Posts Tagged ‘international monetary fund’
by Tyler Durden
11/05/2011 22:49 -0500
Going back to the annals of brokeback Europe, we learn that gold after all is money, after the G-20 demanded that EFSF (of €1 trillion “stability fund” yet can’t raise €3 billion fame) be backstopped by none other than German gold. Per Reuters, “The Frankfurter Allgemeine Sonntagszeitung (FAS) reported that Bundesbank reserves — including foreign currency and gold — would be used to increase Germany’s contribution to the crisis fund, the European Financial Stability Facility (EFSF) by more than 15 billion euros ($20 billion).” And who would be the recipient of said transfer? Why none other than the most insolvent of global hedge funds, the European Central Bank.
Also, in addition to gold, the ECB had set its eyes on that other “fake” currency that DSK had succeded in protecting throughout his tenure, all his other undoings aside, “The Welt am Sonntag newspaper, citing similar plans, said 15 billion euros would come from special drawing rights (SDR) that the Bundesbank holds.” Naturally, these discoveries prompted a prompt and furious rebuttal from the very top of German authorities: “Germany’s gold and foreign exchange reserves, which the Bundesbank administers, were not at any point up for discussion at the G20 summit in Cannes,” government spokesman Steffen Seibert said. The WSJ adds, “A plan to have the International Monetary Fund issue its special currency as a powerful weapon in Europe’s efforts to contain the widening euro-zone debt crisis was blocked by German Chancellor Angela Merkel, according to a report in a German newspaper.”
There are three observations to be made here: i) when it comes to rescuing insolvent countries, Germany is delighted to sacrifice euros at the altar of the 50-some year old PIIGS retirement age; ask for its gold however, and things get ugly; ii) the Eurozone, the ECB and the EFSF are dead broke, insolvent and/or have zero credibility in the capital markets, and they know it and iii) due to the joint and several nature of the ECB’s capital calls, while Germany may have had enough leverage to tell G-20 to shove it, the next countries in line, especially those which are already insolvent and will rely on the EFSF for their existence once the ECB’s SMP program is finished, may not be that lucky, and in exchange for remaining in the eurozone, the forfeit could well be their gold.
WSJ brings details on how German SDRs would be used as a temporary (temporary as in European financial short selling ban, and temporary reduction of initial margin to maintenance for everyone to appease MF Global clients) backstop for Europe:
The idea of using SDRs to fight financial contagion isn’t new. When the collapse of Lehman Brothers in 2008 unleashed a financial crisis, the G-20 in 2009 approved a $250 billion SDR allocation to help backstop efforts to fight the spread of the crisis.
The European Central Bank has been buying euro-zone bonds in an effort to keep borrowing costs of weakened members from exploding. But the ECB’s efforts are considered by some experts to be outside of its central mandate to maintain price stability. And the ECB has said that its special measures – buying euro-zone debt — should be temporary and limited in scope. That is another reason why some people are advocating the IMF play a greater role in propping up weakened euro-zone members and become the lender of last resort.
Speaking to reporters at the close of the Cannes summit, Merkel indicated that G-20 leaders agreed in principle that the IMF and EFSF could work together, but the summit could not agree on any specifics.
“We have an interesting process ahead of us and the discussion is not yet concluded,” she said.
Reuters brings more on the the logical German reaction to the EFSF and ECB’s extortion attempts:
“We know this plan and we reject it,” a Bundesbank spokesman said.
Seibert said several partners had raised the question in Cannes whether SDRs could be used to strengthen the EFSF but Germany had rejected this plan and discussions at Monday’s Eurogroup on Monday would not discuss this topic.
The newspapers had said the issue was taken off the agenda at the G20 following Bundesbank opposition but that it would be debated on Monday at a Eurogroup meeting of euro zone finance ministers.
Why will it be debated? Because when at first you don’t succeed, try, try again. Germany may be crossed off the list, but here is who is next in order of appearance. Sooner or later, Europe will stumble on that one “leader” whose gold is less valuable than their political stability, because after all, a “united”, “EMUed” Europe has the biggest MAD trump card of all.
