The End Of All Crossroads

Where the TAXI makes a stop, to ponder upon which road mayhap be true

Category: central banks

20 Signs That The U.S. Economy Is Heading For Big Trouble In The Months Ahead

20 Signs That The U.S. Economy Is Heading For Big Trouble In The Months Ahead.

 

#1 Freight shipment volumes have hit their lowest level in two years, and freight expenditures have gone negative for the first time since the last recession.

#2 The average price of a gallon of gasoline has risen by more than 50 cents over the past two months. This is making things tougher on our economy, because nearly every form of economic activity involves moving people or goods around.

#3 Reader’s Digest, once one of the most popular magazines in the world, has filed for bankruptcy.

#4 Atlantic City’s newest casino, Revel, has just filed for bankruptcy. It had been hoped that Revel would help lead a turnaround for Atlantic City.

#5 A state-appointed review board has determined that there is “no satisfactory plan” to solve Detroit’s financial emergency, and many believe that bankruptcy is imminent. If Detroit does declare bankruptcy, it will be the largest municipal bankruptcy in U.S. history.

#6 David Gallagher, the CEO of Town Sports International, recently said that his company is struggling right now because consumers simply do not have as much disposable income anymore…

“As we moved into January membership trends were tracking to expectations in the first half of the month, but fell off track and did not meet our expectations in the second half of the month. We believe the driver of this was the rapid decline in consumer sentiment that has been reported and is connected to the reduction in net pay consumers earn given the changes in tax rates that went into effect in January.“

#7 According to the Conference Board, consumer confidence in the U.S. has hit its lowest level in more than a year.

#8 Sales of the Apple iPhone have been slower than projected, and as a result Chinese manufacturing giant FoxConn has instituted a hiring freeze. The following is from a CNET report that was posted on Wednesday…

The Financial Times noted that it was the first time since a 2009 downturn that the company opted to halt hiring in all of its facilities across the country. The publication talked to multiple recruiters.

The actions taken by Foxconn fuel the concern over the perceived weakened demand for the iPhone 5 and slumping sentiment around Apple in general, with production activity a leading indicator of interest in the product.

#9 In 2012, global cell phone sales posted their first decline since the end of the last recession.

#10 We appear to be in the midst of a “retail apocalypse“. It is being projected that Sears, J.C. Penney, Best Buy and RadioShack will also close hundreds of stores by the end of 2013.

#11 An internal memo authored by a Wal-Mart executive that was recently leaked to the press said that February sales were a “total disaster” and that the beginning of February was the “worst start to a month I have seen in my ~7 years with the company.”

#12 If Congress does not do anything and “sequestration” goes into effect on March 1st, the Pentagon says that approximately 800,000 civilian employees will be facing mandatory furloughs.

#13 Barack Obama is admitting that the “sequester” could have a crippling impact on the U.S. economy. The following is from a recentCNBC article…

Obama cautioned that if the $85 billion in immediate cuts — known as the sequester — occur, the full range of government would feel the effects. Among those he listed: furloughed FBI agents, reductions in spending for communities to pay police and fire personnel and teachers, and decreased ability to respond to threats around the world.

He said the consequences would be felt across the economy.

“People will lose their jobs,” he said. “The unemployment rate might tick up again.”

#14 If the “sequester” is allowed to go into effect, the CBO is projecting that it will cause U.S. GDP growth to go down by at least 0.6 percent and that it will “reduce job growth by 750,000 jobs“.

#15 According to a recent Gallup survey, 65 percent of all Americans believe that 2013 will be a year of “economic difficulty“, and 50 percent of all Americans believe that the “best days” of America are now in the past.

#16 U.S. GDP actually contracted at an annual rate of 0.1 percentduring the fourth quarter of 2012. This was the first GDP contraction that the official numbers have shown in more than three years.

#17 For the entire year of 2012, U.S. GDP growth was only about 1.5 percent. According to Art Cashin, every time GDP growth has fallen this low for an entire year, the U.S. economy has always ended up going into a recession.

#18 The global economy overall is really starting to slow down…

The world’s richest countries saw their economies contract for the first time in almost four years during the final three months of 2012, the Organisation for Economic Co-operation and Development said.

The Paris-based thinktank said gross domestic product across its 34 member states fell by 0.2% – breaking a period of rising activity stretching back to a 2.3% slump in output in the first quarter of 2009.

