Gold Special Report: Erste Group Says Foundation Of A Return To Sound Money Has Been Laid, Expects Gold To Hit $2,300 

Erste Group's Ronald Stoeferle has released another must read report on gold, recapping all the recent developments in the space, and more importantly putting the recent price moves in context. While there are numerous key observations which we leave to readers to uncover on their own, arguably the key fact is the following: "The possession of gold is tantamount to pure ownership without liabilities. This also explains why it does not pay any ongoing interest: it does not contain any counterpart risk. Along with the International Exchange and the Chicago Mercantile Exchange, JPMorgan now also accepts gold as collateral. The European Commission for Economic and Monetary Affairs has also decided to accept the gold reserves of its member states as additionally lodged collateral. We also regard the most recent initiatives in Utah and in numerous other States as well as in Malaysia, and the planned remonaterisation of silver in Mexico as a clear sign of the times. The foundation of a return to “sound money” seems to have been laid." And as the currency basket vs gold since 1999 chart below demonstrates, the key feature of fiat money is that is most certainly has liabilities, paradoxically in the form of central bank assets which collateralize it. The more worthless "assets" that are taken up by central banks to match the balance sheet expansion, the more worthless the actual currency in the form of actual circulating paper and reserves. As such it is not so much the actual dilution of fiat paper that devalues it: it is the increasingly less valuable available collateral that supports it. As for the future: one of Erste's scarier hypotheticals is that should the US lose control of its monetary base, leading to a 1000% jump in said monetary metric, the shadow price of gold assuming 40% backing of gold, would be $99,419. Frankly we have yet to hear even some of the most undaunted gold bulls throw this number around.

Let Greece Go Bankrupt

posted by Admin at Jim Rogers Blog - 5 hours ago

Through out history, when countries get on situations like this, the longer you delay reality, the longer you delay the inevitable, the worse it is in the end. Look at Argentina 20 years ago. We could go ...

Back To The Drawing Board: S&P Says Greek Rollover Debt Plan "Would Likely Amount To A Default Under Our Citeria" 

Submitted by Tyler Durden on 07/04/2011 07:27 -0400

Last Wednesday we cited from a Reuters report, according to which the last ditch Greek MLEC/CDO rescue operation, would be welcome to S&P and Moody's as "The whole charm of the French model is that it was worked out in a such way that it will be fine with the rating agencies." Because absent a decree of no EOD, the whole thing is pointless. Well, as often turns out, this was yet more wishful thinking on behalf of some bureaucrat, masked as fact. S&P has just come out with the following: "In recent weeks, a number of proposals relating to this  topic have surfaced, and the particulars in some cases are evidently still  in flux. This credit comment looks at the most prominent of the recent proposals, put forward by the Fédération Bancaire Française (FBF) on June 24, 2011, in the context of our criteria for evaluating distressed debt exchanges and similar debt restructurings (see Related Research below). In brief, it is our view that each of the two financing options described in the FBF proposal would likely amount to a default under our criteria" and specifically: "we believe that both options represent (i) a "similar restructuring" (ii) are "distressed" and (iii) offer "less value than the promise of the original securities" under our criteria. Consequently, if either option were implemented in its current form, absent other mitigating information, we would likely view it as constituting a default under our criteria." Goodbye MLEC 2 - as expected you were just as useless as your first iteration back in 2007.

Barclays Releases Updated Report On Top 40 Greek Debt Holders 

A few weeks ago Barclays compiled a useful chart representing the largest holders of Greek debt. Today, the bank's Laurent Fransolet has issued an update "of the table “Top 40 holders of Greek government bonds and Greek debt” (Figure 1), in which we show updated holdings for Q4 10 for AXA and add KA Finanz from Austria to the list. We also clarify that the holder EFG in previous versions is Eurobank EFG." Not surprisingly, despite the refining drill down of secondary exposed parties, the top holders remain central bank and affiliated institutions, explaining the ongoing prerogative to not impair central banks' Greek holdings as a result of a rating agency event of, even selective, default. 