Read the entire article HERE.
by Jason Folkmanis
Jul 22, 2011 8:47 PM PT
Consumer prices rose 22.16 percent from a year earlier, compared with June’s 20.82 percent pace, data released by the General Statistics Office in Hanoi showed today. Prices climbed 1.17 percent from June.
The central bank reduced its repurchase rate to 14 percent from 15 percent on July 4 after a spate of increases since November to fight inflation, leading the International Monetary Fund to say the cut may confuse investors. The benchmark VN Index of stocks is down 16 percent this year, on concern price gains will hurt the economy.
“The markets were very surprised by the easing,” Prakriti Sofat, a Singapore-based economist at Barclays Capital, said before the release. “It’s too early to go into a full-blown easing cycle given that inflation and inflation expectations remain elevated.”
Vietnam will find it “very difficult” to slow inflation to 17 percent by the end of 2011, Ha Van Hien, head of the National Assembly’s Economic Committee, told the opening of the body in Hanoi on July 21. It may peak as high as 23 percent in August before slowing to 18 percent by year-end, Sofat said.
The VN Index fell 0.9 percent yesterday to 409.2, while the dong weakened 0.1 percent, according to data compiled by Bloomberg. The currency was devalued by about 7 percent in February, the most since at least 1993, risking costlier imports.
Food, Transport Costs
Food, transport and construction-material prices have stoked consumer-price growth, according to Australia & New Zealand Banking Group Ltd. Transport prices rose 21.7 percent from a year earlier in July, today’s data showed. July’s annual inflation rate is the highest in a basket of 17 Asian economies tracked by Bloomberg.
Prime Minister Nguyen Tan Dung in February cut the credit- growth target and ordered a tighter monetary policy to try to tame inflation, revive confidence in the economy and prevent another credit-rating downgrade. This month’s rate cut wasn’t a “policy signal,” the central bank said in a July 8 statement.
“We assume policymakers are again demonstrating their low tolerance for slower growth,” Christian de Guzman, a Singapore- based assistant vice president at Moody’s Investors Service, said in a note on July 11.
The nation’s economy expanded 5.6 percent from a year earlier in the first half of 2011. Moody’s said that a “tight” monetary policy would threaten the government’s full-year target of 6 percent.
‘A Bit Concerned’
“We are a bit concerned that the cut in rates will confuse the market about the government’s commitment to sustaining the stabilization effort under Resolution 11,” Benedict Bingham, the IMF’s senior resident representative in Vietnam, said this month. Resolution 11 refers to the steps Dung took in February.
“A strong commitment to sustaining this effort is essential to re-establishing confidence in the dong and restoring macro-economic stability more generally,” Bingham said.
The State Bank of Vietnam had increased the repurchase rate for the seven-day term from 7 percent at the start of November 2010 before this month’s cut. It appears to have become the benchmark for monetary policy, according to JPMorgan Chase & Co.
Read the entire article HERE.
By Rebecca Christie and Ian Katz
May 17, 2011 7:39 PM GMT-0700
U.S. Treasury Secretary Timothy F. Geithner said the International Monetary Fund needs to formally name an interim leader after Dominique Strauss-Kahn’s jailing, as pressure rose on the fund’s managing director to resign.
“It’s important that the board of the IMF formally put in place for an interim period somebody to act as managing director,” Geithner said at an event in New York yesterday. Austrian Finance Minister Maria Fekter said earlier that Strauss-Kahn “risks damaging the IMF” and her Spanish counterpart said he should “use his best judgment.”
Any resignation by Strauss-Kahn, who has been jailed on charges of sexual assault that he denies, is likely to spark calls by emerging market nations for an end to Europe’s tradition of naming the IMF chief. Bank of Korea Governor Kim Choong Soo said today that he hopes a candidate from an emerging economy will take the post.
“There’s been a gradual shift of economic power and representation to emerging markets but institutions like the IMF and the World Bank are still centered heavily in the West,” said Joseph Tan, Singapore-based chief economist for Asia at Credit Suisse Private Bank. At the same time, “this episode may not be enough to shift that balance of power to emerging markets,” he said.
Brazilian Finance Minister Guido Mantega said that while Brazil would like to see a merit-based system used to select the IMF chief, Strauss-Kahn has been an ally of Brazil and other emerging markets seeking greater representation at the Washington-based lender.
