Globalisation debt & banking

[gobbledock]

This is who calls the shots!

The usual gang all mentioned below - Rothschilds, Rockerfellers and the Morgans. An 'illuminating' article indeed.

Lord Rothschild takes £130m bet against the euro

Lord Rothschild has taken a near-£130m bet against the euro as fears continue to grow that the single currency will break up.



Lord Rothschild has led RIT since 1988 Photo: AP

By James Quinn
9:55PM BST 18 Aug 2012

The member of the banking dynasty has taken the position through RIT Capital Partners, the £1.9bn investment trust of which he is executive chairman.

The fact that the former investment banker, a senior member of the Rothschild family, has taken such a view will be seen as a further negative for the currency.

The latest omen follows news in The Daily Telegraph late last week that the government of Finland is already preparing for the euro’s break-up.

RIT, which Lord Rothschild hasled since 1988, had a -7pc net short position in terms of principal currency exposures on the euro at the end of July, up from -3pc at the end of January. Given a net asset value of £1.836bn at the end of July, the position is worth £128m.

Sources close to RIT suggested that the position was not a dogmatic negative view.

It is not the first time Lord Rothschild has used currency positions as a form of hedge. RIT significantlyincreased its exposure in sterling after the currency’s decline in 2008, but then scaled back on both the sterling and the euro, anticipating the ensuing recessions in both regions.

Some 53pc of RIT’s assets were in US dollars at the end of July, in part a reflection of its deal to buy a 37pc stake in Rockefeller Financial Services at the end of May.

Lord Rothschild is not alone in seeing value in shorting – or selling down – the euro. At a conference organised by business news channel CNBC in July, Mary Callahan Erdoes, head of JP Morgan Asset Management, said “shorting the euro” when asked for her single best investment idea.

In June, George Soros – the billionaire investor best known in the UK for helping to force sterling out ofthe European Exchange Rate Mechanism in 1992 by betting against the British currency – said that European leaders at that point had a “three-month window” to save the euro.

[crystalballwannabe]

130 million pounds for a Rothschild is very small change.

If anything, I would interpret this as the real money is being placed on it staying together.

If you think the market will go up or down, you will always be able to find experts, traders, and chartist's to confirm your opinion.

As wilco points out, since this post was started a little over 12 months ago, if you had bought a blue chip stock portfolio, you would have done very well.

[gobbledock]

If anything, I would interpret this as the real money is being placed on it staying together.

I will place a wager on that one with you. $50.00 says no Euro will exist, at all, by December 2013

P.S I agree that $130 mil is chump change to the wrinkly old pr#ck. After all, his bloodline is one of only a handful who are the worlds wealth.

[crystalballwannabe]

World War three would start before December 2013 if that were the case.

Devaluing individual currencies leads to Hyperinflation.

No one wants a repeat of World War Two.

So I will accept your bet.

If I win - you pay me 50 Euro's, If I lose, I will pay you 50 Euro

[Ultralights]

world war three? its invading embassies that start those sort of things...

[slamer.]

Dick Smith

7:30 AM Wednesday Aug 22, 2012



Australian businessman Dick Smith is on a mission to change big business


Australian electronics retail legend Dick Smith is on a crusade to change the way big businesses operate and has New Zealand in his sights.

Best known here as the founder of Dick Smith Electronics, the entrepreneur is heading to New Zealand next month with the same message he's been pushing at home.

Pressure on big businesses to provide never-ending profit growth is driving our economies towards a big brick wall, he says.

"Anyone with any common sense knows that perpetual growth in a finite world is not possible.

"I can tell New Zealand, just like Australia or America, perpetual growth in the use of resource and energy is impossible. It's a finite planet."

Smith, who last spoke publically in New Zealand about ten years ago, will address Kiwi business leaders at an event in Queenstown next month called Tomorrow's Business.

He admits his knowledge of the New Zealand business world is limited but says he has "heard complaints about lack of growth".

Article continues below


"At the present time if we don't have perpetual growth our economies will collapse. And so the situation you're leading yourself into in New Zealand is going to be a disaster.

"Both economists and cancer cells believe in perpetual growth. And cancer cells quite often kill the host."

Smith describes himself as strong right-wing capitalist who has done "very well" out of financial growth.

"But I like exciting challenges and I've got grandchildren now and I'm concerned for them.

