and when finally the bottom fell out i became withdrawn ...€¦ · idiot wind “i heard the sound...

THINGS THAT MAKE YOU GOHmmmhellipA walk around the fringes of finance

23 July 2011 1

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80

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120

140160180

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320340

N

S

W

E

NW

NE

SW

SE

ldquoAnd when finally the bottom fell outI became withdrawnThe only thing I knew how to doWas to keep on keeping on like a bird that flewTangled up in bluerdquo

ndash BOB DYLAN TANGLED UP IN BLUE

ldquoIdiot windBlowing through the dust upon our shelvesWersquore idiots BabeItrsquos a wonder we can even feed ourselvesrdquo

ndash Bob Dylan Idiot Wind

ldquoI heard the sound of a thunder it roared out a warninrsquoHeard the roar of a wave that could drown the whole worldHeard one hundred drummers whose hands were a-blazinrsquoHeard ten thousand whisperinrsquo and nobody listeninrsquoHeard one person starve I heard many people laughinrsquoHeard the song of a poet who died in the gutterHeard the sound of a clown who cried in the alleyAnd itrsquos a hard and itrsquos a hard itrsquos a hard itrsquos a hardAnd itrsquos a hard rainrsquos a-gonna fallrdquo

ndash Bob Dylan A Hard Rainrsquos A-Gonna Fall

2THINGS THAT MAKE YOU GO Hmmm

23 July 2011 2

As dates go February 17 is a fairly inauspicious one

It was the day in 1801 that saw Thomas Jefferson elected as President after a tie with Aaron Burr was resolved by the House of Representatives 103 years later it saw the premiere of Madame Butterfly at La Scalia in Milan and in 1933 the Blaine Act ending prohibition was toasted far and wide

In 1964 Gabonese president Leon Mrsquoba (contrary to popular rumors NOT the inspiration for the Grammy-nominated Hanson song of the (almost) same name) was toppled by a coup the Volkswagen Beetle overtook the Model T Ford as the worldrsquos best-selling car in 1972 and in 2003 the Congestion Charge was introduced to a delighted London public

But in 2008 on this nondescript day as Michael Jordan celebrated his 45th birthday and the rest of the world rejoiced in Paris Hilton reaching her 27th an event took place that I suspect in years to come may be seen as something of a turning point The event to which I refer didnrsquot make it into Wikipediarsquos list of events that happened that day barely made it into the mainstream press and its significance has been downplayed by pretty much everybody who has been asked to comment on it

It took place on Kish ndash a 915km island in the Persian Gulf which lies 19 miles from the coast of Iran Contradiction in terms though it may seem the island part of Hormozgān Province is described by Wiki-pedia as

ldquo a consumerrsquos paradise with numerous malls shopping cen-tres tourist attractions and resort hotelshellipKish Island was ranked among the worldrsquos 10 most beautiful islands by The New York Times in 2010 and is the fourth most visited va-cation destination in the Mid-dle East after Dubai UAE and Sharm el-Sheikhrdquo

Whorsquoda thunk it

For the visitor Kish boasts such delights as a 170-acre Dolphin Park amp Butterfly Garden an aquariumhellip and as of February 17 2008 an International Oil Bourse

ldquoThis notion that the United States is getting ready to attack Iran is simply ridiculousHaving said that all options are on the tablerdquo

-- President George W Bush February 2005


23 July 2011 3

When it was launched the Iranian Oil Bourse was set up to trade contracts in Euros Iranian Rials and a basket of other currencies ndash in fact pretty much anything but US Dollars which

the Iranians had stipulated the previous year were no longer welcome as payment for their oil

Though the establishment of this exchange was hardly a surprise even though it had received little or no coverage in the West its potential importance had been noted by some observers as far back as 2006 when it was little more than a pipe dream In an article entitled ldquoIranrsquos Oil Bourse A Threat To The US Economyrdquo Niusha Boghrati wrote

ldquoWhile Iranrsquos nuclear program has become a major focus of the international media there are many who strongly believe that the program is only a cover for the US governmentrsquos true motive in a possible attack against Iran

What some analysts posit is the real concern for the United States is Iranrsquos plan to open its own oil exchange mdash the Iranian Oil Bourse (IOB) mdash with the alleged goal of becoming the dominant center of the Middle Eastrsquos oil trade

What makes the IOB the subject of such interest by the American government According to rumors which first vaulted the issue into the spotlight the financial exchange in the aforementioned bourse will trade for oil in euros in-stead of the US dollarhelliprdquo

Pretty standard conspiracy theory stuff ndash nuclear pro-grams ulterior motives world dominance and money ndash

lots of money Ian Fleming would have been proud

Boghrati continued

ldquoThe debate over the ultimate financial impact of trading oil in euros rather than dollars is a com-plex one but according to some experts such a move could lead to a huge drop in value for the American currency potentially putting the US economy in its greatest crisis since the depression era of the 1930srdquo

Thanks to the actions of the folks at the Federal Reserve between Boghratirsquos article being published and the planned opening of the IOB in early February 2008 the dollar had already suffered a ldquohuge drop in valuerdquo declining some 15 before the ribbon across the doors of the exchange was due to be cut Then the tale took another turn for the bizarre when submarine internet cables were mysteri-ously cut crippling Iranrsquos internet and not only postponing the opening of the IOB but casting serious doubts upon its viability

(MarketWatch Feb 8 2008) Nobody knows what caused the cut cables in the Mediterranean that interrupted Internet service to parts of the Middle East last week but there are now conspiracy theories galore written by bloggers and pundits

This concept seems a little farfetched until you look at the details which were provided to me by one of my readers Martin Kuplens-Ewart who has been following the story from the outset He notes ldquothere is a substantial event that has effectively been killed by the loss of connectivity the launch of the Iranian Oil Bourse

ldquoA marketplace for oil gas and various petrochemicals the Iranian Oil Bourse would trade exclu-sively in non-dollars and probably substantial negative impact to the US economy and financial

ldquo such a move could lead to a huge drop in value for the American currency potentially putting the US economy in its greatest crisis since the depression era of the 1930srdquo


23 July 2011 4

system The bourse was scheduled for launch this week (between Feb 1 and 11 With complete elimination of Internet connectivity to the country this launch is now impossible and unlikely to be achievable before monthrsquos end (given the estimate 10-14 days for repairs to fiber-optic cables)

This sort of telecom and Internet failurecollapse no matter what the cause is unlikely to give anyone confidence in an international oil trading system on Kish Island Too much money is at riskrdquo

The problem facing the IOB at this stage was one of credibility They needed to prove their systems were robust but more importantly they needed a trading partner ndash a BIG trading

partner ndash both to legitimize the idea and provide the transaction flow that would establish it as a true trading hub

Perhaps unsurprisingly Venezuela was quick to offer its support to the Bourse and some lip service was paid by the likes of India but with roughly 70 of global oil trade being conducted in dollars the IOB was certainly facing an uphill battle It was the severity of this challenge that led many experts to conclude that the IOB was destined to fail Russian economist Natalia Arlova had this to say at the time

ldquoGiven the fact that Iranrsquos share of the international oil market is somewhere around 5 percent I do not believe that it can really absorb enough customers around the globehellip And Iranrsquos unstable political system is another obstacle Let us not forget that one of the biggest characteristics of the international oil trade centers is stability Apart from that the reason the US dollar has been the dominant currency in the oil trade is the huge share America has in the global economy I do not think that only Iranrsquos ambition to replace the dollar with the euro will be enough There are much bigger factorsrdquo

All fair points to be sure but Iran wasnrsquot the first country to attempt to break free of the shackles of the US Dollar

In late-2000 Time magazine ran the following story about events in another Middle Eastern nation

ldquoEuropersquos dream of promoting the euro as a competitor to the US dollar may get a boost from Saddam Hussein Iraq says that from now on it wants payments for its oil in euros despite the fact that the battered European currency unit which used to be worth quite a bit more than $1 has dropped to about 82[cents] Iraq says it will no longer accept dollars for oil because it does not want to deal ldquoin the currency of the enemy

