Eurozone Failing In Slo-Motion...

Tuesday April 27, 2010
MACRO-EUROPE: The Titanic is SINKING ...
We rewind to our February 15th Money Monitor entitled "Three Card Monty", with its focus on the 'early stages' of the now full-blown Greek debt-deficit-debacle, and we replay the quotes we spotlighted at the time ...
Greek Finance Minister George Papaconstantinou ...
... "We are basically trying to change the course of the Titanic. People think we are in a terrible mess. And we are.
We note comments from Jean-Claude Juncker, speaking on behalf of European Finance Ministers following a meeting of top EU officialdom in Brussels this afternoon ...
... "Greece is responsible for the consolidation of its public finances. It is first a Greek problem, and an internal Greek problem."
From European Central Bank President Jean-Claude Trichet ...
... "Everyone needs to respect their commitments. We have a particular Greek problem, but the other countries have their programs and they must be implemented. It is important that all of the heads of state and governments do what is necessary to guarantee the stability of the euro zone."
And from German Chancellor Angela Merkel ...
... "Germans should not pay for the consciously flawed fiscal and budgetary policies of others."
We stated, in our conclusion to that Money Monitor ...
Thinking that the problems of Greece, let alone two dozen other European debt-deficit 'offenders', will be 'solved', without PAIN, quickly ... or that they will be easily and quietly 'papered-over' ... is like playing Three Card Monty with the hustlers of Eighth Avenue in Manhattan.
It is ALWAYS a LOSING proposition.
Now, over two months later ... the Titanic is SINKING ... amid today's credit rating downgrade announced by Standard and Poor's, as it relates to Greece's sovereign debt.
Moreover, in our March 3rd Money Monitor, "It's All Over Now, NOT !!!", we stated the following ...
In short, it is NOT, at all ... "all over now", in Europe.
And, in our April 12th Monitor, "Three Blind Mice" ... published in the wake of the announcement of the (alleged) solution via a loan to Greece, from EU member nations, and the IMF ... we said the following ...
What happens when Italy needs a bailout, or Portugal, or Spain ...
... bailouts-that-are-not-a-bailout that would be significantly LARGER than the 45 billion EUR offered to Greece ... what then ????
Again, as we have stated repeatedly since the 4Q of last year ... Europe's fiscal debt-deficit crisis is FAR from 'over'.
Again, as we have repeatedly stated ... it will not be over, until draconian fiscal austerity measures are implemented ACROSS the region.
It will not be over ... for years to come.
Fast forward to the present ... and the announcement by Standard and Poor's wherein the credit ratings agency cut Greece's sovereign debt rating to JUNK status ... and we shine the spotlight on commentary from today's S+P 'statement' ...
... "We believe that the government's policy options are narrowing because of Greece's weakening economic growth prospects, at a time when pressures for stronger fiscal adjustment measures are rising. Moreover, in our view, medium-term financing risks related to the government's high debt burden are growing, despite the government's already sizable fiscal consolidation plans."
... "Our updated assumptions about Greece's economic and fiscal prospects lead us to conclude that the sovereign credit rating is no longer compatible with an investment grade rating."
Also ...
... "The government's multi-year fiscal consolidation program is likely to be tightened further under the new EMU-IMF agreement. This is likely to further depress Greece's medium-term economic growth."
And ...
... "The government's resolve is likely to be tested repeatedly by trade unions and other powerful domestic constituencies that will be adversely affected by the government's policy."
Adding insult to injury, Standard and Poor's also put Greece's credit 'outlook' on 'negative watch', opening the door for FURTHER downgrades ...
... "The negative outlook reflects the possibility of a further downgrade if the Greek government's ability to implement its fiscal and structural reform program materially weakens, undermined by domestic political opposition at home, or by even weaker economic conditions than we currently assume."
Indeed, the ICEBERG is HUGE ... and the unsinkable ship is sinking !!!
Evidence the rising water levels in the engine room, as represented by the 'price' of default 'protection', evidenced in the chart below plotting Greece's 5-Year Credit Default Swap Rate ... which has SOARED today, easily reaching a NEW ALL-TIME HIGH ... by FAR !!!
In fact, in our March 22nd Money Monitor entitled "Three Card Monty, Revisited", we offered a chart perspective on the 5-Year Greek CDS. We spotlighted the downside correction that took the CDS to the med-term trend defining 100-Day EXP-MA, in line with a text-book Fibonacci retracement (between the 38% and 50% retracement levels) ... suggesting that the downside correction provided a 'buying' opportunity.
We also 'warned' about the potential for higher interest rates to significantly impact the entire fiscal environment in Greece. Thus we note additional commentary from within the Standard and Poor's statement ...
... "Pressures for more aggressive and wide-ranging fiscal retrenchment are growing, in part because of recent increases in market interest rates."
After today's parabolic rise in the 5-Year Greek Bond yield, as noted below, the word 'increases' becomes a substantial understatement.
As if this was not enough turbulence, we also note that in line with the downgrade of the Greek government credit rating, Standard and Poor's also marked down the 'rating' on the nation's largest banks ... stating that ...
... "We find that Greece's fiscal challenges are increasing pressure on the banking and corporate sectors. In particular we see continuing fiscal risks from contingent liabilities in the banking sector, which, could, in our view, total at least 5%-6% of GDP in 2010-2011."
Standard and Poor's downgraded the 'long-term counterparty credit ratings on National Bank, Eurobank, Alpha Bank, and Piraeus Bank ... causing share prices to plummet. Evidence the pair of charts on display below in which we plot Piraeus Bank ...
... and, the National Bank of Greece, both of which are breaking down technically, following a rally that mapped out another 'text-book' Fibonacci retracement correction.
Hence we turn the spotlight on the Greek stock market as a whole, represented within the chart below in which we plot the Greek ASE stock index. Indeed, we note another Fibonacci retracement, to the 33% target, followed by this week's renewed technical breakdown.
The ship ... is going DOWN.
We have been bearish on the Eurocurrency since October-November of last year, and after suffering because we were 'early' to this thematic-trade, we have been rewarded for our patience and perseverance ... as evidenced in the longer-term daily chart on display below, revealing today's decline in the EUR to a new move LOW.
Further, we spotlight the bearish technical dynamic, as defined by the negative action in the moving averages, and the slide into bearish territory by the long-term 200-Day Rate-of-Change.
While the Titanic (also known as the Eurocurrency) SINKS ... the price of Gold denominated in the Euro is SOARING, reaching a NEW ALL-TIME HIGH today, in excess of EUR 875 per ounce ...

We are now watching for a 'confirming' upside breakout in the spot (USD based) price of Gold. Noting the daily chart on display below we focus on the most recent re-acceleration to the upside in the med-term trend defining 100-Day EXP-MA.
An upside violation of the April 12th high of $1169 would constitute a full-blown med-term upside breakout.
All 'passengers' are going down with the ship ... with a downgrade to Portugal's sovereign credit rating also announced today, as Standard and Poor's marked down Portugal's rating by two notches, from A+ to A-, while placing the country on a negative outlook watch, portending more downgrades in the future.
Subsequently, Portugal's 5-Year Credit Default Swap is SOARING, as noted in the chart below, spiking to a NEW ALL-TIME HIGH ... today.
Similarly, Portugal's 5-Year Government Bond yield SOARED to a NEW HIGH, jumping by + 60 basis points today alone, capping a monstrous +215 basis point rise in the month of April, easily violating the February high of 3.95% ... as evidenced in the chart below.
Like the Titanic ... the Portuguese stock market is also ... sinking ...
... as evidenced in the daily chart on display below, replete with technical breakdown, head-and-shoulders pattern, violation of the med-term trend defining 100-Day EXP-MA ... and ... the downside reversal by the moving average itself, directionally speaking.
And finally, we have been focused on the downside price action and severe underperformance exhibited by the Spanish stock market (specifically spotlighted as recently as last Friday's ETF Playbook) ...
... and thus we note the chart on display below as Spain begins to unravel too, with the 5-Year Credit Default Swap SOARING to a NEW ALL-TIME HIGH, slicing through the (previous) double-top formed as defined by the February 17th, 2009 high at 170 basis points, and the February 8th, 2010 high at 173 basis points, reaching towards 200 basis points.
And, we shine the spotlight on the chart below plotting Spain's 5-Year Bond yield, which is breaking out to the upside, today, and doing so 'from' historically low levels below 2.75%, violating the February 5th high of 3.13%.
The Titanic is sinking, and ultimately, ALL passengers will go down with the ship, including Portugal, Spain, Greece, and several other Maastricht Treaty debt-deficit offenders.
We have been anticipating this event for months.
Thus, we remain bearish on the European currencies ....
... and bullish on Gold priced in EUR. Gregory T. Weldon ---

Great, We're Paying For The Greek Debt Crisis

I Am The US Taxpayer's Lack Of Surprise (And Money): IMF To Provide Another €10 Billion To Greece
04/27/2010