"None of this will affect me, I've probably got another 20 years in me. I could shut up and say nothing. But I think we should be discussing this."

His firm belief is that we can run economic systems without the need for constant, hard growth. If not, "we're all doomed".

"You can still have growth in efficiencies and quality of life but just not in using more and more resources."

Laws would need to be introduced which forced businesses to operate more sustainably, although stopping economic growth suddenly would cause recession, he says.

"But capitalism is incredibly resilient so if we brought laws in like that over a period of time, it'd just operate around it.

"As long as it was an even playing field, we'd still be successful, we just wouldn't dig more out of the ground and we'd be doing more recycling."

He pointed to a company like Tesltra in Australia, which he says tends to focus more on growing the returns to investors than the shareholder value.

"It's working harder on saving money so it's giving a greater return rather than boosting their consumption."

Smith will be joined in Queenstown by business and economic commentator Rod Oram and Sam Johnson, of Student Volunteer Army fame.

Tomorrow's Business organiser Andrew Martin described Smith as "a dynamo".

"Dick is doing some great stuff and is being recognised globally for his efforts in raising awareness around some of the major issues that will impact economies and society over the coming years.

"He is ahead of the curve on many issues, that's why he has been so successful over the years."

Born Richard Harold Smith, the businessman, aviator, and political activist sold Dick Smith Electronics in 1982 to Woolworths for $20 million.

His status has grown across the Tasman since he started Dick Smith Foods in 1999 and Australian Geographic in 1986.

His food company is marketed as a fight against foreign ownership of Australian food producers. The company sells only foods produced in Australia by Australian-owned companies.

Smith recently prepared a magazine called Forbidden Ideas to go as a paid advertising insert in 2.4 million newspapers across Australia.

He was outraged when parts of the media rejected the magazine and he called on Australians to tweet Rupert Murdoch stating, "Mr Murdoch - tear down this wall. Reverse the Dick Smith censorship".

Business leaders in Australia have become so ruthless that all basic honesty and fairness has gone out of business, he says.

But he also acknowledges that any chairman of a public company who doubted growth would be "crucified".

"I talk to some of these top business leaders in public companies and they say 'Dick, off the record, I agree. What's we're having to do now to ensure profit growth is not what we like to do but there's
no alternative and we don't know how it will end and we're worried'."

He expects a positive reaction to his message from New Zealand business leaders next month.

"I'm just telling facts. I'm not saying we should stop growth immediately or that we haven't benefited from growth."

Tomorrow's Business is being held Friday September 14.

Profits from the event go toward a Queenstown Lakes' community engagement initiative Shaping Our Future.

[catch18]

In a way he is right.....

But who wants to wait for a business that is not making money - no one.

People want growth returns and they will look offshore to find them if they have too.

Having said that - the Australian Population will nearly double by 2050 so there is plenty of default growth coming anyway.

[crystalballwannabe]

Don't rush into anything atm.

Patterns, codes, formula's etc DONT WORK OVER THE LONG TERM.

The market requires a certain emotional discipline.

Up can just as easily turn into down.

Booms can turn into busts.

Be sensible with your hard earned cash.

[gobbledock]

Tick tock

Keep your eyes peeled.........The house of cards is buckling. And doesn't 'Morgan' own the biggest chunk of QF???

Whispers on Wall Street: Major Financial House Is Going to Implode… Could It Be Morgan Stanley?

Mac Slavo
August 27th, 2012

Before the collapse of mega behemoth Bear Stearns there were rumors that a major Wall Street firm had bitten off more than it could chew. Mainstream media, for the most part, completely ignored the rumors, with some financial experts like CNBC’s premier Wall Street insider Jim Cramer literally screaming at viewers on the March 11, 2008 airing of Mad Money in which he vehemently denied any problems saying that the company was “fine.”

