A Guide to American Federal debt made easy

Celente on Coast to Coast

The Nightmarish Decline Of The Euro Has Begun

The euro is a dying currency.  On Thursday, the EUR/USD fell below 1.28 for the first time since September 2010.  In fact, as I write this the EUR/USD is sitting at 1.2791.  Back in July, the EUR/USD was over 1.45.  But this is just the beginning.  The euro is going to go a lot lower.  At this point, there are several major European nations that are on the verge of default, the European financial system is overflowing with debt and toxic assets, and most major European banks are leveraged about as badly as Lehman Brothers was when it collapsed.  Most Americans simply do not grasp the gravity of what is happening.  Just because the Dow is sitting above 12000 and a few U.S. economic numbers have improved slightly does not mean that everything is going to be okay.  As I wrote about recently, the EU has a bigger economy than we do and they have a bigger banking system than we do.  U.S. banks are massively exposed to European sovereign debt and European banking debt.  When the financial system of Europe collapses and the euro falls apart it is going to rock the entire planet.  So you better look out below - the euro is coming down and it is coming down hard.  After the euro implodes, nothing is every going to be the same again.

So how far are we going to see the euro decline?

Julian Jessop of Capital Economics expects the euro to fall much further....

The relative strength of the recent economic data from the US is supporting the dollar more generally, and we expect this divergence to persist as the euro-zone slides into a deep and prolonged recession. Above all, doubts about the very survival of the euro itself are likely to remain a drag on the currency. We therefore continue to expect the euro to fall to around $1.10 by the end of the year.

Others are even more pessimistic.

As I have written about previously, the head of global bond portfolio management at PIMCO believes that the euro is going to go even lower than that....

"Parity with the dollar next year is not out of the question"

Can you imagine that?

1 dollar = 1 euro?

Don't think that it can't happen.

But the decline of the euro is just part of the story.  The truth is that Europe is on the verge of a financial collapse that could end up dwarfing the financial crisis of 2008.

Sadly, most Americans have no idea what has been going on in Europe the past few days....

-The stock of the biggest bank in Italy, UniCredit, is absolutely collapsing.  Shares of UniCredit fell 14 percent on Wednesday and 17 percent on Thursday.

-Shares of another major Italian bank, Intesa Sanpaolo, fell 7.3 percent on Thursday.

-Shares of three major French banks all fell by at least 5 percent on Thursday.

-Even shares of German banks are falling like a rock.  Shares of Commerzbank fell 4.5 percent on Thursday and shares of Deutsche Bank fell 5.6 percent on Thursday.

-The yield on 5 years Italian bonds is back over 6 percent and the yield on 10 year Italian bonds is back over 7 percent.  Analysts all over Europe insist that that the Italian debt situation is not sustainable if rates stay this high.

-Italy's youth unemployment rate has hit the highest level ever.

This is mind blowing news.

But what is the top headline on USA Today right now?

"Employers Impose Bans On Smokers"

These are some of the other top headlines on USA Today right now....

"Automakers Rush To Offer Apps In Your Car"

"Bargain Season At Taco Bell, Pizza Hut, Wendy's"

"Does Your Dog Understand You? Study Says Maybe"

Is that what passes as news in this country?

A financial meltdown of historic proportions is happening in Europe and you cannot even find anything about it on the front page of USA Today.

Amazing.

All of us need to snap out of our television-induced comas and start waking up.

Things are about to get really bad for the global financial system.

At this point so much confidence has been lost in the euro that even the Council on Foreign Relations is admitting that the euro is a failure....

The euro should now be recognized as an experiment that failed. This failure, which has come after just over a dozen years since the euro was introduced, in 1999, was not an accident or the result of bureaucratic mismanagement but rather the inevitable consequence of imposing a single currency on a very heterogeneous group of countries. The adverse economic consequences of the euro include the sovereign debt crises in several European countries, the fragile condition of major European banks, high levels of unemployment across the eurozone, and the large trade deficits that now plague most eurozone countries.

If even the CFR is throwing in the towel, that should tell you something about what is about to happen to the euro.

There is a very real possibility that we could see the euro break up at some point during the next couple of years.

It now seems that a report produced a while back by Credit Suisse's Fixed Income Research unit was right on target....

"We seem to have entered the last days of the euro as we currently know it. That doesn’t make a break-up very likely, but it does mean some extraordinary things will almost certainly need to happen – probably by mid-January – to prevent the progressive closure of all the euro zone sovereign bond markets, potentially accompanied by escalating runs on even the strongest banks."

The European debt crisis just continues to get worse and worse.  None of the solutions that European leaders have tried have worked.  We are rapidly approaching the meltdown phase of this crisis.

