Monday, November 14, 2011

Silver Bears Part 8 - The Gold Rush Currency Wars

Why a Dollar & Euro Collapse Is Guaranteed

The Rise Of The State

The ever increasing un-invisible hand of intervention, manipulation, and disintermediation by central planning regimes around the world is an oft-quoted topic among our discussions. UBS's Global Macro Team published a thoughtful piece late last week on global political issues and the rise of the state. Governments are encroaching into more and more areas of the world economy. This is not just through political drama (as we have seen in the Euro area), nor even through the conventional mechanisms of foreign exchange intervention. Regulation (and regulatory uncertainty), sovereign wealth funds, bond market manipulation and default risks all play a role in financial markets, and all are intensely political in their nature. A more politically nuanced world raises an interesting unintended consequence for global financial markets. Directly, as a result of increased regulation, or indirectly, as a result of increased costs associated with assessing foreign political risk, investors may feel that the rise of the state will increase the home country bias of capital flows - exactly as leaders look for global burden sharing.

Is China's New Muni Transparency A Public-to-Private Risk Transfer Trap?

For the first time since 1949, when the Communist Party took power, China will open the regional authority debt markets (muni markets) to the public. Much is being made of the fact that this first issuance - for Shanghai no less - enabled it to dramatically cut its interest expense - as investors were clearly comforted by the increasingly transparent documentation. However, we worry that that this will cause a multi-tier market to evolve very rapidly between the haves and have-nots as we suspect the more than 6000 companies set up by local governments will bifurcate just as the Chinese IPO market did in the US. Color us even more skeptical but when we read the Wall Street Journal's story on Wenzhou's Annus Horribilis this evening, even vibrant thriving (over-stretched and over-levered) city-states are feeling the recoupling pain of a European recession, US residential construction depression, and European bank deleveraging impacting credit conditions in Asia. The bottom-line is more openness is better, more transparency is better, and meeting the demands of yield hungry money managers is reasonable but we hope they go in with eyes wide open as we suspect this move is much more about $1.7tn risk transfer from the public central planner's balance sheet and on to the private capital markets of the world.

IMF Warns of Risks in Chinese Financial System
China's biggest commercial banks face systemic risks if a combination of credit, property, currency and yield curve shocks were to occur together, the International Monetary Fund warned on Tuesday.

Watch Rosenberg And Krugman Debate Larry Summers and Ian Bremmer On Whether The US Is Turning Into Japan

Minutes ago, the always delightful Munk Debate on the American economy concluded, which pitted two skeptics: David Rosenberg and (yes, he is a skeptic when it comes to his belief in the "proper" implementation of Keynesianism) Paul Krugman on the one hand defending the null motion of the debate, against Larry "Warren (watch the clip)" Summers, best known for destroying capitalism, and Ian Bremmer. The core debate topic was as follows: "North America faces a Japan style era of high unemployment and slow growth an accurate forecast of the future." Naturally, as Krugman immediately explained, by North America the organizers mean the US, simply because Canada is too small and hasn't screwed up enough (we would add that the screw up has not been perceived yet: everyone has screwed up, but luckily we have enough distractions for the time being). Either way, the progression of the debate should not come as a surprise to most, neither how each particular economist will perform: that Rosie sees Japan in every aspect of the US should not surprise anyone; that Krugman does too unless the politicians agree to being invaded by aliens, is also to be expected. On the other side, "Warren" Summers' argument can be simplified to his fallback motto of Keynesianism and Central Planning 101 in which he believes that the printing of money and job creation are sufficient to fix all US problems. No surprise there either: after all this is the man who three weeks ago said: "The central irony of financial crisis is that while it is caused by too much confidence, too much borrowing and lending and too much spending, it can only be resolved with more confidence, more borrowing and lending, and more spending."

Jim’s Mailbox

Dear Jim,

And in the meantime the US financial media tells you gold and silver are just shiny pretty metals.

CIGA Madsionstyle

JRG International launches Emirates Investor Savings Plan United Arab Emirates: Saturday, November 12 – 2011 at 12:22
JRG International Brokerage DMCC, a leading broker and clearing member of the Dubai Gold and Commodities Exchange, announced the launch of a novel scheme to encourage savings culture through systematic investment in "Visions of Dubai" gold coins on November 11, 2011.
A first of its kind concept, "Emirates Investor Savings Plan," has been designed as a glowing tribute to the visionary leadership of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, on the occasion of the nation’s 40th National Day.
Through the revolutionary savings plan, JRG International will financially support investors to own "Visions of Dubai" series of gold coins — exciting mementos of Dubai that are truly representative of the visionary leadership of the Emirate — through affordable and systematic monthly investments.
The first coin in the "Visions of Dubai" series released in 2007 under the guidance of Dubai Multi Commodities Centre (DMCC) features the image of His Highness Shaikh Mohammed bin Rashid Al Maktoum on one side, while Burj Al Arab is engraved on the other. Other coins in the series feature landmark images of Dubai that also reflect the spirit and identity of the emirate.

Graham Summers Weekly Market Forecast (the Makings of a Top Edition)
Phoenix Capital...
11/14/2011 - 15:08
It is clear as day that the EU in its current form is finished. I’ve been saying this for months, but now even the mainstream media is picking up on rumblings that Germany wants to exit the Euro or...

Phoenix Capital...
11/14/2011 - 15:24
The NY Fed is the single most powerful entity in charge of the Fed’s daily operations. How can any investor believe that the Fed can manage the system and restore trust when the NY Fed...

11/14/2011 - 21:06
This is how David J. Stern's downfall started here in Florida, See ya at the bottom Baum...

The Banks That Swallowed Europe, Western Civilization Based on Debt

Eurozone Sketches Out Stability Plan as Fears Linger Over Greece and Italy

Gerald Celente on Alex Jones Show

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