All the major economies of the OECD – the US, Japan, Germany, France, Italy and the UK – have already reported falls in output at the end of 2012, with the thinktank noting that the steepest declines had been seen in the European Union, where GDP fell by 0.5%. Canada is the only member of the G7 currently on course to register an increase in national output.

#19 Corporate insiders are dumping enormous amounts of stockright now. Do they know something that we don’t?

#20 Even some of the biggest names on Wall Street are warning that we are heading for an economic collapse. For example, Seth Klarman, one of the most respected investors on Wall Street, said in his year-end letter that the collapse of the U.S. financial system could happen at any time…

 

(continues – check source at the top)

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Our Collapsing Economy and Currency

“Is the “fiscal cliff” real or just another hoax? The answer is that the fiscal cliff is real, but it is a result, not a cause. The hoax is the way the fiscal cliff is being used.”

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December 1, 2012

The fiscal cliff is the result of the inability to close the federal budget deficit. The budget deficit cannot be closed because large numbers of US middle class jobs and the GDP and tax base associated with them have been moved offshore, thus reducing federal revenues. The fiscal cliff cannot be closed because of the unfunded liabilities of eleven years of US-initiated wars against a half dozen Muslim countries–wars that have benefitted only the profits of the military/security complex and the territorial ambitions of Israel. The budget deficit cannot be closed, because economic policy is focused only on saving banks that wrongful financial deregulation allowed to speculate, to merge, and to become too big to fail, thus requiring public subsidies that vastly dwarf the totality of US welfare spending.

The hoax is the propaganda that the fiscal cliff can be avoided by reneging on promised Social Security and Medicare benefits that people have paid for with the payroll tax and by cutting back all aspects of the social safety net from food stamps to unemployment benefits to Medicaid, to housing subsidies. The right-wing has been trying to get rid of the social safety net ever since Franklin D. Roosevelt constructed it, out of fear or compassion or both, during the Great Depression.

Washington’s response to the fiscal cliff is austerity: spending cuts and tax increases. The Republicans say they will vote for the Democrats’ tax increases if the Democrats vote for the Republican’s assault on the social safety net. What bipartisan compromise means is a double-barreled dose of austerity.

Ever since John Maynard Keynes, economists have understood that tax increases and spending cuts suppress, not stimulate, economic activity. This is especially the case in an economy such as the American one, which is driven by consumer spending. When spending declines, so does the economy. When the economy declines, the budget deficit rises.

This is especially the case when an economy is weak and already in decline. A declining economy means less sales, less employment, less tax revenues. This works against the effort to close the federal budget deficit with austerity measures. Instead of strengthening the economy, the austerity measures weaken it further. To cut unemployment benefits and food stamps when unemployment is high or rising would be to provoke social and political instability.

America: The Food Stamp Nation

Bread Lines of the Modern Era– The Great Recession
IF all EBT recipients shopped at only Walmart Super Centers for ALL their SNAP benefits, then this is how the Bread Line would look each month– 14,588 people.
There are 3051 Walmart Super Centers in USA and 44,510,598 participants in SNAP (2011), making the average SNAP line at each Walmart at 14,588 people.
The Modern Era’s Bread Lines are not visible because the business is handled discreetly through EBT Cards.
According to this Food Stamps report pg 16-17, Walmart receives half of all SNAP dollars in Oklahoma.
Walmart is the largest retailer in America.
Short Facts:
47% of Food Stamp participants are children.
78.6% of all SNAP participants are in metropolitan areas.
93.2% of all SNAP benefits go to US citizens.
Only 4% are self-employed.
(CLICK IMAGE FOR SOURCEPAGE)

Some economists, such as Robert Barro at Harvard University, claim that stimulative measures, the opposite of austerity, don’t work, because consumers anticipate the higher taxes that will be needed to cover the budget deficit and, therefore, reduce their spending and increase their saving in order to be able to pay the anticipated higher taxes.

In other words, the Keynesian effort to stimulate spending causes consumers to reduce their spending. I don’t know of any empirical evidence for this claim.

Regardless, the situation on the ground at the present time is that for the majority of people, incomes are stretched to the limit and beyond. Many cannot pay their bills, their mortgages, their car payments, their student loans. They are drowning in debt, and there is nothing that they can cut back in order to save money with which to pay higher taxes.

Many commentators are complaining that Congress will refuse to face the difficult issues and kick the can down the road, leaving the fiscal cliff looming. This would probably be the best outcome. As the fiscal cliff is a result, not a cause, to focus on the fiscal cliff is to focus on the symptoms rather than the disease.

