Thursday, December 29, 2011
European banks hoard cash despite Italian lift
European banks parked record amounts of cash at the European Central Bank (ECB) this week, in a sign that the massive pre-Christmas injection of liquidity into the Continent's financial system has failed to give banks the confidence to lend to each other.
The ECB revealed that financial institutions' deposits with the Frankfurt-based lender of last resort hit an all-time high of €452bn (£291bn) on Tuesday, beating a previous record of €412bn set on Monday. The fact that European banks are ploughing cash into deposit accounts at the ECB, which pays an interest rate of just 0.25 per cent, shows that fears of default in the sector remain elevated. Yesterday the euro fell to its lowest level against the dollar since January.
Last week, the ECB gave European banks €489bn in three-year loans at an interest rate of 1 per cent, in the hope that the banks would use these cheap funds to lend to financial institutions which have been shut out of the money markets.
There were also hopes banks would pass on the funds to struggling European businesses and households as well as governments that are finding it difficult to roll over their debts. The ECB funds are so cheap that any of these investment options would be profitable. But most banks have, so far, decided to hoard the money at the central bank, showing they are more concerned with maintaining large cash buffers than taking profit opportunities.
In a more encouraging sign, Italy yesterday managed to sell €1.7bn of two-year loans at an interest rate of 4.85 per cent, sharply down from the 7.8 per cent it had to pay last month. Some analysts interpreted this as a sign that European banks are, indeed, preparing to buy up eurozone periphery sovereign debt with their ECB loans. But others are sceptical. Simon Derrick of BNY Mellon said: "Is the two-year auction a good sign? Yes. Does it mean that this is how the banks are going to use this money from the ECB? I'd be very cautious about that."
The Independent
Scientists test sick Alaska seals for radiation
SEATTLE — Scientists in Alaska are investigating whether local seals are being sickened by radiation from Japan's crippled Fukushima nuclear plant.
Scores of ring seals have washed up on Alaska's Arctic coastline since July, suffering or killed by a mysterious disease marked by bleeding lesions on the hind flippers, irritated skin around the nose and eyes and patchy hair loss on the animals' fur coats.
Biologists at first thought the seals were suffering from a virus, but they have so far been unable to identify one, and tests are now underway to find out if radiation is a factor.
"We recently received samples of seal tissue from diseased animals captured near St. Lawrence Island with a request to examine the material for radioactivity," said John Kelley, Professor Emeritus at the Institute of Marine Science at the University of Alaska Fairbanks.
"There is concern expressed by some members of the local communities that there may be some relationship to the Fukushima nuclear reactor's damage," he said.
The results of the tests would not be available for "several weeks," Kelley said.
Water tests have not picked up any evidence of elevated radiation in U.S. Pacific waters since the March earthquake and tsunami in Japan, which caused multiple fuel meltdowns at the Fukushima plant and forced tens of thousands of people to evacuate the surrounding area.
Scientists from the National Oceanic and Atmospheric Administration and the U.S. Fish and Wildlife Service have been seeking the cause of the diseased seals for weeks, but have so far found no answers.
CNBC
Conflict between Iran and West ‘the greatest danger’ of 2012
Russia’s ambassador to the United Nations, Vitaly Churkin, believes that the conflict looming between Iran and Western countries poses the “greatest danger” in the upcoming year.
Iran’s recent threats to block a vital oil route if the West places sanctions on its oil exports, followed by the US’s sharp response to the threat, have attracted the attention of the international community and raised concerns that the events might push the two nations to the brink of war.
With 2012 just days away, Russia’s ambassador to the United Nations, Vitaly Churkin, has been talking to RT about Russian and UN Security Council strategy in this conflict and other pivotal events of the year such as the Arab Spring and the turmoil in the Middle East.
“This is a very dangerous scenario,” said Churkin, commenting on the Iranian-Western stand-off. But “we do believe that a peaceful solution is possible,” he said, pointing out that to avoid serious consequences the negotiations route needs to be followed.
He added that Russia shares other countries’ concerns about Iran’s possibly developing nuclear weapons but does not “accept the proposition that the best way to prevent a war is to start a war.”
“Our consistent stand, our effort, is going to be targeted at doing whatever we can in order to prevent this scenario of regional catastrophe being carried out in 2012,” he explained.
Another pivotal event of the year was the civil war in Libya, and though the conflict is over, Security Council activity is not, Churkin said.
A number of Security Council delegations, including the Russian delegation, have called for an investigation into civilian casualties in Libya. The move came after a disturbing report published by the New York Times claimed there had been dozens of civilian deaths as a result of NATO strikes.
