Funds flee Greece as Germany warns of "fatal" eurozone crisis
Quotes from the above article:
“Germany has triggered a near-panic flight from southern European debt markets by warning that there will be no EU bail-outs, even though it fears the region's economic crisis has turned dangerous and could prove "fatal" for the entire eurozone.”
“The yield on 10-year Greek bonds blasted upwards by over 40 basis points to 7.15pc in a day of wild trading. Spreads over German Bunds reached almost four percentage points, by far the highest since Greece joined the euro, and close to levels that risk a self-feeding spiral. Contagion hit Portuguese, Spanish, Irish, and Italian bonds.”
The above article brings a sense of realism to the fragility in global finances, do you feel a change in the air? Confidence in the recovery seems to be vanishing, have the illusionists run out of tricks? Exactly what are they up-to now: Secret summit of top bankers. Seems like there is a secret summit just about every weekend, and if they are really secret then why do we know about them?
Food for thought……
Speeking of food, there are a number official reports that would indicate this years global food harvest has been dismal, yet official numbers from the US show a bumper crop… so who do you believe?
Keep in mind the USA produces 30-40% of major global food crops.
See: *****2010 Food Crisis for Dummies*****
Also:
Global deep freeze threatens 2010 food supply
Food Shortages Coming, Buy Commodities: Jim Rogers
"Strong risk" of 2010 famine in Africa's Sahel: EU
But why would people lie about such a thing?
Well I do believe many markets are manipulated by paper contracts of many forms. In many cases the perpetrators can get away with it for years, but what about food? Does it matter how many futures contracts you have for grain at a fixed price, if the food does not exist you will not get your food, you will not take further contracts as payment like one might do with money, you actually want the real thing, your hungry customers demand it.
Futures contracts can be very dangerous, people get to rely on them like they really do represent something real, but at the end of the day they are just a promise to pay, if the payee has nothing to pay with then what?
Due to artificially low food prices which are enabled by futures contracts combined with questionable statistics, people are not adjusting their consumption based on supply & demand so when the truth comes out its too late, there’s little left for “a rainy day”.
It’s up to individuals to research and decide if this issue is real, but I thought it too important not to mention, I have to say reading through the above link that it is very convincing.
Let’s look at the world with our eyes open, how many have fallen in history by trusting in it. (The World)
To end with a happy quote:
“I am the bread of life; whoever comes to me shall not hunger, and whoever believes in me shall never thirst.” John 6:35
Funds flee Greece as Germany warns of "fatal" eurozone crisis
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FAQ - Getting Started in Precious Metals
|Subscribers please note there is a new section for beginner PM investors (and reference material for others to share with friends & family.
Below are commonly asked questions I am addressing to start with, please advise me if you have other questions you would like to see included. If you have any comments on the content I would be pleased to hear from you, this would help me to maintain a relevant and useful FAQ section.
Frequently asked questions:
What is the Standard weight & measures for precious metals?
What makes Gold & Silver suitable as money?
Did the gold standard cause the great depression?
What is Sterling Silver?
What are common bullion hallmarks (Brands), and does it matter?
The Emperor's New Clothes
|That’s the title of the famous short tale by Hans Christian Anderson, translated into over 100 different languages, well known and appreciated as the tale transcends different languages and cultures to the human condition, something everyone recognizes no matter where they are from.
I listened to this tale again just recently and it made me think about the current situation where very educated, professional and influential people are saying the recession is over, as a matter of fact they are laying future plans based on the recession being over, a similar condition exists around the world transcending culture and language, it’s that same human trait as described in the Hans Christian tale.
The experts say the recession is over, who are we lowly people to disagree, certainly most people would like the recession to be over, so if “they” say so and provide snippets of statistics to show it, most people will be inclined to take their word for it but maybe in their hearts of hearts they know something is wrong.
The little boy at the end of the tale proclaimed "But he isn't wearing anything at all!" Suddenly those around realized that it really was that simple, he really just had no clothes on. In our real life drama I’m saying the recession is not over, nothing has changed for the better and in-fact things are getting worse, and the truth is right in front of us, it’s that simple.