As I have written about previously, it doesn't take a genius to figure out what is happening in Europe.  The equation is simple....

Brutal austerity + toxic levels of government debt + rising bond yields + a lack of confidence in the financial system + banks that are massively overleveraged + a massive credit crunch = A financial implosion of historic proportions

Unfortunately, what is happening right now in Europe is eventually going to happen in the United States as well.

As I wrote about yesterday, U.S. debt is a ticking time bomb that is going to devastate the entire global economy at some point.  Nobody knows when the implosion will happen, but everyone knows that it is inevitable.

When Europe falls apart financially, that is going to make our own financial system much less stable.  What is happening in Europe could turn our "limited recovery" into a "major recession" almost overnight.

So keep your eye on the euro.

If the euro keeps going down, that is going to be really bad news for the global economy.

Unfortunately, the truth is that the decline of the euro is just getting started.

Hold on to your hats.

***UPDATE***

The euro continues to drop like a rock.  Right now it is at 1.2721.

Michael

The Economic collapse

Russian space chief says satellites may have been sabotaged

MOSCOW — Some of the recent failures of Russian satellites may have been the result of sabotage by foreign forces, the country's space chief said.

Roscosmos chief Vladimir Popovkin stopped short of accusing any country of disabling Russian satellites, but in an interview published Tuesday in the daily Izvestia he said some Russian craft had suffered "unexplained" malfunctions while flying beyond the reach of his country's tracking facilities.

Popovkin said he didn't want to proportion blame, but modern technology makes spacecraft vulnerable to foreign influence.

"I wouldn't like to accuse anyone, but today there exist powerful means allowing to influence spacecraft, and their use can't be excluded," he said.

Popovkin added that in 2013 Russia will launch three new communications satellites that would be able to retransmit signals from other spacecraft as they fly over another hemisphere.

Roscosmos spokesman Alexei Kuznetsov refused to elaborate on Popovkin's statement, which marked the first time a senior Russian government official has claimed foreign sabotage has been used to disable one of the country's satellites.

Popovkin made the comment when asked about the failure of the unmanned Phobos-Ground probe, which was to explore one of the Mars twin moons, Phobos, but became stranded while orbiting Earth after its Nov. 9 launch.

Engineers in Russia and the European Space Agency have failed to propel its toward its target, and the spacecraft is expected to fall to Earth around Jan. 15.

Popovkin said that experts so far had failed to determine why the probe's engines failed to fire, but admitted that the program had suffered from funding shortages that led to some "risky technological solutions."

The $170-million craft was supposed to collect soil samples on Phobos and fly them back to Earth in one of the most challenging unmanned interplanetary missions ever. It was Russia's first foray beyond the Earth orbit since a botched 1996 robotic mission to Mars, which failed when the probe crashed shortly after the launch due to an engine failure.

Scientists had hoped that studies of Phobos' surface could help solve the mystery of its origin and shed more light on the genesis of the solar system. Some believe the crater-dented moon is an asteroid captured by Mars' gravity, while others think it's a piece of debris from when Mars collided with another celestial object.

The failed mission was the latest in a series of recent Russian launch failures that have raised concerns about the condition of the country's space industries and raised heat on Popovkin. Space officials have blamed the failures on obsolete equipment and an aging workforce.

Read more: http://www.ctv.ca/CTVNews/TopStories/20120110/satellites-sabotaged-120110/#ixzz1j9wRXQJk

Italy: Mafia's €140 bln in sales makes crime Italy's biggest business

The Italian mafia in 2010 made the lion's share of its 140 billion euros in sales by exploiting small-to-medium-sized businesses through usury, extortion and even robbery, according to a report by Confesercenti, a business association representing 270,000 small-to-medium Italian businesses.

By comparison, Rome-based Eni, one of Europe's top multinational oil exploration companies, in 2010 registered around 99 billion euros in sales.

"The state is working on it, but there needs to be a change with the institutions," said Confesercenti president Marco Venturi. "No bidding, hiring or investments in the shadow of crime."

The report says the economic crisis has been a fruitful time for organised criminals to exploit businesses who are looking for funds at a time when bank loans have dried up. Out of desperation they turn to mobsters who provide loans at crippling interest rates.

Strapped for cash and unable to continue making interest payments to criminals, prompted 1,800 businesses in 2010 to shut down, "erasing tens-of-thousands of jobs," according to the report.

Merchants are the most exposed to loan sharking with "around 200,000 victims suffering 1,300 crimes a day. Practically 50 per hour and almost one per minute," according to the report.

