Why Germany's TARGET2 Eurozone Preservation Mechanism Is Merely A Ticking Inflationary Timebomb
We have covered the topic of the German TARGET2 imbalances previously, both from the perspective of what catalysts can
lead the Bundesbank to suffering massive losses (the one most widely
agreed upon being a collapse of the Eurozone, which explains why even
discussions of that contingency are prohibited in Europe), from the
perspective of its being an indirect current account deficit funding mechanism, and from the perspective of what is the maximum size TARGET2 imbalances, funded primarily by the Bundesbank, can grow to before eventually causing irreperable damage
to the Bundesbank. Still, there appears to be ongoing mass confusion
about the topic, with numerous economists proposing contradictory
theories, all of which supposedly rely on traditional economic models.
Today, to provide some additional and much needed color, we once again
revisit the topic of TARGET2, and this time we look at arguably the most
critical question: what happens when the TARGET2 imbalance bubble ultimately pops. And
here is where the true cost to Germans becomes apparent, because there
is no such thing as a "borrowing from the future" free lunch. Which is
precisely what TARGET2 does, only instead of a direct cost, the
post-TARGET2 world will result in the now traditional indirect cost of
all monetary experiments gone awry: runaway inflation.
The contagion of the European Union and banking debt – 20 European Banks have liabilities above 50 percent of their home country GDP
from MyBudget360.com
The crisis in Europe is boiling over yet again. The central
connecting factor of all of this is too much debt relative to
production. Debt in itself is not a bad thing. If you borrow modestly
for a home and have sufficient income
to cover your mortgage payment then this might actually be beneficial.
When things go haywire is when you leverage up. You had people buying
homes that were 10 to 12 times their annual income. This however is a
modest example compared to investment banks that were levered 30-to-1
and in some cases even higher. The issue with the European Union
is the lack of cohesion but also the amount of debt relative to their
production. True colors do not shine in boom times but do come out in
crisis. The issue at hand for the moment is that stronger more
productive economies with moderate levels of debt will need to step in
if they are to bailout the periphery where debt levels are extreme
relative to the local country GDP. Politically you can see how this is
not going well. In the US, even though the bailouts were geared heavily
in favor of the banks, few doubt the power of the Fed in stepping in
and bailing out a big bank in California all the way to New York. This
is not exactly the scenario playing out in Europe.
Read More @ MyBudget360.com
The crisis in Europe is boiling over yet again. The central
connecting factor of all of this is too much debt relative to
production. Debt in itself is not a bad thing. If you borrow modestly
for a home and have sufficient income
to cover your mortgage payment then this might actually be beneficial.
When things go haywire is when you leverage up. You had people buying
homes that were 10 to 12 times their annual income. This however is a
modest example compared to investment banks that were levered 30-to-1
and in some cases even higher. The issue with the European Union
is the lack of cohesion but also the amount of debt relative to their
production. True colors do not shine in boom times but do come out in
crisis. The issue at hand for the moment is that stronger more
productive economies with moderate levels of debt will need to step in
if they are to bailout the periphery where debt levels are extreme
relative to the local country GDP. Politically you can see how this is
not going well. In the US, even though the bailouts were geared heavily
in favor of the banks, few doubt the power of the Fed in stepping in
and bailing out a big bank in California all the way to New York. This
is not exactly the scenario playing out in Europe.Read More @ MyBudget360.com
The History Of US Unemployment By State, And A Surprising Observation
The
following fascinating chart from Tableausoftware shows the history of
US unemployment by state since 1976, and specifically the difference
from historical averages. What the chart shows is that as more and more
people have migrated to populated coastal areas, or those areas hit
hardest from the recent deleveraging mean reversion depression,
it is the flyover states, typically considered the least interesting,
that are actually performing by far the best, with some places
like North Dakota, Nebraska, South Dakota, and Vermont paradoxically
having better relative employment right now than during any time in the
past 40 years! As the economy continues to revert to trendline
along every possible axis, despite the Fed's persistent efforts to
overrule nature, how long until reverse migration kicks in, and all
those hopefuls who had trekked to the big coastal cities dreaming of
better prospects, leave in disenchantment and head back to where they
came from, and just how would that impact the future of US economic and
demographic trends?