“I am rooting so that this situation resolves itself in a positive way for him,” Mantega said in an interview yesterday on Globo television.
Strauss-Kahn, 62, is accused of attacking a housekeeper at a midtown Manhattan hotel and forcing her to perform sex acts. He denies the charges. Strauss-Kahn was arrested May 14 and ordered held without bail by Manhattan Criminal Court Judge Melissa Jackson this week, after prosecutors said he was a flight risk. The next court date is May 20.
Fekter said “he must consider what needs to be done,” speaking to reporters in Brussels yesterday.
“There’s a lot going on in the world,” especially in Europe, and “you want the IMF to have the capacity to be helpful in that context,” Geithner said. Strauss-Kahn currently is “obviously not in a position” to run the organization, he said.
The Treasury chief, who previously worked at the IMF, also said that John Lipsky, the IMF’s acting managing director who had been the No. 2 official, is competent and capable.
Read the entire article HERE.
By Eric Martin
Apr 16, 2011 4:49 PM PT
World Bank President Robert Zoellick said the global economy is “one shock away” from a crisis in food supplies and prices.
Zoellick estimated 44 million people have fallen into poverty due to rising food prices in the past year, and a 10 percent increase in the food price index would send 10 million more people into poverty. The United Nations FAO Food Price index jumped 25 percent last year, the second-steepest increase since at least 1991, and surged to a record in February.
Food price inflation is “the biggest threat today to the world’s poor,” Zoellick said at a press conference following meetings of the World Bank and the International Monetary Fund. “We are one shock away from a full-blown crisis.”
“For most commodities, stocks are relatively low,” he said. “You have one other weather event in some of these areas and you really take a danger zone and start to push people over the edge.”
Zoellick said he opposes export bans that nations use to depress local commodity prices for their citizens, lifting costs for consumers in other countries.
Farmers in Russia, once the second-biggest wheat exporter, are planting the fewest acres in four years, in part because a government export ban kept prices low, a Bloomberg survey of producers, traders and analysts showed last month. India, the largest grower after China, is mulling lifting an export ban in place since 2007 as harvests may reach a record for a fourth straight year, Agriculture Minister Sharad Pawar said this month.
Economic growth “is leveling off after a post-crisis recovery,” Zoellick said. “The question now is whether it’s strong enough to reduce unemployment, particularly in developed countries. Inflation is up in developing countries, and this could lead to overheating or asset price bubbles.”
Read the entire article HERE.
Secret Iran Gold Holdings Leaked: Tehran Holds Same Amount Of Gold As United Kingdom, And Is Buying More
by Tyler Durden
03/20/2011 20:41 -0400
While it will not come as a major surprise to most, according to senior BOE individuals and Wikileaks, Iran, as well as Qatar and Jordan have been actively purchasing gold well over the amount reported to and by the IMF, in an accelerated attempt to diversify their holdings away from the US dollar. “Iran has bought large amounts of gold in the international market, according to a senior Bank of England official, in a sign of how growing political pressure has driven Tehran to reduce its exposure to the US dollar. Andrew Bailey, head of banking at the Bank of England, told an American official that the central bank had observed “significant moves by Iran to purchase gold”, according to a US diplomatic cable obtained by WikiLeaks and seen by the Financial Times.” The reason for Tehran’s scramble into gold: “an attempt by Iran to protect its reserves from risk of seizure”. The misrepresentation of Iran’s holdings could be so vast that Iran could possibly be one of the largest holders of goldin the world. “Market observers believe Tehran has been one of the biggest buyers of bullion over the past decade after China, Russia and India, and is among the 20 largest holders of gold reserves… with an alleged 300 tons, big enough to challenge the UK at 310 tons, and more than Spain! ” As a reminder according to the WGC, Iran is not even disclosed as an official holder of gold. Also, Iran is not the only one: “Cables obtained by WikiLeaks cite Jordan’s prime minister as saying the central bank was “instructed to increase its holdings” of gold, and a Qatar Investment Authority official as saying the QIA was interested in buying gold and silver.” Which means that there is far more marginal demand by countries supposedly friendly to the dollar, as many more than previously expected are actively dumping linen and buying bullion. What all this means for the future price of gold, especially with geopolitical tension in the region, and QE3 imminent, is rather self-evident.
