Hyperinflation Warning, Preserve Value with Gold
By: The Gold Report and John Williams
Those wondering what caused the accelerated reacquaintance of the EURUSD with gravity on its way to what UBS has just dubbed the "beginning of the end" (report to be published shortly), need look no further than the ECB where the ECB had its first failed sterilization since the expansion to monetize Italian and Spanish bonds was launched in August. As noted yesterday, the ECB had to sterilize €203.5 billion in cumulative bond purchases. Instead, it only got bids for €194.2 billion from a paltry 85 bidders. This means that for the first time, as shown on the chart below, the ratio of Bids to Bonds for Sterilization fell under 1. What is much worse, is that this happened on the day of the weekly 7-day MRO, during which a total of 192 banks took a combined €265.5 billion from the ECB's weekly 1.25% handout. The amount tops the 247 billion that 178 banks took last week and is the second week running that demand hit a new two-year high. In other words, despite demanding the most amount of money in 2 years, the banks were unable to flip all that cash and "sterilize" monetized paper. This is very bad news as it confirms that the SMP program is coming to a forceful close as banks withdraw in their shells and any further PIIGS bonds purchases will be no longer sterilized above some threshold level, somewhere in the high €100's, low €200 Bns. Whether this is the final straw that pushes the ECB to print outright remains to be seen: it is surely providing the needed dead cat bounce to the EURUSD as hopes that Draghi will finally do as the banks demand have once again resurfaced.
Confirming
just how much the market has lost it, at just after 5 am Eastern when
the news of today's Italian auction as announced, the EURUSD soared by
almost 100 pips on news that the auction had not
failed. Apparently the lack of day to day bond issuance failure is now
good enough for Europe. In the meantime, one look at the actual auctions
that made up today's action show just how unsustainable Italian debt
yields have become. The Italian Treasury priced 3, 9 and 11 year BTPs at
yields that were simply laughable, and are completely non-sustainable
in the long run. Specifically, the Tesoro sold €3.5bln in 6.00% Nov'14
bonds at a bid/cover 1.502. The yield was a mindboggling almost 8% or 7.89% compared to 4.93% on October 28 - a 3% increase in 1 month; it also sold €1.499 bln of 4.00% Sep'20 bonds at a 1.538 B/C vs. Prev. 1.49 and a yield of 7.28% vs. Prev. 5.470% a month earlier, and lastly €2.5 billion in 5.00% Mar'22 bonds, at a bid/cover 1.335 vs. Prev. 1.27 and a yield 7.56% vs. 6.060% previously.
Yup, the 3 years were nearly 8%! Yet as noted earlier the fact that
anything priced was enough for a quick kneejerk reaction higher in
prices on the benchmark 10 Year BTP... If only for one hour. As the
chart below shows, the BTP has sold off aggressively post the
realization that the "successful" auction was almost as bad if not worse
than a failure, as that at least would have kicked the ECB into
monetizing.
By: The Gold Report and John Williams
Gross On The Futility Of The European Deus Ex Machina: "A French/German Guillotine Hangs Over The Markets"
Bill Gross continues with his rational Keynes bashing with the following statement from his latest monthly piece just released: "What has become obvious in the last few years is that debt-driven growth is a flawed business model when financial markets and society no longer have an appetite for it. In addition to initial conditions of debt to gross domestic product and related metrics, the ability of a sovereign to snatch more than its fair share of growth from an anorexic global economy has become the defining condition of creditworthiness – and very few nations are equal to the challenge." In addition he also meaks it all too clear why the sudden reappearance of the Federal states of German-funded Europe proposal is a dead end: "On the fiscal side the EU’s solution has been to “clean up your act,” throw out the scoundrels and scofflaws (eight governments have fallen) and balance your budgets. Such a process, however, almost necessarily involves several years of recessionary growth and deflationary wage pressures on labor markets in the offending countries." Gross picturesque analogies never fail to amuse (maybe not the French though): "The ultimate vote of the working men and women in these countries will always hang over the markets like a Damocles sword or perhaps a French/German guillotine. If the axe falls, then bond defaults may follow no matter what current policies may promise in the short term." That's right. He went there. As for his conclusion, he is spot on: "Investors and investment markets will likely be supported or even heartened by recent days’ policy proposals. The problem of Euroland is twofold however. First of all, they will remain a dysfunctional family no matter what the outcome. You can’t tell a German much, and while they can issue what appear to be constructive orders and solutions to the southern peripherals, there is little doubt that none of them will “like it very much.”