Churkin explained that an urgent investigation is needed first of all to help those who might have suffered from the strikes. He said Russia will continue to pursue the clarification of these events within a matter of weeks, not months, which would be the case “if we rely on those other investigations.”
He also promised that the move does not have any anti-NATO implications. “We don`t see anything anti-NATO in this. After all, NATO is a partner of the United Nations and NATO has been acting on the basis of a Security Council mandate, so the Security Council should also play an active role in having this matter clarified.”
Apart from the question of an investigation, Churkin said the Security Council is working quite harmoniously on a range of issues connected with Libya. He mentioned “looking into the dangers of weapons left unattended in the course of the conflict” and “helping Libyans to rebuild their political and economical structures.”
Keeping track of weapons-trafficking from Libya to other countries, especially to Syria, is one of the matters the Security Council is working hard on Churkin said.
“We are told that the most dangerous of those weapons in terms of terrorist use have so far not been detected outside Libya,” he added.
When asked about Libyan militants operating in Syria, Churkin said it is no surprise. “There are some there trying to stir trouble. What usually happens when there is crisis, all sorts of extremists and terrorist elements show up.” He recalled the recent terror attacks in Damascus and reports from Lebanon saying Al-Qaeda groups had been spotted moving into Syria.
He said that Russia has an extremely clear stand in this conflict, which is to help “the people of that country find a peaceful political solution to the crisis.”
“Two weeks ago Russia introduced a draft resolution to encourage the political process by trying to encourage the Arab League’s monitoring mission which is being deployed now in Syria. We are basing our proposal on the presidential statement which was adopted by consensus by the SC on August 3, which called on everybody to stop the violence in Syria and which stated that the solution to the Syrian crisis could only be found through a Syrian-led all-inclusive political process.”
Speaking about the situation in Syria, Churkin also pointed out that it is unreasonable to push for reforms in a country where a military conflict is going on.
“The sooner the crisis, the military clashes, stop the sooner the international community will be in a position to demand that the Syrian authorities move along the reform track as soon as possible,” he explained, adding that until the conflict is over, talk of reform is a “theoretical conversation.”
Speaking about Security Council strategy in 2012, Churkin said that it would try both to solve current problems and avert any new ones. “Preventive diplomacy is a very big concept for the SC and for the UN, but we also try to encourage the work which is going on regarding some longstanding conflicts,” he pointed out.
RT
6.9 magnitude quake hits southeastern Russia: USGS
(Reuters) - An earthquake of 6.9 magnitude hit southeastern Russianear the border with Mongolia on Tuesday, the U.S. Geological Survey said.
The epicenter of the quake was 28 miles deep and was about 57 miles northeast of Kyzyl, Russia, USGS said.
U.S. warns Iran against closing key oil passage
The increasingly heated exchange raises new tensions in a standoff that has the potential to spark military reprisals and propel oil prices to levels that could batter a global economy already grappling with a European debt crisis.
Iran's navy chief boasted Wednesday that it would be "very easy" for his country's forces to close the strategic Strait of Hormuz, the passage at the mouth of the Persian Gulf through which a sixth of the world's oil passes daily. It was the second such threat in two days following a warning by Iran's vice president that Tehran was close
"Iran has comprehensive control over the strategic waterway," Adm. Habibollah Sayyari told state-run Press TV, as the country was in the midst of a 10-day military drill near the strategic waterway.
The comments drew a quick response from the U.S.
"This is not just an important issue for security and stability in the region, but is an economic lifeline for countries in the Gulf, to include Iran," Pentagon press secretary George Little said. "Interference with the transit or passage of vessels through the Strait of Hormuz will not be tolerated."
Separately, Bahrain-based U.S. Navy 5th Fleet spokeswoman said the Navy is "always ready to counter malevolent actions to ensure freedom of navigation."
Iran's threat to seal off the Gulf, surrounded by oil-rich Gulf states, underlines the depth of worry over the prospect that the Obama administration will go ahead with sanctions over its nuclear program that would severely hit its biggest revenue earner, oil. The sanctions themselves have raised worries that removing Iran's crude from the market will lead to a spike in oil prices.
Gulf Arab nations appeared ready to at least ease market tensions. A senior Saudi Arabian oil official told the AP that Gulf Arab nations are ready to step in to offset any potential loss of exports from Iran, which is the world's fourth largest oil producer. The official spoke on condition of anonymity because he was not authorized to comment on the issue.
Saudi Arabia, which has been producing about 10 million barrels per day, has an overall production capacity of over 12 million barrels per day and is widely seen as the only OPEC member with sufficient spare capacity to offset major shortages. But Iran — the world's fourth largest producer — pumps about 4 million barrels per day, meaning that other Gulf states would also have to up their output to offset the decline.