The switch to euros would cost the UN a small fortune in accounting-paperwork changes It would also reduce the interest earnings and reparations payments that Iraq is making for damage it caused during the Gulf War a shortfall the Iraqis would have to make up

The move hurts Iraq the UN and the countries receiving reparations So why is Saddam doing it Diplomatic sources say switching to the euro will favor European suppliers over US ones in com-peting for Iraqi contracts and the PR boost that Baghdad would probably get in Europe would be another plusrdquo

That idea didnrsquot end too well for Saddam However in the wake of his lsquoremovalrsquo and after stability had been restored Iraq returned to the international oil markets - interestingly enough with one rather noticeable change

(FT June 5 2003) The tender for which bids are due by June 10 switches the transaction back to dollars -- the international currency of oil sales - despite the greenbackrsquos recent fall in value Sad-


23 July 2011 5

dam Hussein in 2000 insisted Iraqrsquos oil be sold for euros a political move but one that improved Iraqrsquos recent earnings thanks to the rise in the value of the euro against the dollar

Clearly whether one is a conspiracy theorist or not the emotive issue of oil pricing is one that will forever be surrounded by intrigue and the very existence of the IOB puts Iran right where

it seems to want to be - firmly at the centre of the web As Italyrsquos Panorama magazine commented in an article published back in 2005

ldquoThe weapon of oil in the hands of Iranrsquos regime is more dangerous than any other weaponrdquo

That particular article also contained the thoughts of Iranrsquos then-Deputy Oil Minister Mohammad Javad Assemipour director of the IOB program who was understandably bullish about the prospects for the bourse and seemed certain that change was at hand

ldquoIranrsquos oil exchange with the regionrsquos countries and also some of the East Asia states will take place in euros instead of US dollarsrdquo

Eight months after the launch of the IOB in October of 2008 Iranian President Mahmoud Ahmadine-jad stepped up the pressure on the US when he addressed the 29th meeting of the Council of Minis-ters of the OPEC Fund for International Development in the Iranian city of Isfahan

ldquohellipThe fall in the value of the dollar is one of the biggest problems facing the world today The damage caused by this has already affected the global economy particularly those of the energy-exporting countries Therefore I repeat my earlier suggestion that a combination of the worldrsquos valid currencies should become a basis for oil transactions or (OPEC) member countries should determine a new currency for oil transactionsrdquo

Shortly after the IOB opened the dollar had staged a phoenix-like rally in the wake of the Bear Stearns collapse which only got stronger with the

subsequent demise of Lehman Brothers as the flight-to-quality became a stam-pede The Iranian Oil Bourse became yesterdayrsquos news as the price of crude plummeted below $40 and despite oilrsquos steady climb back to $100 visitors to Kish were far more likely to want to see the inhabitants of the Dolphin Park than to try and ensure Iranian oil trading was about to change the world more

a sense of porpoise than a sense of purpose if you will

That was then

But this is now and things have changed again this week as the IOB returned to relevance ndash sort of ndash though unless you looked for the news yoursquod have been struggling to find it as it took the next step down the trouble-strewn road to becoming the centre of the oil-trading universe by offering high-grade oil for sale

(oilpricecom) ldquoMohsen Qamsari deputy director for international affairs of the Iranian Na-tional Oil Company was modest about the exchangersquos initial capabilities saying ldquoThe commod-ity stock exchange has been pursuing a mechanism for offering crude oil on the stock exchange for a long time and it has taken the preliminary steps to the extent possible Considering the existing banking problems foreign customers are not expected to be taking part in the first phase of offering crude oil on the stock exchange and this will be done on a trial basis To-day Bahregan heavy high quality low sulfur crude oil with less sourness will be offered on the

ldquohellipThe fall in the value of the dollar is one of the biggest problems facing the world today


23 July 2011 6

stock exchange for the first time In the first phase a 600000 barrel shipment will be offeredrdquo Given that the world currently consumes roughly 83 million barrels of crude oil each day the initial oil offerings at the Iranian stock exchange are hardly going to make or break the market but they do represent an attempt by a significant oil producer to divert revenue streams from New York Mercantile Exchange the worldrsquos largest physical commodity futures exchange which handles West Texas Intermediate benchmark futures and Londonrsquos Intercontinental Exchange which deals in North Sea Brent All trades are in dollars effectively giving the US currency a monopolyrdquo

So how did the first day of trading go Well not good

(Business Insider) ldquohellip[trading] got off to a lousy start 600000 barrels of Bahregan heavy crude oil at a base price of $11260 per barrel were offered on its first day of trading but dealers refused to pay over $10965 End result Zero transactionsrdquo

But before we go condemning the IOB to the graveyard of bad ideas (along with Leisure Suits Hair Club For Men Rocky V Jedward and the Maginot Line) we ought to remind ourselves of

the key ingredient needed for the IOB to eventually become a success ndash a BIG trading partner Back in 2006 the lack of such a trading partner was the fundamental flaw in Iranrsquos masterplan but NOWhellip well now things are somewhat different

(oilpricecom) ldquoChina the worldrsquos largest buyer of Iranian crude oil has renewed its annual import pacts for 2011 In 2010 Iran supplied about 12 percent of Chinarsquos total crude imports According to the latest report of the China Customs Organization Iranrsquos total oil exports to China stood at 8549 million tons between January and April 2011 up 32 percent com-pared with the same period last year Iran is currently Chinarsquos third largest supplier of crude oil providing China with nearly one million barrels per day

Chinarsquos Ambassador to Tehran Yu Hung Yang addressing the Iran-China trade conference in Teh-ran on Monday said that the value of the two countriesrsquo trade exchanges surged 55 percent dur-ing the first four months of 2011 over the same period a year ago to $1328 billion and further predicted that the figure would surpass $40 billion by the end of the year

So while Washington prepares to commit political hara-kiri Iran is preparing to take away a little of the capitalist glow from New York and London If the Chinese decide to start paying for their Iranian purchases strictly in yuan expect the trickle away from the dollar in energy pricing to be-come a stampede

Neither China nor Iran have any particular affection towards the dollar The Chinese tolerate it - for now - as a means of doing business but are diversifying their dollar holdings into more tangible as-sets just about as fast as they possibly can (fortunately the Fed has been - at least until June 30th - an obliging buyer of unwanted paper and a perfect combination of Australia and an ever-growing mul-titude of African nations are willing sellers of just about anything and everything the Chinese would rather own) before the inevitable point in time when they are ready to express a lsquodesirersquo to have the Yuan play a more prominent role in world finance while the Iranian administration are fairly open about their own feelings towards lsquoThe Great Satanrsquo and what Iranian President Mahmoud Ahmadine-jad calls lsquoa worthless piece of paperrsquo a point he elaborates upon when declaring that ldquothe era of the dollar has passedrdquo

ldquo while Washington prepares to commit political hara-kiri Iran is preparing to take away a little of the capitalist glow from New York and Londonrdquo


23 July 2011 7

Whether Ahmadinejad is right or not about the future of the dollar is a debate

that draws in new opinions almost daily but one thing is for certain - a big part of its foundation comes from the fact that it is the primary currency in which oil is priced Any serious change to that situation will cause immense problems for an already weakened and weakening currency The massive surge in the sheer number of dollars in circulation in recent years (chart left) will only exacerbate any weakness and the rapidly deteriorating quality of the USrsquo balance sheet as it buys hundreds of billions of dollars of questionable debt along with a similar amount of its own Treasury issuance will ultimately only serve to hasten its demise once it begins

Could such a thing - so completely unthinkable a few short years ago - actually happen Of course it couldnrsquot but then it hardly seems like yesterday that NBER Board members Menzie Chinn and Jef-ferey Frankel (from the University of Wisconsin and Harvard University respectively) presented to the NBER conference on G7 Current Account Imbalances Sustainability and Adjustment a paper entitled

Will the Euro Eventually Surpass the Dollar As Leading International Reserve Currency

It was in fact June 1 2005 (in Rhode Island to be precise) when they gave this speech which kicked off with these words

Might the dollar eventually follow the precedent of the pound and cede its status as leading inter-national reserve currency Unlike the last time this question was prominently discussed ten years ago there now exists a credible competitor the euro

