Time For Tim Geithner's Annual Top-Ticking Op-Ed, In Which We Learn That It Is Time To Panic About America's Banks 

When just under a year ago, Tim Geithner penned "Welcome to the Recovery" he top ticked the zenith of the business cycle to the day if not the hour, with the economy finding itself in a straight line contraction ever since then, blissfully delayed by a 9 month QE2 detour. Now that the QE2 is no longer a factor, we are already seeing economists everywhere cut their Q2 GDP forecasts to sub 2%, an effective stall speed for the economy in real terms, and reducing their full year economic forecasts. Which is why we were delighted to learn that today Geithner has just released his latest iteration of a top-ticking missive, this one titled inappropriately enough "Dodd-Frank Has Made Our Banks Stronger" which is supremely ironic because not only has Dodd-Frank not made anything stronger as it has not even been remotely implemented, but as Bank of America, Goldman and Citi's Q2 results have just confirmed, the US bank sector is now the weakest it has been in years. Thus, when accentuated with a Geithner adminition to not panic our only advice is to do precisely the opposite. Oh yes, it took precisely 25 days between Geithner's heartfelt appeal to America's idiot class last year and Bernanke's Jackson Hole appearance. We wonder if this year it will be shorter.

Gene Arensberg: Are the big gold and silver shorts being overrun?

Exposing China's Mysterious Multi-Trillion Shadow Banking System 

Precisely a year ago, a summary report by Fitch shone the first, if relatively weak, light on the massive Chinese securitization industry which had for years allowed the country to fund its housing bubble without forcing the banks to actually take much if any of the loan risk associated with this unprecedented expansion. At the time of the Fitch report, the securitization discrepancy was not deemed to be excessive and at about RMB 1 trillion in annual issuance it was promptly swept under the rug. Nonetheless the key statement remained: "Fitch believes the vast majority of these transactions are not publicly disclosed by Chinese banks, and few, if any, traces of the loans remain in financial statements." More recently, and long overdue, Moody's took a refresh look at the same problem and on July 4 released a rather disturbing report which found "that the Chinese audit agency could be understating banks' exposures to local governments by as much as RMB 3.5 trillion." At 10% of GDP, the number sure is starting to get larger. Today we present what we believe is the most comprehensive report we have seen to date on the matter of the Chinese "Shadow Banking" industry courtesy of SocGen. For those who enjoy putting things into perspective, SocGen quantifies the total shadow banking system in China to be as large as RMB10 trillion (or 55%, of the Total Social Financing of RBM18 trillion): nearly USD1.5 trillion. While the number is not massive (considering that the most recent corresponding shadow banking number for the US is well higher at about $16 trillion), it keeps increasing as a portion of GDP. Why is this important? Because as SocGen's Wei Yao says, "The currently unsupervised development of the informal financing market delays the intended impact of monetary policy tightening, but adds to the risk of precipitating a liquidity crunch of the entire financial system later." So it this Chinese shadow banking system a potential monetary time bomb, destabilizing the PBOC's efforts at normalization and adding materially to systemic risk? Read on.

How Greece Could Create Another Round of Systemic Risk Pt 2

Posted by: Phoenix Capital Research

Post date: 07/19/2011 - 20:08

To say that systemic risk is a MAJOR problem for the EU would be the understatement of the year. For instance, if Portugal defaults, Spain’s banks will get taken to the cleaners. This in turn could trigger a HUGE systemic collapse as exposure to Spanish debt is equal to 4% or more of GDP for Switzerland, France, Germany, the UK, and the Netherlands.

 

 

 

 

 

Same Old, Same Old…

July 19, 2011, at 2:20 pm  by Jim Sinclair 

Dear CIGAs,

Here is more of the same old, same old.
Of course there will be a deficit deal. A US default will not occur as long as the Fed has a printing press. The Deficit deal will not in any way be a cure for the debt problem.
Gold will take out $1600 and $1650 on its way to test $1764. $1600, like all other round numbers, presents nothing more than a temporary challenge to the market and that only.

 

 

 

 

 

In The News Today

July 19, 2011, at 8:14 pm
by Jim Sinclair 

Jim Sinclair’s Commentary

This is unavoidable.

Moody’s Now Threatening Downgrade on 5 U.S. States By Alexander Schachtel
July 19 2011
Ratings agency Moody’s (NYSE:MCO), which in recent weeks has warned that it will downgrade its AAA on the debt of the United States Federal Government, has now issued a new slate of threats to individual states. Today the “investor’s service” released a statement announcing that it has placed five states, Maryland, New Mexico, South Carolina, Tennessee, and the Commonwealth of Virginia, on review for possible downgrade from their current AAA bond ratings. The agency cites the states’ high federal employment and medicaid exposure as reasons for the review, which will affect a total $24 billion of rated debt.
Hot Feature: 3 Reasons the US Economic Recovery will be Different from Japan.
“While all states are indirectly linked to the U.S. government to some degree, we have identified the five Aaa-rated states that are most vulnerable to changes in the U.S. government rating,” said Nicholas Samuels, a Vice President in Moody’s State Ratings Team. These five states have above average exposure to several sovereign risk factors that Moody’s outlined in a July 13 special comment, “Implications of a U.S. Rating Action for Aaa-Rated U.S. Municipal Credits.” The risk factors are macroeconomic sensitivity, capital markets reliance, and dependence on federal revenues, offset by financial resources available to counteract those risks.”
Moody’s has said that in the event that Washington does not come to agreement on a plan to raise the debt ceiling and enact spending cuts to reduce the deficit, a downgrade of its ratings on federal treasury bonds is highly likely. That downgrade would in turn trigger likely downgrades for the states listed above, and a possible review of an additional ten AAA rated states, “should the sovereign rating be lowered and move by more than one notch.”
More…

 

 

 

 

 

 

A Trillion of revenue is on the plate

Posted by: Bruce Krasting

Post date: 07/19/2011 - 19:10

Any of this money yours?

 

 

 

 

 

Der Spiegel: Tensions Rise in Greece as Austerity Measures Backfire. 

Dr. Ron Paul in The Daily Bell: Debt Ceiling Drama

 

 

 

 

More "Change You Can Believe In"...11,000 Jobs Gone...

Borders Book Stores to Shut Down

 

 

 

 

Bernanke Warns Congress On Debt Default




S&P Joins Moody's to Warn of US Downgrade if No Debt Deal Reached




Return of the Gold Standard as World Order Unravels




And Then They Came For Your Gold 




Bernanke: Gold Isn't Money

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