Where does it end? 100 billion? 1 trillion? 1 quadrillion? And yes America, this is your money, going to bail out Greece... Then Portugal... Then Ukraine....Then Dubai....Then Italy....Then Spain....Then Hungary....Then the Baltics...Then the UK....Then Japan... and by the time we have to bail ourselves out, there will be nothing left, except the Turbo Bernanke 3000 dry heaving with an empty ink cartridge and empty paper cart, while gold oz will be worth one quadrillion Benjamins (or is that Bernankes). In the meantime, as Erik Nielsen, who finally woke up, predicted, the final bailout cost of Greece alone will be €150 billion. So the IMF will do rookie mistake 101 and keep raising the bailout requirement incrementally, even as the depositor runs on Greek banks and the ongoing strikes and riots, destroy the country...But at least in the meantime the dollar will get devalued and Wells-JPM-BofA/REIT investors will be happy.
From the FT:
The International Monetary Fund is looking at raising its share of Greece’s financial rescue package by €10bn ($13.2bn) amid fears that the planned €45bn bail-out will fail to prevent the country’s debt crisis from spiralling out of control.Stock markets on both sides of the Atlantic fell on Tuesday, with leading European indices suffering their heaviest falls of the year, after Standard & Poor’s cut Greece’s long-term credit rating to junk status. The struggling nation is the first eurozone member to have its debt downgraded to junk level.Shares in Athens fell 6 per cent as banks plunged more than 9 per cent. Greek government bonds suffered further heavy falls on growing concern that the country may need to restructure its debts in spite of the proposed eurozone and IMF rescue. Portugal’s stock market was down nearly 5 per cent as Lisbon’s long-term credit ratings were also reduced to by two notches from A plus to A minus, reflecting the country’s weakening public finances.Senior bankers and officials in Washington and Athens told the Financial Times that the IMF was in talks to increase its aid contribution by €10bn. The fund could make that sum available under a planned three-year loan, according to an Athens-based analyst familiar with the talks. Investors and policy specialists said that expectations of the size of the three-year package in Washington policy circles had increased to at least €70bn. The EU has so far proposed to provide €30bn and the IMF €15bn. “The fund’s current ceiling for Greece is €25bn and the release of the extra amount is under discussion,” the analyst said. The IMF declined to comment on the size of the package.
5

Expatriation Is Growing

Renouncing American Citizenship
by Llewellyn H. Rockwell, Jr
Let's be clear about something. A person who decides to give up his US citizenship is not guilty of disloyalty to America; quite the opposite. He could very well be more loyal to American principles than the regime is willing to tolerate.
It also does not mean that he is giving up hope for liberty; he may have great hope for liberty, in a different way and in a different place.
In any case, the rise of emigration, expatriation, and citizenship renunciation is a trend that is not going away. It is rising and will get more significant. In some ways, it is completely expected. When regimes over-control, over-tax, over-regulate, they gnaw at the innate sense of the right to be free. When this gets worse and worse, people tend to look around for better environments.
We've all known people who talk about it openly. It is becoming cocktail conversation, the once-unthinkable now standard fare. It's not just an impression. State Department records show that 502 people gave up citizenship in just the last quarter of 2009. That is more than twice the total for 2008. That might not seem like a lot but what stands out here is the trend line, which is soaring. I also hear reports of year-long bureaucratic delays in approval, and, of course, plenty of people leave without permission.
The driving factors here are not cultural or social; they are economic. The US government is making it ever more difficult for Americans living abroad, taxing them wherever the bureaucrats can find them. The government makes it very difficult even to hold a bank account in the US unless the account holder can point to a US residency (thanks to the Patriot Act). And when the government finds a reporting error on income earned overseas, it can charge a 50% penalty.

Even when a person gives up US citizenship, and establishes citizenship with a freer country, the US government can still haunt him with continuing tax obligations and demands for military service. There is, at the least, a vast exit penalty. Any regime that would do things like this inspires people to want to stay at arm's length.
Far more frightening is the sense that financial calamity is around the corner. A look at the data seems to suggest that. Vast reserves are sitting in the banking system, waiting to be unleashed to create what could be total destruction of the dollar. The deficit is rising so fast that it is hard to chart.
The jobs situation is terrible, especially for young people (and adults often make decisions based on what is best for their kids' future). Personal income is falling and falling. Investment is not recovering after its cliff dive in 2009. The social welfare state is broke. Private debt is rising even though lending has not restarted.
The policies of the fiscal and monetary authorities are absolutely terrifying. The Fed is keeping rates at zero. The government is spending and spending beyond belief. Tax receipts are falling as never before, unleashing the greedy hand of the predator state to extract every last dime.
And look at what the US congress and president are doing about this terrible mess: they are working to socialize health care, start a war with Iran, impose tariffs on China, and otherwise tax, regulate, inflate, and control more more more. An economy that is heavily capitalized and driven by the entrepreneurial spirit can stand a surprising amount of abuse. But that reserve capital is being drained away into new bubbles, and the entrepreneurial spirit is being crushed at every turn.
Based on all these facts, the sense of impending doom is hard to avoid. And consider that most people are thinking only about today, this month, and this year. But among the rich and entrepreneurial we find a class of people who specialize in thinking outside the box, and for the very long term. It is among the ranks of these people that we are seeing the renunciation trend take hold. The smart money is giving up on the US political system.
What precisely is a person actually giving up when he walks into a US consulate and signs the renunciation oath? The right to vote? Yes, but just how much value are we supposed to place on the right to choose between dumb and dumber, and to have your vote cancelled out by the guy behind you in the line? No living person has ever swung a significant election. It is hardly a surprise that people put so little value on going through the motions of democracy.
There is much to give up in a cultural and social sense. It is not a decision to be made with a light heart. It is final and scary for that reason. What compels many people to do it now rather than wait is the sense that at some point, it might not be possible to renounce citizenship. As the controls grow ever tighter, so will the regulations on those who try to escape.
Every socialist and fascist regime in history has put up walls to prevent flight by people and capital. This is why people and capital are flying now, while they still can. In so doing, they are inspired by the writings of the American revolutionaries. The difference is that they have decided that living in the land of the free and the home of the brave means not being a slave of the US government.
The way to stop the brain and capital drain is readily at hand. Relinquish controls. Stop taxing people abroad. Adopt laissez-faire. Reinstitute freedom. Reject militarism and nationalism. Only that path will inspire optimism in the future of this country. Until that happens, we can expect this trend to continue, and to advise the young and successful families who ask us, to get out while the getting is good.

Current U.S. Dollar Currency Controls

NATIONAL COMMON STOCK
National fiat currencies represent the common stock of nations. Because of the large amounts of capital involved they usually move slowly according to trend. As their share price sinks, despots implement doomed currency controls, enforced by violence in a vain attempt to artificially increase price.