by Trevor Timm, Electronic Frontier Foundation:
Since
last year, a few members of Congress—led by Senator Ron Wyden—have been
trying to get the Obama administration to answer a simple question: how
many Americans’ phone calls or emails have been and are being collected
and read without a warrant under the authority of the FISA Amendments
Act of 2008 (FAA)? Unfortunately, no one else in the government seems
to want that question answered.The question arose soon after Congress passed the FAA, which among other things sought to create immunity for telecoms that helped the NSA conduct warrantless wiretapping and gutted privacy protections for Americans communicating overseas. A New York Times investigation described how, under the FAA, a “significant and systemic” practice of “overcollection” of communications resulted in the NSA’s intercepting millions of purely domestic emails and phone calls between Americans. In addition, documents obtained via a Freedom of Information Act request by the ACLU, although heavily redacted, revealed “that violations [of the FAA and the Constitution] continued to occur on a regular basis through at least March 2010”— the last month anyone has public data for.
Read More @ EFF.org
Lords of Finance: The Bankers Who Broke the World
from Silver Vigilante:
Much has been reported
regarding the US Treasury, Federal Reserve and FDIC seeking comment on
the altering of capital adequacy rules pertaining to gold held as
reserves at a bank. Currently, when gold is held as an asset, it is
“risk weight” is 15%, which means a 15% discount on its current value
for capital adequacy. So, when a bank holds gold, one must take 15%
taken off of the spot price so as to arrive at the amount off of which a
bank can make loans. What’s being proposed is that gold not be
discounted in the slightest, thus placing gold on the same plain as
cash. As the document states:
217.131 Mechanics for Calculating Total Wholesale and Retail Risk-Weighted Assets.
(i) A bank holding company or savings and loan holding company may assign a riskweighted asset amount of zero to cash owned and held in all offices of subsidiary depository institutions or in transit; and for gold bullion held in a subsidiary depository institution’s own vaults, or held in another depository institution’s vaults on an allocated basis, to the extent the gold bullion assets are offset by gold bullion liabilities.
Read More @ Silver Vigilante
Much has been reported
regarding the US Treasury, Federal Reserve and FDIC seeking comment on
the altering of capital adequacy rules pertaining to gold held as
reserves at a bank. Currently, when gold is held as an asset, it is
“risk weight” is 15%, which means a 15% discount on its current value
for capital adequacy. So, when a bank holds gold, one must take 15%
taken off of the spot price so as to arrive at the amount off of which a
bank can make loans. What’s being proposed is that gold not be
discounted in the slightest, thus placing gold on the same plain as
cash. As the document states:217.131 Mechanics for Calculating Total Wholesale and Retail Risk-Weighted Assets.
(i) A bank holding company or savings and loan holding company may assign a riskweighted asset amount of zero to cash owned and held in all offices of subsidiary depository institutions or in transit; and for gold bullion held in a subsidiary depository institution’s own vaults, or held in another depository institution’s vaults on an allocated basis, to the extent the gold bullion assets are offset by gold bullion liabilities.
Read More @ Silver Vigilante
from KingWorldNews:
“Quite frankly, you look at Bernanke and he’s done 80% of all the
things he said he wanted to do. He’s achieved banks sitting on massive
amounts of free, excess reserves, almost to the tune of $2 trillion.
But that money is not going places where it can do good.
Bernanke, right now, is in the classic problem that beset the central banks in the 1930s, he’s pushing on a string. He’s got to find a way not to loosen money further or create more reserves, he’s got to find a way to motivate that (existing) money. And there are very few choices that allow for that.”
Cashin then cautioned about Germany’s problems with monetary policy: “Germany has had a very painful past. The initial problem was they were saddled with huge war reparations after the World War I. The economy ground to a halt. They tried to address it by printing money, and they got one of the great Zimbabwe-like inflations in all of history, where people were actually shoveling the currency into the furnace because it was cheaper than buying coal.