Just a few days later Bear Stearns collapsed into heap of rubble and was offered up for sale at just $2 a share to JP Morgan Chase. This incident is widely believed to have been the catalyst that kicked off what we now refer
to as the sub prime mortgage collapse.
In the last few months we’ve started receiving signals similar to what contrarian observers were seeing prior to the Bear Stearns collapse.
Big money flows out of financial stocks by key financiers like George Soros and John Paulson were reported just last week and tens of billions of dollars have been withdrawn from the European banking system since Spring. The government for its part, has taken steps to lock down the banking system so that not only can customers no longer withdraw funds from money market accounts in the middle of a panic, but a recent federal court case set a new precedent that has essentially given the go ahead for banks and investment firms to use segregated customer deposit accounts to engage in highly risky trading strategies without the threat of ever being prosecuted.
Now, a report from analysis firm Beacon Equity Research suggests that there is an unusually high amount of chatter on Wall Street surrounding the possibility of another major financial collapse in the making. When the Department of Homeland Security or other intelligence services hear chatter they often raise the terror alert level, deploy federal SWAT teams and go on complete lock-down.

Thus, we should consider this latest piece of intel from those with their fingers on the pulse of Wall Street as a potential game changer:
With the stock price of Morgan Stanley (NYSE: MS) inches from its Armageddon lows of Oct. 2008, whispers of the imminent overnight collapse of this U.S. broker-dealer begin to surface. Client funds, again, are at risk.

“I’m hearing rumors that another major financial house is going to implode,” says TruNewshost Rick Wiles. In fact, the name I’ve been given is Morgan Stanley . . .
“It’s going to be put on the sacrificial alter by the financial elite.”
Beyond the evidence of a teetering stock price—Morgan Stanley’s troubles may never go away—leading to bankruptcy, if traders can glean anything
from the financial activities of front-running insider George Soros, the man who warned in Jun. 2010 that the global financial crisis has entered “act
II.”…

Adding to the speculation of a Morgan Stanley collapse, Bloomberg coincidentally pens an article on Aug. 23—the following day of the TruNews broadcast—in which the author Bradley Keoun recounts the dark days of Morgan Stanley at the height of act I of the financial crisis in 2008.
“At the peak of Morgan Stanley’s Fed borrowings, on Sept. 29, 2008, the firm reported that liquidity was ‘strong,’ without mentioning how dependent its cash stores had become on the government lifeline. . .” states Keoun.…
But here’s where strong advice from Trends Research Institute founder Gerald Celente and former commodities broker Ann Barnhardt should be heeded. Both consumer-friendly analysts implore investors and savers, alike, to withdraw from the financial system, warning that allocated brokerage
accounts are not truly allocated.…
Regulators were asleep at the switch in the cases of MF Global and PFG Best, both filing bankruptcy post 2008, taking customer funds with them to the financial grave. Why not Morgan Stanley?
“They don’t give you the information to be able to decipher whether they have changed anything,” adds Hurwich.…
Why an establishment cheerleader such as Michael Bloomberg would allow an article which serves to remind investors of Morgan Stanley’s financial problems at this time may lend some credence to Rick Wile’s sources, who hear chatter about the impending doom of Morgan Stanley.…
The timing of the Bloomberg article is no coincidence. Michael Bloomberg is only doing his part for the global banking cartel by tipping off that Morgan Stanley is ready for the “sacrificial alter.” Get your money
out.

Source: Beacon Equity
Via: Woodpile Report, Steve Quayle

We can make predictions or forecasts based on rumors and news,
and often times we’ll be berated for acting to protect ourselves based on this
information. Often, even rumors and chatter have been responsible for driving a particular stock or market up or down, so the very news itself, whether true or not, may set the ball in motion.
But, the fact of the matter is that neither the SEC nor Ben Bernanke nor Tim Geithner nor the White House nor mainstream financial pundits nor Wall Street insiders will ever tell us ahead of time that billions of dollars of our wealth is about to be wiped out.We will only find out after the fact.
You’ve now heard the rumor. You’ve been following the news. The
decision is in your hands.

[jibba_jabba]

If your going to trade, just remember, that HFT (High frquency trading) is basically running at certain random times and you can loose your shirt if you over leverage. The last thing i will be doing is investing in any financial shares..... especially now that the true extent of corruption in the fiscal sector is plain to those with a heart beat and 60IQ.

Speaking of leverage..... people here stating that Rothchilds etc putting in $130 bets on are forgetting the fact that this is leveraged money.... that $130m can possibly be leveraged up to 400 times..... so, chump change my arse when the price moves...... this is more likely a hedge bet, but still says that the threat is very, very real.....