What remains unclear is what routes the Gulf nations could take to bring that production to market if Iran goes through with its threats.
About 15 million barrels per day pass through the Hormuz Strait, according to the U.S. Energy Information Administration. There are some pipelines that could be tapped, but Gulf oil leaders, who met in Cairo on Dec. 24, declined to say whether they had discussed alternate routes or what they may be.
The Saudi comment, however, appeared to allay some concerns. The U.S. benchmark crude futures contract fell 77 cents in early morning trade on the New York Mercantile Exchange, but still hovered above $100 per barrel.
U.S. State Department spokesman Mark Toner played down the Iranian threats as "rhetoric," saying, "We've seen these kinds of comments before."
While many analysts believe that Iran's warnings are little more than posturing, they still highlight both the delicate nature of the oil market, which moves as much on rhetoric as supply and demand fundamentals.
Iran relies on crude sales for about 80 percent of its of its public revenues, and sanctions or an even pre-emptive measure by Tehran to withhold its crude from the market would already batter its flailing economy.
IHS Global Insight analyst Richard Cochrane said in a report issued Wednesday that markets are "jittery over the possibility" of Iran's blockading the strait. But, he said, "such action would also damage Iran's economy, and risk retaliation from the U.S. and allies that could further escalate instability in the region."
"Accordingly, it is not likely to be a decision that the Iranian leadership will take lightly," he said.
Earlier sanctions that have targeted the oil and financial sector have added new pressures to the country's already struggling economy. Government cuts in subsidies on key goods like food and energy have angered Iranians, stoking inflation while the country's currency is steadily depreciating.
The impetus behind the subsidies cut plan pushed through parliament by Iranian President Mahmoud Ahmadinejad was to reduce budget costs and would pass money directly to the poor to pay for their needs. But critics have pointed to it as another in a series of bad policy moves by the hardline president.
So far, Western nations have been unable to agree on sanctions targeting oil exports, even as they argue that Iran is trying to develop a nuclear weapon. Tehran maintains its nuclear program — already the subject of several rounds of sanctions — is purely peaceful.
The U.S. Congress has passed a bill banning dealings with the Iran Central Bank, a move that would heavily hurt Iran's ability to export crude. The bill could impose penalties on foreign firms that do business with Iran's central bank. European and Asian nations use the bank for transactions to import Iranian oil.
President Barack Obama has said he will sign the bill despite his misgivings. China and Russia have opposed such measures. A likely result of the sanctions would be that oil prices would at least temporarily spike to levels that could weigh heavily on the world economy.
Closing the Strait of Hormuz would hit even harder. Energy consultant and trader The Schork Group estimated in a report that crude would jump to above $140 per barrel. Conservatives in Iran claim global oil prices will jump to $250 a barrel should the waterway be closed.
By closing the strait, Iran may aim to send the message that its pain from sanctions will also be felt by others. But it has equally compelling reasons not to try.
The move would put the country's hardline regime straight in the cross-hairs of the world, including those nations that have so far been relative allies. Much of Iran's crude goes to Europe and to Asia.
"Shutting down the strait ... is the last bullet that Iran has and therefore we have to express some doubt that they would do this and at the same time lose their support from China and Russia," said analyst Olivier Jakob of Petromatrix in Switzerland.
Iran has adopted an aggressive military posture in recent months in response to increasing threats from the U.S. and Israel of possible military action to stop Iran's nuclear program.
The Iranian navy's exercises, which began on Saturday, involve submarines, missile drills, torpedoes and drones. A senior Iranian commander said Wednesday that the country's navy is also planning to test advanced missiles and "smart" torpedoes during the maneuvers.
The war games cover a 1,250-mile (2,000-kilometer) stretch of sea off the Strait of Hormuz, northern parts of the Indian Ocean and into the Gulf of Aden near the entrance to the Red Sea as a show of strength and could bring Iranian ships into proximity with U.S. Navy vessels in the area.
Moderate news website, irdiplomacy.ir, says the war games are intended to send a message to the West that Iran is capable of sealing off the waterway.
"The war games ... are a warning to the West that should oil and central bank sanctions be stepped up, (Iran) is able to cut the lifeblood of the West and Arabs," it said, adding that the West "should regard the maneuvers as a direct message."
Newsday
Precious metals tank as euro hits 11-month low
RENEWED investor demand for cash slammed precious metals overnight, sending silver to its lowest levels in almost a year and gold to its lowest price in five months.
A sharp weakening in the euro after days of relative calm in currency markets rattled metals traders and prompted some to head to the sidelines. The losses came in low trading volume, market participants said, with many trading desks lightly staffed between the Christmas and New Year's holidays.