LISEN NOW @ KingWorldNews.com
“Quite frankly, you look at Bernanke and he’s done 80% of all the
things he said he wanted to do. He’s achieved banks sitting on massive
amounts of free, excess reserves, almost to the tune of $2 trillion.
But that money is not going places where it can do good. Bernanke, right now, is in the classic problem that beset the central banks in the 1930s, he’s pushing on a string. He’s got to find a way not to loosen money further or create more reserves, he’s got to find a way to motivate that (existing) money. And there are very few choices that allow for that.”
Cashin then cautioned about Germany’s problems with monetary policy: “Germany has had a very painful past. The initial problem was they were saddled with huge war reparations after the World War I. The economy ground to a halt. They tried to address it by printing money, and they got one of the great Zimbabwe-like inflations in all of history, where people were actually shoveling the currency into the furnace because it was cheaper than buying coal.
LISEN NOW @ KingWorldNews.com
by David Galland, Casey Research:
A former partner of mine got married over the weekend to a former
lover from his youth. Separated by tides of life that kept them apart
for a couple of decades, against all odds their paths once again
crossed, resulting in a beautiful ceremony that took place, most
dramatically, in a tent in the middle of a raging storm.
The less sentimental among you will be pleased to know that I’m not planning on waxing lyrically about love and marriage and all that. Instead, I’ll share a couple of stories from the wedding, as they seemed particularly revealing to me, and maybe to you too.
The first was a conversation with a mutual friend of the groom whom I hadn’t seen in a number of years. I had heard he’d moved on from a previous sales job in the ski business to a position as a broker at a major brokerage house, but we hadn’t had more than a passing conversation until we washed up next to each other at the wedding.
Since he knows I am involved in the research business, he steered the conversation toward investment markets, giving me an opening to do a little on-the-ground research. Specifically, I asked him if he or his clients were invested in gold or gold stocks. “Nope,” he said with a cheerful broker’s smile, adding, “You can’t eat gold.”
Read More @ CaseyResearch.com
from PeterSantilliTV:
Today’s Items:
Finally, Please prepare now for the escalating economic and social unrest. Good Day
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A former partner of mine got married over the weekend to a former
lover from his youth. Separated by tides of life that kept them apart
for a couple of decades, against all odds their paths once again
crossed, resulting in a beautiful ceremony that took place, most
dramatically, in a tent in the middle of a raging storm.The less sentimental among you will be pleased to know that I’m not planning on waxing lyrically about love and marriage and all that. Instead, I’ll share a couple of stories from the wedding, as they seemed particularly revealing to me, and maybe to you too.
The first was a conversation with a mutual friend of the groom whom I hadn’t seen in a number of years. I had heard he’d moved on from a previous sales job in the ski business to a position as a broker at a major brokerage house, but we hadn’t had more than a passing conversation until we washed up next to each other at the wedding.
Since he knows I am involved in the research business, he steered the conversation toward investment markets, giving me an opening to do a little on-the-ground research. Specifically, I asked him if he or his clients were invested in gold or gold stocks. “Nope,” he said with a cheerful broker’s smile, adding, “You can’t eat gold.”
Read More @ CaseyResearch.com
from, Silver Doctors:
CNBC released a hit piece on gold this morning, with gold ‘expert‘
Yoni Jacobs (the only time we have ever heard Yoni Jacobs name mentioned
previously was when he was quoted on the last CNBC hit piece on gold)
predicting that ‘gold is on the brink of a violent downturn‘ and ‘will
fall to as low as $700 an ounce‘.
Rather ironic that CNBC releases a massive hit piece on gold, implying gold will fall another 60% in addition to the 21% it has declined over the last 10 months- on the very day that gold spikes $50 to regain $1600.
Perhaps CNBC’s massively bearish gold call is an indication that the long-awaited bottom is indeed in?
Gold is on the brink of a “violent downturn” and could even fall as low as $700 an ounce as the risk of deflation in developed economies grows and technical pointers turn bearish, one expert tells CNBC.