CURRENCY CONTROLS
Currency controls, or foreign exchange controls, are imposed by governments on the purchase, sale, convertibility, or use of foreign currencies. They are gross interferences with the unalienable human right to freedom of contract.
Most people think that currency controls are only implemented in ruthless socialistic, communistic or fascist countries like Russia under Stalin or Lenin, Germany under Hitler, Zimbabwe under Mugabe or other oppressive regimes like China, Argentina, etc. Viewing explosive history through the lens of monetary policy reveals a common thread. Dictators attempted to abrogate monetary rights and the people either killed them or were killed.
Harvard Professor Niall Ferguson wrote on page 149 of The Ascent Of Money about the French Revolution, which seared the gruesome visage of the guillotine into the hearts and minds of French politicians.
Not surprisingly, some people began to anticipate a depreciation of the banknotes, and began to revert to payment in gold and silver. Ever the absolutist, Law’s initial response was to resort to compulsion. Banknotes were made legal tender. The export of gold and silver was banned as was the production and sale of gold and silver objects. By the arrêt of 27 February 1720, it became illegal for a private citizen to possess more than 500 livres of metal coin. The authorities were empowered to enforce this measure by searching people’s houses. Voltaire called this ‘the most unjust edict ever rendered’ and ‘the final limit of a tyrannical absurdity’.
Money and currency are essential and unalienable human rights. The use of force or intimidation against innocent people is immoral.
With the pot calling the kettle black, Vladimir Putin said,
The only problem: your [U.S.] results were poor [Georgia] and this will always be the case because the work you do is unfair and immoral. In the long run, immoral policies always lose.
Following the example of so many other failed nation-states, as the FRN$ has evaporated additional currency controls have been put in place by unfair and immoral politicians.
PAST DOLLAR CURRENCY CONTROLS
One of America’s greatest tyrants, Franklin Delano Roosevelt, exacerbated the rapidly shrinking United States' share price. He greatly infringed on the Great Writ of Habeas Corpus, implemented Executive Order 6102 (.pdf), passed New Deal legislation, threatened to pack the Supreme Court if they did not vote his way - resulting in a ‘Constitutional revolution’ and implemented extremely restrictive SEC rules.
At least Roosevelt was not as tyrannical as Abraham Lincoln, who, among plenty of other nefarious things, issued an arrest warrant for United States Supreme Court Chief Justice Roger when the Court checked Lincoln’s abuse of Habeas Corpus.
Then on 15 August 1971 Richard Nixon, who said he was not a crook, unilaterally declared international bankruptcy for the United States by refusing to honor the promise of gold convertibility. Now the federal government has no intelligible answer to ‘What Is A Dollar?’ and yet strut around in their costumes robbing people if they do not like how their unintelligible definition is applied.
CURRENT DOLLAR CURRENCY CONTROLS
Many currency controls trammel the FRN$. For example, there are ‘qualified intermediary’ rules the Infernal Revenue Service require foreign banks to follow. The PATRIOT Act allows for ’sneak and peak’ warrants along with the ability to confiscate cash at will and in secret.
A particularly insidious but scarcely mentioned currency control was implemented by the United States Mint on 14 December 2006 which provided:
The United States Mint has implemented regulations to limit the exportation, melting, or treatment of one-cent (penny) and 5-cent (nickel) United States coins, to safeguard against a potential shortage of these coins in circulation. … Prevailing prices of copper, nickel and zinc have caused the production costs of pennies and nickels to significantly exceed their respective face values.
“We are taking this action because the Nation needs its coinage for commerce,” said Director Ed Moy. “We don’t want to see our pennies and nickels melted down so a few individuals can take advantage of the American taxpayer. Replacing these coins would be an enormous cost to taxpayers.”
Specifically, the new regulations prohibit, with certain exceptions, the melting or treatment of all one-cent and 5-cent coins. The regulations also prohibit the unlicensed exportation of these coins, except that travelers may take up to $5 in these coins out of the country, and individuals may ship up to $100 in these coins out of the country in any one shipment for legitimate coinage and numismatic purposes. In all essential respects, these regulations are patterned after the Department of the Treasury’s regulations prohibiting the exportation, melting, or treatment of silver coins between 1967 and 1969, and the regulations prohibiting the exportation, melting, or treatment of one-cent coins between 1974 and 1978.
The new regulations authorize a fine of not more than $10,000, or imprisonment of not more than five years, or both, against a person who knowingly violates the regulations. In addition, by law, any coins exported, melted, or treated in violation of the regulation shall be forfeited to the United States Government.
Notice the underlying assumptions Mr. Moy makes evidenced by ‘the Nation needs’ and ’see our pennies and nickels’. Who owns the penny or nickel in your change jar? Are one-hundred nickels five dollars? Are one-hundred pennies a dollar? What Is A Dollar?
If you own the penny or nickel then why would you be prevented from doing whatever you want with your property so long as you do not violate another person’s rights or harm their legitimately acquired property?
Often I receive questions about the ultimate form of currency control: gold confiscation, which I think is highly unlikely.
INFLATION AND SHORTAGES
Inflation leads to shortages and shortages lead to rationing. The adjusted monetary base has spiked tremendously since October 2008. Many prancing court economists seem to think that this activity is not inflationary because asset prices have not risen. They are wrong.
Inflation is an increase in the money or currency supply. Rising prices are an effect that generally results from inflation. Rising prices are not inflation anymore than wet streets are rain.
The United States Treasury Bubble is the biggest bubble of them all and there are reasons for how and why the Treasury bubble will burst. Should the effects of this out of control inflation begin to be felt then it will be real things of intrinsic value and not paper tickets that will be of the most worth.
During these relatively calm times it is important to learn how to buy gold or silver and why to avoid the problematic GLD or SLV ETFs. There will likely be shortages, delivery delays and other potentially chaotic conditions.
Many of the complex systems society takes for granted, like the just-in-time inventory systems of our supermarkets, may become difficult or impossible to operate. Due to rapid advances in supply chain management the margin for error is getting increasingly thin.
The marketplace and creative entrepreneurs will likely devise alternative services and digital commodity currencies, like GoldMoney, to fulfill market demand for a medium of exchange but they may take a while to be adopted in commerce.
In Zimbabwe the people are trading gold for bread at a price of about one gram of gold per loaf. I think it would be wise to set aside at least three months of food and get a 72 hour kit. Food storage is a great form of insurance that is not subject to counter-party risk. Store what you eat and eat what you store. Chicken Little may also like to have a plan for how to vanish.
CONCLUSION
Money and currency are unalienable humans rights. Infringements on these rights are immoral and always fail. As the FRN$ continues evaporating the mendacity of the United States government appears unbounded as decade after decade it keeps implementing increasingly oppressive currency controls and uses greater savagery to perpetuate its influence.
There is not enough real capital, private liquidity, to sponge up all the bonds the incontinent government is selling - 10-20x per month more than a few years ago. Interest rates need to rise higher for Treasuries to become attractive because of the budget and trade deficits which act like an millstone on the income statement and balance sheet of a devalued nation.
At all times and in all circumstances gold and silver remain money. They constitute insurance against currency crisis. And it is the world reserve currency, the FRN$, that is in a currency crisis. Gold and silver, being safer and more liquid, are immune to the black hole above them which constitutes The Great Credit Contraction.

The Prez Don't Care

Obama(doesn't)caretaking surprise hitsDavid Limbaugh's amazed New York Timesmentioned 'unplanned consequences' of law
April 27, 20101:00 am Eastern
By David Limbaugh
As President Barack Obama is attempting to steamroll yet another enormous policy change through Congress against the best interests of Americans, we would be well-advised to keep abreast of the frauds that are already being exposed about Obamacare.
Last week, reality dealt Obamacare twin blows – not that Obama will care. An analysis inside his own administration and a report from New York state shed the grim light of reality on this monstrosity before its draconian provisions have even gone into effect.
Economic experts at the Health and Human Services Department issued a report last week, conveniently after Obamacare was shoved through, finding that though more people will end up with health insurance (many of them against their will, of course), costs are going to increase. Shocker.
How could coverage not increase with the legal mandate forcing unwilling people to buy health-insurance coverage? Today millions entitled to assistance don't avail themselves of it, but Obamacare will presumably be different because there will be a penalty for noncoverage – an idea that Obama expediently mocked during the primary campaign.
But costs will also increase? I thought Obama promised to bend the cost curve down – that he wouldn't add one dime to the deficit with Obamacare. But two dimes or a quarter are apparently a different matter.
The HHS analysis found Obamacare will raise projected spending by about 1 percent over 10 years – and this is without even considering the impact of numerous gimmicks and camouflaged items, such as the Medicare "doctor fix." There are presently scheduled 21-percent cuts in Medicare reimbursements to physicians, but House Speaker Nancy Pelosi has promised they won't be implemented. What a sham!
The report also revealed that Obamacare could drive 15 percent of hospitals into the red and possibly jeopardize access to care for seniors.
Meanwhile, the New York Times reported last week that New York's experience with provisions that parallel Obamacare do not portend well for Obamacare.
According to the Times (it's amazing it admitted this): "New York's insurance system has been a working laboratory for the core provision of the new federal health-care law – insurance even for those who are already sick and facing huge medical bills – and an expensive lesson in unplanned consequences."
Translation: in 1993, New York forced insurance companies to cover individuals and small groups regardless of pre-existing illnesses. It also forced insurers to charge the same premium rates for the same benefits in every region of the state regardless of the demographics of those covered and the different risks that might exist. How about those "unplanned consequences"? You guessed it: "Premiums skyrocketed." Of course they did, because the state grossly interfered with market forces by prohibiting insurers from using risk assessment to set their premiums – just as Obama, in his beneficence, will be doing for all of us under Obamacare.
(Column continues below)
Healthy people began to subsidize people who needed more health care. Duh. The healthier customers began to drop out, and the pool of covered people shrank and mostly included high-risk people. Since 2001, the number of people buying comprehensive individual policies through HMOs has dropped dramatically, from 128,000 to 31,000. And "New York has the highest average annual premiums for individual policies: $6,630 for single people and $13,296 for families in mid-2009, more than double the nationwide average."
Attentive readers might say, "Well, this won't happen under Obamadoesn'tcare because it forces people to buy health insurance whether they want it or not." Amazingly, again, the Times addressed that question, as well. Analysts, the Times said, conclude that this mandate "could prove meaningless if the government does not vigorously enforce the penalties" or if people opt out and pay the penalties.
Well, of course many of the healthy ones are going to opt out, because the penalties will probably be but a fraction of the premiums.
But these twin blows to Obamacare barely scratch the surface of the horror that awaits us. Respected health-care expert Sally Pipes warns that Obamacare will add strain to an already burdened system by increasing the load on family doctors while imposing price controls on government plans. Those controls will inevitably be imposed on private plans, too, as they were in another state – Massachusetts – that is a partial microcosm of Obamacare.
So we'll have increased demand for medical care with price controls, which will necessitate rationing. But making matters worse, doctors are going to retire early; you've surely heard of the 2009 poll by Investor's Business Daily finding that 45 percent of doctors would consider quitting if Obamacare passed. You think the Obamacrats will try to amend the law to force doctors to keep their jobs? Why not? This living Constitution can be pretty handy in a pinch.
Can you believe there are actually Republicans out there contemplating forgoing a full repeal?