From the FT:
Andrew Bailey, head of banking at the Bank of England, told an American official that the central bank had observed “significant moves by Iran to purchase gold”, according to a US diplomatic cable obtained by WikiLeaks and seen by the Financial Times.
Mr Bailey said the gold buying “was an attempt by Iran to protect its reserves from risk of seizure”.
Market observers believe Tehran has been one of the biggest buyers of bullion over the past decade after China, Russia and India, and is among the 20 largest holders of gold reserves.
They estimate it holds more than 300 tonnes of gold, up from 168.4 tonnes in 1996, the date of the most recent International Monetary Fund data.
Ummm, according to the WGC the UK (thank you Gordon Brown) has 310 tons of gold… Iran has the same amount of gold in storage as the (formerly) biggest colonial power in the history of the world. And this is not breaking news?
The cable, dated June 2006, is the first official confirmation of Tehran’s buying. Last year central banks became net buyers of bullion after 22 years of large sales, helping drive gold prices to all-time nominal highs. Trades by central banks are often kept secret.
Bankers said other Middle Eastern countries had also been quietly adding to gold holdings to diversify away from the dollar amid political tensions and volatility in currency markets.
“The totality of central bank reserves is not what is reported to the IMF,” said Philip Klapwijk, executive chairman of GFMS, a precious metals consultancy. “There’s probably another 10 per cent on top of that.”
Cables obtained by WikiLeaks cite Jordan’s prime minister as saying the central bank was “instructed to increase its holdings” of gold, and a Qatar Investment Authority official as saying the QIA was interested in buying gold and silver.
“There is no question some Middle Eastern countries are very interested in buying gold,” said George Milling-Stanley, head of government affairs at the mining industry-backed World Gold Council.
Secret undisclosed purchases of physical gold… What next: secret undisclosed selling of paper gold by such unusual suspects as JPM? Impossible.
Read the entire article HERE.
By Ben Rooney, staff reporterFebruary 10, 2011: 4:37 PM ET
NEW YORK (CNNMoney) — The International Monetary Fund issued a report Thursday on a possible replacement for the dollar as the world’s reserve currency.
The IMF said Special Drawing Rights, or SDRs, could help stabilize the global financial system.
SDRs represent potential claims on the currencies of IMF members. They were created by the IMF in 1969 and can be converted into whatever currency a borrower requires at exchange rates based on a weighted basket of international currencies. The IMF typically lends countries funds denominated in SDRs
While they are not a tangible currency, some economists argue that SDRs could be used as a less volatile alternative to the U.S. dollar.
Dominique Strauss-Kahn, managing director of the IMF, acknowledged there are some “technical hurdles” involved with SDRs, but he believes they could help correct global imbalances and shore up the global financial system.
“Over time, there may also be a role for the SDR to contribute to a more stable international monetary system,” he said.
The goal is to have a reserve asset for central banks that better reflects the global economy since the dollar is vulnerable to swings in the domestic economy and changes in U.S. policy.
In addition to serving as a reserve currency, the IMF also proposed creating SDR-denominated bonds, which could reduce central banks’ dependence on U.S. Treasuries. The Fund also suggested that certain assets, such as oil and gold, which are traded in U.S. dollars, could be priced using SDRs.
Oil prices usually go up when the dollar depreciates. Supporters say using SDRs to price oil on the global market could help prevent spikes in energy prices that often occur when the dollar weakens significantly.
The Dollar Alternatives
Fred Bergsten, director of the Peterson Institute for International Economics, said at a conference in Washington that IMF member nations should agree to create $2 trillion worth of SDRs over the next few years.
SDRs, he said, “will further diversify the system.”
Dollar firms after starting 2011 weak
The dollar has been drifting lower so far this year as the global economy improves and investors regain their appetite for more risky assets such as stocks and commodities.
After rising above 81 in early January, the dollar index, which measures the U.S. currency against a basket of other international currencies, eased below 77 earlier this week.
However, the dollar was higher Thursday against the euro, pound and yen as disappointing corporate results weighed on stock prices following several days of gains on Wall Street. The rally in the commodities market also cooled, with the price of oil and metals backing off recent highs.