The US economy has two serious diseases, and neither one is too much welfare spending.

One disease is the offshoring of US middle class jobs, both manufacturing jobs and professional service jobs such as engineering, research, design, and information technology, jobs that formerly were filled by US university graduates, but which today are sent abroad or are filled by foreigners brought in on H-1B work visas at two-thirds of the salary.

The other disease is the deregulation, especially the financial deregulation, that caused the ongoing financial crisis and created banks too big to fail, which has prevented capitalism from working and closing down insolvent corporations.

The Federal Reserve’s policy is focused on saving the banks, not on saving the economy. The Federal Reserve is purchasing not only new Treasury bonds issued to finance the more than one trillion dollar annual federal deficit but also the banks’ underwater financial instruments, taking them off the banks’ books and putting them on the Federal Reserve’s books.

Normally, debt monetization of this amount results in rising inflation, but the money that the Federal Reserve is creating in its attempt to manage the public debt and the banks’ private debt is hung up in the banking system as excess reserves and is not finding its way into the economy. The banks are too busted to lend, and consumers are too indebted to borrow.

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However, the debt monetization poses a second threat that is capable of biting the US economy and consumer living standards very hard. Foreign central banks, foreign investors in US stocks and financial instruments, and Americans themselves observing the Federal Reserve’s continuous monetization of US debt cannot avoid concern about the dollar’s value as the supply of ever more dollars continues to pour out of the Federal Reserve.

Already there is evidence of central banks and individuals moving out of dollars into gold and silver bullion and into other currencies of countries that are not hemorrhaging debt and money. According to John Williams of Shadowstats.com, the US dollar as a percentage of global holdings of reserve assets has declined from 36.6% in 2006 to 28.7% in 2012. Gold has increased from 10.5% to 12.8% and other foreign currencies except the euro increased from 38.4% to 44.4%.

Russia, China, Brazil, India, and South Africa intend to conduct trade among themselves in their own currencies without use of the dollar as reserve currency. The EU countries conduct their trade with one another in euros, and although not reported in the US media, Asian countries are discussing a new common currency for trade among themselves.

The world is abandoning the use of the dollar to settle international accounts, and the demand for dollars is falling as the Federal Reserve increases the supply of dollars.

This means that the price of the dollar is threatened.

Concern over the dollar means concern over dollar-denominated financial instruments such as stocks and bonds. The Chinese hold some $2 trillion in US financial instruments. The Japanese hold about $1 trillion in US Treasuries. The Saudis and the oil emirates also hold large quantities of US dollar financial instruments. At some point the move away from the dollar also means a move away from US financial instruments. The dumping of US stocks and bonds would destabilize US financial markets and wipe out the remainder of US wealth.

"Federal

As I have previously written, the Federal Reserve can create new money with which to purchase the dumped financial instruments, thus maintaining their prices. But the Federal Reserve cannot print gold or foreign currencies with which to buy up the dollars that foreigners are paid for their US stocks and bonds. When the dollars in turn are dumped, the exchange value of the dollar will collapse, and US inflation will explode.

The onset of hyperinflation can be as sudden as the collapse of a currency’s exchange value.

The real crisis facing the US is the impending collapse of the US dollar’s foreign exchange value. The US dollar’s value in relation to silver and gold has already collapsed. In the past ten years, gold’s price in US dollars has increased from $250 per ounce to $1,750 per ounce, an increase of $1,500. Silver’s price has risen from $4 per ounce to $34 per ounce. These price rises are not due to a sudden scarcity of gold and silver, but to a flight from the dollar into the two forms of historical money that cannot be created with the printing press.

The price of oil has risen from $20 a barrel ten years ago to as high as $120 per barrel earlier this year and currently $90 a barrel. This price rise has come about despite a weak world economy and without any supply restrictions other than those caused by the attempted US occupation of Iraq, the Western assault on Libya, and the self-harming Western sanctions on Iran, impacts most likely offset by the Saudis, still Washington’s faithful puppet, a country that pumps out its precious life fluid in order to save the West from its own mistakes. The moronic neoconservatives wish to overthrow the Saudi Arabian government, but what more faithful servant has Washington ever had than the Saudi royal house?

What can be done? For a number of years I have pointed out that the problem is the loss of US employment, consumer income, GDP, and tax base to offshoring. The solution is to reverse the outward flow of jobs and to bring them back to the US. This can be done, as Ralph Gomory has made clear, by taxing corporations according to where they add value to their product. If the value is added abroad, corporations would have a high tax rate. If they add value domestically with US labor, they would face a low tax rate. The difference in tax rates can be calculated to offset the benefit of the lower cost of foreign labor.