Chin and Frankelrsquos summary makes for interesting reading

The major pay-off of the paper is predictions about scenarios under which the euro might in the future rival or surpass the dollar as the worldrsquos leading international reserve currency That ques-tion appears to depend most importantly on two things (1) whether enough other EU members join euroland so that it becomes larger than the US economy and in particular whether the UK comes in with its large financial markets and (2) whether US macroeconomic policies eventually undermine confidence in the value of the dollar through inflation and depreciation Whatever value this exercise has probably consists of estimating contingent on those two things happening how quickly the euro might rise to challenge the dollar We find that if all 13 EU members who are not currently in EMU join it by 2020 including the United Kingdom then the euro overtakes the dollar a few years later We also find that even if some of these countries do not join a continua-tion of the recent trend depreciation of the dollar were it to occur for whatever reason could bring about the tipping point even sooner

Euro enthusiasts suffered some setbacks in mid-2005 But most assessments of the sustainability and adjustment of the US current account see a role for substantial depreciation of the dollar in the future whether operating via expenditure-switching or a valuation effect Our results suggest that such dollar depreciation would be no free lunch and could have consequences for the func-tioning of the international monetary system as profound as the dollarrsquos pre-eminent international currency position and along with it the exorbitant privilege of easily financing US deficits

SOURCE ST LOUIS FED


23 July 2011 8

As I write this the Eurozonersquos 17 constituents are as follows Austria Belgium Cyprus Estonia Finland France Germany Greece Ireland Italy Luxembourg Malta the Netherlands Por-

tugal Slovakia Slovenia and Spain (if by the time I publish this edition of Things That Make You Go Hmmm that list has changed at all please donrsquot email me things move fast lately) and of those countries Cyprus Malta Slovakia and Slovenia have been admitted AFTER Chinn amp Frankelrsquos speech

Currently the wider EU consists of 27 Member States The Eurozone countries plus Bulgaria the Czech Republic Denmark Hungary Latvia Lithuania Poland Romania Sweden and the United Kingdom There are five official candidate countries Croatia Iceland Macedonia Montenegro and Turkey Al-bania Bosnia and Herzegovina and Serbia are officially recognised as potential candidates and Kosovo is also listed as a potential candidate but the European Commission does not list it as an independent country because not all member states recognise it as an independent country separate from Serbia

So back in 2005 Chinn and Frankel thought that the best chance for the dollar to hang on to its re-serve currency status for a few more years was if Bulgaria Cyprus the Czech Republic Denmark Hun-gary Latvia Lithuania Malta Poland Romania Slovakia Slovenia Sweden and the United Kingdom JOINED the Eurozone and presumably weakened the Euro Four down 10 to go

The Euro however is doing a quite remarkable job of torpedoing itself without the assistance of the likes of Lithuania and Latvia as Greece and the rest of the PIIGS slowly crumble It is strong testament indeed to just how precarious the dollarrsquos position actually IS when a currency that is literally being held together solely by the promises of a group of the poorest political minds in living memory is managing to strengthen against it

We are the hollow menWe are the stuffed menLeaning togetherHeadpiece filled with straw AlasOur dried voices whenWe whisper togetherAre quiet and meaninglessAs wind in dry grassOr ratsrsquo feet over broken glassIn our dry cellar

Shape without form shade without colourParalysed force gesture without motion

This is the way the world endsThis is the way the world endsThis is the way the world endsNot with a bang but a whimper - TS Eliot The Hollow Men

Despite the outcome of the latest summit in Europe and the application of another admit-tedly slightly more robust-looking tourniquet to the Euro the lsquofixrsquo is like all the others only

short-term in nature Sooner or later equilibrium will be found naturally and when it is it will not be as a direct result of political solutions

The Euro is a failing dream The dollar a broken promise Astride them both stands gold


23 July 2011 9

The events on that tiny island in the Persian Gulf this past week seem at first glance to be little more than a whimper But wersquod be well-advised to pay careful attention for that is precisely

how worlds end

So what exactly IS happening in that world Well funnily enough plenty as the see-saw of paranoia tips from Europe (where once again financial faith has been miraculously restored by

the soothing words of a group of politicians whose hour upon the stage is drawing to a close) to the United States (where another group of politicians continue to play chicken with the worldrsquos largest overdraft)

Today we hear a heartfelt plea for default from Ron Paul and read how the Fed is preparing for just such an eventuality Portugalrsquos incoming Prime Minister finds a rather nasty house-warming gift in the shape of a euro2 billion hole in the budget (Greece 2009 anybody) Chinarsquos banks are playing fast and loose with wealth management money and we revisit Dubai to find that the property market there shows no sign of turning around any time soon

In Europe the announcement of a debt panacea is challenged by Jeremy Warner (who sees trouble ahead as German taxpayers are asked to foot the bill for Greece) Tyler Durden (who sees trouble ahead as German taxpayers are asked to foot the bill for Greece) and Matthew Lynn (who probably also sees trouble ahead as German taxpayers are asked to foot the bill for Greece - but focuses on the fact that printing money is now also Europersquos only way out)

Speaking of Greece we travel to the Aegean to assess the likely long-term effects of continued auster-ity and from there itrsquos only a hop skip and a jump to Italy where the situation seems to be going from bad to worse in a country that is the epitome of lsquotoo big to bailrsquo

But itrsquos not all doom and gloom - just as long as you are Indian and have something to celebrate - as we examine the increasing fascination with lsquosilver biscuitsrsquo on the sub-continent

In our charts section we try to ascertain whether itrsquos the Republicans or Democrats we have to blame for the huge US deficit (see if you can guess which way THAT conundrum resolves itself) take a look at gold and silver charts ahead of next weekrsquos COMEX options expiry and Doug Short shows us that gasoline consumption in the US just hasnrsquot recovered and shows no signs of doing so We also see a fascinating change in the patterns of the coal trade in the last 30 years

Marc Faber talks to Jim Puplava about QE3 the dollar and inflation and gives a bravura performance (thank you Laura) John Embry ponders $100 silver and hyperinflation with Eric King and in case you havenrsquot seen it already this week we take an absolutely AMAZING look at 60 seconds on the CO-MEX that will blow your mind and do more damage to the paper-silver-markets-ARENrsquoT-manipulated crowd than anything I have seen in a long long time - donrsquot miss it (in fact if you just canrsquot wait you can skip straight to it by clicking HERE)

All that and a cool quarter of a billion dollars spent by the FDIC late on Friday night as three more banks hit the skids

Got Gold


23 July 2011 10

Contents 23 July 2011

Portugalrsquos Prime Minister Pedro Passos Coelho discovers lsquocolossalrsquo budget hole

The Fed Wall Street plan for default

The Fatal Flaw In Europersquos Second ldquoBazookardquo Bailout

Greece Threatened with Widespread Long-Term Poverty

How Chinarsquos Banks Risk Wealth Management Cash

Dubai house prices keep on falling as market bust deteriorates

Printing money is Europersquos only way out

Italyrsquos Downward Spiral Accelerates

Silver lsquobiscuitsrsquo - the booming new Indian gifting option

Default Now or Suffer a More Expensive Crisis Later Ron Paul

German taxpayers are being asked to socialise Europersquos debts

Charts That Make You Go Hmmm

Words That Make You Go Hmmm

And Finally

The Gonnie Gonnie Banks

Bank Assets ($m) Deposits ($m) Cost ($m)

56 Southshore Community Bank Apollo Beach FL 463 453 83

57 LandMark Bank of Florida Sarasota FL 2750 2467 344

58 Bank of Choice Greely CO 10070 9249 2136

Total Cost to FDIC Deposit Insurance Fund 2563


23 July 2011 11

Portugalrsquos new leader Pedro Passos Coelho has told the nation to brace for further austerity measures after his government discovered a ldquocolossalrdquo euro2bn (pound17bn) hole in the public ac-

counts left by the outgoing Socialists

Yields on two-year Portuguese debt rose to a fresh record of 203pc on Monday reflecting fears by investors that the country would struggle to pull itself out of downward spiral without some form of debt restructuring