Read More @ SilverDoctors.com
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CNBC released a hit piece on gold this morning, with gold ‘expert‘
Yoni Jacobs (the only time we have ever heard Yoni Jacobs name mentioned
previously was when he was quoted on the last CNBC hit piece on gold)
predicting that ‘gold is on the brink of a violent downturn‘ and ‘will
fall to as low as $700 an ounce‘.Rather ironic that CNBC releases a massive hit piece on gold, implying gold will fall another 60% in addition to the 21% it has declined over the last 10 months- on the very day that gold spikes $50 to regain $1600.
Perhaps CNBC’s massively bearish gold call is an indication that the long-awaited bottom is indeed in?
Gold is on the brink of a “violent downturn” and could even fall as low as $700 an ounce as the risk of deflation in developed economies grows and technical pointers turn bearish, one expert tells CNBC.
Read More @ SilverDoctors.com
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from PeterSantilliTV:
by Stephen Lendman, SJLendman.Blogspot.com:
At issue was National Federation of Independent Business, et al,
Petitioners v. Kathleen Sebelius, Secretary of Health and Human
Services, et al (NFIB v. Sebelius).
Voting 5 – 4 on Thursday, the Supreme Court upheld what should have been rejected. Pro-business High Court rulings aren’t new.
Since the 19th century, what business wants matters most. Santa Clara County v. Southern Pacific Railway stands out. It granted corporations legal personhood.
Ever since, they’ve had people rights without responsibilities. Their limited liability status exempts them. As a result, they’ve profited hugely and continue winning favorable high and lower court rulings.
Another big one came on June 28. Health giants won. People lost. At issue was challenging Obama’s Patient Protection Affordable Care Act (PPACA) – aka Obamacare.
Read More @ SJLendman.Blogspot.com
At issue was National Federation of Independent Business, et al,
Petitioners v. Kathleen Sebelius, Secretary of Health and Human
Services, et al (NFIB v. Sebelius).Voting 5 – 4 on Thursday, the Supreme Court upheld what should have been rejected. Pro-business High Court rulings aren’t new.
Since the 19th century, what business wants matters most. Santa Clara County v. Southern Pacific Railway stands out. It granted corporations legal personhood.
Ever since, they’ve had people rights without responsibilities. Their limited liability status exempts them. As a result, they’ve profited hugely and continue winning favorable high and lower court rulings.
Another big one came on June 28. Health giants won. People lost. At issue was challenging Obama’s Patient Protection Affordable Care Act (PPACA) – aka Obamacare.
Read More @ SJLendman.Blogspot.com
from KingWorldNews:
The KWN Weekly Metals Wrap – We have added new segments to the KWN
Weekly Metals Wrap covering gold, silver, trading and a plethora of
other factors affecting the precious metals markets. I am giving King
World News listeners globally access to what has long been my secret
weapons in researching where gold and silver are headed directionally
along with the COT Report. We Cover the Commitment of Traders Report in
detail as well as a number of other factors which can influence the gold
and silver market price action.
LISTEN NOW @ KingWorldNews.com
The KWN Weekly Metals Wrap – We have added new segments to the KWN
Weekly Metals Wrap covering gold, silver, trading and a plethora of
other factors affecting the precious metals markets. I am giving King
World News listeners globally access to what has long been my secret
weapons in researching where gold and silver are headed directionally
along with the COT Report. We Cover the Commitment of Traders Report in
detail as well as a number of other factors which can influence the gold
and silver market price action.LISTEN NOW @ KingWorldNews.com
from Japan Times:
Tokyo Electric Power Co. said Wednesday that radiation levels
exceeding 10 sieverts have been detected in the flooded basement of
reactor 1 at the crippled Fukushima No. 1 nuclear plant, a development
that will hamper its decommissioning.
Radiation from the basement water was found to be as high as 10,300 millisieverts an hour, a deadly intensity that will deliver the maximum annual dose in only 20 seconds and sicken anyone who is exposed within minutes.