"Our goal is to retake territory occupied by the mafia," said Confesercenti's Venturi.

IGN

Government Set to Sell Foreclosures in Bulk

The Obama administration, in conjunction with federal regulators and led by the overseer of Fannie Mae and Freddie Mac, is very close to announcing a pilot program to sell government-owned foreclosures in bulk to investors as rentals, according to administration officials.

There currently are about a quarter of a million foreclosed properties on the books of Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA), and millions more are coming.

The foreclosure processing delays of last year created a mammoth backlog of properties yet to be processed, which are just now being re-started. One of the initiatives of this program is for the federal government to be in the position to mitigate and manage any new wave of foreclosures, sources say.

Late-stage delinquencies still in the pipeline number close to two million, according to a new report from Lender Processing Services. Foreclosure starts outnumber foreclosure sales by two to one and "the trend toward fewer loans becoming delinquent, which dominated 2010 and the first quarter of 2011, appears to have halted," according to LPS.

Knowing this all too well, the Treasury Department, Federal Reserve, HUD, FDIC, Fannie Mae and Freddie Mac, with their conservator, the Federal Housing Finance Agency (FHFA) at the helm, are engaged in a collaborative effort to face this new wave of foreclosures head on and figure out a way to keep these properties from sitting on the books of the government and sitting empty in the nation's neighborhoods.

As the Federal Reserve alluded to in its white paper on housing last week, "A government-facilitated REO-to-rental program has the potential to help the housing market and improve loss recoveries on reo portfolios." REO's (Real Estate Owned) are bank-owned properties, or, in this case, properties owned by the government-sponsored enterprises and the FHA. Three Fed governors pushed for similar plans in speeches last week, as well.

A pilot sales program will be starting in the very near future, according to administration officials. They are working on what the market potential is, what pricing would be, how government can partner with private investors, and who has the operational experience to manage so many properties.

"I think there is a fair amount of money in the wings waiting to buy, investors doing cash raises to buy properties on a large scale," says Laurie Goodman of Amherst Securities. "But that means they have to build out a rental organization; it means they build out a management company, because if you're accumulating a hundred homes in Dallas that's very different than running a multifamily building."

A number of institutional investors have shown appetite and interest in bulk REO deals, according to officials, but the plan has to incorporate ways to help facilitate financing. That has been one of the biggest roadblocks to deals already in the works between hedge funds and the major banks. Sources close to these private bank negotiations say there is plenty of cash to buy properties, but building out a management structure for the rentals is pricey, and some investors are finding the math doesn't add up to make it worth their while.

CNBC

West approach on Iran in 'turning point' for 2012

War games. Threats to close a key oil passageway and block a U.S. aircraft carrier from returning to the Persian Gulf. An American sentenced to death in Tehran, accused of spying. And now a breakthrough in Iran's nuclear program.

The developments portend what officials see as a momentous year ahead in the standoff between Iran and the West, as Iranian leaders appear to grow bolder despite a new round of international sanctions which, by most accounts, is taking a toll. 

"There won't be taking an eye off the ball," Adm. Jonathan Greenert, chief of naval operations at the Defense Department told reporters on Tuesday. Greenert spoke after the second rescue in less than a week of Iranians in trouble in Gulf waters. "If you ask me what keeps me awake at night, it is the Strait of Hormuz and the business that is going on in the Arabian Gulf."

U.S. lawmakers and other officials say western nations, which already have been putting the screws to the regime in Tehran, must take additional steps in order to persuade the country not to go down the nuclear weapons path.

In a letter to the European Union released Tuesday, a group of bipartisan senators described 2012 as a "turning point in the confrontation between Iran and the international community." They urged the organization to impose an oil embargo on Iran and follow the U.S. lead by sanctioning Iran's Central Bank.

"We believe that both (steps) are absolutely necessary if we are to prevent the Iranian regime from acquiring nuclear weapons and thereby foreclose either a regional war or a cascade of nuclear proliferation in the Middle East," reads the letter signed by Sens. Joe Lieberman, I-Conn.; Mark Kirk, R-Ill.; Charles Schumer, D-N.Y., and five others.

In New York, state senators on Monday passed legislation already approved by the state Assembly to prohibit state and local governments from doing business with companies that have more than $20 million in ties to Iran's energy sector.

"The Senate's swift action shows how important it is that we stand together to condemn tyrannical governments like Iran which sponsor terrorism, have attempted to acquire nuclear weapons and threaten U.S. allies like Israel, as Iran has repeatedly done," Senate Majority Leader Dean Skelos said on the Senate floor.