Precious metals sank in near lockstep with the euro, as the common currency's declines to 11-month lows brought the focus back to Europe's battered financial system. Investors worried that an Italian debt auction scheduled for today in Europe could fare poorly and push the eurozone closer to a credit crunch.
At the close of Comex floor trading, the euro was around $US1.294, down from $US1.306 late Tuesday in New York.
Silver for March delivery, the most actively traded contract, fell $US1.506, or 5.2 per cent, to settle at $US27.234 a troy ounce on the Comex division of the New York Mercantile Exchange, the lowest settlement price since late January.
"You've got another round of deleveraging heading into this market," said Frank McGhee, head precious-metals dealer with Integrated Brokerage Services. "I think you're going to have a hard time finding the wherewithal with two trading days left (in the year) to rally."
Some investors buy precious metals in the belief that they hold their value better than other assets during economic turmoil. But that relationship hasn't held true at times when worries about Europe's debt crisis have dominated trading. Some money managers have liquidated their holdings of gold and silver along with other assets in periodic bouts of selling that began in September.
The euro's overnight fall and the reaction in precious metals mirrored a similar set of declines after the currency dropped below $US1.30 on December 14. The benchmark gold futures contract on that day crashed below its 200-day moving average for the first time in more than two years, a bearish signal for market participants who place bets based on patterns in market activity.
Overnight, the February-delivery gold contract fell $US31.40, or 2 per cent, to settle at $US1564.10 a troy ounce, the lowest settlement since July and the fifth-consecutive loss.
Gold's declines began overnight and intensified early in New York's trading day "as year-end sellers once again cashed still-profitable chips in and opted to park proceeds in cash at least until the first week of 2012," Kitco Metals analyst Jon Nadler said in a note.
The selloff didn't spare other metals markets already on edge due to a weakened global growth outlook.
Platinum fell to the lowest levels since November 2009, with the January-delivery contract settling down 3.2 per cent at $US1387.70 a troy ounce. Palladium for March delivery sank 2.9 per cent to $US647.15 an ounce. Both metals are used chiefly by the auto sector.
The Independent
China Should Buy More Gold – Central Bank
News of falling gold prices may bad news for most, but not for China.
Now is the most opportune time for China to buy more gold assets when prices of the yellow metal are dropping, to ensure the country maintains and protects a well-diversified foreign-exchange portfolio, Zhang Jianhua, research bureau director at the People's Bank of China, said in the Financial News, a newspaper published by the Chinese central bank.
News of falling gold prices may bad news for most, but not for China. Now is the most opportune time for China to buy more gold assets when prices of the yellow metal are dropping, to ensure the country maintains and protects a well-diversified foreign-exchange portfolio.
"The Chinese government... needs to further optimise China's foreign exchange asset portfolio and seek relatively low entry points to buy gold assets," Mr Zhang wrote, noting government should remain cautious of possible inflationary pressures rising.
Other assets such as government bonds and property are slowly losing value. "Gold remains the only safe haven for risk-averse investors," he said.
China should increase its gold acquisition, more aggressively when prices drop, Mr Zhang said.
Figures from China's central bank showed the world's second-largest economy currently holds 33.89 million ounces of gold in its reserves, unchanged since April 2009.
Gold purchases of central banks from China, Russia, Thailand and Mexico in the third quarter of 2011 showed a hike of more than six times to 148.4 tons compared to a year ago. Figures from the Gold Demand Trends report for Q3 2011 by the World Gold Council said central banks have been aggressively buying the yellow metal to increase their total reserve allocation, a move to diversify investments away from U.S. dollars.
Central bank purchases have more than doubled by 114 per cent over the previous quarter, in what could be the highest level of central bank buying since at least 1970.
Iternational Business Times
Guest Post: A Run On The Global Banking System - How Close Are We?
Nine weeks after its bankruptcy, the general public still hasn’t quite realized the implications of the MF Global scandal.
My own sense is, this is the first tremor of the earthquake that’s coming to the global financial system. And how the central banks and financial regulators treated the “Systemically Important Financial Institutions” that had exposure to MF Global—to the detriment of the ordinary, blameless customer who got royally ripped off in its bankruptcy—is both the template of how the next financial crisis will be handled, and an accelerator that will make the next crisis happen that much sooner.
So first off, what happened with MF Global?
Simple: It went bankrupt—because it made bad bets on European sovereign debt, by way of leveraging positions 100-to-1. Yeah, I know: Stupid. Anyway, they went bankrupt—which in and of itself is no big deal. It’s not as if it’s the first time in history that a brokerage firm has gone bust. But to me, the big deal in this case was the way the bankruptcy was handled.