As all offshored production that is brought to the US to be marketed to Americans counts as imports, relocating the production in the US would decrease the trade deficit, thus strengthening belief in the dollar. The increase in US consumer incomes would raise tax revenues, thus lowering the budget deficit. It is a win-win solution.

The second part to the solution is to end the expensive unfunded wars that have ruined the federal budget for the past 11 years as well as future budgets due to the cost of veterans’ hospital care and benefits. According to ABC World News, “In the decade since the Sept. 11, 2001 terrorist attacks on the World Trade Center, 2,333,972 American military personnel have been deployed to Iraq, Afghanistan or both, as of Aug. 30, 2011 [more than a year ago].” These 2.3 million veterans have rights to various unfunded benefits including life-long health care. Already, according to ABC, 711,986 have used Veterans Administration health care between fiscal year 2002 and the third-quarter of fiscal year 2011. http://abcnews.go.com/Politics/us-veterans-numbers/story?id=14928136#1

The Republicans are determined to continue the gratuitous wars and to make the 99 percent pay for the neoconservatives’ Wars of Hegemony while protecting the 1 percent from tax increases.

The Democrats are little different.

No one in the White House and no more than one dozen members of the 535 member US Congress represents the American people. This is the reason that despite obvious remedies nothing can be done. America is going to crash big time.

And the rest of the world will be thankful. America along with Israel is the world’s most hated country. Don’t expect any foreign bailouts of the failed “superpower.”

 

SOURCE:
http://www.paulcraigroberts.org/2012/12/01/our-collapsing-economy-and-currency/

Our Broken World: The Toxic Nexus of Power and Money

“In our global society, only money gives a few people access to power which in return allows the very same people the possibility to accumulate even more wealth.”

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By Gilbert Mercier
NEWS JUNKIE POST
Jan 19, 2012 at 8:41 pm

A Crisis of Ontology

The deadly disease of our global capitalist system is rather easy to understand from a philosophical standpoint. The crisis is ontological, a profound existential turmoil. Human beings are currently defined and valued by what they have, not by what they are. The quantitative aspect of our lives is in the forefront of all human interactions-either between groups or individuals within a group-while the qualitative aspect has been pushed aside, not even on the back burner of our collective consciousness, but literally into the trash of our social interactions. Usually, people are gauged by their assets, incomes, and cars they drive not by evaluating what contributions they make to the common good. We live in a world where a person is defined by quantity not quality, and it is probably our biggest systemic problem.

https://i0.wp.com/newsjunkiepost.com/wp-content/uploads/2012/01/6727207147_a25aabfce5-448x298.jpg

This is reflected by countless examples in the popular culture with expressions such as “show me the money”, “money talks” or the famous line in Brian De Palma’s “Scarface”: “First you get the money, than you get the power”. Poor kids, dreaming of a better future, are constantly bombarded by the spectacle of the “bling, the cool cribs, the fancy rides and the sexy babes” which are the trademarks of most Hip Hop music videos. Money is always center stage in this out of reach universe of “players” which regardless of any tangible cultural meaning serve as heroes and role models for the disenfranchised. It is the deadly equation of money= success + happiness + self respect =power. The same toxic component motivates some of the brightest and best educated young people in the United States to opt for a career on Wall Street instead of becoming doctors, engineers or scientists.

In our global society, only money gives a few people access to power which in return allows the very same people the possibility to accumulate even more wealth. A typical example of this vicious cycle is the constant revolving door between investment banks, such as Goldman Sachs and the highest jobs at the US Treasury Department. Top finance executives with a taste for power- such as Hank Paulson or Larry Summers- under the premises of an interest in “public service”, work for governmental branches for a few years, then go back to their extremely lucrative jobs in finance, and so on.

https://i0.wp.com/newsjunkiepost.com/wp-content/uploads/2012/01/2284575543_3ec8e16622_b-404x336.jpg

Anxiety Rising: Occupy Versus Fear and Paradigm Paralysis

Some people are still living under the pretense that “things” in our broken global system will eventually fix themselves up spontaneously by some kind of miracle. Of course it will not happen, and this model is, by essence, the definition of magical thinking. Recently, a Haitian woman, interviewed for the occasion of the second anniversary of the earthquake, said that she was “putting her trust in god not in people” to rebuild Haiti from the horrific disaster. With a rising uncertainty and global anxiety building up like a pressure cooker, most people are scared and either try to escape reality by putting their heads in the sand or are convinced that the global system can be salvaged by making changes from within.