Stop The VAT

Hold the VAT -- Taxpayers May Prefer Spending Cuts

By Michael Barone April 26, 2010
The Obama Democrats' stealth strategy for increasing the size and scope of the federal government is well underway, despite huge voter backlash. Federal spending has been increased from a 30-year average of 21 percent of gross domestic product to 25 percent, and a bipartisan commission tasked with reducing the deficit may recommend tax increases.
Presidential economic adviser Paul Volcker has already called for a value-added tax, a form of national sales tax, and presidential press secretary Robert Gibbs has declined to rule it out.
The assumption in some quarters is that a tax increase is inevitable and that the public won't allow any significant decrease in public spending. But there's reason to question that assumption.
Spending cuts have proved politically sustainable in other advanced countries. Economist Tyler Cowen, writing in The New York Times, notes that in the last two decades Canada, Sweden and Finland all cut government spending 20 percent within a few years when faced with structural budget deficits. It may have been painful, but no one saw starving people in the streets of Ottawa, Stockholm or Helsinki.
We may also be seeing some examples in American states. The focus in Washington has been on the federal budget deficit, but state and local government spending amounts to more than 10 percent of gross domestic product and grew faster than the economy over the last decade.
When revenues crashed, congressional Democrats sent one-third of the money in their $862 billion February 2009 stimulus package to state and local governments. The stated reason was to prevent interruption of services.
The political motive was to maintain existing state and local payrolls -- while the private sector has shed 8 million jobs, the public sector has shed zero -- and to keep the dues money flowing to the public employee unions that were so generous to Democrats in the 2008 election cycle.
But that was onetime relief. As New York's Democratic Lt. Gov. Richard Ravitch notes, "The stimulus package just raised higher the cliff from which we all will have to jump off." Revenues continue to lag beneath the trajectory of spending. Improvident pension promises are coming due. Crunch time is arriving sooner in the states than in Washington.
Some states and localities have responded by raising taxes. But the two governors elected in November 2009 have not.
In Virginia, Republican Bob McDonnell has shepherded "painful cuts" in spending through a divided legislature. In New Jersey, Republican Chris Christie, facing an $11 billion deficit, has used his office's unusually great powers to cut spending way back.
In the process, Christie has taken on the teacher unions. That required some guts. In 2005, California Gov. Arnold Schwarzenegger backed ballot propositions to reduce the power of public employee unions. The unions spent something like $100 million -- every dollar ultimately provided by taxpayers -- to drive Schwarzenegger's numbers down and beat the propositions, sending California state government toward insolvency.
That came at a time when surging prosperity seemed likely to continue forever. After losing on the ballot propositions, Schwarzenegger -- like his predecessor Gray Davis -- was unable or unwilling to stop the public employee unions and obedient legislators and local officials from spending every dollar available and many more. Lenders in California and the three other "sand states" -- Nevada, Arizona and Florida -- were busy pumping out the subprime mortgages to uncreditworthy homebuyers that produced the financial crash in 2008. Revenues crashed, and California state government faces something like insolvency.
In today's dire economic climate, Christie seems to be marshalling more voter support than Schwarzenegger was able to in prosperous 2005. He points out that teachers are getting pay raises when most people are not and that they pay zero percent of health insurance premiums. And that the head of the state teachers union makes $550,000 -- all it of derived from taxpayers -- and refused to fire a county union head who wrote a poem calling for Christie's death. Last week, New Jersey voters turned out in large numbers and defeated 260 of 479 local school budgets -- usually 70 percent are approved.
Barack Obama's project of turning the United States into something more like Western Europe has stirred strong opposition and generated much less enthusiasm. What's happening in states like Virginia and New Jersey -- and what happened not so long ago in Canada, Sweden and Finland -- suggests that voters may support spending cuts more than most American politicians and pundits have assumed. And much more than a value-added tax.

Ron Paul's Latest

Socialism vs Corporatism
Tuesday, April 27, 2010 – by Dr. Ron Paul
Lately many have characterized this administration as socialist, or having strong socialist leanings. I differ with this characterization. This is not to say Mr. Obama believes in free-markets by any means. On the contrary, he has done and said much that demonstrates his fundamental misunderstanding and hostility towards the truly free market. But a closer, honest examination of his policies and actions in office reveals that, much like the previous administration, he is very much a corporatist. This in many ways can be more insidious and worse than being an outright socialist.
Socialism is a system where the government directly owns and manages businesses. Corporatism is a system where businesses are nominally in private hands, but are in fact controlled by the government. In a corporatist state, government officials often act in collusion with their favored business interests to design polices that give those interests a monopoly position, to the detriment of both competitors and consumers.
A careful examination of the policies pursued by the Obama administration and his allies in Congress shows that their agenda is corporatist. For example, the health care bill that recently passed does not establish a Canadian-style government-run single payer health care system. Instead, it relies on mandates forcing every American to purchase private health insurance or pay a fine. It also includes subsidies for low-income Americans and government-run health care "exchanges". Contrary to the claims of the proponents of the health care bill, large insurance and pharmaceutical companies were enthusiastic supporters of many provisions of this legislation because they knew in the end their bottom lines would be enriched by Obamacare.
Similarly, Obama's "cap-and-trade" legislation provides subsidies and specials privileges to large businesses that engage in "carbon trading." This is why large corporations, such as General Electric support cap-and-trade.
To call the President a corporatist is not to soft-pedal criticism of his administration. It is merely a more accurate description of the President's agenda.
When he is a called a socialist, the President and his defenders can easily deflect that charge by pointing out that the historical meaning of socialism is government ownership of industry; under the President's policies, industry remains in nominally private hands. Using the more accurate term – corporatism – forces the President to defend his policies that increase government control of private industries and expand de facto subsidies to big businesses. This also promotes the understanding that though the current system may not be pure socialism, neither is it free-market since government controls the private sector through taxes, regulations, and subsidies, and has done so for decades.
Using precise terms can prevent future statists from successfully blaming the inevitable failure of their programs on the remnants of the free market that are still allowed to exist. We must not allow the disastrous results of corporatism to be ascribed incorrectly to free market capitalism or used as a justification for more government expansion. Most importantly, we must learn what freedom really is and educate others on how infringements on our economic liberties caused our economic woes in the first place. Government is the problem; it cannot be the solution.

Heebie-Jeebies!