Mr Passos Coelho also appeared to caution the European authorities that his government will not tolerate heavy-handed interference in the country

ldquoWe want to take part in an ambitious European project and make our contribution so Europe can confront its problems in the most ambitious way but as prime minister I will not stand by and let Europe govern Portugalrdquo he told a party gathering

There is growing rancor in Lisbon over the term of the euro78bn rescue by the EU and the International Monetary Fund and the sweeping powers of the inspectors as they impose a ldquostructural adjustmentrdquo on the economy

The penal rate of interest charged by the EU is expected to top 55pc and risks trapping the country in debt-deflation At the same time fiscal austerity without off-setting monetary stimulus or devaluation may tip the economy into an even deeper downturn

EU officials are pushing hard for a 100 basis points reduction in rates on rescue loans hoping to win backing from a reluctant Germany at an EU summit on Thursday

The revelation of a budget hole in Portugal has echoes of what occurred in Greece in late 2009 when an audit by the new Pasok government exposed a budget deficit twice the level previously declared to the European Commission

Portugalrsquos government will have to cover the gap with another round of spending cuts mostly in the civil service and state-owned industries The sacrosanct Christmas Bonus is already being slashed effectively cutting salaries

Portugal is obliged to cut the budget deficit to 59pc of GDP this year under its rescue terms This looks like a Sisyphean task since the deficit was still 87pc in the first quarter and further austerity will have the side-effect of choking tax revenue The experience of Greece is that the country can find itself chasing its tail with the deficit remaining stubbornly high in a shrinking economy Portugalrsquos central bank said the economy will contract a further 18pc next year

ldquoThere are limits to cutting you canrsquot just cut blindlyrdquo said Mr Passos CoelhoO O O AMBROSE EVANS-PRITCHARD LINK

With less than two weeks before the United States cannot borrow more money the Federal Reserve and Wall Street are making plans to prepare for the countryrsquos possible default on

its $143 trillion debt

In the most revealing comments to date Charles Plosser the president of the Philadelphia Federal Reserve told Reuters the nation has for months been in ldquocontingency planning moderdquo to deal with the fallout when the federal government runs out of money

ldquoThe revelation of a budget hole in Portugal has echoes of what occurred in Greece in late 2009 when an audit by the new Pasok government exposed a budget deficit twice the level previously declared to the European Commissionrdquo


23 July 2011 12

ldquoWe are developing processes and procedures by which the Treasury communicates to us what we are going to dordquo Plosser said ldquoHow the Fed is going to go about clearing government checks Which ones are going to be good Which ones are not going to be good There are a lot of people working on what we would do and how we would do itrdquo

The Treasury Department has repeatedly denied making plans for default saying raising the debt ceil-ing is the lone acceptable option A spokesman did not comment to Reuters

Wall Street officials are in the same boat devising what the New York Times called ldquodoomsday plans in case the clock runs outrdquo

Meanwhile the Wall Street firms the Times wrote are seeking to reduce their risk related to Treasury bonds while hedge funds are hoarding cash to purchase US debt if the price plummets in the event of a post-default sell-off

The paper wrote that a full-scale financial panic has not set in but is close

ldquoThe metaphor is a pile of sandrdquo Mark Zandi the chief economist at Moodyrsquos Analytics told the Times ldquoYou keep putting one piece of sand on the pile nothing happens and then all of the sudden it just cavesrdquo

Plosser also told Reuters that despite the shaky economy the Fed may raise interest rates before the year is out He said he expects the unemployment rate now at 92 percent to fall to 85 percent

ldquoI donrsquot see the fundamentals of the economy as changed that muchrdquo he said ldquoYeah therersquos been some shocks and disruptions but the underlying forces that are going to cause us to continue a slow moderate recovery are still in placerdquo

O O O POLITICO LINK

A funny thing happened in Euro spreads today While the bonds of all PIIGS countries surged higher in price (and plunged in yield) upon the announcement of the second Big Bang bail-

out the reaction in core Eurozone credit was hardly as exuberant and in fact spreads of the two core European countries pushed wider by the end of the day and over the last week Why After all the elimination of peripheral risk should have been seen as favorable for everyone involved most certainly for those who had been seen as supporting the ever more rickety house of European cards Well no Basically what happened today was a two part deal the i) funding of future debt for coun-tries that are currently locked out of the market (all the PIIGS and possibly core countries soon) or in other words the ldquoliquidity mechanismrdquo which is being satisfied by the EFSF ldquoTARP-likerdquo expansion and ii) the roll-over mechanism for existing holders of debt which ldquoallowsrdquo them to ldquovoluntarilyrdquo transfer existing obligations into a ldquofresh startrdquo Greece which can then emerge promptly from the Selective Default state that is coming from Moodyrsquos and SampP any second and supposedly allow the country to access markets as a non-bankrupt country

For all intents and purposes the second can be ignored because as has been made clear over the past few days and as will be demonstrated below the actual rollover from non-Peripheral banks will be de minimis the bulk of impaired debt being held by banks in the host countries as is and used as col-lateral with the ECB in the form of par instruments for cash

Now the second part of the mechanism was never an issue further demonstrated by the plunge in

ldquo ldquoYou keep putting one piece of sand on the pile nothing happens and then all of a sudden it just cavesrdquo


23 July 2011 13

net notional in Greek CDS as core banks no longer needed to hedge exposure and instead opted to divest their holdings This is merely a red herring that attempts to confuse the issues associated with the first and far more important concept the nuances of the EFSF and its imminent expansion And expand it will have to because in reality what is happening is that the net debt of the countries will

end up growing even more over time for one simple reason this is not a restructuring of existing debt from the perspective of the host country Simply said Greek debt will continue growing as a percentage of its GDP meaning it and Ireland and Portugal and soon thereafter Italy and Spain will be forced to bor-row exclusively from the EFSF Therein lies the rub In a just released report by Bernstein which has actu-ally done the math on the required contributions to the EFSF by the core countries the bottom line is that for an enlarged EFSF (which is what its blank check

expansion today provided) to be effective it will need to cover Italy and Belgium As AB says ldquoits fire-power would have to rise to euro145trn backed by a total of euro17trn guaranteesrdquo And here is where the whole premise breaks down if not from a financial standpoint then certainly from a political one ldquoAs the guarantees of the periphery including Italy are worthless the Guarantee Germany would have to provide rises to euro790bn or 32 of GDPrdquo Thatrsquos right by not monetizing European debt on its books the ECB has effectively left Germany holding the bag to the entire European bailout via the blank check SPV The cost if things go wrong a third of the country economic output and the worst case scenario a depression the likes of which Germany has not seen since the 1920-30s Oh and if France gets downgraded Germanyrsquos pro rata share of funding the EFSF jumps to a mindboggling euro1385 tril-lion or 56 of German GDP

The Europarliament ECB and IMF may have won their Pyrrhic victory today But what happens to-morrow when every German (in a population of 82 very efficient million) wakes up to newspaper headlines screaming that their country is now on the hook to 32 of its GDP in order to keep insolvent Greece with its 50-some year old retirement age not to mention Ireland Portugal and soon Italy and Spain as part of the Eurozone

O O O ZEROHEDGE LINK

Greece is tightening its belt -- and the number of people living in poverty is surging as a result Thousands line up in front of food banks and resort to rifling through rubbish bins The coun-

tryrsquos financial crisis is rapidly turning into a social one -- while wealthy tax evaders manage to get off scot-free

This time the fight for survival last exactly 29 minutes At precisely 3 pm Father Andreas a 37-year-old Greek Orthodox priest opens the doors of the food bank in downtown Athens At this hour the line of hungry people stretches all the way across the large square outside and into the street Needy people of all ages are waiting patiently -- pensioners unemployed people mothers with children immigrants asylum seekers ldquoWe canrsquot let these people starverdquo the priest says ldquoThey are already suf-fering so much They should at least not go without foodrdquo

It is a charitable deed But in just under half an hour all of the kitchenrsquos 1200 servings have been taken causing several dozen people to leave with empty hands and growling stomachs They can only hope to be among the lucky ones next time

ldquo But what happens tomorrow when every Ger-man wakes up to newspaper headlines scream-ing that their country is now on the hook to 32 of its GDP in order to keep insolvent Greece with its 50-some year old retirement age not to men-tion Ireland Portugal and soon Italy and Spain as part of the Eurozone