But, what they refuse to see is that following this model of a “business as usual” mentality impair their judgments and lock them into the box of paradigm paralysis. Even so most people feel that we have already entered an extraordinary period of global paradigm shift, the fear of the unknown makes them want to hang on to a system in advance state of decay. More people worldwide are getting aware of the fact that it is not a question of if the system will collapse but rather when.

The global Occupy movement has two functions in this process: firstly, to be the main catalyst for systemic change, secondly, as one of the architects setting up the foundations for a new global system where quality not quantity shall finally prevail in human relationships. Turning what seems to be Utopian into a reality is the challenge, and it is what this brave new world is all about. It is only a question of reaching a certain critical mass, and of developing the psychological ability to welcome the unknown, without fear, and to enter into uncharted territories.

Editor’s Note: All photographs by Magalie L’Abbe.

SOURCE:
http://newsjunkiepost.com/2012/01/19/our-broken-world-the-toxic-nexus-of-power-and-money/

UK banks face £60bn black hole

“Britain’s banks face a financial black hole of up to £60bn from regulatory demands, hidden losses, and potential mis-selling costs that threaten to jeopardise future growth, the Bank of England has warned.”

By Philip Aldrick, Economics Editor
6:46PM GMT 29 Nov 2012

In its Financial Stability Report (FSR), the Bank revealed that the big four lenders – RBS, Lloyds, Barclays and HSBC – may need to take £15bn of extra provisions on consumer loans and European debt, “a further £4bn-£10bn” to cover fines and customer compensation, and “between £5bn and £35bn” to meet regulatory risk standards.

https://i1.wp.com/blogs.telegraph.co.uk/finance/files/2012/11/20100119_bank-of-england-getty_w.jpg

The Bank of England has just crossed the line into straight government financing (Click for Article)

 

Sir Mervyn King, the Bank’s Governor, said the potential losses distorted the “picture of banks’ health” and that lenders may have to “raise capital or take steps to restructure”. He added: “The danger to be avoided is that of inadequately capitalised banks holding back our recovery.”

However, he stressed that no more taxpayer money would be put on the line. “It was made very clear that the Treasury did not want to put more into the state-owned banks,” he said.

Markets have lost confidence in the banks due to their “complex and opaque” numbers and, to recover investors’ trust, lenders need to set aside capital for “expected losses” and for potential compensation and fines over customer mis-selling and Libor rigging, the Bank said. Risk levels also need to be calculated more prudently.

The decision was taken after last week’s meeting of the Financial Policy Committee. In the most dramatic intervention since the £67bn bail-out of lenders from RBS to Lloyds, the proposal will see regulators from the Financial Services Authority sent into banks and building societies to ensures losses are properly declared by March next year.

However, the Bank declined to put a single number on the scale of potential recapitalisations, stressing that it would depend on the FSA judgement on each individual bank. Sir Mervyn added: “The problem is manageable, and is already understood at least in part by markets.”

Bank shares reacted favourably as fears of a worse outcome proved unfounded. Barclays shares closed up 1pc at 244.6p, RBS was 1.5pc higher at 299p, and Lloyds rose 1.5pc to 46.64p. Jason Napier, an analyst at Deutsche Bank, said: “Overall, the FSR is in line with our expectation, and in areas the report is better than we had feared.”

The plan could lead to a shake-up of the industry with rights issues, asset sales, and disposals – so long as they “do not hinder lending to the real economy”.

Barclays has already raised $3bn (£1.8bn) in contingent capital, Royal Bank of Scotland has previously been asked by the regulators to consider selling its US operation Citizens, and Lloyds Banking Group is rumoured to be looking at the disposal of its stake in wealth manager St James’s Place.

Sir Mervyn said: “The recommendation we have made will soon get the banks back to a position where they can support our economic recovery.”

The Bank also released separate data yesterday showing that write-offs by UK banks fell to £3.5bn in the third quarter from £4bn in the previous three months – well below the peak of £6.3bn in 2011 and the lowest since 2009. Citi’s economist Michael Saunders said: “The drop may be a symptom of increased banking forbearance and reluctance to face losses .”

 

SOURCE:
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9712722/UK-banks-face-60bn-black-hole.html

Gold could be the panacea for global banking woes: Sprott

SPOILER: DO-NOT-FALL-FOR-THAT!! This all-coming ‘goldrush’ is artificially supported in order to actually KEEP the US Dollar’s status-quo in tradings – that is, until it finally collapses.