Now there are several extremely serious aspects to the MF Global case: Specifically, how their customers were shut out of their brokerage accounts for over a week following the bankruptcy, which made it impossible for those customers to sell out of their positions, and thus caused them to lose serious money; and of course how MF Global was more adept than Mandrake the Magician at making money disappear—about $1 billion, in fact, which still hasn’t turned up. These are quite serious issues which merit prolonged discussion, investigation, prosecution, and ultimately jailtime.
But for now, I want to discuss one narrow aspect of the MF Global bankruptcy: How authorities (mis)handled the bankruptcy—either willfully or out of incompetence—which allowed customer’s money to be stolen so as to make JPMorgan whole.
From this one issue, it seems clear to me that we can infer what will happen when the next financial crisis hits in the nearterm future.
Brokerage firms hold clients’ money in what are known as segregated accounts. This is the money that brokerage firms hold for when a customer makes a trade. If a brokerage firm goes bankrupt, these monies are never touched—because they never belonged to the firm, and thus are not part of its assets.
Think of segregated accounts as if they were the content in a safety deposit box: The bank owns the vault—but it doesn’t own the content of the safety deposit boxes inside the vault. If the bank goes broke, the customers who stored their jewelry and pornographic diaries in the safe deposit boxes don’t lose a thing. The bank is just a steward of those assets—just as a brokerage firm is the steward of those customers’ segregated accounts.
But when MF Global went bankrupt, these segregated accounts—that is, the content of those safe deposit boxes—were taken away from their rightful owners—that is, MF Global’s customers—and then used to pay off other creditors: That is, JPMorgan.
(The mechanics of how this was done are interesting, but insanely complicated, and ultimately not relevant to this discussion. To grossly simplify, MF Global pledged customer assets to JPMorgan, in a process known as rehypothecation—customer assets which MF Global did not have a right to. Needless to say, JPMorgan covered its ass legally. Ethically? Morally? Black as night.)
This was seriously wrong—and this is the source of the scandal: Rather than being treated as a bankruptcy of a commodities brokerage firm under subchapter IV of the Chapter 7 bankruptcy law, MF Global was treated as an equities firm (subchapter III) for the purposes of its bankruptcy.
Why does this difference of a single subchapter matter? Because in a brokerage firm bankruptcy, the customers get their money first—because after all, it’s theirs—while in an equities firm bankruptcy, the customers are at the end of the line.
In the case of MF Global, what should have happened was for all the customers to get their money first. Then everyone else—including JPMorgan—would have picked over the remaining scraps. And the monies MF Global had already pledged to JPMorgan? They call it clawback for a reason.
The Chicago Mercantile Exchange, which handled the bankruptcy, should have done this—but instead, the Merc was more concerned with making JPMorgan whole than with protecting the money that rightfully belonged to MF Global’s 40,000 customers.
Thus these 40,000 MF Global customers had their money stolen—there’s no polite way to characterize what happened. And this theft was not carried out by MF Global—it was carried out by the authorities who were charged with handling the firm’s bankruptcy.
These 40,000 customers were not Big Money types—they were farmers who had accounts to hedge their crops, individuals owning gold (like Gerald Celente—here’s his account of what happened to him)—
—in short, ordinary investors. Ordinary people—and they got screwed by the regulators, for the sake of protecting JPMorgan and other big fry who had exposure to MF Global.
That, in a nutshell, is what happened.
Now, what does this mean?
It means that nobody’s money is safe. It means that regulators care more about protecting the so-called “Systemically Important Financial Institutions” than about protecting Ordinary Joe investors. It means that, when crunchtime comes, central banks and government regulators will allow SIFI’s to get better, and let the Ordinary Joes get fucked.
So far, so evil—but here comes the really troubling part: It is an open secret that there are more paper-assets than there are actual assets. The markets are essentially playing musical chairs—and praying that the music never stops. Because if it ever does—that is, if there is ever a panic, where everyone decides that they want their actual asset instead of just a slip of paper—the system would crash.
And unlike with fiat currency, where a central bank can print all the liquidity it wants, you can’t print up gold bullion. You can’t print up a silo of grain. You can’t print up a tankerful of oil.
Now, question: When is there ever a panic? When is there ever a run on a financial system?
Answer: When enough participants no longer trust the system. It is the classic definition of a tipping point. It’s not that all of the participants lose faith in the system or institution. It’s not even when most of the participants lose faith: Rather, it’s when a mere some of the participants decide they no longer trust the system that a run is triggered.
And though this is completely subjective on my part—backed by no statistics except scattered anecdotal evidence—but it seems to me that MF Global has shoved us a lot closer to this theoretical run on the system.
