Saturday, 27 December 2008

Pot. Kettle. Black

Top banker accused by bishop of financial 'idolatry'

Speaking to the Berliner Zeitung newspaper, Bishop Huber argued bankers had a duty to look beyond the short term: "Never again should a Deutsche Bank chief executive set a profit goal of 25 per cent." Such goals drove up profit expectations to unsustainable levels and amounted to "a form of idolatry", he said. "In the current circumstances, money has become a god."

Only when the church renounces its 'worldly goods' will it be in a position to preach about false gods.... until then money and religion are two sides of the same coin.

Saturday, 20 December 2008

Swindler’s List

Heres the weekend special for this week:

"It's Kristallnacht Two!" An Ethnic Cleansing in America

Uncle Sam is the biggest Ponzi operator of all, with the added magical power denied Madoff (unless forgery was among his talents) of being able to print money at will. CounterPunch tip of the week. Wheelbarrow stocks. Buy ‘em while the price is right. Soon Americans will be needing wheelbarrows to put the money in to go shopping. A vast new wheelbarrow industry could be part of Obama’s recovery plan. Collapsible wheelbarrows for the soccer moms to get in the back of the Volvo. Electric-powered wheelbarrows. Hybrid wheelbarrows from GM. Gold-plated wheelbarrows from the Defense sector.

Bankrunwatch like the wheelbarrow stories....

Sunday, 14 December 2008

10 days and counting

The story of unusual happenings in the gold market keeps running:

Backwardation That Shook The World

On Friday, December 12, backwardation on gold was still in force at an annualized discount rate hovering around 2% in the December contract, and 0.3% in February contract.

Holders of physical gold, now on fully-fledged strike, are offered a strike-pay by the futures market, and the offer is left on the bargaining table, but the strikers still won't budge. There it is: the gold basis went negative, gold has been in backwardation for over a week, and physical gold is still not coming out of hiding.

Backwardation also gives a signal to those who are not so fortunate as to have some of the precious yellow in hand. It tells them to be prepared for a thunderous collapse of the international payments system, worse than the collapse of the twin towers of the World Trade Center. Backwardation means the inevitable contraction of the world economy, the beginning of an era of diminishing enterprise and employment, an era of snowballing business failures and poverty. Printing more irredeemable promises to pay will make this condition worse, not better.

I am still not sure where this is all leading.... but if things turn out as the writer of this article suggests then maybe a run on the banks will be the least of our worries.

Tuesday, 9 December 2008

Backwardation buzz

After seeing this article on the backwardation of gold prices it now seems that the mainstream have picked up on the story:

The gold backwardation theory

Checking in today and backwardation is still in place. At 1430 GMT Tuesday December 9 spot gold was trading at some $768 while Comex futures were at 766.40.

No small call, Fekete is essentially calling the end of the fiat-dollar system - just as the US Treasury sells 3-month bills at the lowest level since 1929, and CDS spreads on sovereign debt continue to wander - hmmm does he have a point?

It certainly sounds like the talk of conspiracy theorists.

Except that this article was written for the Financial Times!

Sunday, 7 December 2008

More light reading

Deflation virus is moving the policy test beyond the 1930s extremes

Another fatuous article by the same journalist as the previous posting. The interesting part - as always - are the comments. So good in fact that i thought i would cut n paste a few:

What planet is this Ambrose guy on? I keep having this nightmare that I have been transported to a parallel universe where everybody in power has gone mad and is trying to destroy the world. I am running around trying to find someone with any sense who isnt obsessed with lowering interest rates. And then I wake up and - wait a minute - oh my God it wasnt a nightmare. This is really happening!

This thought has crossed my mind too - why are the mainstream media running all these scare stories?

So this is what all sensible people should do: (1) wait for the value of a �1,000,000 house to fall to,say, �600,000 borrow �600,000 to buy it and then 2) wait for the arrival of hyperinflation to wipe out the real value of the loan. Brilliant!

Nice idea - just be careful you don't loose your job or you will end up with nothing.

Deflation is a symptom not a cause surely. The causes are many of course. I would say a main cause to be the fractional reserve system with money creation through debt. Last and not least the people have been blinded and fleeced equity cannot flourish.

There we are again - the fractional reserve system and money as debt - fiat money has no 'real' value.

Note also that for the first time in history in December 2008 gold prices went into backwardation. Anyone who has actual gold won't sell at any price denominated in worthless paper. I don't know what will happen, but the greatest probability is that whatever happens isn't going to be pretty. Gordon Mugabrown should remember we savers have votes as well.

For more info on gold backwardation read this article. Maybe i should start 'gold/silver bullion run watch' cos by the time the banks start failing there wont be any 'real' money left to buy with your cash.


No... not the aging british cruise liner but the 'next big idea' of the worlds central bankers:

ECB cuts to 2.5pc and mulls "printing money"

I try to find a bit of light reading for a sunday evening - this article is so good that i intend to cut n paste the whole thing....

The European Central Bank has slashed interest rates by three-quarters of a point to 2.5pc in the boldest move since the launch of monetary union and hinted at revolutionary action to head off a severe slump next year as the economic crisis ravages the car, steel, and machine tool industries.

Revolutionary action - i very much doubt that!

"Tensions have increasingly spilled over from the financial sector to the real economy," Jean-Claude Trichet, the ECB's president, said. He added: "Global and euro-area demand are likely to be dampened for a protracted period of time."