If the euro breaks up, gold will shoot up...... but the down side is that Paper gold, may do well briefly but if any fiscal collapse happens with a "too big to fail" then you could see a big sell off of assets (gold being one of them) to raise capital...... also, leveraged paper gold very well could declin while physical goes up due to the fact that margin calls remove speculators out of the market allowing only the real players with physical to back up the bets in.....

Just my 2 cents on the oil thing....... read in a middle eastern paper here about LNG investment of 20bn dollars that shell have been making and, funnily enough it stated in the artical, much to my surprise that Shell only required a costing of $6 per barrel for extraction and the current price is 70 USD p/b!!!! they must think were f*cking stupid to not see that one out....... I just laughed and though if people in western countries read this and thought about the fuel price they may be less inclined to be apathetic!!!

In saying this, there are many little articals here that report about Saudi commencing drilling operations in deeper water and to other areas in the north of the country....... WHY would they do this..... for one they admitted they overstated there oil reserves by 40% in 2010/11 and nobody blinked an eye! secondly you would have to think that if the low hanging fruit has been picked or found then "Reserves" not viable at a low price all of a sudden become viable to add to the books, still equates to a loss of net energy once it is refinned etc..... so you get higher prices because traders know this kind of thing......... we will still have oil for at leats another 20 - 30 years although price spikes due suply/high demand issues will be the new norm.........

maybe the people relying on the "scientists" to figure it all out better put there "tin foil hats" of ignorance on. Try making a rubber tyre out of nuclear energy!

[Jibba Jabba]

How many Jibba Jabba's are there?

Quit your Jibba Jabba you Fool!

[Foie gras]

What sort of "Flation" is coming?

Inflation

Inflation is the easiest symptom for all to agree on. In spite of the official rate of inflation, the data leading to these rates are skewed. Items such as food and fuel (the foremost essentials for most everyone) have been removed from some calculations, rendering the results meaningless. Studies that include these data report figures are roughly three times more than those without.

Hyperinflation

Historically, whenever a country reaches the level of indebtedness that now exists in Europe and, particularly, the US, hyperinflation becomes almost a certainty. It can correctly be argued that, as long as the government does not continue printing money at such a rapid pace, hyperinflation may be avoided. Trouble is, once a government does get to the present state, they almost always continue printing money.

The remaining question is when it may kick in. Governments can often delay the inevitable by continuing the same borrowing that is the root cause of the problem.

Due to continued monetary injections (such as the US's Quantitative Easing), any projection for a date for the onset of hyperinflation, in order to be meaningful, should be for the outside date of the onset. Whilst a prediction of the earliest possible date is likely to be inaccurate, the outside date proves far more useful.

John Williams, of Shadow Government Statistics, currently predicts 2014 as an outside date. His reasoning is as succinct as it is well-taken:

Why 2014? While inflation is far from being out of control at the moment, the U.S. dollar is relatively strong, due to the euro crisis, that can change rapidly as global markets and domestic holders of the U.S. currency begin to flee the dollar, along with dumping dollar-denominated assets. Fiscal, systemic-solvency and economic conditions are deteriorating markedly, with a confluence of unstable circumstances likely to come to a head within the next year or so, placing extremely heavy selling pressure on the U.S. dollar and, before 2014, setting the stage for hyperinflation.

Deflation

But what of the deflationists? There can be no question that some of the most reliable economic forecasters in the world today speak regularly of deflation. More confusingly, they often sprinkle their sentences with predictions of inflation, hyperinflation and deflation. So, which is it? Have we returned to the question posed above, "Is the predictability of whether there will be inflation, hyperinflation or deflation as impossible as deciding whether it will rain in London on Christmas day?"

In a word, "no." For anyone seeking to understand the maze that is economic study, a principle often overlooked (due to the fact that it is rarely stated) is that inflation, hyperinflation and deflation can follow one another in the same catastrophic economic period. In fact, they can exist at the same time.

If the reader finds himself scratching his head at this concept, he is in good company. Even the very best of forecasters do the same. Whilst one may be regarded as a hyperinflationist and another may be accurately described as a deflationist, each one is fully aware that the coming period will contain elements of both. It's just that each tends to focus his study more on one aspect of the Greater Depression than the other.

[gobbledock]

Contagion

No wonder they have gold dispensing machines on the street corners, literally!

