Proof That Europe Is Primed For A Lehman Brothers-Style Bank Bust, But Likely On A Much Larger Scale!!!

Posted by: Reggie Middleton

Post date: 07/21/2011 - 13:24

Recent history shows us what happens when you borrow short and lend long against assets that have been halved in value, hasn't it? Guess who hasn't been to (very recent) history class...

 

 

 

 

 

18 Signs That Global Financial Markets Smell Blood In The Water

 

 

 

 

 

Marc Faber on Gold, Silver, Deflation and the U.S. Economy podcast (podcast interview with Jim Pulplava)





Too Big To Fail?: 10 Banks Own 77 Percent Of All U.S. Banking Assets





Bill Clinton: I'd use 14th Amendment
 

 

 

 

 

 

Update On Obama-Boehner's Debt Ceiling Non-Deal "Deal" 

The speculative headlines on the debt ceiling status are now coming in fast and furious. The latest is from Reuters according to which President Barack Obama and U.S. House Speaker John Boehner are discussing a possible deal that would include $3 trillion in spending cuts over 10 years to avert an unprecedented U.S. default, a senior Democratic congressional aide said on Thursday. Their potential agreement would include a promise of tax reform in 2012, the aide said. In other words, this is not a deal at all, but merely promises of cuts at some point in the future, coupled with tax reform...in 2012.

 

 

 

 

 

Guest Post: If You Haven’t Bought Any Gold Yet… 

Print. Lie. Borrow. Deceive. Deny. These are a the principal tenants of the Greek restructuring plan that were released today from Brussels… it’s as if EU policymakers put it together after shaking a Magic 8-ball. With limited debate and even less fanfare, Europe has just officially signed on to destroy its own currency. Utterly worthless, quasi-defaulted Greek debt will become perfectly acceptable collateral, much in the same way that the US Federal Reserve took every scrap of toxic paper it could find off banks in 2008 and 2009. Given the favorable market reaction, European politicians must be feeling pretty proud of themselves. The euro is up. The stock market is up. Oil is up. Well, never mind about oil, they’ll blame that on evil speculators… just like food prices. The European sovereign default SOP has just been set. When Spain, Italy, Portugal, and Ireland’s time of insolvency arrives, it will be handled just like this: Print. Lie. Borrow. Deceive. Deny. This is going to kick inflation up another notch as anyone holding on to Greek debt is going to trade out of it as quickly as possible. All that money has to go somewhere… and it’s a sure bet that a lot of it will feed rising commodities price (which translates into more inflation). This is going to kick inflation up another notch as anyone holding on to Greek debt is going to trade out of it as quickly as possible. All that money has to go somewhere… and it’s a sure bet that a lot of it will feed rising commodities price (which translates into more inflation). 

 

 

 

 

 

Asia doesn't believe in summer lull for gold, Agnico Eagle CEO says

 

 

 

 

John Paulson Capitulates, Admits Was "Too Aggressive", Dumps Bank Of America, Lowers Net Exposure From 81% To Below 60% 

After two years of ridicule for his ludicrous bet that Bank of America (about which we will have much more to say shortly) would triple, John Paulson has finally capitulated on his rose-colored glasses call that there is nothing but smooth sailing ahead for US financials. Reuters reports that "he pseudo-mutual fund manager "told investors on Thursday he was "too aggressive" with some of the stock bets in his flagship funds and he is trimming back some of his riskiest holdings. The hedge fund manager told investors in a conference call that he is limiting his funds' riskier stocks by moving away from bank holdings with heavy mortgage exposure." Translation: goodbye Bank of America. For those wondering what caused the drop in BAC from $14 to $9.5 in the past several months, now you know: VWAPed selling of 100MM+ shares of BAC stock will do that to you. 

 

 

 

 

 

 

"It’s A Cash-Flow Problem": The Ever Broker US Consumer Increasingly Relying On Credit Cards For Daily Staples 

Somehow, in all the confusion, the endangered species known as the American "consumer" missed the economic recovery. The reason, as Bloomberg writes, is that consumers are increasingly "using credit cards to pay for basic necessities as income gains fail to keep pace with rising food and fuel prices." The data comes from credit card transaction processor First Data which reported that the dollar volume of charged purchases rose 10.7% in June (a 6.8% increase in the number of transactions). "The difference probably represents the increasing cost of gasoline, said Silvio Tavares, senior vice president at First Data, the largest credit card processor. "Consumers, particularly in the lower-income end, are being forced to use their credit cards for everyday spending like gas and food,” said Tavares, who’s based in Atlanta. “That’s because there’s been no other positive catalyst, like an increase in wages, to offset higher prices. It’s a cash-flow problem." Alas, it gets worse. As Bank of America's Joshua Dennerlein reports today, the end of the year will see 3.7 million Americans stop receiving jobless benefits. "This will act as a hit to consumption in the first quarter of 2012." This number is completely independent of any possible new legislation to extended jobless benefits for new unemployed labor pool entrants, as it merely affects those about to hit the 99 week cliff. Unfortunately even more "growth" over the next 6-9 months will have to come from the Fed and the only thing it knows how to do: print, print, print.