As I write this, a lot of investors whom I know personally—who are sophisticated, wealthy, and not at all the paranoid type—are quietly pulling their money out of all brokerage firms, all banks, all equity firms. They are quietly trading out of their paper assets and going into the actual, physical asset.
Note that they’re not trading into the asset—they’re simply exchanging their paper-asset for the real thing.
Why? MF Global.
“The MF Global scandal has made it clear that the integrity of the system has disappeared,” said a good friend of mine, Tuur Demeester, who runs Macrotrends, a Dutch-language newsletter out of Brugge. “The banks are insolvent, the governments are insolvent, and all that’s left is for the people to realize what’s going on—and that will start a panic.”
He hit it on the head: Some of the more sophisticated people—like Tuur, like some of my acquaintances, (like myself, frankly)—have realized that the MF Global scandal means that there is no safety for any paper investment: The integrity of the systems has been completely shattered. If in the face of one medium-sized brokerage firm going under, the regulators will openly allow ordinary people to be ripped off for the sake of protecting the so-called “Systemically Important Financial Institutions”—in this case JPMorgan—what will happen if there is a system-wide run? What if two or three MF Globals happen simultaneously?
Will they protect the citizens’ money? Or will they protect the “Systemically Important Financial Institutions”?
I think we know the answer.
And I think we all know the answer to the question of whether there will be crisis flashpoint in the near-term future: After all, as Demeester pointed out, all the banks and all the governments are broke.
Thus it’s only a matter of time before they come for your money.
At SPG, we’ve been putting together Scenarios for other black swan events which are becoming increasingly likely: What to do if the eurozone breaks up, what to do if you have to leave America, what to do if there is an Israeli-Iranian war, what to do if there is forced dollar devaluation, and so on.
Now, because of this open kleptocracy and cronyism being shown by the financial authorities in the wake of the MF Global bankruptcy, we’ve been obliged to put together a new Scenario, devoted exclusively to preparing for a run on the markets: What to do in order to protect your assets from regulatory malfeasance, if there is a system-wide MF Global-type breakdown and a subsequent run on the entire financial system.
And there will be such a run on the system: It’s only a matter of time. In fact, the handling of the MF Global affair has sped up the timeframe for this run on the system, because the forward-edge players—such as Demeester, myself, and my other acquaintances who understand the implications of the bankruptcy—realize that the regulators will side with the banksters, and not the ordinary investors: So we are preparing accordingly.
Once there is a full-on panic, anyone with money in the system will lose at least a big chunk of it, in one of two ways, or a combination thereof:
• One, the firms—commodities brokerage firms, equity firms, investment banks and commercial banks—will not allow people to withdraw the totality of their money, and/or they will put a withdrawal cap of some sort, enforced by the central banks and other regulatory bodies. (Like they did in Argentina.)
• Two, the central banks will “provide liquidity”—that is, print money—while simultaneously declaring a banking holiday to, quote, “calm the markets”. During that bank holiday, the currency will be devalued by double digits—which will mean that your cash holdings will essentially be taxed to save the banksters—again. (Like they did in Argentina.)
Thus apart from proving that the United States really is Argentina with nukes, the MF Global bankruptcy has proven something crucial: The central banks and government regulators have completely fallen into the trap of confusing the welfare of the “Systemically Important Financial Institutions” with the welfare of the system itself. They don’t seem to realize that the SIFI’s are actors within the system—not the system itself.
We critics of the current, corrupt state of affairs also sometimes confuse the SIFI’s with the system itself, whenever we say, “The whole system is corrupt!”
But the system is not corrupt—it’s the regulators and SIFI’s who are corrupt. If nothing else, the handling of the MF Global bankruptcy has proven that, once and for all. That’s why we’re pulling out our money now—while we still can.
Because once the general public catches on to what we already know . . . oh boy.
Zero Hedge
The Obama Nation: More Debt And More Store Closings
Well, it is time to raise the debt ceiling again. Right now we are about to hit the current limit of $15.194 trillion and the Obama administration is going to ask that it be raised by another 1.2 trillion dollars. Unfortunately, Congress has already promised not to stand in the way, and so soon the debt limit will be raised to a staggering $16.394 trillion. Considering how much debt we have already placed on the backs of future generations, what is another 1.2 trillion dollars? After all, if we are going to sell our children and our grandchildren into debt slavery, we might as well go all the way, right? Such is the thinking in "the Obama Nation". During "the Obama Nation", the federal government has already accumulated more debt than it did from the time that George Washington took office to the time that Bill Clinton took office. Of course the Bush administration was nearly as bad at piling up government debt. Between Bush and Obama (with a big helping hand from the Federal Reserve), they have done a pretty good job of wiping out the financial future of the United States. If there are future generations of Americans, they will look back and curse those that did this to them. It is absolutely immoral to steal trillions of dollars from future generations. Unfortunately, there are very, very few members of Congress that are even objecting to this madness.