CLICK TO ENLARGE


23 July 2011 14

Katarina was one of the lucky ones The 44-year-old got her hands on eight servings of a salad made of carrots potatoes and peas several yoghurts and a bag of bread -- the only food her family will have today Katarina is ashamed and prefers not to give her full name She and her 7-year-old daughter have to take a bus in from a suburb and travel all the way across the sprawling city just to get a warm meal

Katarina was laid off from her job at a biscuit factory roughly a year ago Since then shersquos been forced to rely on the handouts paid for by what Fa-ther Andreas calls ldquoholy moneyrdquo Katarina says there are no more jobs to be had ldquoNo one will even pay you to stuff mailboxes with advertisements anymorerdquo she says ldquoGreece is finishedrdquo

Spyros Xaplanteris has been coming to the food bank for a year His shirt is greasy his trousers tattered ldquoIrsquom driven here by needrdquo he say The 62-year-old lost his job in the storeroom of a Hilton hotel ldquoIt hurtsrdquo he says ldquoBut what am I supposed to do Irsquom brokerdquo

For weeks thousands of enraged Greeks have been holding anti-govern-ment demonstrations outside Greecersquos parliament building They come with bullhorns and banners and a couple hundred also bring stones and Molotov cocktails Camera crews from around the world are always there to film them but they never turn their lenses toward those in the dark back alleys of central Athens

In recent weeks the needs of such people have been keeping Father An-dreas and his colleagues very busy Almost all of the 400 parishes in the Archdiocese of Athens have opened food banks like the one he runs City officials have opened some as well

O O O DER SPIEGEL LINK

Call it the Great Wealth Rollover of China

The nationrsquos banks have been introducing new wealth management investment products at a blurring pace over the past year dazzling upper-class clients with fat cata-logues of high-yield investment opportunities

Yet Caixin has learned from bank and regulatory sources that much of the wealthy investor cash pouring into short-term high-risk products is being rolled over by banks to provide fresh financing for long-term investments including unfinished property developments local government financing platforms railway projects and private equity

The rollover game is providing badly needed funds for infrastructure projects for which credit has dried up over the past year with every notch of monetary tightening by the central government Itrsquos helped offset the governmentrsquos rising bank deposit reserve requirement for example which has crimped bank lending

At the same time some industry experts warn the banks may be fobbing off long-term investment risks to their wealth management clients

By offering the well-to-do a dizzying variety of investment products along with promises of near-

CLICK TO ENLARGE SOURCE DER SPIEGEL


23 July 2011 15

double-digit returns some fear banks are leading wealth management clients into the same trap that caught US investors before they were fleeced during the 2007 subprime mortgage crisis

About 9000 types of wealth management products were available to Chinese investors during the first half of 2011 double the number offered in 2010 Capital turnover for these products topped 8 trillion yuan between January and June

One risk management executive at a commercial bank told Caixin that wealth management product risks in China are far lower than those faced by subprime mortgage investors in the United States But others say Chinese products are often too good to be true

ldquoSome products are expected to yield close to 10 percentrdquo said one bank executive ldquoBut how are banks getting access to so many high-return investment channelsrdquo

Chinarsquos banking regulators have taken note of the rollover game and are trying to reign in risk and prevent a potential wealth management meltdown But the players are already firmly entrenched

Some bank critics say wealth management products have been used to build a shadow banking sys-tem beyond regulatory reach Others warn of possible Ponzi schemes or call the race among banks for wealthy clients maddening

O O O CAIXIN LINK

Dubairsquos housing market still has nearly a third too much supply and prices will plummet by another ten percent deepening a three-year rout to nearly 60 percent from its peak a Reuters

poll showed on Wednesday

Rents and prices in Dubairsquos once-booming property market have been in a free-fall over the last few years pummeled by the global financial crisis ensuing global slowdown and the Gulf statersquos own debt crisis

Residential property prices in Dubai which boasts of the worldrsquos tall-est building and man-made islands in the shape of palms will fall 58 percent from a peak in the third quarter of 2008 according to the median estimate of 11 banks investment firms and research institu-tions

ldquoDespite increasing transaction volumes and improvement in eco-nomic activities property prices in Dubai are expected to be under

pressure due to oversupplyrdquo said Sajeer Babu an analyst at National Bank of Abu Dhabi

The findings matched those of a Reuters poll in April which showed that existing supply and additional new units would push Dubairsquos house prices down by 10 percent

Global markets were rattled in 2009 when Dubai announced a $25 billion debt restructuring of con-glomerate Dubai World

A real estate collapse followed putting an end to a historic building spree in Dubai

Confidence has not recovered yet Respondents in the Reuters poll saw zero chance of Dubairsquos resi-dential property market recovering in 2011 They gave just a 25 percent chance of recovery in 2012 and only 50-50 percent in 2013

Only one respondent said house prices in Dubai have already reached a bottom Three said they ex-

ldquo In percentage terms the Dubai housing market crash is set to be nearly double the size of the fall in the United States which is down by about a third from its peakrdquo


23 July 2011 16

pected prices to reach a trough in 2011 while others said 2012 or later

In percentage terms the Dubai housing market crash is set to be nearly double the size of the fall in the United States which is down by about a third from its peak

A Reuters poll in June found US home prices as measured by Standard amp Poorrsquos 20-City Composite Home Price Index are expected to fall 50 percent in 2011 before finding a floor

Oversupply in Dubai remains a major problem - 18000 new homes expected to hit Dubairsquos market by year end and rents in Abu Dhabi dropping nine percent in the second quarter a report from property consultancy Jones Lang LaSalle said

The United Arab Emirates - at $298 billion the second largest Arab economy - is seen growing by 37 percent this year slightly faster than in March and well up from 14 percent in 2010 when it faced a debt restructuring challenge

The overall debt burden of Dubai and its companies is now estimated at around $113 billion or 138 percent of its gross domestic product

Meanwhile Abu Dhabi the capital of the United Arab Emirates and home to most of the countryrsquos oil had fared better during the downturn but is now facing challenges as a huge supply of high-end homes are expected to enter the market

O O O AL ARABIYA LINK

Italy is wobbling Spain is facing a fresh crisis Even France doesnrsquot look like it is a secure member of the euro zone anymore The storms swirling around Europersquos beleaguered single currency are

growing by the day as the crisis moves in from the periphery into what can only be regarded as core Europe The markets remain poised on a knife edge fearful of the consequences of a full scale col-lapse

And yet the one thing that canrsquot be underestimated is the political will of Europersquos leaders to keep the euro alive Three generations of politicians have staked their careers on closer European integration They wonrsquot give up without a fight

They will make one last-ditch effort to save the project How Europe will soon start printing money on a massive scale mdash far larger than even the US Federal Reserversquos exercises in quantitative easing

That is the only move that can save the euro And when it happens it will spark another rally in global commodity and asset prices

By training their guns on Italy the bond markets have taken the euro zonersquos debt crisis up to a new and far more dangerous level Italy is a big important economy It has the third largest debt market in the world after the US and Japan And even though the Italians save a lot by global standards and buy their own governmentrsquos debt even the hard-working citizens of Milan and Turin canrsquot absorb all the paper the Italian government has issued over the years Around half of that debt is internationally traded If the country goes to the brink of insolvency the shock waves will be felt everywhere

Italy cannot be ignored But it increasingly looks as if it canrsquot be bailed out either

European Union leaders are meeting on Thursday for yet another summit The aim as always will be to convince the markets that this time they have really got a grip on the crisis And as so often during the year this crisis has been dragging on they wonrsquot be able to agree on a plan that convinces anyone they can stop the contagion spreading


23 July 2011 17

The reason is simple They canrsquot get a grip because they keep getting offered completely unacceptable choices

Realistically there are only two ways out of this mess A fiscal union that involves massive transfers from Germany to the peripheral countries mdash and quite possibly to Spain and Italy as well Or else a managed default and an exit from the euro by Greece Portugal and potentially some other countries as well