TARP vs EFSF 

The best analogy I have heard so far about today's European Solution is that EFSF is being asked to do a lot of what TARP did for the U.S. I cannot disagree with that assessment. The EU is clearly pushing it well beyond it's original design. The question that remains to be answered is, who would fund the EFSF? There are stories that EFSF might buy assets from the ECB at cost. It is clearly going to lend to countries at rates that are massively off-market. It may buy debt in the open market? It may recapitalize banks? I am not sure it can have such a broad mandate and get the rating it needs or to get outside investors. What private investor would have lent to TARP? I think for this program to work, Germany and France will have to suck it up, skip the whole CDO methodology and just fund the EFSF directly. TARP only worked (or got the money it needed and was flexible enough) because the U.S. government gave the treasury carte blanche to do what they wanted. 

 

 

 

 

 

 

Total Bond Market Chaos!

Submitted by Tyler Durden on 07/21/2011 13:07 -0400

If someone is hell bent on breaking the bond market, they are doing a bang up job.

GAO Audit Exposes Fed's Corruption Once Again 

Today, in addition to the official launch of Europe's PPT, we get a reminder that our own version, the Federal Reserve, is as criminal and corrupt as always, especially when working in conjunction with that old standby, Goldman Sachs. Just like back in 2009 and 2010 it was discovered that former Goldman director and New York Fed Chairman Stephen Friedman had bought tens of thousands of shares of Goldman stock while the entire system was being bailed out by the very same Fed, so today we learn that another former Goldmanite and then Plunge Protection Head team (i.e., Brian Sack predecessor) Bill Dudley had held shares of AIG stock while the Fed was arranging the bailout of the doomed insurer. But it's all good: Dudley had a waiver. Mostly likely signed by his then boss and former Goldman coworker Friedman. We wonder if it was Dudley who signed Friedman's waiver? From Bloomberg: "The Federal Reserve Bank of New York’s William C. Dudley got a waiver in 2008 to keep personal financial holdings of American International Group Inc. (AIG) after the company received a Fed rescue, a U.S. senator said. Dudley, who was the New York Fed’s markets-group chief at the time and is now the bank’s president, is the senior New York Fed official identified in a Government Accountability Office report today as receiving the waiver, Senator Bernard Sanders, a Vermont Independent, said today in a statement. Jack Gutt, a New York Fed spokesman, declined to comment." Of course, when one is from Goldman, one does not care about the glaring impropriety of one's actions. After all, one rules the world. And speaking of Bernie Sanders, he earlier tore the Fed a new one, after he released details of the Fed's GAO audit and took every opportunity to make his opinion on the master criminals well-known: "As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world," he said. "This is a clear case of socialism for the rich and rugged, you're-on-your-own individualism for everyone else." Well, didn't everyone know that by now?

UPDATE: NYT Full Of Crap Jay Carney Says.... Here It Comes: Obama and Boehner Close To Major Budget Deal, Long Bond Surges 

UPDATE: CARNEY DENIES NYT REPORT: "THERE IS NO DEAL" 30 Year plunging

Just breaking news from the NYT for now. 30 Year surging. 

 

 

 

 

 

 

 

 

 

 

Jim’s Mailbox

July 21, 2011, at 11:58 am
by Jim Sinclair in the category Jim's Mailbox |  Print This Post |  Email This Post

Controlled Steps
CIGA Eric
The loss of upward momentum in the stocks to gold stocks ratio suggests another down step is coming. Gold stocks will outperform equities once the power up trend breaks.
U.S. Large Cap Stocks Capital Appreciation Index (LCSCAI); S&P 500 to S&P Gold Ratio (GPM)*:
* S&P Gold from 1945, Barron’s Gold Stock Index from 1939-1945, Homestake Mining
More…





Eric Fry: Investing Ahead of the Curve. Here is a quote: "In 1969, for example, the Argentine government trimmed two zeros off the existing Peso Moneda Nacional to create the new Peso Ley. In 1985, the government slashed four zeros off the Peso Ley to create the Peso. Then in 1992, the government cut three zeros off the Peso to create the Austral, simultaneously linking it to the US dollar, one-for-one. Ten years later, this peg to the dollar ruptured and the Argentine currency swiftly lost 75% of its purchasing power…again."

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