"We Are Trapped In Some Sort Of Horrendous Keynesian/Monetarists' Nightmare...."
By Bob Janjuah
We are trapped in some sort of horrendous Keynesian/monetarists Nightmare.... Maybe its the return of sunshine, maybe its because I have moved back into my lovely 'new' home after 6mths of renting & refurbishment, it may even be because I have accepted that my beloved Liverpool FC now needs some dramatic and radical 'surgery' if it is ever to be a real force again. Whatever it is, the net effect is that I have spent an awful lot of time 'reflecting', just thinking abt the world, watching the world 'get on with it', and listening to our policymakers and their buddies in the media, in the lobby groups and in the financial sector. My conclusion? Well, I am fast coming round to the idea that (A) I am an idiot (cue the applause!) and that (B) Kevin G may have been right all along. First, it must be made clear that Kevin and I neither have nor 'have had' any disagreement abt the issue of sustainable REAL private sector grwth in the WEST. We don't see any. Yes, a bounce from the extreme weakness of late 08/early 09 was to be fully expected. In fact the 2 of us were cheerleading this view way back in early 09 - and were being criticized for this view. Kevin's work also made clear that one 5%+ GDP data point, driven by inventory, was certain - he thgt it would be Q3 09 but it ended up being in Q4. However, we both have felt and feel that the prvte sector is in the middle of a long multi-yr period of balance sheet repair, and that the questions re sustainable real 'growth' could/can only be answered once we strip out and/or see the abatement/absence of UNSUSTAINABLE government largesse/bailouts/handouts etc. To us, once you strip away the policymaker and his period of peak effectiveness, where we are now much closer to the end rather than the beginning, what is left to take grwth forward is not very much at all. When calling myself an idiot and suggesting that Kevin may have been right all along, I refer of course to the key themes I have been talking abt for nearly a year now: Sovereign Creditworthiness; and The Great Battle between Voluntary Austerity & Deflation, vs Involuntary Austerity, Inflation/Stagflation, Serial Bailouts, Debt & Debasement. I do not intend to go thru a repeat/rehash of these themes - see my previous comments for that. What is important is this: After the disaster of the 18/24mths culminating in March 09, which nearly saw a complete collapse in the global financial system and the global economy on the precipice of utter multi-yr depression, I had, STUPIDLY it now seems, assumed that policymakers and alike would (A) learn lessons, (B) get serious abt reform and regulation, and (C) not do anything to repeat the primary mistakes that lead to the said disaster. Namely too much debt, too many global imbalances, too much moral hazard, and the belief that the only good economic policies are the ones that encourage and promote reckless spending, reckless leverage, and which view reckless asset bubbles as symbols of success. I had assumed, after doing what it took in late 08 and early 09 to avoid global depression and systemic financial system collapse, that policymakers & their buddies would see the light and realise that the only path to long term success for the problem economies (US, UK, most of Europe, Japan, etc) would be a period of Austerity, Balance Sheet repair, Deflation, Real Structural Economic reform and Serious Financial System/Accounting regulation/reform. This path is NOT the easy path near term, but it is the ONLY path for ensuring the long term health and success of the problem economies, as well as ultimately the ONLY path which will both successfully iron out the grotesque global imbalances and help ensure the long term success of the global economy. SADLY, during my period of reflection, I have come round to the view that we have missed this golden opportunity. What instead I am seeing is a desperate attempt to re-write history ('there was no bubble', 'rates too low for too long had nothing to do with it', 'it's all just the fault of a bunch of greedy traders', etc etc) AND at the same time it is clear global policymakers and their buddies, whilst jaw-boning us abt 'exit' and 'austerity/fiscal repair', simply do NOT mean what they are saying - in other worlds, they are talking 'responsibly' but are acting IMHO in a reckless and irresponsible manner. And in my book actions ALWAYS speaker far more clearly and far louder than (cheap) talk. As part of this self-reflection I have thgt a lot abt the old truism, which is as true now as it has always been, that MV = PY. That, in essence, the level of high powered 'money' multiplied by money velocity equates to nominal growth. In particular I have reflected upon the post-07 multiple factor increase in high powered money at the Fed and others, the observation that the V of M IS returning, and in particular I am now clear that the Fed et al have no interest in, and would find it almost impossible anyway, to successfully and PRUDENTLY calibrate its 'reduction' of M as V picks up. In fact, it seems clear from recent action that the Fed et al will prefer to keep M too high for too long, in the course of which we will see bubbles and Ponzis which will make the 08 unwind seem like a walk in the park. Folks will dispute the 'pick-up in V' part of this discussion. But ask yourself this - are you more or less WILLING, and more or less ABLE, to borrow money personally now vs 12mths ago. The answer is obvious and clear I think, certainly on ABILITY, and arguably so on WILLINGNESS. Of course I have also been thinking abt the argument that we in the West have excess capital, human and non-human, which means we cannot have an inflation problem. I think this may all be utter rubbish. Why? Well it seems clear that, (for example) in the US, Capacity Utilisation rates, the levels of long-term unemployment (both standalone & as a % of total unemployment) and CPI inflation are ALL not only closely linked, but also the l-t trend in the US is clear. Namely that the peaks in Cap Ut rates required to give (say) 5% annualised headline CPI in the US have been on a declining trend since the 70s, AND the labour market in the US is far less efficient than it used to be (a function of the US becoming a service sector economy and a 'skilled labour' economy over a 40yr period where the investment in school education has been sharply declining). All of which means that perhaps, whilst there is excess labour, it is the wrong type of labour based on required skills/education. And whilst Cap Ut at 73% may imply lots of excess capital stock overhang, perhaps economist have underestimated the scrappage cycle and the levels of obsolete but not yet scrapped capital stock. We may only be 2 Cap Ut points away from a serious inflation problem, not 7! Also, in the context of labour, lets not forget that President Obama, and esp. folks like Reid and Pelosi are clearly very keen to EUROPEAN-NISE the US labour/benefits/welfare state system. ALREADY, the current administration has made it far more attractive than 2 - let alone 20! - years ago to be a long term unemployed person thru increased benefits etc. The US is catching the European disease and something that was and is again a big problem in the UK also - that it is, for many folks who lack the required skills/education, far more attractive to be 'permanently' unemployed and on benefits, rather than working in unskilled jobs. The Greece bail-out, the goings on at the IMF involving the huge build-up of 'new bail-out' reserves, and all the talk in the UK abt fiscal repair based on fantasyland 'efficiency gains' are the latest evidence that policymakers EVERYWHERE have no appetite to be brave, to be strong and to do the right thing. It seems that it is clearly too painful to do anything else. Instead, policymakers EVERYWHERE seem to have decided that the only way out of the hole is MORE DEBT, MORE DEBASEMENT, MORE BAILOUTS, ugly INFLATION and/or even uglier STAGFLATION, FAKE AUSTERITY, ZERO STRUCTURAL ECONOMIC REFORM, & MINIMAL REGULATORY REFORM. We are trapped in some horrendous Keynesian/monetarist nightmare, where policymakers, aided/abetted/advised by their buddies in the media, in the lobbyist cabal and in financial system, have YET AGAIN decided to go down the route which merely delays the problem/pushes it down the road, but which virtually guarantees that when the NEXT bubble collapses (I assume it will be the Global Government Debt/Bond Bubble and/or the Global Fiat Money/Paper Money/FX Bubble), there is NO pleasant way back. When this next bubble collapses, those of us living/working in these problem economies will realise, too late of course, that WE are the new emerging markets. And no, I don't mean the next China, instead my reference is to Argentina back in the late 90s/early 00s!. So if (as it seems to me) - even though we are agreed on the weak sustainable grwth outlook for the UK US Japan & Europe - that I WAS wrong and that Kevin is right on Austerity and the Reflation Trade, that policymakers will simply keep on behaving recklessly by loading on more debt and blowing more and bigger bubbles until the point of market and/or taxpayer revulsion, then this has some very clear 'asset allocation', and other, implications:

1 - Paul Volcker - it seems to me you were used by President Obama as a tool of political convenience post-Massachusetts. It seems to me that there is no real policymaker will to implement genuine reform/regulation - the lobbyists and the financial sector's players seem to have taken care of that. As you are one of my heroes, can I please suggest that you tell the President to find another tool, and please go enjoy your well earned retirement away from the beast that is Washington.

2 - Reform/regulation is all the chatter post SEC/Goldman. I have no view on this specific issue at all, but I do see this whole issue as having a broader side-effect - it serves Washington as a smokescreen against that chrge that prgress on real reform and regulation has been at a pace that would embarrass a snail on sedatives. As the policymakers in the West have clearly decided that MORE debt and MORE bubbles are the only way forward, whereby wealth is transferred from those who have been prudent and saved, to those that have been reckless and who have levered up and speculated, via inflation, then we should not be at all surprised at the lack of zeal on the issue of reform and regulation.

3 - Citizens of Germany, Finland etc - Oh Dear! You have, IMHO, been sold-out by your leaders domestically and at the European level. All your hard won wealth, success and competitiveness is now, it seems, going to be used as a CASH COW to bail-out countries that had decided to go down the easy money/debt/don't pay any taxes route. Is this what you really signed up for when the European project was being put together (assuming you had a choice!!). You should feel deeply disappointed in (and perhaps even disgusted by) your policymakers as you, your wealth, your competitiveness and your successes have been SOLD OUT for the sake of bailing out a country which historically has been a serial defaulter. Be prepared for the next guy coming cap in hand.

4 - For me, if I am right abt what I have written so far I have, long term, ABSOLUTELY NIL desire to own any EUROS or to own any BUNDS....why own BUNDS when you may as well own Greek Govvies - same risk, big pick up!?!?!!?...This is what the EURO and EUROZONE has become - the Greek bailout ensures that everyone in the club will be 'dumbed down' to the level of Greece. A truly sad day for Germany/Northern Europe.

5 - On this, it seems that the market is going to wait for Greece to actually get some IMF/EU cash into its coffers before it is convinced. Once this cash turns up, certainly 'out to 3yr debt' - the bit covered by the IMF/EU - looks likely to rally. How long it rallies for and how far is a moot point. I think it is virtually certain that Greece will not be able to deliver on its fiscal promises and therefore what this all really comes down to is 'at what point does the German electorate and domestic leaders other than Merkel say 'No Mas''. Nobody knows for sure. But to me the biggest nonsense around is that the whole EUROZONE project will fail if Greece is NOT bailed out and allowed to default. On the contrary, the failure of the EUROZONE is GUARANTEED if Germany 'opts' out. And the credibility of the EUROZONE would be GREATLY ENHANCED if Greece were allowed to default/restructure. After all, membership of ANY club only has value if the club rules are adhered to. Any club that does not enforces its own rules and which instead 'forgives' (BAILS OUT!) those who knowingly and repeatedly break these rules is, frankly, a JOKE and an embarrassment and not a club worth joining UNLESS you are looking for handouts/'arb-ing' the club (and its rules).

6 - More generally, it is clear to me that in the UK, US, EUROZONE (x-periph!!) & JAPAN, owning govvies is a total disaster on anything other than on a short term trading horizon. The global policy solution to the Credit Crisis is now clearly MORE DEBT, MORE FX DEBASEMENT, MORE BAILOUTS and MORE INFLATION, so why own any govvies other than for trading purposes. The same applies to the currencies/fiat money of these 'blocs'. I think the next big trend in govvie mrkts in the UK US EUROZONE is to expect bear flatteners - the shrt end of curves will wear all the inflation repricing risk, whereas very long (10yr+) maturities will do relatively better. I think we could see 2yr US UK EUROZONE out by 200bps over the next 6/9mths, with 10yrs out by perhaps 'only' (!!) 50/100bps. The bigger risk is parallel shifts higher in yield curves across the curve. Urgh!

7 - On bonds, and whilst the real underlying prvte sector trend is one of deflation, policymakers have decided this is undesirable and therefore INFLATION is their sole motive. They also feel they can, over the long term, fool the investor community into believing their 'talk' of exit and into believing that some uber-narrow and 'convenient' measure of inflation is enough to fool us all into to think that there is no inflation risk. Thus they can carry on debasing and adding debt ad nauseam. All fine of course until inflation becomes TOO OBVIOUS to deny. At that point - and this may be mths/qtrs off - this game ends horribly badly with deflation the end trend, but not before a horrible inflation/stagflation spike. And at which point we will all again see the exploded bubble we have (again!) been part of, wittingly or not. When this bubble bursts, I really do think 08 will look like a picnic. I will also be curious to see who the scapegoat is next time, as clearly policymakers will not of course accept their central role. After all they have a 'great' track record on this issue.