I repeat: BEWARE. Do not fall for that trick, as it’s what banks would like the most. That’s exactly why they pay people like this to write essays like these.

I warned ye.

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Marc Howe | November 30, 2012

On the eve of the implementation of the Basel III capital rules governing the world’s largest financial institutions veteran investor Eric Sprott points to gold as the most convenient and over-looked solution to the global banking system’s woes.

https://i2.wp.com/lookingglassreview.com/assets/images/John_Sutter_and_the_California_Gold_Rush.jpg

The Basel Committee on Banking Supervision, responsible for devising guidelines for the world’s leading financial institutions, has spent the past four years since the Great Financial Crisis drafting a new set of international banking regulations to prevent the recurrence of similar catastrophes.

The new rules are slated to take effect on 1 January 2013, yet only months prior to their scheduled implementation they have already triggered refractory responses – particularly in the United States, due to their complexity and adverse impact on profits.

In a trenchant essay on the new regulations Sprott highlights what he believes to be one of their chief defects – their treatment of gold as an asset class.

Sprott notes that Basel III regulators cling to the notion that AAA-government securities should comprise the preponderance of high quality liquid assets which banks are required to hold.

Such securities are no longer esteemed by the financial community as safe harbor holdings due to the sovereign risk issues blighting a number of indebted nation-states, as well as the propensity of governments to issue blithely issue debt.

According to Sprott, precious metals such as gold could be the solution to the instability of the global banking system were they conferred with a heightened liquidity profile under the new Basel III framework.

Sprott writes that this would “open the door for gold to compete with cash and government bonds on bank balance sheets – and provide banks with an asset that actually has the chance to appreciate.”

Non-Western central banks have already cottoned on to this and included gold as a key component of their foreign exchange reserves, while two banking jurisdictions in particular – Turkey and China – “have openly incorporated gold into their capital structures.”

The People’s Bank of China recently made remarks which would imply that the government wishes to capitalize on their growing gold stockpile by integrating the domestic market with the international market, and Sprott speculates that China “may have already cornered most of the world’s physical gold supply” in anticipation of the day that Western banks realize that the precious metal is preferable to Treasuries.

 

SOURCE:
http://www.mining.com/gold-is-the-panacea-for-global-banking-woes-sprott-53227/

Brazil Boosts Gold Reserves to the Highest in More Than 11 Years

SPOILER:

Some of ye might have already heard a bit about this ‘buy-gold’ advicing that some grid & offgrid sources have been preaching.

Now, ponder with me. ‘Tis been a while that BRICs countries have been realigning their axis of international support – by buying gold and expanding spheres of influence abroad. For these tophat people all around the globe, remember, the world is a mere diorama – weren’t it true, there wouldn’t be unfairness and iniquity worldwide.

But why, you do ask, would they stockpile in such a moment of Time?…

…’tis easy. The dollar is really, REALLY about to collapse. And that be nay just me saying – ’tis been said by both in- and offgrid economists. Check this:

Governments worldwide are for long well-aware that there would be the day that the dollar will eventually collapse – that’s due to several factors:

1. Dollar, as SEVERAL other currencies, is ‘fiat money’ – made out of nothing.

2. Dollar’s value is NOT based upon what grid economists and pundits barf to ye – it is solelly based on OIL. You can’t perceive it so easily because of the many layers that hide this truth, but come to think with me: what is the most sold and bought commodity worldwide? ‘Tis PETROIL, crude oil. If ye still believe nay, look around ye and reason that, be the product nay composed, ’tis but either refined and/or transported by using one (or SOME) of crude oil’s derivates. Again, ’tis so dilluted into yer life that it becomes unnoticed.

3. Nations are swapping their assets from dollars to other solid, steady currencies/commodities – and EVERY country that tried to sell oil for other than dollar was either stormed by drones or troops, or destabilised by coups and turmoils.

…and why are the BRICs increasing gold reserves, while the US APPARENTLY does nothing? That’s something I think I’m better comprehending day by day – but let us talk about it at another Time.

EVERYTHING you consume makes this wheel spin faster and faster. Think about it.

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“The IMF figures showed continued strong buying by central banks,” said Dan Smith, a commodities analyst at Standard Chartered Plc in London. “This continues the trend of recent months and we expect this to support gold prices.”