The below article describes how the New Zealand treasury are busy borrowing 250 Million dollars a week for our government, just to keep it running. There are only 4 million people in New Zealand! Yet the article tends to focus on how they raise the funds and how they must work hard to promote our bonds to do so, but not how crazy it is that we are borrowing like this in the first place! See: Treasury office keeps NZ afloat
The recession is not over when governments replace “the people” as borrower, governments get their money from “the people” in the first place. Will our government ever recover this money from tax payers without selling many major assets… I don’t thick so.
Even selling assets is more honest than what is going on in the US, I have suspected for some time that the major buyer of USD bonds has been the US itself! This would have been thought crazy only 1 year ago, yet they are doing it, and to a much higher level than outlined in their “quantitative easing” program, this is Zimbabwe economics and it’s really happing. See this article for more detail (a must read I think)
Bottom line is New Zealand, UK and US are still spending more than they earn (now at an accelerated rate), This extra borrowing is called “Stimulus”. But how do you stimulate an economy that is dying of indebtedness with more debt! It’s not logical, it’s a lie that all should see clearly, its right out in the open, its simple, not complicated, you don’t need to be highly educated to understand this, you don’t need to be the top dog in the reserve bank to know this. 36+ years of spending more than we earn will not go away in 1 year… have we started to pay it back…No. Have we at least stopped borrowing more…. No.
Lowering interest rates does make the burden more manageable, like transferring bricks from a back-pack to a wheel barrow, it’s easier to carry but the weight is still there and in-fact still growing bigger as more bricks are being added. Commentators suggest that with the “recession over” interest rates will need to be pushed up to curb inflation, the RBNZ likes to be imagined poised with their hand on the interest rate lever waiting for the first sign of recovery and inflation. Reality is there is no way our economies can stand increasing interest rates, this would be like taking the bricks in the wheel barrow that have now increased in number and putting them back in the back-pack, impossible to carry collapse will quickly follow.
Does debt really matter? Can’t “they” just print money and bail out businesses and even people?
Debt really does matter, if debt does not matter then neither does money, we cannot have it both ways. Making debt not matter with bailouts, stimulus and self funding debt (printing money to buy bonds) is the path of hyper-inflation. A path the US and UK are heading down, buying their own bonds means that debt obligations don’t matter, there is no limit to it, thus money changes from a limited token of exchange to a worthless piece of paper. Will NZ be following this example?
However I do think debt forgiveness is a good thing, this is different to a bailout. A bailout doubles the amount of money originally borrowed because the original amount is “out there” in the economy, the bailout amount is added making the pool of money bigger (Inflation).
Shakespeare said “Neither borrower or lender be”
I think the lender must take responsibility along with the borrower. However reality is our governments are not heading down this path, they are firmly on the bail and stimulate path, this is rapidly increasing the public burden and this will come back to bite.
“the borrower is servant to the lender” (Proverbs 22:7)
So who are the lenders to our government and population, what will they ask of our countries?
Debt is a task master, and like a servant indebted countries and people must ask their task masters first before they do anything, they are not free or flexible to changing situations.
It seems all too late to change the outcome now, the fireworks will come, ask yourself, are you prepared?
Purging debt is a very good place to start.
(Matthew 6:24) (1 Corinthians 7:23)
Famous last words
|Alan Bollard reserve back governor of New Zealand said on 14th July 09: "Early signs of global recovery have now emerged. We have avoided a repeat of the Great Depression,"
That sounds like a famous quote in the making, and this week AMP Capital Investors head of investment strategy, Jason Wong said "It has been a pretty mild recession in New Zealand," and "On balance, we think the recession is pretty much over,".
Could the above quotes become famous (or infamous) like these statements made not long after the crash of 1929:
"Financial storm definitely passed."
- Bernard Baruch, cablegram to Winston Churchill, November 15, 1929
"I see nothing in the present situation that is either menacing or warrants pessimism... I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress."
