December 2012 : Collapse of the Dollar , Bank Holiday & Martial Law

The Collapse of December 2012 : Set in December 2012. This speech details what we believe the President might say on the day America's foreign creditors finally stop lending us money, and demand repayment for our country's debts...The largest debts EVER accumulated in the history of mankind.The prediction is that the dollar along with other currencies will collapse the NWO will demand a single currency and the Euro is being kept afloat for that reason food will be expensive so stock up now with long life products fuel will be treble today's price its all by design hyperinflation is months away claim global economists, the banks are in complete control and will achieve their goal starving nations will gathering their own wealth, we will suffer not them.Actually, that's what's gonna happen, yes. Chinese, as much as they know the dollar is not worth the paper it's not printed on (Quote Gerald Celente ) will need to buy foreign companies. That will increase the demand for USD, other than that, not much can they do. It's basically: Let's keep this system going on.

December 2012 : Collapse of the Dollar and Bank Holiday

The Great Credit Contraction

Deutsche Bank CEO Just Gave A Terrifying Speech In Frankfurt

Josef Ackermann just gave a terrifying speech about the fragility of the Euro banking sector right now.

At a conference in Frankfurt he said, "It is an open secret that numerous European banks would not survive having to revalue sovereign debt held on the banking book at market levels."

We have translated the speech based on Handelsbatt's, the organizer of the event where Ackermann spoke, account of it.

"In recent weeks, the distrust of the financial markets has spread to the banks because they are now suffering from the debt crisis in Europe and have a lot of exposure to, for example, Greek bonds."

"Since the financial crisis, some European banks have lost a third or more of their market capitalization," he said, according to Google Translate.

"Most institutions have a rating of "below the book value or at best."

There are three major stress factors crushing Euro banks right now, he says: the debt crisis, structural factors and financial regulation. With them together, it will be hard for the European banks to increase their revenues.

The implication is that not just Eurozone countries are buckling under the pressure of Greece's, France's, and Italy's debts, but banks are too. It sounds like a desperate call for a bailout. Now.

However he says, "State funds could use means to put stability back into many companies and countries, but that does not remain the only solution."

Still, the situation he describes looks dire. He says, "Many countries and households would have to reduce their debt. The mortgage business and consumer loans were [the few things] driving growth. In addition, there's the problem of shrinking populations in several European countries, which negatively affects the growth of credit markets."

"All this reminds one of the autumn of 2008," said Ackermann. "We should resign ourselves to the fact that the 'new normality' is characterized by volatility and uncertainty."

Some hedge funds, like in 2007 and 2008, saw the enormity of the Eurozone debt crisis and began betting against Euro banks and other companies that have exposure to the crisis earlier this year. Their profits have already started to pay off.

As for the rest of the financial industry, things don't look good.

Here's what Ackermann sees: "Prospects for the financial sector overall... are rather limited."

"We have a financial industry that is still not really providing convincing answers to the questions about the meaningfulness of many modern financial products and trading in securities. The questions are getting louder and require new responses."

He also believes high frequency trading needs to be investigated more. He said regulators and the banks need to begin a dialogue to examine the effects of HFT in the markets, so as to avoid imbalances in the markets.

However a consequence of all of this scrutiny is that growth prospects for banks are low.

"The outlook for the future growth of revenues is limited by both the current situation and structurally."

The banks will have to ask how they can be more long-term investors in order to gain more stability in financial markets.

"We must in my opinion, check all our work in all areas thoroughly again to ascertain whether we prioritize our genuine tasks as servants of the real economic needs."

But immediately, the Euro banking sector must prepare for what happens if solutions to the Eurozone crisis and corresponding Euro banking crisis remain unsupported or nonexistent.

However recapitalization is not the answer. Ackermann duly shot down the measure suggested by IMF head Christine Lagarde at Jackson Hole.

He said recapitalizing the banks urgently, as Lagarde suggested, would be "counterproductive."

"A forced recapitalization would give the signal that politicians do not themselves believe in the measures" they are negotiating.

As a result, it could exacerbate the debt situation in individual countries. Also, faced with a threat of dilution (a result of recapitalization), private investments in banks would be even less likely.

Another measure that he does not think will help, he says, is dissolving the Eurozone. "The costs of supporting weak member states, particularly from the German perspective, are less than the costs of disintegration.... It is a dangerous illusion to believe that a country could do better should it reclaim the sovereignty it has delegated to the EU."

Sounds like Ackermann just sounded the alarm. There is now a full-on Euro banking crisis.

The conference he's at continues tomorrow. It's entitled "Banks in Transition," and it's organized by the German business daily Handelsblatt.

Here's a couple of videos of him giving the speech. Warning: they are in German.