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By Nicholas Larkin – Nov 21, 2012 9:51 AM GMT-0200

Brazil raised its gold reserves for a second month in October to the highest level in more than 11 years as emerging nations from Kazakhstan to Russia boosted holdings by more than 40 metric tons.

Brazil’s holdings expanded 17.2 tons last month to 52.5 tons, the most since January 2001, according to data on the International Monetary Fund’s website. The country’s 1.7-ton purchase in September was the first since December 2008. Kazakhstan’s holdings increased 7.5 tons, Russia added 0.4 ton and Turkey’s reserves rose 17.5 tons, the data show. Germany, the second-biggest holder, after the U.S., cut gold holdings by 4.2 tons, the first reduction since June.

Brazil
Brazil has in recent years become an Economic
power-house and is now included in the G7 (Group of 7)
nations meetings. The economy is rated @ 2517 Billion USD.
With a 4.7% unemployment in 2011 and an export surplus it
it is doing rather well. (CLICK EACH IMAGE FOR ITS SOURCE)

Central banks have been expanding reserves as the metal heads for a 12th straight annual gain and investors hold a record amount in bullion-backed exchange-traded products, data compiled by Bloomberg show. Nations bought 373.9 tons in the first nine months of the year and full-year additions will probably be in the “bottom end” of 450 to 500 tons, the London-based World Gold Council estimates.

“This is a chunky purchase by a central bank, and the gold market will likely sit up and pay attention,” Edel Tully, an analyst at UBS AG in London, wrote today in a report, referring to Brazil’s addition. “Today’s news confirms much of the market chatter at the time that official sector buying was taking place and was one of the key factors that gave prices a reasonable floor last month.”

Germany’s Reserves

Germany holds 3,391.4 tons, the IMF data show. The Bundesbank declined to comment on the past month’s gold reserves, spokeswoman Susanne Kreutzer said, adding that the central bank reserves 7 tons a year to sell to the Finance Ministry for minting. The year started on Sept. 27, she said. The Bundesbank sold about 0.7 ton to the finance ministry in June and 4.7 tons in October 2011 to mint commemorative coins.

Germany
Germany is considered the flag-ship of European economies.
Germany holds a 78.8% debt ratio to economy, above the 60% limit standard set by EU for stability, while being mad at Greece and PIIGS for doing the same.
Germany faces a $285 Billion USD repayment/refinance of debt in 2012 but sees no problem of finding lenders, since Germany’s economy
looks great compared to the rest of the industrialized world.

Gold for immediate delivery was little changed at $1,726.99 an ounce by 10:57 a.m. in London. It’s gained 10 percent this year. Holdings in gold-backed ETPs reached a record 2,604.9 tons yesterday, data compiled by Bloomberg show.

“The IMF figures showed continued strong buying by central banks,” said Dan Smith, a commodities analyst at Standard Chartered Plc in London. “This continues the trend of recent months and we expect this to support gold prices.”

Turkey’s bullion holdings have increased due to it accepting gold in its reserve requirements from commercial banks. Belarus expanded holdings by 0.1 ton in October and Mexico reduced them by 0.2 ton, the IMF data show.

Gold accounts for about 0.5 percent of Brazil’s total reserves and 20 percent of Kazakhstan’s, according to the World Gold Council. That compares with more than 70 percent for the U.S. and Germany, the biggest bullion holders, the data show.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: John Deane at jdeane3@bloomberg.net

SOURCE:
http://www.bloomberg.com/news/2012-11-21/brazil-boosts-gold-reserves-to-the-highest-in-more-than-11-years.html

The Fed’s Nuclear Balance Sheet. Stand Back: This Baby’s Going to Explode

Mitch Feierstein
Author, ‘Planet Ponzi’

 

Over the coming weeks, we’re going to be hearing a lot about the ‘fiscal cliff’: the threat that some 5% of GDP is going to be ripped out of the economy in a combination of tax hikes and spending cuts. A fiscal slow-down on that scale will almost certainly trigger recession. The CBO thinks so, though their numbers look optimistic to me. (If you cut demand by 5%, more or less overnight, then you shouldn’t expect the economy to grow by more than 1% in the year following.)

Because the process of fiscal compromise acts itself out on the political stage – all big personalities and high drama – the media loves to report it. Loves to imply that vast questions are at stake, that political careers will stand or fall by the outcome.