The trouble is neither is politically feasible The German electorate wonrsquot accept paying vast subsidies to the periphery They are already up in arms about paying for the Greeks Present them with the bill for Italy and the German Chancellor Angela Merkel can kiss goodbye to any hope of re-election

And yet the EUrsquos establishment canrsquot contemplate default or the break-up of the single currency ei-ther For 60 years the momentum of the EU has been toward ever closer union The euro was a key step in that process If it starts to break apart the momentum will swing into reverse If countries can opt out of the euro why not start opting out of any other part of the EU that isnrsquot working for them Very soon the whole structure will start falling apart

Neither is acceptable So what do you do Simple logic tells us they will scrabble around for a third option

O O O MATTHEW LYNN LINK

International financial markets have lost their faith in Italy and Italians have lost their faith in their

leader Prime Minister Silvio Berlusconi has led his coun-try into the economic doldrums and the moral abyss And he has shown no interest in solving any of the myri-ad problems which plague the country

in the Milan Palace of Justice a building protected by steel gates and blocks of marble the next hearing in a trial got underway It is the 16th trial against Italian Prime Minister Silvio Berlusconi since the early 1990s -- and by far the most spectacular The proceedings are only now moving forward after delays due to questions about the courtrsquos jurisdiction and because the defen-dant was unable to attend because he was traveling on official business

Indeed Berlusconi has yet to appear in the courtroom whose front wall is adorned with the images of three women -- allegorical depictions of Truth Justice and the Law Cages once used to hold defendants in Mafia trials are lined up along the side

A 782-page dossier numbered 56572011 was created in this Mussolini-era building near Milanrsquos cathedral It is filled with recordings of telephone conversations held by Berlusconirsquos party girls their text messages their diary entries and the transcripts of their police interrogations

Berlusconi is said to have had sex with 33 women during private parties at his estates such as the 145-room Villa San Martino in Arcore One of those women was only 17 a nightclub dancer who uses



23 July 2011 18

the stage name Ruby Rubacuori The indictment by the Fourth Chamber of the Milan Criminal Court includes charges of abuse of office and the promotion of underage prostitution

The investigators have compiled several pieces of evidence that support the indictment even though both the defendant and Rubacuori deny the charges Nevertheless recorded telephone conversations between Rubacuori and her friends suggest the opposite is true In one of many examples Rubacuori says ldquoHe called me yesterday and said Ruby Irsquoll give you as much money as you want Irsquoll pay you Irsquoll cover you with money but itrsquos important that you keep everything a secret Say nothing -- to anyonerdquo

Il Cavaliere -- a sinner caught in the act Not just the Milan court but all of Italy must once again confront the buffooneries of its aging prime minister -- and this at a time when the country is in economic difficul-ties serious enough to threaten its very survival and when the future of Project Europe depends in part on whether the third-largest economic power in the euro zone is being run decently and with sound judgment

But the world as has recently become apparent thinks that it is not Berlusconirsquos Italy is debt-ridden shouldering a burden worth euro185 trillion more than twice as much as Greece Ireland and Portugal combined In the next 12 months alone euro300 billion of that debt will have to be refinanced -- more than the euro250 billion in the euro-zone bailout fund Last week confidence in the country seemed to be disappearing from one day to the next

Rating agencies led by Moodyrsquos threatened to downgrade Italyrsquos credit rating Private investors pan-icked and sold their Italian investments US hedge funds bet gigantic sums on the further decline of Italian government securities and the Milan Stock Index declined for an entire week It seemed as if Italy the worldrsquos eighth-largest economy and a founding member of the European Union had become the next Greece


It is a custom in India to give silver coins as gifts They are not very expensive they come in handy for every festive occasion and are a sure-fire winner as a give-away present at the birth of a child

or on any small occasion In a bid to tap the increasing demand for silver coins bullion dealers in India have gone a step further and are bringing in innovation and creativity

For the first time in the country bullion dealers have introduced a 1 kilo silver biscuit on the lines of the gold biscuit with a 999 fineness High denomination currency notes made out of silver are also the flavour of the season say traders

Adesh Kumar Jain bullion retailer in Mumbai called it a new trend amongst the youngsters and said that people were buying both the silver notes made to look like Indian currency as well as silver dol-lars which look like a $5 bill or a $10 bill

ldquoThe silver notes are looked upon as a good gifting option with the denomination of the note equiva-lent to its weight in silver For example a Rs 50 note is equivalent to 50 grams of silverrsquorsquo added Jain

With silver prices easing off slightly retailers say that notes of various denominations such as Rs 500 and Rs 1000 are being made out of silver to cater to an ever-increasing demand from aspirational middle-class Indian families

ldquo Berlusconirsquos Italy is debt-ridden shouldering a burden worth euro185 trillion more than twice as much as Greece Ireland and Portugal combined In the next 12 months alone euro300 billion of that debt will have to be refinanced


23 July 2011 19

ldquoMany families come to use for a unique gifting option and want something new for marriages and birthdays Earlier the only bulky item that would be sold by most retailers would be silver bars be-tween 800 gram to 1400 gram Now the silver note with its sleek personalised look is taking over from these bars as well as smaller silver coinsrsquorsquo said Satishbhai Zaveri bullion retailer

Lalit Jagawat proprietor of Nakoda Bullion Ltd and Director of the Bombay Bullion Association whose firm has introduced the silver biscuits said ``Most families are not bothered about the swings in the price of silver on a regular basis They are not investors They just buy coins or small items of both the previous metals because it is the `in thingrsquo to do and is a great gifting productrsquorsquo he said

The metal has found renewed interest with many Indian families he said adding that the demand for silver would continue ``as long as it finds an application in prayers and in industriesrsquorsquo despite the fact that silver plummeted to $1280 per kg from $1685 per kg trading in April

O O O MINEWEB LINK

Debate over the debt ceiling has reached a fever pitch in recent weeks with each side trying to outdo the other in a game of political chicken If you believe some of the things that are be-

ing written the world will come to an end if the US defaults on even the tiniest portion of its debt

In strict terms the default being discussed will occur if the US fails to meet its debt obligations through failure to pay either in-terest or principal due a bondholder Proponents of raising the debt ceiling claim that a default on Aug 2 is unprecedented and will result in calamity (never mind that this is simply an arbitrary date easily changed marking a congressional recess) My expec-tations of such a scenario are more sanguine

The US government defaulted at least three times on its obligations during the 20th century

-- In 1934 the government banned ownership of gold and eliminated the right to exchange gold certificates for gold coins It then immediately revalued gold from $2067 per troy ounce to $35 thus devaluing the dollar holdings of all Americans by 40 percent

-- From 1934 to 1968 the federal government continued to issue and redeem silver certificates notes that circulated as legal tender that could be redeemed for silver coins or silver bars In 1968 Congress unilaterally reneged on this obligation too

-- From 1934 to 1971 foreign governments were permitted by the US government to exchange their dollars for gold through the gold window In 1971 President Richard Nixon severed this final link be-tween the dollar and gold by closing the gold window thus in effect defaulting once again on a debt obligation of the US government

No longer constrained by any sort of commodity backing the federal government was now free to engage in almost unlimited fiscal profligacy the only check on its spending being the marketrsquos appe-tite for Treasury debt Despite the defaults in 1934 1968 and 1971 world markets have been only too willing to purchase Treasury debt and thereby fund the governmentrsquos deficit spending If these major defaults didnrsquot result in decreased investor appetite for US obligations I see no reason why default-ing on a small amount of debt this August would cause any major changes

The national debt now stands at just over $14 trillion while net total liabilities are estimated at over $200 trillion The government is insolvent as there is no way that this massive sum of liabilities can

ldquo The US government defaulted at least three times on its obligations during the 20th century


23 July 2011 20

ever be paid off Successive Congresses and administrations have shown absolutely no restraint when it comes to the budget process and the idea that either of the two parties is serious about getting our fiscal house in order is laughable