Global crisis moves East as China suffers rapid downturn - Telegraph

Tick tock

[LT Selfridge]

The Chess Board Option

You know the feeling - you're playing chess, you've lost your queen. All you have to look forward to is the remorseless pursuit and capture of all your pieces. That's when you "accidentally" knock over the board.

The Chess Board

[gobbledock]

Lets rack up another another 400 billion dollars worth of debt

Fools....

US national debt hits $16 trillion as Republicans blast Obama's handling of economy - Yahoo! News

And

Federal debt $417 billion below the debt ceiling - Sep. 5, 2012

And
U.S. debt tops $16 trillion, closes in on $16.4 trillion debt ceiling | Edmonton Journal

Tick tock

[LT Selfridge]

Chess Board Tipping

Vice Chairman of the Joint Chiefs of Staff visiting Israel Winnefeld

and Canada closes its embassy Canadian Embassy Closure

[TheWholeEnchilada]

Who is the Superclass? David Rothkopf takes a swing in 2007.

[TheWholeEnchilada]

Australian former AIG insider warns of more collateral damage

Exclusive
Jonathan Shapiro

James Aitken spent four years at the ill-fated New York-based insurer AIG working under a character Vanity Fair labelled The Man Who Crashed The World. This experience at the epicentre of the global banking crisis gave him profound insight into the complex plumbing that underpins world markets.


Aitken, the elder brother of Australian stockbrokers Charlie and Angus, fears that once again all is not functioning well beneath the surface. He should know. Since he left AIG, he’s built a global reputation advising the world’s largest investors on the risks in the financial system.


Today he warns clients of a potential collision between the actions of central banks and regulators as the former boost their ailing economies by draining the world of key assets and the latter demand banks stockpile these very same assets to demonstrate their solvency.


This threatens instability as banks search for good assets outside the regulated system in a process known as “collateral transformation”, a twist on the collateral debt obligations or CDOs that helped produce the 2008 global financial crisis.


“The efforts to understand all the moving parts of the financial system continue but the facts are still trying to catch up with all the innovation over the last 20 years,” Aitken told the Weekend Financial Review from London.


“Some of it is good, a lot of it is deeply unhelpful and unsound.”
In Australia, few ring the sharemarket bell harder than Charlie and Angus Aitken. But James, the oldest of the Aitken boys, has an altogether different perspective on the financial world.


He headed to London 13½ years ago. In 2002 he landed a role at global insurer AIG’s Financial Products Group, run by a 47-year- old New Yorker, Joe Cassano, whose name would become infamous in financial markets folklore.


AIG Financial Products made money by insuring subprime bonds, writing billions of dollars of insurance without so much as a sliver of capital set aside to protect against losses. When they arrived, it triggered a destructive wave of margin calls and a scramble for assets among banks trading with AIG.


The $US85 billion 11th-hour tax-payer bailout was required to plug the hole that Cassano’s AIG FP had created.


Aitken wasn’t around to see the implosion. He and Cassano parted ways in 2006, but his four years at the unit left him with an in-depth grasp of the inner workings of the credit markets, and the role of collateral (assets pledged as security) in the provision of credit to the economy.


By September 2006 he was working for investment bank UBS, where his job involved explaining to the world’s largest investors the risks of something he knew a lot about – subprime. His ability to untangle the complexities of the financial system, and its potential to implode, earned him a loyal following among the institutional investor community.
When it did implode, the bond between banker and client solidified.


By 2008 his Rolodex had expanded to include not only the business cards of the world’s largest investors but also the powerful policymakers battling to restore faith and functionality to financial markets. He decided to go it alone and established a private consultancy – Aitken Advisors LLP, the one-man show that he runs today from the London suburb of Wimbledon.
“I want to help people be less wrong,” he says. “If we get everything right that is fantastic, but in a complex world, my aim is to be less wrong about key issues.

“It’s a work in progress and, with an ever increasing number of central banks seemingly embarking on QE forever, one has to be very humble, and very nimble.”

His communications to clients, who pay top dollar for his insights, come in the form of a daily pdf titled Notes From a Small Island.
Aitken keeps a low public profile. His business has no website, and he has not appeared in the media. He says this serves him well. Photos of Aitken are hard to come by and he expressed surprise at being tracked down by the Weekend AFR. But on this occasion he was prepared to share his views on the global economy as public policy and financial markets collide more violently than ever.