“Workers cannot enter the site and we must use robots for the demolition,” Tepco said.
Tepco took samples from the basement by inserting a camera and surveying instruments through a drain hole in its ceiling.
Read More @ Japan Times.co
Tokyo Electric Power Co. said Wednesday that radiation levels
exceeding 10 sieverts have been detected in the flooded basement of
reactor 1 at the crippled Fukushima No. 1 nuclear plant, a development
that will hamper its decommissioning.Radiation from the basement water was found to be as high as 10,300 millisieverts an hour, a deadly intensity that will deliver the maximum annual dose in only 20 seconds and sicken anyone who is exposed within minutes.
“Workers cannot enter the site and we must use robots for the demolition,” Tepco said.
Tepco took samples from the basement by inserting a camera and surveying instruments through a drain hole in its ceiling.
Read More @ Japan Times.co
from laroucheyouth:
In order for the United States to regain the sovereignty necessary to lead civilization out of the oncoming global crisis, our number one priority must be the removal of British puppet President Barack Obama. Developments both nationally and internationally only prove to make this point more clear.
In order for the United States to regain the sovereignty necessary to lead civilization out of the oncoming global crisis, our number one priority must be the removal of British puppet President Barack Obama. Developments both nationally and internationally only prove to make this point more clear.
from opportunityshow:
Ellis Martin Interviews Economists and Precious Metals Experts David Morgan and Paul Mladjenovic. Mr. Mladenovic and Mr. Morgan discuss Obamacare and a socialistic centralized government dictating American economic policy as compared to the failed policy dictates in the former Communisty Bloc of Eastern Europe. Mr. Mladjenovic and his family are from what was once Yugoslavia.
Ellis Martin Interviews Economists and Precious Metals Experts David Morgan and Paul Mladjenovic. Mr. Mladenovic and Mr. Morgan discuss Obamacare and a socialistic centralized government dictating American economic policy as compared to the failed policy dictates in the former Communisty Bloc of Eastern Europe. Mr. Mladjenovic and his family are from what was once Yugoslavia.
by Adrian Ash and Robin Molinas, Gold Seek:
So does Argentina a decade ago set a template for today’s crisis in Greece…?
BACK IN 2001, Argentina was hit by a crisis similar to Greece’s today.
Imposing a strict currency peg of 1 Peso to 1 US Dollar meant the currency was over-valued. Or the state should have reined in its spending. Or the economy needed to be more productive. Or all three, depending on your view. But either way, the trade deficit widened as imports became cheaper than exports – especially after neighboring Brazil devalued its Real in 1998-99, adding more pressure to the currency peg, and leading the government to borrow huge amounts of money overseas, including $40 billion arranged by the International Monetary Fund in December 2000.
High tax rates already meant tax evasion was widespread, so raising taxes to try and cover debt interest didn’t bring extra revenue. Well aware how such crises had ended before, the middle-class quickly moved to withdraw money from bank deposits, even though interest rates jumped to 16%, because that wasn’t enough to beat inflation. Squeezed by falling wages and rising prices, many Argentinians took to the streets of big cities, especially Buenos Aires, banging pots and pans in protest at soaring food costs, corruption and economic mismanagement – protests that became known as cacerolazo.
Read More @ GoldSeek.com
So does Argentina a decade ago set a template for today’s crisis in Greece…?BACK IN 2001, Argentina was hit by a crisis similar to Greece’s today.
Imposing a strict currency peg of 1 Peso to 1 US Dollar meant the currency was over-valued. Or the state should have reined in its spending. Or the economy needed to be more productive. Or all three, depending on your view. But either way, the trade deficit widened as imports became cheaper than exports – especially after neighboring Brazil devalued its Real in 1998-99, adding more pressure to the currency peg, and leading the government to borrow huge amounts of money overseas, including $40 billion arranged by the International Monetary Fund in December 2000.