O O O RON PAUL LINK

We showed lsquoem You thought we couldnrsquot do it you thought wersquod chicken out and choose disintegration over further integration But in the end the unshakeable resolve and will of

political leaders has triumphed over the scepticism of markets

There was no disguising the smug sense of self satisfaction among Europersquos policymaking elite on Thursday night after agreement was reached on a further bailout for Greece and the effective estab-lishment of joint liability for eurozone sovereign debt It was all smiles and mutual back slapping

ldquoToday was game changingrdquo Christine Lagarde the newly appointed managing director of the IMF gushed ldquoIt was amazing to see heads of government come together and say what happens to one could happen to another and act collectivelyrdquo Europe had demonstrated she went on a collective resolve to support and help its members until they were able to regain access to markets

What she studiously ignored was the underlying truth ndash that what has been agreed is nothing less than the progressive socialisation by taxpayers in Europersquos more solvent nations of the debts of its less solvent ones

She also deliberately skirted around the fact that what has been agreed is against the spirit and very probably the letter of exist-ing European treaties with their no bailout clauses and fiscal fire-

walls specifically designed to prevent the emergence of joint liability No wonder markets breathed such a sigh of relief the assumption they made when they crunched European spreads down to zero that in extremis the creditworthy would bailout the non creditworthy has ultimately proved correct

Still none of this seems to matter Europe has done what it takes to save the euro Thatrsquos the narra-tive in any case In reality the measures agreed on Thursday night raise as many questions as they answer What the British response to it all should be is anyonersquos guess for it is impossible to know from the bare bones of what so far has been announced what we are really dealing with here

What is Britain expected to contribute to all this The bulk of the heavy lifting is to be done through the European Financial Stability Facility which for the time being is entirely a eurozone liability but the EFSF can also draw on loans of up to euro60bn from the European Commission and euro250bn from the IMF both of which the UK does have to contribute to

The latest Greek bailout appears to be funded entirely from the EFSF and the IMF but it is not entirely clear And if the EFSF is to become a European IMF as promised by Nicolas Sarkozy the French presi-dent then it is certainly going to need a lot more backing than the current euro440bn Will the European Union as a whole be expected to contribute more Itrsquos not yet clear

Indeed the whole package is shot through with lack of detail It raises at least as many questions as it answers Does this amount to a Greek default or doesnrsquot it How will the credit rating agencies react Fitch for one has already pronounced it a ldquorestricted defaultrdquo Does that trigger credit default swap contracts or not Howrsquos the European Central Bank going to react And so on

O O O JEREMY WARNER LINK

ldquo what has been agreed is nothing less than the progressive socialisation by taxpayers in Europersquos more solvent nations of the debts of its less solvent ones

21CHARTS THAT MAKE YOU GO Hmmm

23 July 2011 21

Since 1980 the debt ceiling has been raised 39 times It was raised 17 times under Ronald Reagan four

times under Bill Clinton and seven times under George W Bush Congress is currently in a contentious debate with the White House on whether to raise the ceiling by the Aug 2 deadline which would make the fourth raise under Obama

O O O WASHINGTON POST LINK

Gasoline sales vol-ume on a per-capita

basis peaked in September 2009 In fact [US] per-capita consumption of gasoline is lower (-17) than it was at the end of the Great Recession

What does this analysis suggest about the state of the econ-omy From an official stand-point the Great Recession ended 25 months ago But if we want confirmation that the economy is in recovery gaso-line sales is the wrong place to look

O O O DOUG SHORT LINK

SOURCE DOUG SHORTCLICK TO ENLARGE

SOURCE WASHINGTON POST


23 July 2011 22

A look at the change in major coal trade routes between 1980 and 2009 demonstrates not only how significant Asia has become in the space of just three decades but also how important

that Asian growth has been to Australia Canadarsquos shift from major importer to major exporter is also worthy of note In both charts the red countries are the largest importers and the green countries are the largest exporters

SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23

Ahead of next Tuesdayrsquos CO-MEX options expiry itrsquos time to

step back and take a look at the daily chart of gold (left) and the weekly chart of silver (right) courtesy of Jes-sersquos Cafe Americain

As a handy reference the previous five options expiries are marked on both charts

CLICK TO ENLARGE

CLICK TO ENLARGE

SOURCE JESSES CAFE AMERICAIN


24

23 July 2011 24

WORDS THAT MAKE YOU GO Hmmm

Regular readers will be well aware of my leanings

towards there being an ongoing manipulation of the silver futures market on the COMEX but for any-one unfamiliar with the types of machinations upon which I base those leanings this remarkable video will give you as good a sense as any

250000000 oz is a LOT of silver

One minute is NOT a lot of time

Marc Faber talks to Jim Puplava about the perils of QE3 and the coming inflationary scare takes his usual shots at Ben Bernanke

and explains how economists can look at the same set of data and come to wildly different conclusions

ldquoif the Dow Jones went below a thousand what kind of an economic environment would we be in We would be in a total credit collapse We would be in a total economic collapse And we would have a complete corporate profit collapse And in a corporate profit collapse and in an economic depres-sion what do you think would happen to tax revenues They would collapse as wellrdquo

Meanwhile John Embry of Sprott AM explains to Eric King why silver is heading to $100 the reasons behind recent failed

Chinese auctions the follow-on offering in the Sprott Physical Gold Trust and the reasons why the unsustainable debt levels are setting the world up for hyperinflation

CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN

SUBSCRIBE UNSUBSCRIBE COMMENTS

and finallyhellip

23 July 2011 25

Wondering what form QE3 will eventually take when if it comes

Well there may be some clues in this amazing video of 3D printing technology

Gold bars will never look so good than when they get pulled out of this wondrous machine

Hmmmhellip

copy THINGS THAT MAKE YOU GO HMMM 2011


23 July 2011 2

As dates go February 17 is a fairly inauspicious one

It was the day in 1801 that saw Thomas Jefferson elected as President after a tie with Aaron Burr was resolved by the House of Representatives 103 years later it saw the premiere of Madame Butterfly at La Scalia in Milan and in 1933 the Blaine Act ending prohibition was toasted far and wide

In 1964 Gabonese president Leon Mrsquoba (contrary to popular rumors NOT the inspiration for the Grammy-nominated Hanson song of the (almost) same name) was toppled by a coup the Volkswagen Beetle overtook the Model T Ford as the worldrsquos best-selling car in 1972 and in 2003 the Congestion Charge was introduced to a delighted London public

But in 2008 on this nondescript day as Michael Jordan celebrated his 45th birthday and the rest of the world rejoiced in Paris Hilton reaching her 27th an event took place that I suspect in years to come may be seen as something of a turning point The event to which I refer didnrsquot make it into Wikipediarsquos list of events that happened that day barely made it into the mainstream press and its significance has been downplayed by pretty much everybody who has been asked to comment on it

It took place on Kish ndash a 915km island in the Persian Gulf which lies 19 miles from the coast of Iran Contradiction in terms though it may seem the island part of Hormozgān Province is described by Wiki-pedia as

ldquo a consumerrsquos paradise with numerous malls shopping cen-tres tourist attractions and resort hotelshellipKish Island was ranked among the worldrsquos 10 most beautiful islands by The New York Times in 2010 and is the fourth most visited va-cation destination in the Mid-dle East after Dubai UAE and Sharm el-Sheikhrdquo

Whorsquoda thunk it

For the visitor Kish boasts such delights as a 170-acre Dolphin Park amp Butterfly Garden an aquariumhellip and as of February 17 2008 an International Oil Bourse

ldquoThis notion that the United States is getting ready to attack Iran is simply ridiculousHaving said that all options are on the tablerdquo