In addition, renewed concerns about the debt problems facing troubled European economies put pressure on the euro and supported the dollar. The yield on Portugal’s benchmark bond rose to a record high Wednesday, and borrowing costs for Ireland, Spain and Greece remain elevated.
“The market is shedding risk, with equities and commodities weakening and the U.S. dollar broadly stronger” said Camilla Sutton, currency strategist at Scotia Capital.
Traders were also digesting comments from Federal Reserve chairman Ben Bernanke, who told Congress Wednesday that despite a strengthening economic recovery, the unemployment rate remains high while inflation is “still quite low.”
Those remarks reaffirmed the view that “the Fed would be very slow to tighten policy given its dual mandate of price stability and employment,” analysts at Sucden Financial wrote in a research report.
Bernanke also urged lawmakers to come up with a “credible plan” to bring down “unsustainable” federal budget deficits.
“We expect that the outlook for the U.S. fiscal position will weigh heavily on the U.S. dollar in the quarters ahead,” said Sutton. In the near-term, however, she said “a strengthening growth profile” could help provide “a temporary period of dollar strength.”
Read the entire article HERE.
Submitted by Jim Willie on Wed, 3 Nov 2010
A love affair with silver is so natural. The fundamentals are astoundingly positive and bullish in price prospects. My basic argument has been repeated many times. Industry has countless uses for silver, significant demand. But industry has only miniscule isolated uses for gold, in trivial demand. So silver wins on the Demand side of the equation. Central banks own a huge amount of gold. They frequently sell it, even through their slippery surrogate the Intl Monetary Fund. Central banks own zero silver. So silver wins on the Supply side of the equation. My motto is that gold fights the major political and financial war, but silver will ride in on a shiny white horse and take much larger spoils. That effect has already begun. Since the significant game changing FOMC meeting on September 21st, where the telegraph message delivered to the world financial markets was made by megaphone, the impact has been clear and stark. Compared to closing prices on September 21st versus October 29th, just five weeks, the silver price had risen from $20.64 to $24.56, up 19.0%. During the same timespan, the gold price had risen from $1274.30 to $1357.60, up 6.5%. My claim, a loose forecast often repeated, has been that the silver breakout gains would be at least double and possible triple the gold gains. We have seen exactly that in recent weeks.
An extremely fuzzy factor is the CFTC attention. The Commodity Futures Trading Commission is supposedly investigating the Big Four Banks for gigantic concentrated short positions in the silver market, for naked shorting of silver, and for collusion with other banks. Commissioner Bart Chilton has made a lot of noise, but has done next to nothing. Some find encouragement, an absurd notion in my view. Let me know when court injunctions are slapped at JPMorgan. Several class action lawsuits against JPMorgan have begun, also encouraging, but unclear on substance. They crop up every couple weeks, the latest citing a RICO aspect. Let me know when the full force of the USGovt regulatory bodies order JPMorgan, Goldman Sachs, Citigroup, and Bank of America to liquidate even 10-20% of their short positions. Unless and until such action occurs, the CFTC chirping is just that, noise from the managerie of obedient pets who work on short leashes at the behest of bankers. Mail room clerks do not give orders or make demands to the executive suites, not now, not ever. The regulatory chiefs are mere squires to the bankers, and will follow orders, not give them. By the way, the Big Four positions are naked short positions in all likelihood. They are immune from posting collateral, as required by the metals exchanges. So they routinely sell a stack of silver whenever the price moves have been made, like in the wee hours this Wednesday and very early at the New York open. Good Morning New York resulted in almost a full $1.00 drop in the silver price, undoubtedly another naked short raid before the QE decision by the US Federal Reserve and its statement. The full impact of the ambush decline was reversed by afternoon. Right before important events deemed negative nasty to the USDollar, the Big Four go wild with naked shorts, called ambushes. The evidence, the trails, the fingerprints are easily seen except by blind men, official gold industry wonks, and USGovt regulators.