Guest Post: July 4, 2011: The Cycle Of Dependency And The Atrophy Of Self-Reliance 

Submitted by Tyler Durden on 07/04/2011 07:40 -0400

The 4th of July is a fitting day to ponder the reality that we are at Peak Government, and the Savior State is unsustainable. This is a matter of accounting: no nation can spend more than it generates in surplus real output forever. What goes unremarked is the intrinsically destructive nature of our rising dependence on a Savior State. In his book Collapse of Complex Societies, anthropologist Joseph Tainter identified two causes of economic collapse: investments in social complexity yield diminishing marginal returns, and energy subsidies, i.e. cheap, abundant energy, decline. In my terminology, the dynamic he describes is one in which the cost structure of a society continues rising due to “the ratchet effect” but the gains from the added expenses are increasingly marginal. At some point the additional costs, usually justified as the “solution” to the marginal returns problem, become counterproductive and actually drain the system of resilience as dissent and adaptability (“variation is information”) are suppressed. This feeds systemic instability: on the surface, all seems stable, but beneath the surface, the potential for a stick/slip destabilization grows unnoticed. Cheap, abundant energy offers a surplus of value that can be invested in social complexity and consumption. Once the cost and availability of energy declines, then that surplus shrinks and can no longer be used to support the high cost structure. The U.S. economy has clearly been driven to the cliff edge of instability by both dynamics: the cheap, abundant energy which enabled fast growth of consumption and high cost social complexity is vanishing, and the cost structure of the economy has ballooned far beyond sustainability.

 

Tristane Banon To File Legal Complaint Against DSK In France 

Submitted by Tyler Durden on 07/04/2011 09:27 -0400

While the legal case against DSK in New York may be ending shortly, a new one, and possibly the first of many if the man's reputation as a womanizer is indeed valid, is about to be launched against him in France. From Reuters: French writer Tristane Banon will file a legal complaint on Tuesday over an alleged rape attempt by former IMF chief Dominique Strauss-Kahn in 2002, her lawyer told Reuters. David Koubbi, Banon's attorney, said the complaint would relate to an incident that took place when she went to interview Strauss-Kahn in an apartment in Paris. She was 22 at the time and has already publically discussed the incident. "Tristane Banon will file a complaint on Tuesday for attempted rape in Paris," Koubbi said." It is unclear if the case will be civil or criminal although considering statuse on limitations on these kinds of things for a criminal trial is hardly 9+ years, we are confident the weakest for of allegation against DSK will be filed. Of course, this is to be expected when one waits 9 years to actually lodge a complaint against something that should have been brough to the authorities' attention immediately. 

Mark Zandi Says Jamie Dimon Would Be "Fabulous" Replacement To Geithner, Unclear On Madoff Succession Chances 

There may have been those who thought that our focused mockery of Moody's head something Mark Zandi went a little too far last summer when he and other prominent Princeton proctovoodoologist Alan Blinder praised Tim Geithner's abysmal "recovery" in a desperate attempt to get an administrative job away from their respective sinking ships. Well now he have pure comedy genius to add to allegations of incompetent buffoonery. On Friday, Zandi told Yahoo's Daily Ticker that of all proposed replacements to Tim Geithner (a list which he somehow was not part of despite years of sycophantry) JPMorgan head, currently embroiled in billion dollars worth of mortgage fraud litigation, would make a "Fabulous" Treasury Secretary. That's right: the head of the bank that effectively shares its balance sheet with the Fed courtesy of being the primary shadow banking system gatekeeper as one of two tri-party repo clearers, and whose relentless printing of new bonds would necessitate round after round of QE, would make a "fabulous" treasury secretary... While we are at it, why not just get Bernie Madoff, who continues to be in jail for doing what the global financial system does each and every day, furloughed and have him run the US Treasury every Tuesday, Wednesday and Thursday on alternative weeks when the bimonthly refunding occurs. After all who better to lead the US Treasury than him?

Guest Post: Making Sense Of The French Rollover Plan 

Submitted by Tyler Durden on 07/04/2011 10:55 -0400

Confusion continues to reign supreme over what the French rollover plan does for the various entities. The details and mechanics are a bit sketchy, but I have attached the proposal that I found, and will use that as a basis for the analysis. As I go through the details, and incorporate the latest rating agency comments, the conclusion remains the same – this is a good deal for the Participants, a mediocre deal for the Troika, and punitive to Greece. 

Expect to see this at the bottom of each post... for a week...

Economic Armageddon and You...Prepare for the Worst...

Jim Sinclair’s Commentary

Here is the entire story. I would suggest spreading the truth to offset the lies.

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