Poor old Trichet is feeling tense as people in the 'real' world are finding out that from now on things will be a bit 'damp' !

Sweden's Riksbank went even further, stunning the markets with a cut of 175 basis points to 2pc. The Swedish authorities are deeply alarmed by the collapse of vehicle sales at Volvo, as well as the large exposure of Swedish banks to the property crash in Eastern Europe
"We're moving towards a world of zero rates in Europe and the G10 countries, perhaps as soon as the second half of next year," said Michael Klawitter, a strategist at Dresdner Kleinwort.

Zero rates... or zero work?

Mr Trichet said the eurozone is likely to contract by 0.5pc next year amid a "hardening" of the credit markets. This is a dramatic reversal from the ECB's forecast of an economic rebound published in September. The bank has undoubtedly been startled by the latest PMI confidence data, which has a good record as a leading indicator and is now pointing to a brutal contraction of 2.7pc year-on-year in early 2009.

Startled? wtf... they havn't a clue. Economic rebound my @$$.

In France, President Nicolas Sarkozy unveiled a €26bn (£22bn) stimulus package of tax cuts and state spending to fight unemployment. It includes €1bn in loans for the French car industry, which is shutting a string of plants for up a month to clear an unprecedented glut of unsold vehicles. The state will build 100,000 new homes to keep construction alive.
Mr Sarkozy said the goal of restoring France's dilapidated public finances to good order could wait for better times. "Not doing anything now would have cost us much more. We're not going to sacrifice the present for the future. This crisis is an ordeal, a painful ordeal and a terrible ordeal, but we have to keep faith," he said.

The financial crisis is turning all religious for the French - painful ordeals and sacrifice all round.

Italy needs a stimulus package even more badly but is having to tread with care as markets fret over some €200bn of Italian state debt that must be rolled over next year. The yield spread on 10-year bonds has risen to 123 basis points over German Bunds. Giulio Tremonti, Italy's finance minister, insisted yesterday that state bonds were at no risk. "Buy them. They are absolutely solid".

Go on... go ahead and buy them... you can always trust the word of a politian.

Mr Trichet signalled for the first time that the bank is considering some form of "quantitative easing" (QE), the term used to describe the emergency measures pioneered by Japan during its Lost Decade and now being adopted by the US Federal Reserve.
"We are supplying liquidity on an unlimited basis. We will continue to look very carefully at the situation of the market and if needed we will take new decisions," he said, when asked about QE measures.

Here we are - QE - also known as printing more money - now apparently on an unlimited basis. Just so you know.

Julian Callow, Europe economist at Barclays Capital, said the ECB had been caught off guard as the crisis gathered pace this year but is now beginning to catch up. "They are still being too hesitant given the gravity of what is happening. Even so, it seems they are now preparing for quantititave easing and undoubtedly have other tricks up their sleeve," he said.

Yes far too hesitant... lets get on with it!! QE will do the trick. If not the conjuror will never fail to amaze!

The Maastricht Treaty prohibits the ECB from injecting stimulus by purchasing the government debt of the eurozone's fifteen states debt – a method known as "monetizing the deficit", or more crudely as "printing money".

Welcome to Weimar World - where wheelbarrows are wallets. Monetize. You know it makes sense.

But it can achieve the same effect by mopping up sovereign debt, mortgage securities, or even company debt on the open market, as the Fed has already begun to do. At the moment the ECB accepts some of these assets as collateral in exchange for loans, but it has not yet hit the atomic button by buying them outright with its own freshly-minted fiat money.

Ahhh... at last - the magic words fiat money... and the one big question no ones talking about - where does all this money come from? Watch this for some of the answers.

Thursday, 4 December 2008

The silent type

Just spotted this lightweight, heavily anicdotal piece about how the public are reacting to risk:

Where Safety-First Investors Are Putting Their Money

Figures released this week by the Bank of England suggest we could be seeing the beginnings of another bank run – as depositors head into the safest investments they can find. Except this time, the consequences could be a whole lot nastier. Because it’s not just one bank that has lost the trust of its customers. It’s the entire British banking industry....

No queues are forming outside any branches. No CEO memos are being read out to anxious customers. But, behind the scenes, depositors have started fleeing for the exits…

I’m reminded of a conversation I had with a friend two months ago. He was telling me he’d just that day transferred the bulk of his money into his wife’s account. Not only that, his mother and his sister had done the same.

“I’ve engineered my own mini bank run,” he told me. “I’m not proud, but it’s worth it for the peace of mind.”

What are you doing to protect your money?

Tuesday, 2 December 2008

Ice Storm

The latest reports from Iceland show that the local population know who to blame for their country's financial problems:

Protesting Icelanders storm bank, streets, over economy crisis

Reykjavik - What began Monday as a celebration of Iceland's 90th birthday since its independence from Denmark in 1918 turned into protests by several hundred people who stormed to the central bank in anger over the government's handling of the financial crisis.
Monday's protestors pushed into the Central Bank foyer, loudly demanding the resignation of Central Bank chief David Oddsson.

You can also see a video of the days events here.

Monday, 1 December 2008

Running Ahead

Most of the respondents on the bankrunwatch poll have now withdrawn their money from the bank for the first time since i started this blog. I dont know how significant this is as the numbers are low....