8 - My loathing of paper 'assets' out of these economies also applies to credit and equity. Clearly however some excess credit spread provides some inflation offset/protection - esp. in HY and distressed, and in equity land there is also some inflation protection, up to a point. So net net I can see SOME reasons to hold such risky assets - after all, the WHOLE POINT of Western policymaker 'policy' is to blow up these speculative bubbles, with total disregard for both the fundamentals and for the inevitable consequences of exploding bubbles. HOWEVER, once the inflation genie really takes hold - and it may be some mths/qtrs away - risky assets like credit and equity will get crushed too. Our work last yr told us the sweet spot for equities re CPI in the US was between abt 1.5% (headline annualised) and 3.5% - a very narrow window!!

9 - IF I am going to be forced to own paper assets I want to focus on quality, on global big caps (debt & equity), and on strong balance sheet developing economy stks, where the focus should be on DOMESTIC grwth/growing domestic demand.

10 - What I really want to own in a world of reckless policy, debasement, more debt, inflation etc, are PHYSICAL ASSETS like Gold, Oil and PRIME PROPERTY. I can see GOLD @$2k/oz in the next yr or so, Oil north of $100, and when I say Prime, I really mean SUPER PRIME - location and quality are key.

I still hope, for the sake of the long term, that I am wrong and that Voluntary Austerity and Deflation will be enacted sooner rather than (too) late(r) in the problem economies. However, it is clear that over the last 6/9 mths I have let my view and vision get coloured. I let my HOPES (for Voluntary Austerity) and my still total BELIEF that this is the only way forward for long term success, colour my judgement. I have been blind to the reality - that our leaders and their buddies care little abt the long term and that all that seems to matter to them are short-term 'fixes', short-term popularity gains, more bubbles and more debt, whatever the consequences for inflation/stagflation and fiat money. We seem to be stuck in an era where policymakers only understand more debt, more deficits, & more debasement. This IS gonna come back and savage (forget 'bite') us real hard unless our policymakers turn abruptly towards Voluntary Austerity/Deflation. As I've said before, we do NOT have the luxury of time here - it is simply not feasible to continue on the current policy paths for much more than a few qtrs. We do NOT HAVE years. And the longer we wait, the worse the unwind will be. All of the above is of course a longer term focus. In the shorter term, more trading focus: As per my last cmmt of over 6wks ago, S&P has rallied and is in spitting distance of my 1220 target. I think we can see 1220 over the next few days, BUT I would now - tactically - be reducing risk. Why? Well firstly because we have had lots of 'good' news over the last 2mths, esp. around grwth & Greece (yes, good news!..or aren't bailouts good news anymore?!?!), but also because I think that over the next few weeks bond yields are going to breakout into a higher trading range (say 4.25% 10yr UST yield +/- 20bps) as we collectively realise that reflation is the only game in town - whatever the consequences!! For me the initial breakout will be enough to knock up to 10% off global stocks over and May, which in turn shud set up the next bubblicious buying oppo. Bottom line though re the trading outlook is that the BULLISH call from early March has abt run its course with upside S&P price targets pretty much hit - 1220 should be hit in the next few days but I think this is the tail of the rally from the 1040 early Feb lows. From here, over the next mth/6 weeks, the trading theme is MORE BEARISH with higher bond yields and S&P off by maybe 10%, say from 1120 to very low 1100s.

Euro On The Way Down

The Euro Is Evaporating

I had a conference to attend in Southern California last week but the true capstone was a Sunday evening dinner with several readers. Although ‘gold bugs’ may be perceived in their writing as cranky I have found them to be among the most considerate and cultured company. Perhaps it stems from their respect for individual rights. Either way the grilled chicken was fabulous and I brought delicious creations from Extraordinary Desserts.But we had serious and complicated legal, financial and economic discussions. Fiat currency, fractional reserve banking and derivatives have completely broken the pricing mechanism. A tiny volcano burps and entire transportation systems grind to a halt. We addressed tough questions about survivalism in the suburbs. And then focus turned to the timing of the evaporation of the FRN$.

Euro GoldBut the FRN$ is below the Euro in the liquidity pyramid. The FRN$ has deeper capital pools, more economic underpinning, greater liquidity, a stronger economic union and more thoroughly self-deceived owners of colored coupons and imaginary digits. Therefore, the Euro will evaporate before the FRN$. And that is precisely what is happening.Fiat currencies represent the common stocks of nations, or in the Euro’s case the common stock of a weak coalition of nations. Since gold is the numaire par excellence then lets take a view at the Euro zone’s stock through that lens.
A few weeks ago when I was around Doug Casey he remarked that the Euro will be gone in about five years. As the above chart shows, the Euro has lost about 75% of its value in the last 10 years. Mr. Casey may be slightly optimistic about this particular intrinsically worthless colored coupon that represents the common stock of that monetary union.
Euro ZoneSo what has happened in the Euro zone as its common stock has been evaporating? Government budgets have exploded, economic output has slowed, individuals are rioting and causing material amounts of damage, governments are being toppled and armed forces, despite being prohibited by the law that they ultimately enforce, are striking.For example, on 26 April 2010 King Albert II of Belgium accepted Prime Minister Yve Leterme’s colation government’s resignation after futile blathering to resuscitate the government dissipated. This highlights one of the common themes in Europe as Belgium is a prototype of cultural differences with French and Dutch speaking communities disputing while the government debt as a percentage of GDP is over 100%. These giant parasitical vampire squids cannot be supported by the underlying livestock base. But a friendly tip, if you are in Bruges be sure to get a waffle as they are delectable.Another fun example, also on 26 April 2010, hundreds of Greek air force pilots called in sick. Sure, these armed services members are not legally allowed to strike but such civil disobedience happens when members of the enforcer and brutalizing class do not get their paychecks or those paychecks are reduced due to ‘austerity measures’.

Sure, Greek Finance Minister George Papaconstantinou incoherently babbles about cutting the budget deficit through structural reforms instead of salaries but the truth of the matter is that government, like the vampires in Daybreakers, would rather suck the humans dry and then die than curb their appetite and coexist. It is economic law, not voluntary restraint by the vampire squids, through undulating waves of mass psychology that forces limited government.Despite what Merkel and Germany do the die is already cast with regards to the Euro and Euro zone. Interest rates must go up and the market is already forcing this with rises in debt default insurance rates. Additionally, the European banking system is still in terrible condition. On 23 April 2010 Moody’s lowered National Bank of Greece’s credit rating one grade to A3/A. Other Greek banks will likely be downgraded such as Emporiki, Agrotiki Bank, Piraeaus Bank, Eurobank, and Alpha Bank. Plus, Belgium banks need to be cleansed along with plenty of other banks throughout Europe from England to Austria and France to Norway.

The Euro Is BrokenThe Euro is broken. This was its destiny. This is the destiny of all fiat currencies. These bureau-rats cannot stop this anymore than Cnut the Great could command the tide to halt. If these impotent bureau-rats are so powerful then why did they fail to pass legislation commanding the ash cloud to disperse?So what will a post Euro Europe look like? Hopefully, the Europeans do not go back to doing what they have been doing for thousands of years. But those are some of the ominous clouds on the horizon.
ConclusionGold has hit record highs around €860. The Euro is the only possible fiat contender as the world reserve currency and for rational investors it fails muster. Like the Euro the FRN$ is destined to evaporate but this will likely happen later and over a longer period of time.As the political situation continues deteriorating in Europe holders of capital will continue turning towards the precious metals to protect and preserve their wealth. Europe has a rich culture, delicious foods and fine art. Hopefully I will be enjoying it next month and at a lower cost because of the evaporating Euro.But Europe also has a savage past that only the vampire squids desire to see again. After all, luring countries to increase their debt load while destroying the production and productive capacity is bad for everyone but the sociopathic bankers. And I should be gone before that happens.

Amidst All This Bad News, One Prayer Has Been Answered!

CNBC's Amanda Drury Becoming U.S. Anchor

Just announced: CNBC Asia anchor Amanda Drury is joining the stateside CNBC network as a business day anchor. Drury will start May 10th, when she begins as a fill in for Melissa Francis on the "The Call" while she is out on maternity leave.
Drury was most recently based out of Sydney, Australia, her home country, where she anchored CNBC Asia Pacific's "Squawk Box" and "Cash Flow." Prior to that she'd been based out of Singapore for a number of years.
In recent months, Drury has made regular trips to the U.S. to fill-in as an anchor on a number of CNBC programs. During one of those stopovers in the fall, TVNewser caught up with her for a video interview about working in the United States. Check it out here.
More from CNBC after the jump. No word right now on what her role will be following her stint on "The Call."

Housing Round #2

The Housing Crash Has Just Started
Get set for falling prices again. Round two is about to begin.