High tax rates already meant tax evasion was widespread, so raising taxes to try and cover debt interest didn’t bring extra revenue. Well aware how such crises had ended before, the middle-class quickly moved to withdraw money from bank deposits, even though interest rates jumped to 16%, because that wasn’t enough to beat inflation. Squeezed by falling wages and rising prices, many Argentinians took to the streets of big cities, especially Buenos Aires, banging pots and pans in protest at soaring food costs, corruption and economic mismanagement – protests that became known as cacerolazo.
Read More @ GoldSeek.com
Today’s Items:
The UN Human Rights Council has come to
its pre-scripted conclusion that Syria is guilty. Guilty of what? Well,
to utilize those words by Pelosi in relation to Syria… We will have to
invade and bring down the government of Syria to find out what crimes
were committed.
Next…
Europeans Storing Gold in Switzerland On Concerns About Inflation and Systemic Risk
http://www.goldcore.com
Europeans Storing Gold in Switzerland On Concerns About Inflation and Systemic Risk
http://www.goldcore.com
Europeans trying to protect their wealth
from global economic uncertainty have been stashing bank cash and gold
bullion coins and bars in safety deposit boxes and depositories in
Switzerland. With central banks around the world flooding markets with
liquidity, some people fear spiraling inflation. Gold is an
increasingly attractive option. Unfortunately, not having the gold in
one’s own possession exposes the gold to the potential of it being
manipulated with tungsten.
Eric Sprott, after carefully analyzing the
situation, has come to the conclusion that there is no plan to save the
system. Yes, Merkel has caved on euro-zone aid, but it changes nothing
in the long run. In fact, with retail sales plunging and other
indicators, the fundamentals of paper instruments are deteriorating.
The fact is, if you are not preparing and getting physical, you will
most likely lose it all.
Next…
15 Reasons Why The Obama-care Decision Is A Mind Blowing Disaster For America
http://endoftheamericandream.com
15 Reasons Why The Obama-care Decision Is A Mind Blowing Disaster For America
http://endoftheamericandream.com
Here are a few…
1. The IRS will hunt down and penalize millions of Americans that do not have health insurance.
2. Obama-care imposes more than 20 new taxes on the American people. Which means those waivers will have to be invalidated because that would be discrimination.
3. Will make the doctor shortage in the U.S. worse.
1. The IRS will hunt down and penalize millions of Americans that do not have health insurance.
2. Obama-care imposes more than 20 new taxes on the American people. Which means those waivers will have to be invalidated because that would be discrimination.
3. Will make the doctor shortage in the U.S. worse.
Next…
Chief Justice Roberts Is A Genius
http://freedombunker.com
http://abcnews.go.com
http://www.youtube.com
http://www.youtube.com This is the oral transcript before the SCOTUS!
Chief Justice Roberts Is A Genius
http://freedombunker.com
http://abcnews.go.com
http://www.youtube.com
http://www.youtube.com This is the oral transcript before the SCOTUS!
The majority opinion written by Chief
Justice Roberts was really brilliant. Believe it or not, it was payback
for Obama’s numerous insults to the Supreme Court and it actually
supports the U.S. Constitution. When read closely, the decision
actually ruled that the individual mandate, relative to the commerce
clause, was unconstitutional; however, as the biggest tax increase in
human history while millions are suffering in a horrible economy, Obama,
and those who supported Obama-care, that is supported with taxes, will
be having a bad day in the end. No wonder the White House is now
desperately trying to put out that this is not a tax even though they
claimed it was a tax as they were going to the Supreme Court for Oral
arguments!
Next…
17 Reasons To Be EXTREMELY Concerned About The Second Half Of 2012
http://theeconomiccollapseblog.com
17 Reasons To Be EXTREMELY Concerned About The Second Half Of 2012
http://theeconomiccollapseblog.com
Here are a few…
1. The ongoing paralysis in the EU.
2. Increasing bank runs and sophisticated cyber attacks on banks.
3. Obamacare decision that essentially threw a wet blanket on a U.S. economy already in a total mess.
1. The ongoing paralysis in the EU.
2. Increasing bank runs and sophisticated cyber attacks on banks.
3. Obamacare decision that essentially threw a wet blanket on a U.S. economy already in a total mess.
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