The Brent-WTI Disconnect

Earlier today Jim Quinn rhetorically asked why the price of oil hasn't collapsed despite the contraction in the global economy. Well, in a completely unrelated letter, Grant Williams of Things That Make You Go Hmmm, answers not only the question of why Brent and WTI continue to disconnect (must read for anyone interested in the oil market), but also Grant's underlying quandary (as rhetorical as it may be): "As stock markets plummeted in August, one thing that was noticeable was the resilience of both ‘the oil price’ (in the shape of Brent Crude, of course) and that of copper - two bellwether indicators of any slowdown in growth that can be relied upon to flash signals when a recession is nigh. To be sure, the data reported in August was dreadful. In the US we saw a slew of appalling regional manufacturing reports, (the Philly Fed and Empire numbers could genuinely be described as ‘shock- ers’), shattered consumer confidence numbers and rising inflation all topped off with a big fat goose egg in the NFP report last Friday, while in Europe, as the periphery continued to confirm just how week their economies continue to be, the real shocks came from the region’s perennial powerhouse economy, Germany. So why doesn’t ‘the oil price’ reflect this likelihood? Simple: 1. China has a LOT of paper money and is happy to swap it for hard assets that it knows will ulti- mately be far more beneficial in the long run as Western governments continue to debase their currencies. 2. Western governments continue to debase their currencies."

Full TTMYGH letter (pdf):

Hmmm Sep 04 2011

Wikileaks Discloses The Reason(s) Behind China's Shadow Gold Buying Spree

Wondering why gold at $1850 is cheap, or why gold at double that price will also be cheap, or frankly at any price? Because, as the following leaked cable explains, gold is, to China at least, nothing but the opportunity cost of destroying the dollar's reserve status. Putting that into dollar terms is, therefore, impractical at best, and illogical at worst. We have a suspicion that the following cable from the US embassy in China is about to go not viral but very much global, and prompt all those mutual fund managers who are on the golden sidelines to dip a toe in the 24 karat pool. The only thing that matters from China's perspective is that "suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency. China's increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB." Now, what would happen if mutual and pension funds finally comprehend they are massively underinvested in the one asset which China is without a trace of doubt massively accumulating behind the scenes is nothing short of a worldwide scramble, not so much for paper, but every last ounce of physical gold...

From Wikileaks:

3. CHINA'S GOLD RESERVES

"China increases its gold reserves in order to kill two birds with one stone"

"The China Radio International sponsored newspaper World News Journal (Shijie Xinwenbao)(04/28): "According to China's National Foreign Exchanges Administration China 's gold reserves have recently increased. Currently, the majority of its gold reserves have been located in the U.S. and European countries. The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold's function as an international reserve currency. They don't want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency. China's increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB."

Perhaps now is a good time to remind readers what will happen if and when America's always behind the curve mutual and pension fund managers finally comprehend that they are massively underinvested in the one best performing asset class.

From The Driver for Gold You’re Not Watching (via Casey Research)

You already know the basic reasons for owning gold – currency protection, inflation hedge, store of value, calamity insurance – many of which are becoming clichés even in mainstream articles. Throw in the supply and demand imbalance, and you’ve got the basic arguments for why one should hold gold for the foreseeable future.

All of these factors remain very bullish, in spite of gold’s 450% rise over the past 10 years. No, it’s not too late to buy, especially if you don’t own a meaningful amount; and yes, I’m convinced the price is headed much higher, regardless of the corrections we’ll inevitably see. Each of the aforementioned catalysts will force gold’s price higher and higher in the years ahead, especially the currency issues.

But there’s another driver of the price that escapes many gold watchers and certainly the mainstream media. And I’m convinced that once this sleeping giant wakes, it could ignite the gold market like nothing we’ve ever seen.

The fund management industry handles the bulk of the world’s wealth. These institutions include insurance companies, hedge funds, mutual funds, sovereign wealth funds, etc. But the elephant in the room is pension funds. These are institutions that provide retirement income, both public and private.

Global pension assets are estimated to be – drum roll, please – $31.1 trillion. No, that is not a misprint. It is more than twice the size of last year’s GDP in the U.S. ($14.7 trillion).

We know a few hedge fund managers have invested in gold, like John Paulson, David Einhorn, Jean-Marie Eveillard. There are close to twenty mutual funds devoted to gold and precious metals. Lots of gold and silver bugs have been buying.

So, what about pension funds?

According to estimates by Shayne McGuire in his new book, Hard Money; Taking Gold to a Higher Investment Level, the typical pension fund holds about 0.15% of its assets in gold. He estimates another 0.15% is devoted to gold mining stocks, giving us a total of 0.30% – that is, less than one third of one percent of assets committed to the gold sector.