If you think home prices have hit bottom and are now headed back up for good, don’t look down now. The ground is about to be pulled out from underneath your feet. Think Wile E. Coyote spinning his legs over thin air as he runs off the cliff.
Lender Processing Services just released a report that said mortgage delinquencies have reached record highs again. A whopping 10.2 percent of all mortgages in America are delinquent—and the percentage is still growing. Add in homes that are in some stage of foreclosure and the rate for non-current mortgages rises to an astounding 13.5 percent—that is approaching one in seven mortgages.
All told, approximately 8 million homeowners are currently behind on their payments.
And that is not all. In February the total number of foreclosures jumped by 51.1 percent over February 2009 levels—which seems to indicate that banks are finally starting to face the music and starting to repossess homes.
According to Mike Whitney, writing for the Market Oracle, “banks have been withholding supply to keep prices artificially high.” During the banking panic in 2008 and 2009, banks did not want to foreclose on homes because it would have pushed prices lower, and that would have affected the value of banks’ mortgage-backed security bonds—causing the banks more trouble at a time when many big banks were collapsing. The government too wanted to stop foreclosures, for political reasons, so a moratorium on foreclosures was adopted.
That moratorium ended on March 31, and now that the banks are stuffed with reserves (due to the bank bailout program), “there’s no need to continue the charade,” says Whitney. “So the dumping of backlog homes has begun.”
And the house dumping could turn into a flood.
On March 29, the Irvine Housing Blog reported that Bank of America was set to increase its monthly foreclosures from 7,500 per month to 45,000 per month—a 600 percent increase. At this rate, Bank of America will foreclose on 540,000 homes over the next year. Other banks are set to follow suit.
“It’s a disaster,” says Whitney. It will affect everything from consumer spending to state revenues. And Whitney did not mention a national unemployment rate still above 17.5 percent, or the 20 million vacant homes currently saturating the housing market.
Here is the reality facing America: In the run-up to peak housing in 2007, upward of 40 percent of all job creation, by some estimates, within the U.S. economy was related to the housing market (builders, suppliers, real-estate agents, brokers, bankers, etc.). Those jobs are now gone, and unless housing prices not only stop falling but start rising, the jobs won’t be coming back again. But here is the catch. Before the housing market can sustainably regain its health, and before consumers can start responsibly spending again, housing prices have to be at a point where regular people can afford them.
That means housing prices still need to fall. All those housing-related jobs could be gone for longer than most people anticipate.
If you are hoping for a meaningful recovery in the housing market, and the economy in general, Wile E. Coyote, super genius, offers some pertinent advice: Look out below.

Grocery Store Shopping Is Getting More Painful!

U.S. Food Inflation Spiraling Out of Control

The National Inflation Association today issued the following food inflation alert to its http://inflation.us members:The Bureau of Labor Statistics (BLS) today released their Producer Price Index (PPI) report for March 2010 and the latest numbers are shocking. Food prices for the month rose by 2.4%, its sixth consecutive monthly increase and the largest jump in over 26 years. NIA believes that a major breakout in food inflation could be imminent, similar to what is currently being experienced in India.Some of the startling food price increases on a year-over-year basis include, fresh and dry vegetables up 56.1%, fresh fruits and melons up 28.8%, eggs for fresh use up 33.6%, pork up 19.1%, beef and veal up 10.7% and dairy products up 9.7%. On October 30th, 2009, NIA predicted that inflation would appear next in food and agriculture, but we never anticipated that it would spiral so far out of control this quickly.The PPI foreshadows price increases that will later occur in the retail sector. With U-6 unemployment rising last month to 16.9%, many retailers are currently reluctant to pass along rising prices to consumers, but they will soon be forced to do so if they want to avoid reporting huge losses to shareholders.Food stamp usage in the U.S. has now increased for 14 consecutive months. There are now 39.4 million Americans on food stamps, up 22.4% from one year ago. The U.S. government is now paying out more to Americans in benefits than it collects in taxes. As food inflation continues to surge, our country will soon have no choice but to cut back on food stamps and other entitlement programs.Most financial experts in the mainstream media are proclaiming that the recession is over and inflation is not a problem in the U.S. Unfortunately, they fail to realize that rising food and gasoline prices accounted for 58% of February's year-over-year 3.85% rise in retail sales. NIA believes price inflation is beginning to accelerate in many areas of the economy besides food and energy, and all increases in U.S. retail sales this year will be entirely due to inflation.

Nicely Said......................

"As the state grows, one’s sense of self-ownership is destroyed, liberty is traded for 'security', the human spirit diminishes, and the citizenry increasingly thinks and behaves like dependent children". - Eric Englund in Income Taxes, Obesity, and Other Maladies of Nanny Statism, 2005.

Prison Doors Are Open

Obama’s Wall Street Bill Lets Crooks Escape
April 20, 2010
While Paulson has contributed financially to both major political parties, Soros is a major financial backer of Obama, the Democratic Party, and “progressive” organizations like the Center for American Progress (CAP)...
The indictment of Goldman Sachs is as deceptive as the "financial reform" bill that President Obama and the liberals are pushing on Capitol Hill, says Zubi Diamond, author of the blockbuster book, Wizards of Wall Street. Diamond is warning legislators not to fall for the Obama Administration's claim that the legislation somehow punishes Wall Street for bad financial practices.
Diamond, who has emerged as a major critic of the unregulated hedge fund industry, says he was not surprised that the Securities and Exchange Commission (SEC) named hedge fund short-seller John Paulson as a key player in the Goldman Sachs scheme to defraud investors but failed to indict him.
Diamond says that Paulson is being let off the hook because he is a member of the most powerful special interest group working the corridors of power in Washington, D.C.--the Managed Funds Association (MFA). He says the major media are afraid of taking on the MFA, which calls itself "the voice of the global alternative investment industry," because of its tremendous financial clout.
"The SEC charges against Goldman Sachs are a ruse, a ploy, and a smokescreen to get the Dodd financial reform passed," he said. The bill, he argues, fails to hold the multibillion dollar hedge fund short sellers accountable for their illegal market manipulations. One of these short sellers, not named in the Goldman suit, is billionaire George Soros, known as the man who "broke the Bank of England" by betting against the British pound and who was convicted of insider trading in France.
The firms of Soros and Paulson are key players in the MFA.
As AIM reported back in January of 2008, Paulson, who had already made billions of dollars betting that the housing market would collapse, had met with George Soros about using various "financial instruments" against the U.S. economy.
We warned at the time: "The American people should be quickly educated by our media on how very rich people like Paulson and Soros make 'bets' on the rise or fall of national currencies and economies. Paulson is now telling investors 'it's still not too late' to bet on more economic problems. These are capitalists who seem to have a vested interest in the further decline of the U.S. economy."
Soros refused to talk about his meeting with Paulson, according to the Wall Street Journal.
While Paulson has contributed financially to both major political parties, Soros is a major financial backer of Obama, the Democratic Party, and "progressive" organizations like the Center for American Progress (CAP), which Diamond labels the "Center for American Destruction" and the base of Marxist operations in the U.S. today. CAP President John Podesta recently re-hired Van Jones, the communist "Green Jobs" czar ousted from the Obama Administration for allegedly concealing his radical views.
If John Paulson had been charged along with Goldman Sachs, says Diamond, "It would lead to other charges such as insider trading, manipulation by collusion, conspiracy to defraud the banking industry and their shareholders, bribery of government officials, political campaign law violations, possible election fraud and interference with the 2008 presidential election."
He says, "Do not forget some people died by suicide as a result of losing all their money due to the financial violence visited upon them and millions of American families by the hedge fund short-sellers George Soros, John Paulson and pals."
If such charges were to be brought, the scandal would be bigger than Watergate, Diamond says, and it will shed light on the stock market manipulators in the MFA, their strategic partners, alliances, and the hedge fund short sellers who are in fact responsible for the financial crisis.
In the Goldman case, as noted by the New York Times and other major media, the SEC filed a civil fraud lawsuit against the firm for neglecting to tell its customers that mortgage investments they were buying consisted of pools of dubious loans that Paulson had selected because they were highly likely to fail. By betting against the pool of questionable mortgage bonds, Paulson made $1 billion on this deal alone when they collapsed just a few months later.
Although Paulson's role in devising the financial instrument that caused the losses is detailed in the complaint, he is not named as a defendant in the suit.
Rather than demand action from the SEC, the major media have been content to repeat nonsensical SEC claims that Paulson was somehow not involved in the fraudulent aspects of the scheme.
"If John Paulson were charged along with Goldman Sachs, it would lead to other players as well and blow the case wide open," Diamond told Accuracy in Media.
After the financial bailouts began, just weeks before the 2008 presidential election, Diamond, an African immigrant, a naturalized U.S. citizen, and a successful businessman, began his detailed examination of how the hedge fund short sellers were operating behind the scenes. The result was his explosive book, Wizards of Wall Street, which has generated enormous controversy on the Internet.
Diamond's book makes the case that billionaire hedge fund short sellers deliberately engineered the economic collapse, making billions of dollars while ordinary Americans lost trillions of dollars in the value of their homes and investments. He says the purpose of the crash, in addition to making money for the hedge fund short sellers, was to elect Barack Obama to the presidency and achieve total control over the U.S. economy.
One book reviewer commented, "This is more of an exposé of who owns Barack Obama and put him in the White House!"
There is still time for the SEC to do its duty and bring charges against all of those responsible for the economic collapse, he says. But he thinks political considerations are guiding the entire process, and that the Goldman charges are a classic case of misdirection.
The charges filed are civil, as opposed to criminal, meaning that no one will go to jail.
Diamond says that Obama is working with liberals on Capitol Hill to pass a "financial reform" bill that has absolutely nothing to do with the root cause of the economic crisis--the people like Soros and Paulson. These are the hedge fund short sellers, whom he labels the "bad Wall Street," and who worked as members of MFA to cause the economic crisis.
Diamond contrasts the hedge fund short sellers with the "good Wall Street" of banks and investors which help produce goods and serve the public, including by providing badly needed jobs.
The hedge fund short sellers are not capitalists in the traditional sense, he says. They are anti-capitalists because they are predators who feast on companies and economic sectors that can be buffeted by market manipulations through collusion and unrestricted short selling.
Diamond says that the failure to bring charges against Paulson in the Goldman case means that the whole process is a political deception and that the "financial reform" bill is a fraud.
The charges against Goldman are just "throwing the public a bone, a sacrificial lamb to further the cause of passing the Dodd financial reform bill," Diamond went on. "But the legislation is based on the false premise of 'too big to fail' being the cause of the economic crisis."
The problem is not that some banks and companies are "too big to fail," he says. Instead, the problem is that major industries are being looted by the behind-the-scenes hedge fund short sellers who make money through market volatility, unrestricted short selling, a company or country collapse, and generally through economic calamities.
A piece of legislation is not needed to prevent a future bailout of any company, Diamond points out. He asks, "Was there previously a law that required the government to bail out any company? The answer is NO. They did not have to bail out any company. They chose to do the bailouts, in order to replace the money looted by members of MFA. Meanwhile, the nation continues racking up more debt in trillions upon trillions of dollars to replace the stolen money."
"George Soros and Obama adviser Larry Summers were recently laughing it up in Davos, Switzerland," Diamond notes.
He adds, "The only reform that is needed is to restore the safeguard regulations which protect the invested capital from being looted by the hedge fund short sellers. These financial market safeguards were removed by former SEC Chairman, Christopher Cox, due to the lobbying influence of MFA."
In a previous column, Diamond explained the nature of these safeguards and reforms.
In terms of the case against Goldman, Diamond predicts the result will be a financial fine and the firing of a Goldman vice president, who will then turn up working for a member of the MFA.
Diamond says the embarrassment to Goldman Sachs from the charges is a small price for the MFA to pay in order to get the financial reform bill passed, "which will cover their role in engineering the economic collapse, exonerate them from culpability, distort history in their favor, and put all the publicly traded companies under their potential control."
The American people must be made to understand that the Managed Funds Association is "the secret government within the Obama administration," Diamond argues. "They had to give an example of bad behavior on Wall Street as a compelling reason to quickly pass the Dodd financial reform bill, but since they could not find any example from the 'good Wall Street,' who are the victims of their crimes, they had to use one of their own. The case, however, is deliberately designed to be weak by letting the big fish off the hook."