SUPPLY & DEMAND BASICS
Silver total demand was essentially flat in 2009 versus 2008, as the world adjusted to a mammoth meltdown late in 2008. During the extraordinary disruptions, disturbances, and sudden insolvencies, JPMorgan liquidated much of the inherited (commandeered) precious metals accounts from Bear Stearns and Lehman Brothers. In the case of Bear Stearns, a solid argument can be made that they were targeted for kill due to their long gold account. In the case of Lehman, they were targeted fro kill in order to consolidate the power structure in the twin monoliths at JPMorgan and Goldman Sachs. On silver demand, the bulk of the 11.9% decline in the 2009 fabrication demand was primarily driven by the global financial crises. The reduced drop in industrial requirements was the lowest level since 2003. Total fabrication demand totaled 729.8 million oz and industrial demand was 352.2 moz in consumption. Much of the decline in factory demand was attributed to the car industry.
Implied net silver investment increased by a staggering 184% to 136.9 million oz last year, reaching its highest level in 20 years. Overall jewelry demand fell slightly by 1.1% in 2009 to 156.6 moz, a testament to the historical norm. It falls with a bull market, not to contradict it, but to confirm it!! That is the opposite message, contrary to what the official gold industry propaganda preaches. In fact, India and China posted increases in jewelry demand last year, outside the global trend. Silverware demand rose by a decent 4.6% to 59.5 moz, largely due to a surge in Indian fabrication. Their middle class grows impressively.
As for supply, the silver mine production rose by 4.0% to 709.6 moz in 2009. Gains came both from primary silver mines and output from mining by-product. The strongest growth came from Latin America, where silver output increased by a hefty 8%, the biggest gains logged in Argentina and Bolivia. Again Peru was the world leader in silver production in 2009, followed by Mexico, China, Australia, and Bolivia. All of these countries saw increases last year except for Australia, where output was dragged down from the lead/zinc sector, with the by-product impact. Some mines are devoted solely to silver targets, called primary silver projects. Global primary silver output saw a 7% increase in 2009, accounting for 30% of total mine production last year. The cash operating costs for primary silver mines remained relatively stable, rising by less than 1% to $5.23/oz in 2009. The big story is the huge decline in net silver supply from above ground inventory stocks, which were reduced by 86% to 20.2 moz in 2009. The drawdown was driven mostly by the surge in net investment, higher de-hedging (the active reduction in forward sale contracts), lower government sales (like official mints), and a drop in scrap supply. The scrap supply came down by 6% from 2008, enough to register a 13-year low of 165.7 moz. It was the third consecutive year of losses in the scrap category. Government stocks of silver, the feeder in official coin mint programs, fell by an estimated 13.7 moz last year, to reach their lowest levels in more than a decade. Data was supplied by the Silver Institute (SEE LINK).
IMPACT OF Q.E. CANCER
The big event on the horizon has been the US Midterm Elections, just completed. Its outcome was close to poll expectations. Many decisions have been delayed. Much detail has been withheld. Unfortunate pauses have come as a result. A palpable dread can be identified and pointed to. Difficult unpopular decisions will now be made. Some of the decisions will involve continued bank sector welfare after failed fiduciary responsibility. Some of the next programs or legislation will involve devious political and legal cover for criminal bond fraud related to the mortgage industry, which is fully in the open for dissection, outcry, and acrimonious debate. Basically, the bank sector will see great maneuvers to be supported, protected, with escape routes, now that the consequences of voter backlash are out of the picture. Furthermore is the issue of political partisan gridlock. Only dim bulbs would call the gridlock constructive or a good thing in the current setting. When a nation is mired in a financial crisis, requires leadership, demands restructure, and urgently needs reform, any inaction from gridlock is like fighting over the steering wheel on a big tractor trailer truck unable to manage a winding road, certain to careen over the cliff. Some analysts use the term public serpents to describe public servants, which seems spot on. Activists should demand that private bank accounts be investigated of committee heads, or even past Secretary of State (Colin Powell), or joint chiefs of staff at the Pentagon, or past SEC and CFTC heads. While at it, check the bank accounts of past presidents too.