The move, which mirrors actions by Florida and California, comes after state Comptroller Thomas DiNapoli announced $86 billion of the nearly $150 billion state pension fund has been divested from companies involved in Iran and Sudan.

The array of actions and latest warnings -- particularly on the Republican presidential campaign trail -- highlight the West's effort to make tough choices on Iran, within a quickly narrowing window.

The latest alarm bell came Monday when the United Nations' nuclear agency confirmed that Iran had started to enrich uranium at its underground Fordo site. The level of enrichment being pursued is said to be 20 percent, far more than the 3.5 percent-level material being produced at Iran's central enrichment site.

The State Department described the development as very bad news.

Secretary of State Hillary Clinton said in a statement Tuesday that the enrichment activity "demonstrates the Iranian regime's blatant disregard for its responsibilities."

She called on Iran to stop enriching uranium and return to international talks on its nuclear program, adding that the circumstances surrounding the Fordo site are "especially troubling."

"There is no plausible justification for this production. Such enrichment brings Iran a significant step closer to having the capability to produce weapons-grade highly enriched uranium," she said.

State Department spokeswoman Victoria Nuland also said a day earlier that, "When you enrich to 20 percent, there is no possible reason for that if you're talking about a peaceful program."

John Bolton, former U.S. ambassador the United Nations under the Bush administration, said that if there is a strike, Israel is the most likely candidate to carry it out. But he said Israel risks a "nuclear response" in the event the country waits too long to launch one.

"Every day that goes by means that the military option gets less and less likely," Bolton told Fox News.

Reflecting the views of the senators who wrote to the European Union, Bolton said a nuclear Iran would trigger a nuclear race in the volatile Middle East among Iran's powerful neighbors.

"I think it's a very dangerous period. I think Iran is drawing close to the point where it will have a nuclear weapons capability," Bolton said.

On Tuesday, White House spokesman Jay Carney said the U.S. is consulting with countries like India and China on ways to keep the pressure up -- after both nations committed to stronger partnerships with Iran's oil sector.

In the meantime, Carney said, "We have effectively isolated Iran to a degree that has never before been the case. And the impact of the sanctions and the efforts that we've implemented is profound.

He added that while the military option isn't off the table, the U.S. is focused on "diplomatic, economic and other non-military actions that we can take to bring about the results that we and many, many countries around the world -- our international partners and allies -- are demanding."

Israel has not betrayed its plans, though the country's military chief of staff Benny Gantz said Tuesday that 2012 "will be a critical year" on the Iranian nuclear front, according to The Jerusalem Post.

The Institute for National Security Studies, an Israeli think tank, also claimed that Israel could still attack Iran even after an Iranian nuclear test.

"The Israeli military option is likely to be a significant lever," the group said in a report on a simulation it conducted regarding the possible responses to such a test.

The United States has not publicly signaled a shift away from the international sanctions route. Defense Secretary Leon Panetta, speaking Sunday on CBS' "Face the Nation," said that while no option is off the table, the "responsible" path is "to keep putting diplomatic and economic pressure on them," so they don't pursue a nuclear weapon. He said it's important for the international community, "including Israel," to work together.

Panetta, who said last month that Iran could develop a weapon in 2012, claimed Sunday that Iran is not currently trying to develop one.

"But we know that they're trying to develop a nuclear capability. And that's what concerns us," he said. "And our red line to Iran is do not develop a nuclear weapon. That's a red line for us."

Panetta said "they're going to get stopped" if they pursue a weapon.

Other U.S. lawmakers have pressed the Obama administration to do more. Rep. Ileana Ros-Lehtinen, R-Fla., chairwoman of the House Foreign Affairs Committee, said in a statement Monday that she is "deeply troubled by the sense of complacency that seems to describe the administration's view of Iran as undecided about whether to pursue nuclear weapons."

She said an Iran with "nuclear breakout capability" should be treated like an Iran with a nuclear weapon, and noted that Iran is making inroads into Latin America to directly threaten U.S. security.

Rep. Peter King, R-N.Y., chairman of the House Homeland Security Committee, said in a statement to FoxNews.com that "it seems apparent that Iran is seeking a nuclear weapon in the face of international condemnation and sanctions."

"While we may not yet be at risk of nuclear retaliation from Iran, the longer we wait to act, the harder it would be to destroy an Iranian nuclear arms program while keeping civilian casualties and environmental damage to a minimum," King said.


Read more: http://www.foxnews.com/politics/2012/01/10/iran-west-approaching-turning-point-in-2012-officials-warn/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+foxnews%2Fpolitics+%28Internal+-+Politics+-+Text%29&utm_content=Google+Reader#ixzz1j9pP35mt