....Secondly, and perhaps more importantly however, investors should recognize that Euroland’s problems are global and secular in nature, reflecting worldwide delevering and growth dynamics that began in 2008." And that's it folks: Europe will never submit to a federalist union controlled by Germany. And even if it does, it is not just Europe that is broken. It is the entire world. Speaking of broken marriages, we wonder just how many CDS Gross is long parent risk-soaring Allianz?ECB Fails To Sterilize Bond Purchases, €9 Billion Shortfall Confirms Euro
Those wondering what caused the accelerated reacquaintance of the EURUSD with gravity on its way to what UBS has just dubbed the "beginning of the end" (report to be published shortly), need look no further than the ECB where the ECB had its first failed sterilization since the expansion to monetize Italian and Spanish bonds was launched in August. As noted yesterday, the ECB had to sterilize €203.5 billion in cumulative bond purchases. Instead, it only got bids for €194.2 billion from a paltry 85 bidders. This means that for the first time, as shown on the chart below, the ratio of Bids to Bonds for Sterilization fell under 1. What is much worse, is that this happened on the day of the weekly 7-day MRO, during which a total of 192 banks took a combined €265.5 billion from the ECB's weekly 1.25% handout. The amount tops the 247 billion that 178 banks took last week and is the second week running that demand hit a new two-year high. In other words, despite demanding the most amount of money in 2 years, the banks were unable to flip all that cash and "sterilize" monetized paper. This is very bad news as it confirms that the SMP program is coming to a forceful close as banks withdraw in their shells and any further PIIGS bonds purchases will be no longer sterilized above some threshold level, somewhere in the high €100's, low €200 Bns. Whether this is the final straw that pushes the ECB to print outright remains to be seen: it is surely providing the needed dead cat bounce to the EURUSD as hopes that Draghi will finally do as the banks demand have once again resurfaced.
UK Embassy In Tehran Taken Over By Protestors, Building On Fire
Things getting ugly fast.- IRANIAN PROTESTERS THROW PETROL BOMBS INSIDE BRITISH EMBASSY COMPOUND IN TEHRAN, ONE SMALL BUILDING SET ON FIRE -STATE BROADCASTER IRIB - RTRS
- IRANIAN PROTESTER ENTERS U.K. EMBASSY COMPOUND IN TEHRAN -BBG
- IRANIAN STUDENTS BROKE INTO BRITISH EMBASSY IN TEHRAN: AP
- U.K. FOREIGN OFFICE AWARE OF REPORT EMBASSY IN IRAN BROKEN INTO -BBG
American Airlines Files For Bankruptcy
We hope you used up those frequent flier miles which are now a General Unsecured Claim on thee company and will likely result in an exchange rate of 1 million miles for one round trip flight...Italy Prices €7.5 Billion In New Bonds At Unsustainable Yields, Market Rejoices If Only For A Few Minutes
Confirming
just how much the market has lost it, at just after 5 am Eastern when
the news of today's Italian auction as announced, the EURUSD soared by
almost 100 pips on news that the auction had not
failed. Apparently the lack of day to day bond issuance failure is now
good enough for Europe. In the meantime, one look at the actual auctions
that made up today's action show just how unsustainable Italian debt
yields have become. The Italian Treasury priced 3, 9 and 11 year BTPs at
yields that were simply laughable, and are completely non-sustainable
in the long run. Specifically, the Tesoro sold €3.5bln in 6.00% Nov'14
bonds at a bid/cover 1.502. The yield was a mindboggling almost 8% or 7.89% compared to 4.93% on October 28 - a 3% increase in 1 month; it also sold €1.499 bln of 4.00% Sep'20 bonds at a 1.538 B/C vs. Prev. 1.49 and a yield of 7.28% vs. Prev. 5.470% a month earlier, and lastly €2.5 billion in 5.00% Mar'22 bonds, at a bid/cover 1.335 vs. Prev. 1.27 and a yield 7.56% vs. 6.060% previously.
Yup, the 3 years were nearly 8%! Yet as noted earlier the fact that
anything priced was enough for a quick kneejerk reaction higher in
prices on the benchmark 10 Year BTP... If only for one hour. As the
chart below shows, the BTP has sold off aggressively post the
realization that the "successful" auction was almost as bad if not worse
than a failure, as that at least would have kicked the ECB into
monetizing.
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_2.gif)
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/silver/t24_ag_en_usoz_2.gif)
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