Shayne is head of global research at the Teacher Retirement System of Texas. He bases his estimate on the fact that commodities represent about 3% of the total assets in the average pension fund. And of that 3%, about 5% is devoted to gold. It is, by any account, a negligible portion of a fund’s asset allocation.

Now here’s the fun part. Let’s say fund managers as a group realize that bonds, equities, and real estate have become poor or risky investments and so decide to increase their allocation to the gold market. If they doubled their exposure to gold and gold stocks – which would still represent only 0.6% of their total assets – it would amount to $93.3 billion in new purchases.

How much is that? The assets of GLD total $55.2 billion, so this amount of money is 1.7 times bigger than the largest gold ETF. SLV, the largest silver ETF, has net assets of $9.3 billion, a mere one-tenth of that extra allocation.

The market cap of the entire sector of gold stocks (producers only) is about $234 billion. The gold industry would see a 40% increase in new money to the sector. Its market cap would double if pension institutions allocated just 1.2% of their assets to it.

But what if currency issues spiral out of control? What if bonds wither and die? What if real estate takes ten years to recover? What if inflation becomes a rabid dog like it has every other time in history when governments have diluted their currency to this degree? If these funds allocate just 5% of their assets to gold – which would amount to $1.5 trillion – it would overwhelm the system and rocket prices skyward.

And let’s not forget that this is only one class of institution. Insurance companies have about $18.7 trillion in assets. Hedge funds manage approximately $1.7 trillion. Sovereign wealth funds control $3.8 trillion. Then there are mutual funds, ETFs, private equity funds, and private wealth funds. Throw in millions of retail investors like you and me and Joe Sixpack and Jiao Sixpack, and we’re looking in the rear view mirror at $100 trillion.

I don’t know if pension funds will devote that much money to this sector or not. What I do know is that sovereign debt risks are far from over, the U.S. dollar and other currencies will lose considerably more value against gold, interest rates will most certainly rise in the years ahead, and inflation is just getting started. These forces are in place and building, and if there’s a paradigm shift in how these managers view gold, look out!

I thought of titling this piece, “Why $5,000 Gold May Be Too Low.” Because once fund managers enter the gold market in mass, this tiny sector will light on fire with blazing speed.

My advice is to not just hope you can jump in once these drivers hit the gas, but to claim your seat during the relative calm of this month's level prices.

12 Things College Students Don't Need

The sticker shock when you first see the bill for tuition, room and board, and all those nebulous fees is bad enough. With the excitement and stress that accompanies the move to college, it’s easy to let down your guard and pony up the plastic for a whole lot of other expenses. Sure, you want what’s best for your child, but you don’t have to say yes to every item on his or her wish list.

Of course, not all students’ needs are the same -- students in engineering and medical studies, for example, may require new textbooks they’ll keep or a more powerful computer. But, generally speaking, here are 12 expenses campus life doesn’t really require:

New textbooks. More and more universities are offering textbook rental programs to help students avoid paying unfathomable new-book prices. Check to see whether your university offers a rental program, which is most often available for the school’s core-curriculum and prerequisite classes.

Save even more by comparison-shopping online for new and used textbooks for sale and for rent. You can even save some trees by licensing e-textbooks that you can access from your computer or mobile devices. Learn more in How to Cut Your Textbook Costs by Half -- or More.

A high-end laptop or desktop computer. An inexpensive laptop or desktop should do the trick. Netbooks are cheap, but their small keyboards and slow processing speed won’t make the grade for a student’s first year in college. One powerful, portable and affordable option is the Dell Inspiron 15R Intel Core i3 laptop. It has a 15.6-inch screen, weighs 5.9 pounds, and has 4 gigabytes of memory and a 500GB hard drive. The Dell is available at Best Buy for $530.

A printer. If you skip this, you’ll save about $50 for a printer, $30 a pop for replacement ink and $9 per pack of paper. For about $10, your teen could buy a flash drive instead, save his 20-page term paper on it and print the paper in the campus computer lab, which you may already be paying for. (Some schools include a technology fee in room-and-board costs -- $100 per semester in some cases.) Students may also have the option of sending files directly from their dorm room to a computer-lab printer. But make sure you ask about page limits and any printing fees.

A pricey smart-phone plan. Students may think that a smart phone -- especially an iPhone or a Droid -- is de rigueur to deal with the rigors of campus life, but contracts with data plans can run as high as $200 a month.

Fortunately, there are less-expensive, no-contract alternatives. Consider Virgin Mobile’s Beyond Talk Plan, which uses Sprint’s Nationwide Network. Plans start at $35 a month, for which you get unlimited Web, data, messaging and e-mail and 300 Anytime minutes. Simply buy a phone, select a plan at www.virginmobileusa.com, activate it on the Web site and manage your account online.

