the people's liberator" Sarkozy, busy celebrating the recent developments in New York, will take time from his presidential campaign to urge the "marines in the water" to become "boots on the ground." 

 

 

 

 

Guest Post: Greece - Is The Shotgun Wedding Still On? 

Submitted by Tyler Durden on 05/17/2011 15:45 -0400

Last week I used the analogy of a shotgun wedding to describe how the bailout was being forced upon the Greek people. Maybe, after the events of this weekend, I wasn’t being harsh enough in my choice of analogy. As I continue to digest the news and various opinions, I still reach the same conclusion. Default or restructuring is the most logical outcome and should occur sooner than later. I believe that the image of the IMF has been tainted and it will make it more difficult for the Greek people to accept a deal from them, unless the terms are incredibly favorable. I’ve also listed several of the arguments most commonly used to encourage Greece to delay restructuring, and point out the flaws in each of them.