Today, more debt just seems to be the answer to everything. The truth is that debt is not just a government problem. We are a nation that is addicted to debt.
As of October, total consumer credit in the United States had increased for 12 of the past 13 months. We simply have not learned the lessons of the past and we are making the same mistakes all over again.
We are living in the greatest debt bubble in the history of the world, and this false prosperity that we are enjoying is simply not sustainable.
But even in the midst of this false prosperity we are seeing a huge number of store closings.
For example, it was just announced that Sears has decided to close between 100 and 120 Sears and Kmart stores.
Once upon a time, Sears was the dominant force in the retail industry, but those days are long gone. Sears stock has declined more than 45 percent so far this year, and many are wondering how long the company is going to be able to survive.
And there have been other high profile store closings announced during this holiday season as well. A while back it was announced that all Syms stores and all Filene’s Basement stores will be closing.
Will we all eventually be relegated to shopping only at Wal-Mart?
In the middle of this "economic recovery" that Obama keeps talking about a staggering number of retail stores are closing up shop. The following is a list of store closings in 2011 that I recently found. The first number represents the total number of stores being closed for each chain....
405 Blockbuster
633 Borders
200 GameStop
189 Gap
160 f.y.e.
117 Anchor Blue
117 Foot Locker
100 Talbot's
71 A.J. Wright
69 Metropark
63 Friendly's
60 Rite Aid
52 Destination Maternity
50 Abercrombie & Fitch
50 Hot Topic
45 Big Lots
45 Family Dollar
43 Select Comfort
43 Sonic Drive-In
35 Denny's
32 Great Atlantic and Pacific Tea Company, Inc. (SuperFresh, Pathmark Super Market)
30 Ultimate Electronics
28 Dominos
25 Superfresh (Great Atlantic & Pacific Tea Company)
20 Lowe's
Sadly, it looks like things are going to get even worse next year. One consulting firm is projecting that there will be more than 5,000 store closings in 2012.
The United States is piling up unprecedented amounts of new debt at a time when our economy is dying and our ability to produce wealth is diminishing.
All over America right now, poverty is absolutely exploding. Millions of people that never dreamed that they would have to reach out for help now find that they have no other options. The following comes from a recent article in the Fiscal Times....
For years, the food pantry in Crystal Lake, Ill., a bedroom community 50 miles west of Chicago, has catered to the suburban areas’ poor, homeless and unemployed. But Cate Williams, the head of the pantry, has noticed a striking change in the makeup of the needy in the past year or two. Some families that once pulled down six-figure incomes and drove flashy cars are now turning to the pantry for help. A few of them donated food and money to the pantry before their luck soured, according to Williams.“People will shyly say to me, ‘You know, I used to give money and food to you guys. Now I need your help,’” Williams told The Fiscal Times last week. “Most of the folks we see now are people who never took a handout before. They were comfortable, able to feed themselves, to keep gas in the car, and keep a nice roof over their head.”
But not everyone will ask for help nicely. As the economic numbers continue to get worse, desperate Americans will lash out in wild and unpredictable ways.
The following is from a local NBC station down in Texas. In the days to come, this type of report will become quite common....
A 19-year-old Houston-area man says he was beaten and a friend was slashed in the face as a group of men robbed him of his new pair of expensive Air Jordan shoes.
We will also see more mass protests and more mass riots as the months and years roll along. This country is going to become increasingly unstable.
Check out this video of a massive brawl that erupted inside Mall of America the other day. Soon scenes such as this will become so common that they will not even be newsworthy anymore.
In response, many Americans will get sick and tired of waiting for the police to protect them and will take matters into their own hands.
In fact, we are already starting to see this. For example, just the other day a store clerk down in North Carolina knocked a would-be robber out cold and then forced him to clean up his own blood after he woke up.
There are millions of Americans out there that are not going to put up with a whole lot of nonsense. When desperate criminals try to rob from their homes or businesses it might not end well for the criminals.
Of course it would be much nicer if the federal government would do some things to actually fix the economy and avoid some the problems that are looming on the horizon.
Ah, but that would interrupt their vacations. Right now, the U.S. House of Representatives is on vacation until mid-January.
If you can believe it, Congress does not work for most of the year. Normally they are scheduled to be in session for about a third of all the days on the calendar.
And Obama is certainly taking it easy. He is enjoying yet another vacation. As I wrote about yesterday, it has been estimated that the Obama Hawaiian vacation this year will cost somewhere in the neighborhood of 4 million dollars.