“Policymakers move to a slower drumbeat than investors and there is often a lag between something going wrong in the financial system and the response,” he says.

But as financial markets move deeper into the realms of the political economy, predicting market price moves has become, he says, an exercise in futility.


“What all investors, and leveraged investors in particular, have learned since the second quarter of 2009 is that it is all very well to fulminate over central bank policy, and to criticise and occasionally to excoriate [US Federal Reserve chairman Ben] Bernanke in particular,” says Aitken. “But the last thing you want to do is put on a trade where the other side of your position is a central bank with an open-ended balance sheet.”
Whether key policymakers like Bernanke actually know what they are doing is not really the point for investors. “You have to understand why he is doing what he is doing and how it affects asset prices,” Aitken says. “The other thing is trying to work out what policymakers might not know about the workings of the financial system.”


For instance, Aitken warns that the initiative of the Group of Twenty (G20) nations to migrate much of the $US500 trillion global derivatives trading market to central clearing houses could “spark another wave of involuntary deleveraging across the system”.


Quality assets, or collateral, are poorly understood yet vital financing for global banks, which pledge them for short-term financing. As their supply shrinks, experts have warned that the ability of banks to finance themselves and to trade diminishes. The rapid shrinking of the universe of quality bonds, as investors recognise that government bonds are not as safe as once assumed, further reduces the amount of available collateral.

The International Monetary Fund estimates the pool of safe haven assets will shrink by $US9 trillion to $US74 trillion by 2016 while new banking and trading requirements will require a further $US4 trillion of safe assets to be posted. Adding to this is a concern that, as central banks embark on open-ended bond-buying progams, they are draining the world of trillions of dollars of quality assets at the exactly the time regulators are requiring more of them be held by lenders.
In response to the shortage of assets, the world’s largest custodians of investment assets, such as BNY Mellon and State Street see an opportunity to source safe assets through securities lending.


Through a process known as “collateral transformation”, banks could pledge riskier assets such as equities and corporate bonds to existing owners of government bonds. This allows banks with riskier assets to obtain the safer assets required to be accepted by central banks and clearing houses.


The rapid change in the supply and demand of the assets that underpin the global financial system could have immense consequences.


On this matter, Aitken singles out the Reserve Bank of Australia as ahead of the game. The RBA is the first central bank to publish work on the impact of a collateral crunch on the nation’s monetary system in a paper published earlier this month titled Financial Regulation and Australian Dollar Liquid Assets.


Australia faces a particularly acute shortage, given the low stock of government bonds, of which three-quarters are held offshore.
The RBA has created a backstop lending facility to deal with the collateral shortage. But it estimates that $35 billion of high quality bonds, or 16 per cent of the total supply of government bonds, will be required to switch bank trades to a central clearing house.
The impact on of this shortfall of assets was further expanded on by RBA assistant governor Guy Debelle in a speech earlier this week that demonstrates the bank’s ability to delve into the dangers the global financial fix may throw up. Aitken describes Debelle as “one of the world’s outstanding central bankers” for his “technical expertise”.


While Aitken praises the RBA (“it’s a close call between them and the Bank of Canada for the title of world’s best central bank”), his views on the prospects of the Chinese economy upon which Australia so relies appear to diverge from that of the RBA and some of his family.


“I just sense that, as the major policy announcements from the Fed and [European Central Bank] recede into the rear-view mirror, the market is going to reassess its views on Chinese growth and how the Chinese financial system works,” he says. “If bank interest rate deregulation continues – forcing banks to compete for deposits among themselves and with other sectors – the Chinese banks will have to make sharper, more informed choices about who they lend to and at what price.”
To Aitken, “it just doesn’t feel” that China is growing at 7 per cent to 8 per cent annually and, despite the apparent scope of authorities to respond, his doubts persist.



What does that mean for Australia, which has grown prosperous on the exports of iron ore and coal required for China’s industrialisation?
“The sad fact is the only way to find out what must still be considered a hypothetical structural slowdown in Chinese growth means for Australia is when it happens,” says Aitken.
The consequence is that the RBA could cut the cash rate to levels that “strike many and perhaps the RBA itself as extraordinarily low, in order to ensure that the monetary transmission mechanism is not impaired”.