-- President George W Bush February 2005


23 July 2011 3









Boghrati continued








23 July 2011 4















23 July 2011 5












That was then





23 July 2011 6












23 July 2011 7










SOURCE ST LOUIS FED


23 July 2011 8













23 July 2011 9


how worlds end










Got Gold


23 July 2011 10















And Finally








23 July 2011 11


















23 July 2011 12









O O O POLITICO LINK







23 July 2011 13











CLICK TO ENLARGE


23 July 2011 14















23 July 2011 15







O O O CAIXIN LINK














23 July 2011 16


















23 July 2011 17















23 July 2011 18















23 July 2011 19




O O O MINEWEB LINK












23 July 2011 20


O O O RON PAUL LINK















23 July 2011 21











23 July 2011 22



SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



23 July 2011 3









Boghrati continued








23 July 2011 4















23 July 2011 5












That was then





23 July 2011 6












23 July 2011 7










SOURCE ST LOUIS FED


23 July 2011 8













23 July 2011 9


how worlds end










Got Gold


23 July 2011 10















And Finally








23 July 2011 11


















23 July 2011 12









O O O POLITICO LINK







23 July 2011 13











CLICK TO ENLARGE


23 July 2011 14















23 July 2011 15







O O O CAIXIN LINK














23 July 2011 16


















23 July 2011 17















23 July 2011 18















23 July 2011 19




O O O MINEWEB LINK












23 July 2011 20


O O O RON PAUL LINK















23 July 2011 21











23 July 2011 22



SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



23 July 2011 4















23 July 2011 5












That was then





23 July 2011 6












23 July 2011 7










SOURCE ST LOUIS FED


23 July 2011 8













23 July 2011 9


how worlds end










Got Gold


23 July 2011 10















And Finally








23 July 2011 11


















23 July 2011 12









O O O POLITICO LINK







23 July 2011 13











CLICK TO ENLARGE


23 July 2011 14















23 July 2011 15







O O O CAIXIN LINK














23 July 2011 16


















23 July 2011 17















23 July 2011 18















23 July 2011 19




O O O MINEWEB LINK












23 July 2011 20


O O O RON PAUL LINK















23 July 2011 21











23 July 2011 22



SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



23 July 2011 5












That was then





23 July 2011 6












23 July 2011 7










SOURCE ST LOUIS FED


23 July 2011 8













23 July 2011 9


how worlds end










Got Gold


23 July 2011 10















And Finally








23 July 2011 11


















23 July 2011 12









O O O POLITICO LINK







23 July 2011 13











CLICK TO ENLARGE


23 July 2011 14















23 July 2011 15







O O O CAIXIN LINK














23 July 2011 16


















23 July 2011 17















23 July 2011 18















23 July 2011 19




O O O MINEWEB LINK












23 July 2011 20


O O O RON PAUL LINK















23 July 2011 21











23 July 2011 22



SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



23 July 2011 6












23 July 2011 7










SOURCE ST LOUIS FED


23 July 2011 8













23 July 2011 9


how worlds end










Got Gold


23 July 2011 10















And Finally








23 July 2011 11


















23 July 2011 12









O O O POLITICO LINK







23 July 2011 13











CLICK TO ENLARGE


23 July 2011 14















23 July 2011 15







O O O CAIXIN LINK














23 July 2011 16


















23 July 2011 17















23 July 2011 18















23 July 2011 19




O O O MINEWEB LINK












23 July 2011 20


O O O RON PAUL LINK















23 July 2011 21











23 July 2011 22



SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



23 July 2011 7










SOURCE ST LOUIS FED


23 July 2011 8













23 July 2011 9


how worlds end










Got Gold


23 July 2011 10















And Finally








23 July 2011 11


















23 July 2011 12









O O O POLITICO LINK







23 July 2011 13











CLICK TO ENLARGE


23 July 2011 14















23 July 2011 15







O O O CAIXIN LINK














23 July 2011 16


















23 July 2011 17















23 July 2011 18















23 July 2011 19




O O O MINEWEB LINK












23 July 2011 20


O O O RON PAUL LINK















23 July 2011 21











23 July 2011 22



SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



23 July 2011 8













23 July 2011 9


how worlds end










Got Gold


23 July 2011 10















And Finally








23 July 2011 11


















23 July 2011 12









O O O POLITICO LINK







23 July 2011 13











CLICK TO ENLARGE


23 July 2011 14















23 July 2011 15







O O O CAIXIN LINK














23 July 2011 16


















23 July 2011 17















23 July 2011 18















23 July 2011 19




O O O MINEWEB LINK












23 July 2011 20


O O O RON PAUL LINK















23 July 2011 21











23 July 2011 22



SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



23 July 2011 9


how worlds end










Got Gold


23 July 2011 10















And Finally








23 July 2011 11


















23 July 2011 12









O O O POLITICO LINK







23 July 2011 13











CLICK TO ENLARGE


23 July 2011 14















23 July 2011 15







O O O CAIXIN LINK














23 July 2011 16


















23 July 2011 17















23 July 2011 18















23 July 2011 19




O O O MINEWEB LINK












23 July 2011 20


O O O RON PAUL LINK















23 July 2011 21











23 July 2011 22



SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



23 July 2011 10















And Finally








23 July 2011 11


















23 July 2011 12









O O O POLITICO LINK







23 July 2011 13











CLICK TO ENLARGE


23 July 2011 14















23 July 2011 15







O O O CAIXIN LINK














23 July 2011 16


















23 July 2011 17















23 July 2011 18















23 July 2011 19




O O O MINEWEB LINK












23 July 2011 20


O O O RON PAUL LINK















23 July 2011 21











23 July 2011 22



SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



23 July 2011 11


















23 July 2011 12









O O O POLITICO LINK







23 July 2011 13











CLICK TO ENLARGE


23 July 2011 14















23 July 2011 15







O O O CAIXIN LINK














23 July 2011 16


















23 July 2011 17















23 July 2011 18















23 July 2011 19




O O O MINEWEB LINK












23 July 2011 20


O O O RON PAUL LINK















23 July 2011 21











23 July 2011 22



SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



23 July 2011 12









O O O POLITICO LINK







23 July 2011 13











CLICK TO ENLARGE


23 July 2011 14















23 July 2011 15







O O O CAIXIN LINK














23 July 2011 16


















23 July 2011 17















23 July 2011 18















23 July 2011 19




O O O MINEWEB LINK












23 July 2011 20


O O O RON PAUL LINK















23 July 2011 21











23 July 2011 22



SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



23 July 2011 13











CLICK TO ENLARGE


23 July 2011 14















23 July 2011 15







O O O CAIXIN LINK














23 July 2011 16


















23 July 2011 17















23 July 2011 18















23 July 2011 19




O O O MINEWEB LINK












23 July 2011 20


O O O RON PAUL LINK















23 July 2011 21











23 July 2011 22



SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



23 July 2011 14















23 July 2011 15







O O O CAIXIN LINK














23 July 2011 16


















23 July 2011 17















23 July 2011 18















23 July 2011 19




O O O MINEWEB LINK












23 July 2011 20


O O O RON PAUL LINK















23 July 2011 21











23 July 2011 22



SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



23 July 2011 15







O O O CAIXIN LINK














23 July 2011 16


















23 July 2011 17















23 July 2011 18















23 July 2011 19




O O O MINEWEB LINK












23 July 2011 20


O O O RON PAUL LINK















23 July 2011 21











23 July 2011 22



SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



23 July 2011 16


















23 July 2011 17















23 July 2011 18















23 July 2011 19




O O O MINEWEB LINK












23 July 2011 20


O O O RON PAUL LINK















23 July 2011 21











23 July 2011 22



SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



23 July 2011 17















23 July 2011 18















23 July 2011 19




O O O MINEWEB LINK












23 July 2011 20


O O O RON PAUL LINK















23 July 2011 21











23 July 2011 22



SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



23 July 2011 18















23 July 2011 19




O O O MINEWEB LINK












23 July 2011 20


O O O RON PAUL LINK















23 July 2011 21











23 July 2011 22



SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



23 July 2011 19




O O O MINEWEB LINK












23 July 2011 20


O O O RON PAUL LINK















23 July 2011 21











23 July 2011 22



SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



23 July 2011 20


O O O RON PAUL LINK















23 July 2011 21











23 July 2011 22



SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



23 July 2011 21











23 July 2011 22



SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



23 July 2011 22



SOURCE BEIJING AXIS

SOURCE BEIJING AXIS


23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



23 July 2011 23




CLICK TO ENLARGE

CLICK TO ENLARGE



24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip


24

23 July 2011 24











CLICK TO WATCH

CLICK TO LISTEN

CLICK TO LISTEN


and finallyhellip

23 July 2011 25




Hmmmhellip



and finallyhellip

23 July 2011 25




Hmmmhellip


and when finally the bottom fell out i became withdrawn ...€¦ · idiot wind “i heard the sound...

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