The most reliable and expert sources within my contacts mention a specific point, with consistency. When the US elections are over, and after the USFed gives some guidance on the QE2 Launch for monetized debt, the system will experience tremendous added strains and will gradually show signs of breakdown again, in accelerated mode. This time, unlike September 2008, efforts to stabilize will not be possible. The system will degrade, as supports, pylons, control cables, levers, guy wires, and buttresses will be removed in the coming weeks. The Midterm Elections served at the roadblock event, the beacon on the horizon, the gate factor, the delayed lit fuse. The actions taken in November will involve both the US captains and foreign entities. The US brass can act without as much concern of voter backlash. The foreign financial decision makers can act with knowledge that the USGovt, the USFed, and Wall Street will not make a single solitary move toward bank system reform, toward bank debt restructure, or toward debt liquidation on the balance sheets. Instead, the US will redouble the magnitude of what failed, their habit, their engrained failure in policy, their legacy.
The main worry by the USFed and USDept Treasury will center on foreign creditors and abandonment. US bank leaders will ramp up the monetization under the QE2 banner with added motivation. Trade war stokes the fires of hostility, angst, and rebuke. Foreign creditors are worried that their debt security paper is being diluted. Its value will be diminished, but later in time. Expect a new European Dollar Swap Facility to be announced soon, but with less delay than the last one. They must match and offset the power of the QE2 initiative. It could be urgently declared by EU in next several weeks. They must defend against a rising Euro currency. Do not be trapped into thinking a USTreasury Bond rally means a USDollar coincident rise. The USTBonds are from the Printing Pre$$, which means no source of funds to convert. The Jackass still believes 2.0% is an important 10-year USTreasury yield target. All hell breaks loose after the target is hit, as the USTBond bubble is likely to give off massive greenhouse gas afterwards.
UNWIND OF TREMENDOUS SUPPRESSION
When professional equity analysts ply their craft in examining the merits of a certain stock, they often use a simple statistical technique. They fit a model of the growth in a stock Y versus the sector X in which it trades, like BAC (Bank of America) versus the BKX (bank index). They fit a model of the growth of a major stock Y versus the X market backdrop, like IBM versus the S&P500 index. A stock Y performs well if it does better than its sector or does better than the entire market. That shows up as a BETA over 1.0 within the fitted model using data as weekly change entries in price for X and Y. Take silver as Y and the entire commodity arena as X, as measured for instance by the CRB index. Clearly silver rises and falls with the commodities, and even makes swings with more volatility than other items. That testifies to a high silver BETA. Lately, the silver move has been powerful, much bigger than other commodity items since it is being recognized as a currency hedge, a safe haven asset, with the menace of lawsuits and investigations hanging overhead. In fact, Silver is a currency, if pure money can be classified as currency at all. Like gold, silver is a super-currency.
Y = ? + ? X
The important aspect to highlight of the linear price change model is the ALPHA component. When an asset or stock has a particular advantage or unique strength, it can outperform its class. Take for instance a pharmaceutical firm with a vaccine discovery, or a computer firm like Apple with a nifty IPod winner, or a mining firm with a huge ore discovery or great process improvement. Silver and gold each share a robust ALPHA feature that is not often mentioned, even in the gold community. As the monetary system crumbles further, as the big banks topple amidst insolvency, as the sovereign debt for certain nations defaults, as the USGovt deficits spiral endlessly into the $trillions, the concept of real money is being questioned by important chambers of global finance. Money wants to escape the false monetary clutches, and find true safe haven. Sound money is sought out with increased vigor and even desperation to preserve wealth. At the same time, illicit activity from two to three decades of gigantic price suppression, extended from enormous naked short positions being revealed, has conspired to suppress the price of gold & silver. The slow healing of the market infestation reveals the manifestation of the Silver Alpha, during its release.
The monetary system works gradually to unmask the corrupt precious metals market, and to lay bare the absent bullion at the official metals exchanges. Angry depositors like the Chinese and Arabs have been demanding their bullion for return back home, no longer trusting the London and New York banksters. They have grown fully aware of illicit gold leasing as commonplace. The fraud of the USGovt balance sheets, recording deep storage gold as a ledge item, an utter absurdity, only adds to the motive to unmask the banksters at their own game. The fast rising deadly USGovt deficits has brought cries to prove the collateral for new debt added upon old debt, in an uncontrollable debt episode. The world pursues gold & silver, knowing the USGovt has none, even as it continues to suppress its price with heavy hands. Foreign creditors are angry that the gold & silver they hold has been pushed down in price by illicit USGovt devices.