But they’re not. Not really. This so-called ‘cliff’ is really just the first in a series of steps. The US budget is arguably the most distorted in the Western world. Greece and Japan may have higher debts, Italy and Portugal may have worse growth prospects – but for sheer budgetary insanity, the US is probably the world leader, combining huge current deficits with vast unfunded promises to retirees, and welfare entitlement program recipients. You don’t need to take my word for this. The IMF states, ‘under our baseline scenario, a full elimination of the fiscal and generational imbalances would require all taxes to go up and all transfers to be cut immediately and permanently by 35 percent. A delay in the adjustment makes it more costly.’

The political ructions of the next few weeks will simply constitute the first scenes in a drama that will run for the next ten or fifteen years. And what’s more, this is a play where we already know the ending. Taxes will have to go up. Spending will have to come down. No other outcome is available: just ask the Greeks.

And meantime, there is a monetary time-bomb charged and ticking. A bomb which is being constantly primed with further explosive, further destructive force. Remember that the economic catastrophe of 2008 was created by loose monetary policy, the indisciplined expansion of credit and a market where increasingly shoddy securities were sold as investment grade assets. You might think that a logical reaction would be the steady tightening of policy and encouraging a climate of credit discipline.

Alas, however, such logic has no place at the Fed. Interest rates are on the floor, and have been for four years now. Because four years of loose money isn’t enough for the ivory-tower academics in charge of monetary policy, the Fed has explicitly committed to keep rates low indefinitely.

Loose money in the past, loose money guaranteed into the future … but that’s still not enough. The Fed has enlarged its balance sheet by $2 trillion since the crisis began to unfold. But that doesn’t even say it. The unelected officials at the Fed handed out an extraordinary $16 trillion in secret loans to bail out banks and businesses in the 2008-10 period. Those loans were not known to, or authorized by, Congress and many of the recipients were firms owned and headquarter abroad. Sen. Bernie Sanders, who has much to call attention to these issues, comments, ‘No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president.’ Well, duh! It’s frankly extraordinary that there should be any question about this.

As Sanders also points out, the actual operation of the bailouts was largely outsourced in large part to investment banking firms on Wall Street who benefitted directly from the bailout. According to the Government Accountability Office, some two-thirds of such outsourcing contracts were awarded on a no-bid basis, an extraordinary failure. And meantime in a ‘money-laundering’ style operation, the Fed is acquiring $40 billion of low-quality mortgage backed securities – in many cases from the firms that created and missold them – thereby cleaning corrupt balance sheets at the risk of the US taxpayer.

The problems created by this unconstitutional misconduct go far beyond the mere trillions of dollars involved. The US Treasury market is being currently manipulated on a heroic scale. At times we’ve seen the Fed buying as much as 70% of US government bond issuance. Worse still, it’s effectively told the market that it intends to continue supporting the market as much as necessary for as long as necessary. In effect, we have a tiny group of unelected officials pursuing a set of radical and experimental policies – QE infinity, money-printing, unlimited bond buying, call it what you will.

And the theory behind this activity is simply crazy. When have price controls and state intervention ever worked? I don’t just mean for the US Treasuries market, but for any major market at any time? State intervention always fails. The Fed is simply setting up what looks set to be the largest Ponzi Scheme in history.

What’s more, because financial markets are interlinked, indiscipline in one market soon ripples through the system and unintended consequences impact many other markets. Wall Street traders, both currently and historically, price junk bonds off the US ten year treasury, which currently trades at an implausible 1.61%. But since the US Treasury market is flawed, every related market is too. As the Economist notes, a bubble is being inflated in government bonds, quality corporate bonds, junk bonds, and (I would add) global equities. As that newspaper comments, ‘When the market does turn everyone will want to head for the exit at once, as was the case with mortgage-related bonds in 2007. That might turn a retreat into a rout.’ I’d agree, except that the word might ought to be will.

And all this wouldn’t be so bad, except for one thing. What’s the exit strategy? Could it be hope-based by any chance? How do you climb down from these heights? Who will buy these bonds when the Fed stops? Who absorbs the losses? What exactly happens to the economy when interest rates normalize and bond prices collapse back to normal levels? Indeed, what happens to the banks when they can no longer sell their lousy assets to the Fed, can’t bump up their profits by selling no-bid services to the dumbest buyer in town? Too big to fail is still getting bigger.

The fiscal cliff is scary, because an abrupt one-off change in fiscal posture is a dumb way to do something that needs doing. But still, it needs doing. If a temporary economic slowdown is the price we pay for that, too bad. We’ll still be in better shape for taking the hit.

The monetary neutron bomb is worse. We’re still building it. No one’s talking about it. And the amounts are colossal.