Yes, it is tough being the head of the Obama Nation.
Sadly, a lot of Americans still have faith in these jokers.
According to a Gallup poll that was just released, Barack Obama is the most admired man in America by far and Hillary Clinton is the most admired woman in America by far. If you can believe it, Barack Obama has held the top spot for men for four years in a row, and Hillary Clinton has held the top spot for women for ten years in a row.
When are we going to learn?
Someone once said that insanity is doing the same thing over and over again and expecting different results.
Well, the American people keep sending corrupt politicians such as Bush and Obama to the White House and they keep expecting things to get better.
It just isn't going to happen.
If we stay on the current path that we are on, there will be a lot more store closings, the economy will continue to crumble and government debt will continue to skyrocket.
Minor changes are not going to cut it. We need massive changes on a fundamental level.
Unfortunately, neither political party is offering massive changes. The Republicans and the Democrats just keep offering the same tired solutions and they keep promising that they can "fix things" if we will just send more of them to Washington.
Hopefully the American people will wake up and see through these lies because time is running out.
The Economic Collapse
ECB Balance Sheet Increases to Record
The European Central Bank’s balance sheet soared to a record 2.73 trillion euros ($3.55 trillion) after it lent financial institutions more money last week to keep credit flowing to the economy during the debt crisis.
Lending to euro-area banks jumped 214 billion euros to 879 billion euros in the week ended Dec. 23, the Frankfurt-based ECB said in a statement today. The balance sheet increased by 239 billion euros in the week and was 553 billion euros higher than three months ago.
The euro weakened and stocks fell, halting a five-day advance in the Standard & Poor’s 500 Index, as the announcement highlighted risks from Europe’s debt crisis.
“The market reaction is slightly incomprehensible,” said Jens Kramer, an economist NordLB in Hanover. “After that record liquidity injection it would follow that the balance sheet would swell. Seeing the figure in black and white, and the fear of what would happen to the ECB if a country defaulted, may have spooked the market.”
The ECB last week awarded 523 banks three-year loans totaling a record 489 billion euros to encourage lending to companies and households and prevent a credit shortage. Barclays Capital estimates the loans injected 193 billion euros of new money into the system, with 296 billion euros accounted for by maturing loans. So far, banks are parking the money back at the ECB. Overnight deposits at the central bank increased to an all- time high of 452 billion euros yesterday.
Stocks Decline
The S&P 500 declined 0.8 percent to 1,255.01 at 10:30 a.m. in New York and the Stoxx Europe 600 Index fell 0.5 percent, reversing a 0.6 percent advance. The euro slid more than a cent $1.2952 at 3:41 p.m. in London and reached an almost 10-year low versus the yen.
If the balance sheet release was the reason for the euro’s decline, “it shows you how thin the market is at the moment,” said Eric Wand, a fixed-income strategist at Lloyds Bank Corporate Markets in London. “Nobody who’s following the ECB should be surprised that the balance sheet is at that level as it has been continuously adding liquidity. Almost three trillion is a relatively elevated level, but it is collateralized lending, so it’s not a huge concern at the moment.”
Policy Response
The ECB this month cut its benchmark interest rate to 1 percent, matching a record low, as the debt crisis threatened to engulf Italy and Spain, the euro area’s third- and fourth- largest economies. Growth in the 17-nation euro region will slow to just 0.3 percent next year from about 1.6 percent this year, the ECB forecast this month.
ECB policy makers have resisted calls to step up their government bond purchases to cap borrowing costs in Europe’s peripheral nations, choosing instead to grease the region’s financial system with unlimited cheap loans.
In addition to offering longer-term funds, the ECB has also widened the pool of collateral banks can use to obtain the cash. The central bank will offer a second three-year loan on Feb. 28.
Italy today sold 9 billion euros of six-month Treasury bills, meeting its target, and its borrowing costs plunged in a sign that banks may channel some of the ECB’s money into debt markets.
The Rome-based Treasury sold the 179-day bills at a rate of 3.251 percent, down from a 14-year-high of 6.504 percent at the last auction of similar-maturity securities on Nov. 25. Investors bid for 1.7 times the amount offered, up from 1.5 times last month.
Bloomberg
Muslim Brotherhood: Hamas is our role model
Hamas Prime Minister in Gaza Ismail Haniyeh has met with Egyptian Muslim Brotherhood Leader Mohammed Badie in Cairo Monday, and told him that "Our presence with the Brotherhood threatens the Israeli entity."
Badie told Haniyeh that Hamas has served as a role model to the Brotherhood in its reconciliation with the Fatah movement and in closing the prisoner swap deal with Israel. (Roi Kais)
Ynet
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