The consequence is that SILVER possesses a high ALPHA. What lifts the ALPHA is many factors, each powerful. The Silver price will rise much more than price inflation. The Silver price will rise in response to money fleeing corrosive vehicles like the major currencies, whose basis is not gold but rather rapidly growing debt resting upon broken banking and economic foundations. The Silver price will rise as the USTreasury Bond bubble becomes more widely recognized. The Silver price will rise as greater volumes of freshly printed money undermine the USDollar well behind controlled activity. The Silver price will rise more than most analysts anticipate out of the sheer release from corrupted markets that hold down the price after a mountain of silver has been shorted in the market without collateral. THIS IS THE ESSENCE OF ALPHA!! The shorts are being squeezed, in clear fashion since August. The naked short quantity for Silver is well beyond a full year of annual global output from the mining industry. As the markets work toward a freely traded system that seeks a true equilibrium, the Silver price will move past $100 per ounce easily. Laughter now will be followed by sheepish quiet in three years. But first it will surpass the $40 price, maybe as soon as late 2011 or early 2012. The silver ALPHA is big, and that fact will be quite evident very soon, if not already. My forecast is for a $29 to 31 price for Silver by mid-January. Both December and January are strong seasonal months for silver, just like September. Notice how silver is outperforming the commodity group, and shows a BETA over one.
Read the entire article HERE.
IMF Executive Board Approves Major Expansion of Fund’s Borrowing Arrangements to Boost Resources for Crisis Resolution
Press Release No. 10/145
April 12, 2010
The Executive Board of the International Monetary Fund (IMF) today approved a ten-fold expansion of the Fund’s New Arrangements to Borrow (NAB) and the transformation of the Fund’s premier standing credit arrangement into a more flexible and effective tool of crisis management. The NAB will be increased by SDR 333.5 billion (about US$500 billion) to SDR 367.5 billion (about US$550 billion), representing a major increase in the resources available for the Fund’s lending to its members.
This responds to the call by the leaders of the Group of 20 (G-20) economies, endorsed by the International Monetary and Financial Committee (IMFC), to increase the financing available to the Fund, through an expanded and more flexible NAB increased by up to US$500 billion. Thirteen new participants, including a number of major emerging market economies, have indicated their willingness to join 26 current participants in the NAB. The decision today follows the agreement reached by current and prospective participants at their meeting in Washington in November 2009 on the key elements of an expanded and more flexible NAB.
“The expansion and enlargement of the NAB borrowing arrangements provides a very strong multilateral foundation for the Fund’s efforts in crisis prevention and resolution, as an essential back-stop to the Fund’s quota resources. This will help ensure that the Fund has access to adequate resources to help members that are vulnerable to financial crises,” IMF Managing Director Dominique Strauss-Kahn said.
The NAB is a standing set of credit arrangements under which participants commit resources to IMF lending when these are needed to supplement quota resources. The expanded NAB will become operational when it receives formal acceptances from the required proportion of current and potential participants, which will require legislative backing in some cases.1
“The expansion of the NAB will make an important contribution to global financial stability, but it is not a substitute for a general increase in the Fund’s quota resources. The Fund is, and shall remain, a quota-based institution. It is important now that member countries rapidly take the necessary steps to make the increased resources available,” Mr. Strauss-Kahn underscored.
The NAB is a credit arrangement between the IMF and a group of members and institutions to provide supplementary resources to the IMF when these are needed to forestall or cope with an impairment of the international monetary system. The NAB is supplementary to quota resources, which are made up of the quota subscriptions each country pays upon joining the Fund, broadly based on its relative size in the world economy. IMF members’ quotas currently total SDR 217.4 billion (about US$330 billion). Like quota allocations, the NAB is reviewed on a regular basis.
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WASHINGTON — The chief of the International Monetary Fund said Friday that the organization should reorient itself to better detect systemic risks to the global economy and quickly step in with emergency loans when financial crises emerge.
The I.M.F. leader, Dominique Strauss-Kahn, also floated the idea of creating a global reserve currency that could serve as an alternative to the dollar.
After a speech at the I.M.F. headquarters, Mr. Strauss-Kahn said in response to a question about the fiscal crisis in Greece that the fund would be “happy to help if asked” but that the European Union appeared able to resolve the crisis on its own.
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