“Australia has enjoyed uninterrupted growth for over two decades and until recently has benefited from an extremely well run economy,” he says. “Betting against Australian banks, for example, or the economy as a whole has been foolish – but one wonders what excesses have been built up over the past two decades and what lies out there.


“The fact is that we don’t know yet. But we must have confidence in the likes of Debelle to get up to speed.”
The Australian Financial Review

Jonathan Shapiro

Australian Financial Review 22 September 2012

[Cost Index]

The End Game Nears...

Great catch there TWE. Will a larger amount of Australian government bonds be offered as a result? What would happen to yields etc?

Economic Effects Of QE3 Will Soon Enter The Markets
September 20, 2012, at 6:24 pm

My Dear Extended Family,

Everyone has an opinion of QE3. Almost all are wrong.

What has taken place here in its size, and in an almost simultaneous international unified approach has no precedent in economic history.

QE1 and QE2 were not failures. Do you have any idea what the world would have looked like if every major bank in the Western financial world broke?

It is easy to be a naysayer and say let the banks go broke, but you have no idea how hard it would have hit you and yours and maybe gold and silver. This is not to say that Debt Monetization, which QE represents, is correct, but it was the only tool available to central banks that would create infinite cash for the Fed and Treasury to use in a totally discretionary manner. Governments, because of the size of their debt, were incapable of applying the better tool for reviving economic activity, which is fiscal stimulation. One thing for certain is the infrastructure of the USA is collapsing in front of your eyes. Dar es Salaam airport looks better on approach than JFK. Dubai is beyond description. Roads from the Beijing airport are brand new. The USA infrastructure is disgraceful for a major power. New York City roads look like "Mad Max and the Day After." However when you are the major debtor nation fiscal stimulation is simply not possible. It will not happen because it cannot happen.

Please stop listening to those that tell you QE will have no effect. They are "Ignorant to Infinity." QE3 is going to have an unprecedented effect, as it is now simultaneous and global in scope.

Please make note of all the governments that screamed at the Fed for the use of QE1 and QE2 that are now applying QE to infinity.

There will be no QE4 because QE3 is going to go on continually with a month or two off now and then. Please recognize that it is hard for markets to discount what they do not believe in and therefore by definition do not anticipate.

Know within 90 days the economic effects of QE3 will be entering markets for money and therefore the markets for gold, silver, and most certainly the dollar.

Gold is going to at least $3500. Silver will certainly perform well also. The real support for the US dollar is .7200 on the USDX and it will trade there. The euro will trade at $1.35 and $1.40.

Ron McEwen of MUX fame said it correctly: “Patience is bitter; but the fruit is sweet!”

Respectfully,
Jim

and this..

QE3 To Infinity–The Final End Game
September 21, 2012, at 2:30 pm

My Dear Extended Family,

The final end game of QE3 to infinity, with a month or two off from time to time, will be a product of the long term viability of the Federal Reserve Balance sheet and the impact on the dollar there from.

Let’s review what has transpired and begin to look at what will happen:

1. OTC derivative manufacturers and distributors sold fraudulent paper to almost every entity as clients of the Western world financial system. Inherently the OTC derivatives manufacturers and distributors had part of the transaction on their books. No problem as long as the entire scam was a "Daisy Chain," a connected set of transactions that has the appearance of risk but when all netted out equals almost zero.

2. Until Lehman was flushed, and flushed it was, most all OTC derivatives could have been netted to zero in a derivative resurrection bank. Losers would have rejoiced and winners would have declared war. However when Lehman was forced into bankruptcy it broke the "Daisy Chain" (a chain of near risk-less transactions when netted) of the OTC derivatives scam. At this point winners had won huge and loser had lost huge and there was no longer a means of repair to the quadrillion dollar scam. The problem has no practical solution other than transferring all losing paper to the balance sheet of the Federal Reserve where then it was anticipated no non-government "mark to market" audit would ever occur. It was the perfect hole to stick the junk into.

3. The size of the OTC derivative market stood at one quadrillion one hundred and forty four trillion as reported by the Bank of International Settlement, the counter internationally.

4. The Bank of international Settlements, seeing this outrageous number, changed their computer method of valuation to maturity assuming no failures and reduced the size of OTC derivatives of all kinds to a more acceptable but still huge number of $700 trillion notional value.