The IMF Wants To Become Your Tax Overlords...Isn't That Quaint?

IMF’s Global Taxes Can Only Be Enforced Through Global Government
Latest proposals part of ongoing centralisation into new economic world order
Thursday, April 22nd, 2010
As you will have no doubt read in the headlines today, the IMF has proposed levying two “global” taxes on the world’s banks to make sure those greedy guys don’t get us into trouble again. If that sounds dubious, it’s because it is. In reality what is being proposed, and has been falling into place for some time, is the framework for an unelected global authority with powers above and beyond those of sovereign governments.
We've explained how the IMF’s so called global Financial Activities (FAT) tax on banks is nothing more than a bailout slush fund that would inevitably trickle down to the consumer, and also be levied upon all financial institutions (not just the big ones that commit massive fraud on a daily basis).
This will not prevent globalist bankers from over reaching, it will in fact provide the incentive for more moral hazard by providing built in insurance against risky actions.
Such taxes will drastically reduce the profits of all banks and financial institutions, ensuring only the biggest can continue to thrive. Global competition could be killed off completely, signaling the final nail in the coffin of the free market.
Some within the banking industry also argue that reduced capital in financial institutions makes them a less attractive investment and makes it more likely that governments will have to step in when a fresh crisis hits.
The Association for Financial Markets in Europe issued a statement to this effect: “The IMF has set the right objective in addressing the need to avoid another financial crisis, but appears to have chosen the wrong means to achieve it.
“The financial sector should not rely on public funds in the event of a crisis. As an industry, it needs to put in place measures that will enable failing firms to be wound down or restructured without needing taxpayer support. Banks must be allowed to fail and the cost of dealing with any failure must be first met by shareholders and creditors, not taxpayers.”
Even The Economist has denounced the idea as “Treating the symptoms, not the cause”.
Aside from these issues is another valuable point being made by the banks themselves, as well as economists and commentators – you cannot have global taxes without a powerful enough global authority to enforce them.
Global Consensus Key to Introducing New Levies is the headline in the Korea Times, which notes that without an overarching international framework to oversee global taxation, the idea will struggle to come to fruition.
“Certainly, the recommendation will provide momentum for global discussions on whether to put the idea of this taxation into action.” The report states. “This issue is also expected to be on the top of the agenda during a G-20 meeting of finance ministers and central bankers to be held this weekend in Washington. What’s important is to build a global consensus on this contentious matter.”
The London Telegraph reiterates this key point:
“Both taxes would be tricky to enforce, as bankers were quick to point out. A FAT tax would almost certainly require global co-ordination or face “regulatory arbitrage” by banks moving operations to friendlier territories.”
The IMF is well aware of this problem, outlining in the proposal that unilateral measures “risk being undermined by tax and regulatory arbitrage, and may also jeopardise national industries’ competitiveness”. Coordinated action, it says, would promote a level playing field for cross-border institutions and ease implementation.
The Telegraph article continues:
“The IMF’s idea is for the levy to support a resolution regime that would minimise the need for state support. A resolution agency would determine when a bank was insolvent and ‘replace managers, recognize losses in equity accounts, and, as necessary, expose unsecured creditors to loss’.”

Leading globalists have recently called for further empowering the IMF, as well as the World Bank as global authorities in a new economic world order under a “bank of the world”. This is not a conspiracy theory, it is written in the IMF’s own internal documents, has been reiterated by World Bank President Robert Zoellick, and is the stuff of Washington Post articles.
Last year Zoellick openly spoke of using the economic crisis to give global financial bodies the power to regulate national policy as part of the larger creation of global government.
“If leaders are serious about creating new global responsibilities or governance, let them start by modernising multilateralism to empower the WTO, the IMF, and the World Bank Group to monitor national policies.” Zoellick stated.
In his article under the headline A Bigger, Bolder Role Is Imagined For the IMF – Anthony Faiola of the Washington Post described how the IMF is on course to be transformed into “a veritable United Nations for the global economy.”
Faiola envisages a scenario where “central bankers and finance ministers would meet to convene a financial security council of sorts.”
“Serving almost as ambassadors to the IMF, they would debate ways to put out the world’s economic fires and stifle reckless policies before they ignite new ones.” he continues.
“Bowing to a new economic world order, the IMF would grant fresh powers to the likes of China, India and Brazil. It would have vastly expanded authority to act as a global banker to governments rich and poor. And with more flexibility to effectively print its own money, it would have the ability to inject liquidity into global markets in a way once limited to major central banks, including the U.S. Federal Reserve”
The article then explains that this imagined scenario is taken directly from internal IMF documents, interviews and think-tank reports. The details were thrashed out at the G20 summit in London last year, and though they may take years to fully implement, this model represents the global financial elite’s blueprint for the near future.
Following the G20 summit, the London Telegraph’s international business editor also highlighted the agenda, noting that under a clause in Point 19 of the communiqué issued by the G20 leaders, the IMF’s power to create money outside the control of any sovereign body was activated.
The new reserve currency would be formed from Special Drawing Rights (SDRs), a synthetic paper currency issued by the IMF that has lain dormant for half a century.
“The world is a step closer to a global currency, backed by a global central bank, running monetary policy for all humanity.” Ambrose Evans-Pritchard wrote, quipping that “Conspiracy theorists will love it”.
As we have previously reported, both the IMF and the United Nations have thrown their weight behind proposals to implement this “multilateral” de-facto global financial dictatorship. Both bodies have also expressed support for new world reserve currency system to replace the dollar as part of the acceleration towards the new economic world order.
The introduction of a new global taxation and currency system, with an overarching regulatory body, is a key cornerstone in the move towards global government, centralized control and more power being concentrated into fewer unaccountable hands. The former cannot be fully realised without the latter.
The IMF’s global taxes are part of the ongoing movement to empower a group of unelected central bankers with the authority to usurp state sovereignty by overseeing benchmarks for national financial governance and setting regulations for financial institutions all over the globe.
Currently opposition to the taxes exists in the form of Canada, Australia and Japan, countries all arguing that their banking institutions should not be punished for the failures (should read crimes) of the big banks headquartered in U.S. and Europe.
The proposals for the IMF’s global taxes are set to be debated by the G20 in June.