- Andrew W. Mellon, U.S. Secretary of the Treasury December 31, 1929
"I am convinced that through these measures we have re-established confidence."
- Herbert Hoover, December 1929
"...there are indications that the severest phase of the recession is over..."
- Harvard Economic Society (HES) Jan 18, 1930
"While the crash only took place six months ago, I am convinced we have now passed through the worst -- and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us."
- Herbert Hoover, President of the United States, May 1, 1930
"...by May or June the spring recovery forecast in our letters of last December and November should clearly be apparent..."
- HES May 17, 1930
In the New Zealand context of this global recession why do people think a problem 36 years in the making will be over in 1-2 years?
We have had current account deficits for 36 years in a row! this debt has not gone away, it has built up for 36 years, it has not dissolved into the ether, it was there waiting in the background the whole time (Now coming into sight), we have reached debt saturation, we have reached the end of a long rope we were given to hang ourselves with.
The rope we were given was long because we have green productive land, we could have used our resources to save and build a sustainable future, but as per normal the human condition took over, that being to get things now and pay for them later, we have sold our birth rights and partied away our inheritance.
But will our creditors act like the prodigal sons father who welcomed his son back with open arms after wasting his inheritance? Will our debts be forgiven by our foreign creditors. “Here, don’t worry about it New Zealand, sure you have wasted our money we lent you, and you have productive assets we want also, but lets just forget about it and be friends”
Reality is, the likely outcome will be forced productive assets sales to foreign creditor “friends” because they are the people we owe money to. After that we will not have productive assets to pay our remaining debt back with, we will be renters in our own land paying money to foreign companies who will own our power, telecommunications, refineries and possibly large productive farms etc..
Food for thought…
For a moment lets jump back to an infamous statement a few years before the Great Depression got underway:
"We will not have any more crashes in our time."
- John Maynard Keynes in 1927
There are plenty of quotes like this from others but this one is significant because our economist and central bankers were all taught Keynesian economics and that is the system they are following now. One of the pillars of Keynesian economics is to keep confidence in the monetary system, it focuses on perception to keep people lending and borrowing. We can see this written all over recent Reserve back of New Zealand statements (and other central banks). They spend more of their time maintaining the illusion because the fundamentals are so rotten that any light shone on them will bring an overdue correction.
So it is no wonder that we see continuing statements from “leading economists” that the recession is over and all is well, they have said that since the start, they are just following their training to provide confidence, then the problem will go away.
But as John Maynard Keynes found out a few years later, confidence will only get you so far…
Then later in 1933:
"All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S."
- President F.D. Roosevelt, 1933
People need to think and prepare, what if all banks were put on “bank holiday” after hours and the dollar was devalued by 50% overnight (Or worse), effectively robbing the public of their savings. These things have happened before (Argentina another example) will they happen again? I certainly would not rule it out, it would be wise to plan ahead for this type of event, once announced it is already too late.
Bye for now
Andrew
It’s Kitt to the rescue, finally!
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According to the latest RBNZ news release there is a new inflation busting piece of technology called KITT, no not the Kitt above (Sorry Micheal) I’m talking about Kiwi Inflation Targeting Technology (KITT).
Quote:
“The new Reserve Bank economic model. KITT replaces the decade-old Forecasting and Policy System (FPS) model, and will be an important tool for Reserve Bank forecasting and economic assessment into the future.”
Wow sounds impressive…
But wait there’s more…
According to the news release there are more tools at the RBNZ’s disposal other than KITT, yes they can extrapolate the statistical patterns in available economic data, but wait there’s more and I quote: “Another way the Bank obtains information for its economic assessments is through economic indicators. There are thousands of these indicators, covering New Zealand and elsewhere, which demand expert and careful analysis to distil the meaning.” Wow that sounds like alchemy , I sure hope they distil the right meaning and don’t blow themselves up!
I don’t know about you, but while they are trying to make Gold out of Lead, I think I would rather just buy the real thing.