5. In the first and second round of QE the Federal reserve purchased OTC derivatives including the variety called securitized mortgage debt to remove them from the balance sheets of the Western world financial system, thereby improving the Western world’s financial institutions balance sheet and preventing an international industry wide bankruptcy. That means the Federal Reserve has impaired its balance sheet in order to repair some of the balance sheet integrity of the Western world financial system. The amount they have purchased is significant, but not compared to total outstanding above more than one quadrillion dollars.

6. The reason for QE to infinity, QE3, is the failure of business activity in the Western world to pick up with early huge monetary stimulation so as to repair the balance sheet of the Western financial world financial system. The unseen crisis is the hidden weakness of the Western world financial system thanks to FASB (The gatekeepers of world accounting) which allows financial institutions internationally to hide their losses by valuing their paper at whatever the bank wants it to be with no reference to seek a market value, primarily because there is none to seek.

7. The crisis not seen by Fed observers is the true balance sheet condition of the loses on the trillions of dollar of worth-less paper fraudulent paper because numbers are given but no independent mark to market audit has been or is likely performed.

8. As QE3 to infinity moves ahead, the balance sheet of the Federal Reserve continues to acquire worthless paper in exchange for dollars. Junk moved onto the balance sheet of the US Federal Reserve as the common share of the USA, the US dollar, continues to expand exponentially.

9. The end game problem is an extended recessionary business conditions going into 2015 to 2017 wherein the supply of dollars continually expands, the US Federal Deficit grows, US state deficit spending continues to grow and the quality of the Federal Reserve balance sheet proceeds to deteriorate further.

Therefore the end game is the perception of the weakness of the lender of last resort, the Federal Reserve’s Balance sheet, as it impacts confidence the US dollar and US interest rates.

Now you know what brings about the end game.

In the future I will do small simple articles dealing with the impact on markets of a to be Bankrupt Central Bank, the US Federal Reserve. The end game could come sooner, but only if there was an independent "mark to market" audit of the Federal Reserve inventory of worthless paper which remains unlikely no matter who wins the election in November.

Those of you invested in gold and silver vehicles of all kinds (with the exception of ETFs and futures) rest well this weekend. $3500 will easily be a place gold trades. The Canadian dollar and blasphemy to the euro snobs, the Swiss franc, remain go to vehicles for cash positions. Yes cash because you to not have to pay to own them as you do with a sovereign paper with negative interest.

Your watchman,
Jim

With respect to Canada, does this, by transference, imply hot money will flow into Australia as well? Australian bonds, property? Will Steve Keen be proven wrong and the private debt bubble continue to inflate as a result?

[TheWholeEnchilada]

With respect to Canada, does this, by transference, imply hot money will flow into Australia as well? Australian bonds, property? Will Steve Keen be proven wrong and the private debt bubble continue to inflate as a result?

CI, interesting questions, I'll answer with "I don't know" and another quote:

First, here is our rule of thumb to determine if someone who talks about money, inflation or monetary policy has even a vague clue of what they are talking about: do a text search for the words: repo, shadow banking, collateral, collateral-chains, rehypothecation, or deposit-free money creation. If not one of those terms appears anywhere, feel free to toss the reading material right into the trash.

Fed's John Williams Opens Mouth, Proves He Has No Clue About Modern Money Creation.

As the AFR article I quoted in two posts up, it is all to do with the Shadow Banking system, which has its heart 4 transformations: Credit risk, maturity, liquidity & a new one to me "Collateral" (as per AFR article). An example of one of these "transformations" is a CDO - where a pile of say B grade securitised mortgages were bundled together and tranches or slices of various rating were produced - including AAA (on the basis that the AAA slice would get its interest and capital ahead of all other slices, and mathematical modeling showed that the AAA slice would be extremely unlikely to ever default. We all know how that one worked out!)

Currently the shadow banking system is deleveraging, and governments and CB's and trying to lever up to compensate, from On The Verge Of A Historic Inversion In Shadow Banking





Its now all about collateral - and this is running out. As I quoted above, traditional economics no longer applies Keynsian, Post Keynsian (Steve Keen) and Austrian, its all about trying to figure out the shadow banking system to predict what may happen next. The truth is we are way off the map.
check out this map of the SBS (its too big to post here as an image)