And more:
The fourth article, "looks in detail at how public views on inflation are formed, discussing demographic evidence about how households consistently over-estimate inflation. The Reserve Bank's inflation analysis depends heavily on understanding how the public expects the economy to develop”
Yes it’s all about expectation and opinions, that’s where I went wrong, it has nothing to do with logic.
However that last statement says a lot about the nature of central banking, many people wrongly think it takes an expert in mathematics, a logic expert to guide a countries finances, after all money is just numbers on paper or computers, but actually it turns out it’s all about mixing expectations with some financial wizardry.
I can’t help but comment on the statement “households consistently over-estimate inflation” what a joke, the reserve banks job is to create inflation without anyone noticing it, they are part of the grand illusion. Do readers here believe the CPLie reports the real rate of inflation? Give me a break… (CPLie is my name for the CPI)
To be fair, the RBNZ and other central bankers around the world are fighting a big battle here, the battle against logic, so they need all the help they can get! It’s not easy to have debts mean nothing and money to mean something at the same time, some might ask “why do I work for money if debts in same said money don’t matter?”
Yes it is getting difficult for central bankers to maintain the illusion, just read the previous release from the RBNZ:
"We expect the economy to begin growing again toward the end of the year, but the recovery is likely to be slow and drawn out. It could also be erratic. To many households it may not feel like a recovery at all, with lower employment, house prices and wage increases into next year."
So they are expecting a recovery but no one will know it, you just have to believe it OK, do you have faith in the RBNZ or not?
Stay tuned…
Will KITT be able to inflate away debts and at the same time provide low inflation?
Will KITT be able to maintain the credibility illusion and escape the inflation monster?
Will KITT be able to make debts worth less and at the same time maintain the value of the currency they are in??!
In other words…Will KITT be able to defy logic??!
Tune in next week to find out…
Did the gold standard cause the great depression?
|“The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. Deficit spending is simply a scheme for the 'hidden' confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard." This was a wise and telling statement, but why did Alan not talk like this while running the FED? Unfortunately I think he corrupted his logic to be in the position he was, as Chairman of the federal reserve, pushing the gold standard would have made him very unpopular with politicians, who want to give people social benefits without taxing for them, in other words to get voted in, also Alan’s ego was massaged, he was held up as a genius. But really it does take a genius to hold together money based on nothing, to give them there due, it is not easy to hold up a piece of paper and declare it has real value or worth, and even that it’s worth is what ever they say it is, they are clever illusionists no doubt. (Alan was not the only old school central banker who recognized the discipline and benefits of the gold standard, see John Exter. "the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation." King Solomon once declared: "That which has been is what will be, “The Roaring 20’s” Quote: Appeals to buy were dinned in their ears hour after hour on radio, and the movies teased them with fantasies of beautiful people living frivolous lives in luxurious surroundings. Yet no matter how alluring the advertisements of new products, how could they buy? When the newspapers were not heralding heroes such as Charles Lindbergh, who flew the Atlantic, or Babe Ruth, who hit 60 homers in one season, they were front- paging the sex scandals of millionaires and movie stars. Publicity and advertising ballyhooed everything from an imported Chinese game, mah-jongg, to bathing beauty contests at Atlantic City to real estate in Florida, where swampy lots sometimes changed hands 10 times in one day, selling at prices incredibly above their real value. The stock market was soaring and prosperity was in full flood in 1928. Quote: Herbert Hoover took office in March 1929, confident in his own campaign prediction that the policies he had helped shape over the preceding eight years would soon banish poverty from the nation. Quote: It was a time to get rich quickly, and it looked like it could be done without much effort. A speculative fever took hold. Even the collapse of the Florida land boom in mid-decade did not cool it off. Those who gave up gambling on the Florida climate believed they could get rich just as effortlessly by gambling on the stock market. Of course, there were working people who had no extra funds to play with. In 1929 the Brookings Institution, an economic research group, made a national study of family income. Of the country’s 27.5 million families, 21.5 million, or 78%, were not doing so well. They earned under $3,000 a year. Among them were 6 million families with incomes under $1,000 a year.
Part 1
I think it is important to have a grasp on this subject, history is a great teacher, it is foolish to think of past events as inconsequential, however, to think this modern generation would not make the same mistakes is common, i.e. "we have laptop computers and far more access to data, we will not make the same mistakes", while history tells a different story, a repeating one.
Modern “Central banker types” seem naturally inclined to think the gold standard caused the Great Depression, gold is their enemy. Seriously gold is their nemesis as it puts power in the hands of “the people” rather than theirs. Without a gold standard they have the power to print money along with a complicated swath of activities to go with it, making them feel important “the wizards of finance” remember “the maestro” Alan Greenspan?
Without his monetary policy America might not have got where it is today… But maybe not all readers here will realize that Alan Greenspan is a closet Gold bug, below is a quote from Alan Greenspan from a 1967 article entitled Gold and Economic Freedo: 
The new Fed Chairman does not have even a hint of gold bug about him, there are no pro gold speech in his past to drag out, no just the opposite, Ben Bernanke considers himself a scholar of the great depression and what caused it, yes he thinks a lack of liquidity was at the root of it, and the gold standard was the restricting factor.
Referring to his speech in 2002 "Deflation: Making Sure "It" Doesn't Happen Here" I quote:
It is far beneath the modern central banker to have a gold standard, it is too simple, it does not require a series of degrees to work out gold backed money, it does not take a genius to work out you can’t spend more than you earn, so they don’t like it, they like a system that does take a genius.
So is Bernanke right? Did a lack of liquidity caused by the inflexible gold standard stop the “wizards of finance” working their magic, namely printing money without gold backing. Because of the gold standard they were unable to flood the market with money. They say it was lack of liquidity that was at the root of the problem. But in reality they did not get to the root of the problem they only made it from the branches down to the truck and stopped there, they needed to look deeper.
So now Ben and the others have their chance to shine, and they are going about it “hammer and tongs”, bailing this, buying that, money is really no object, there is no limit, they will stop deflation I’m sure. But here is the trillion dollars question: they may stop deflation but will they stop a 2nd Great Depression? Well the scene is set and the actors are in place we will soon see if the modern central backers are right.
As for me I’m one of those people who does not expect more from men than has been demonstrated in the last 4000 years! The studies I have carried out on the Great Depression surprised me in some ways but not in others. I was surprised to find out that debt was the major issue and root of the problem, people exhibited similar behavior in the 1920’s compared to 2000-7. On the other hand I was unsurprised in that it made logical sense rather than just saying “it was the gold standard”. We tend to think people were far more restrained back in the “good old days” that they were sensible about debt, they stayed away from it. But actually that’s the problem we weren’t looking far enough back to the bad old days, or deep enough to uncover the realities that are not in the central banker text books. The older generations I know or knew (being in my 30’s) avoided debt because of the hangover from the Great depression, while folks back in the roaring 20’s had a different attitude, one that was yet unchanged by what was to come.
That which is done is what will be done,
And there is nothing new under the sun.”
So were the roots of the Great Depression the same as our current developing financial crisis? In both cases a major cause was plain old debt, yes the debt of today has fancier names, and takes more bureaucrats to manage but debt is debt.
Following are some excerpts from the book “Brother can you spare a Dime” (I highly recommend reading this book)
Sound familiar! Quote:
Salesmen had an answer: offer the goods on credit. Soon almost anything could be bought on the installment plan. By 1929 three out of every four cars were being financed on time. The cautious American habit of buying only what could be paid for in cash gave way to a philosophy of “a dollar down and a dollar forever.” You took a chance on buying now because you believed business would keep prospering, and you, too, would have more money. So why not buy that Model T today, while you were young? Gambling on the stock market was another way of gambling on the future. Speculation was so widespread.
So, then as now there were many distractions in the media to cover up the real issues going on , these days the media has far more technology at there disposal to distract, and yes the real-estate boom sounds familiar, right!
This is an important point to understand, profits climbed higher also after the year 2000 because people were borrowing money to buy, so corperates made money without paying the wages to support the spending! This happened in the 20’s too. Also governments get a cut of the debt in the form of taxes as money changes hands, then trumpet their brilliant management of things.
In the New York Times of May 7, 1929, a full-page advertisement placed by True Story magazine trumpeted:
You business executives sitting at your desks, you have been making a fairy tale come true. Within ten years you have done more toward the sum total of human happiness than has ever been done before in all the centuries of historical time.
Yes, the twenties were a very good time for many Americans. More were doing well and living comfortably than ever before. Business profits spiraled rapidly upward, over 80% in that decade, climbing much higher than productivity.
The 1929 crash may have had its groundings in the real estate fall, but it did not trigger the collapse, people went into stocks next. As it turns out this time in 2007/8 they both went down together, I think this is just the start of things to come, at least for the “Western World”.
Sound familiar? So in the "roaring 20's" the middle class was actually under pressure, while all was well in the media, “just borrow and get what you need now”.
The 21.5 million families earning under $3,000, the study reported, were able to save nothing at all.
In part 2 I will draw some conclusions on the question "did the gold standard cause the great depression?"
Note to subscribers: this article will become part of the precious metals FAQ section.
THE DAMS A BUST'N
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WATCH OUT....FIREWORKS IN THE US TREASURY-BOND MARKETS
Many of you might not be aware....or on the other hand...maybe you are. The treasury and bond markets are blowing up as we speak. This is not a normal correction...or what happens in response to the stock markets. We all know, that when the stock markets head higher, so do the treasury and bond rates. The opposite is true as well. We have to remember, that when treasury-bond rates head higher...the yields head lower...thus these investors lose money.
The fed is trying to keep long rates down...by buying 10 year treasuries. Also, the 30 year bond rate (which is not that important as the 10 year) has importance on the mortgage rates as well. So 10 year and 30 year treasuries-bonds are what determines the mortgage rates. In just 2 days 30 year mortgage rates went up from 4.75% to now 5.25-5.5%. Many of those who were getting refinancing just got kicked out of their loan application ...now unable to qualify for the loan.
Not only are long term treasury and bond rates heading higher, but so are the short term ones. This is highly problematic for the fed, treasury and the fiat dollar. Take a look at the different treasury rates:
6 MONTH TREASURY
1 YEAR TREASURY
2 YEAR TREASURY
10 YEAR TREASURY
30 YEAR BOND
If you look at the shorter treasuries (6 month, 1 yr, 2yr) you will notice that on Friday last week they just went off the charts. Treasuries don't move in this fashion. Furthermore, the longer treasuries and bonds are not moving up as fast but are still heading higher as the stock market heads lower or stays the same. Today, even though the stock market was down most of the day, most of the treasury rates went higher.
Bob Chapman who is on the discount gold & silver trading show on mon-wed-fri, stated that the govt is losing control of the treasury markets. The treasury market is many times larger than the stock market. If you have not listened to his Friday show on June 5th, here is the link:
BOB CHAPMAN FRIDAY JUNE 5:
http://libertyarchives.com/farlive/FS2_FRI.MP3
BOB CHAPMAN TODAY JUNE 8:
http://libertyarchives.com/farlive/FS2_MON.MP3
Folks, we are coming to a significant dislocation in the markets. Within the next 2-4 months the whole sha-bang could come to an end...and that is the US dollar, and us treasury markets.
Furthermore, the bric countries are having a meeting on June 16 to discuss global markets:
BRIC countries (Brazil, Russia, India and China): A new global order emerging!
| On June 16, at Brazil’s urging, BRIC leaders will meet in Russia to discuss an ambitious agenda: overhauling the international financial system, enlarging the United Nations Security Council and dumping the dollar as the world’s reserve currency. |
It’s only a matter of time folks before gold and silver take off, too many nails against the US dollar and treasury markets.
I will show in my next post the real reason that silver and gold got clobbered last year. Remember this....it was on July 15. That is the key...it won't happen again this year. No more bullets left.
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Looking forward to the follow up post Steve, thank you!