Cable TV. Cut this additional expense by accessing a wide variety of current entertainment and news online. You can stream programs from your computer or a Web-enabled device, such as an Xbox 360 gaming console, a Playstation 3, a Wii or a TiVo:

• TV Shows. XfinityTV.com and Hulu.com, for example, let you download TV shows free. You can also catch recent episodes of your favorite shows at the networks’ own sites. Hulu.com now offers Hulu Plus, which for $8 a month gives you access to more than 1,000 seasons of current and classic TV shows, hundreds of movies (including films from the Criterion Collection) and limited commercial introduction in 720p high definition. College students can get a one-month free trial if they sign up with their .edu e-mail address. Movies. Netflix offers for $8 a month unlimited TV episodes and movies streaming online through a Web-enabled device.

• Sports. WatchESPN (formerly ESPN3.com) streams live broadcasts of professional sports, such as professional baseball, basketball, golf, soccer and tennis, and of course college basketball and football. You can stream WatchESPN content to an Xbox 360, but you must have an Xbox Live Gold membership, which is $10 a month, or $60 a year (same goes for streaming Netflix content with the Xbox 360).

A car. In a nine-month academic year, according to AAA, the average small sedan would rack up about $3,000in expenses, including costs for gas, standard maintenance and insurance. Parking permits and any tickets or breakdowns would add even more to the bill. Keeping the car parked at home could lower insurance premiums, too (see VIDEO: Kids, Cars and College).

A credit card. The average freshman who has a credit card has nearly $700 in card debt, according to a recent study by Sallie Mae. To curb the frivolity of first-year credit card spending, Uncle Sam is now enforcing stricter credit card rules. Anyone younger than 21 is required to prove his or her ability to repay any debts or have a parent (or someone else 21 or older) co-sign the card application.

Help your student stay in the black by withholding your signature until he has a long track record of fiscal responsibility. A debit card is a good way to get started. For tips on how to discuss personal finance, see What College Students Need to Know About Money and How to Get Kids Motivated About Money Management.

High bank fees. Open an account for your child at a bank that is close to campus and has nationwide coverage. If your child uses an account with the hometown bank, she could spend up to $5 when she withdraws money from an out-of-network ATM. If she withdraws money, say, once a week, she could spend up to $260 a year on fees. Or consider opening an online checking account with a bank that doesn’t charge ATM fees or that refunds ATM surcharges by other banks. Be sure to read the fine print: Some of these banks do not refund ATM fees beyond a certain amount, and some require the account holder to maintain a minimum account balance every month.

When choosing a bank, also find out how much it costs, if anything, to transfer funds online from your account to your student’s. This will save you from having to mail checks. Another option is to open an account with a credit union that belongs to a surcharge-free network. Click here to locate one.

Overdraft protection. You now have the option when you open an account to opt out of overdraft protection. That means the bank either will not permit you to withdraw funds if your balance is too low or will ask whether you want to pay a $35 fee and proceed with the withdrawal. This is not a one-time decision; you can switch your preference if you decide you want the bank to cover overdrafts. Checks and recurring payments that cause you to overdraw the account are not covered even if you opt out, so you can still incur hefty overdraft fees.

A big meal plan. You’ve heard of the Freshman 15, so avoid loading up your child’s meal account with enough money to feed the football team. Often, the money you spend on a meal plan does not roll over from year to year -- if you don’t use the money, you lose it. Best to start low and see how much your student eats. Many colleges give you the opportunity to replenish meal-plan funds midyear. You could also supplement your kid’s meal plan with gift cards to the local grocery (or pizza joint). Or you can buy gift cards at GiftCertificates.com.

Campus health insurance. If you have family health coverage, your child may still be covered under that plan when she goes to college. If your plan does not cover out-of-network costs, a campus health-insurance plan may be a more cost-effective option. Be careful, though: Some college policies have low coverage maximums, which could leave you with thousands of dollars in uninsured expenses. See Kids, College and Insurance for other options.

Private loans. The hefty price tag on higher education makes it hard to avoid student loans, but if at all possible, steer clear of private student loans. They usually carry variable rates (as opposed to the fixed rates of federal loans), have fewer repayment options and allow students to rack up high balances. (See Be Wary of Private Student Loans.)

You still have time to apply for federal student loans to cover the bills this school year (see Cracking the Financial-Aid Code). And look for scholarships -- they’re easier to get than you might think (see Master the Financial Aid Process).

Why Gadhafi’s demise may presage end of the euro

Nobody quite realizes it. With the demise of Moammar Gadhafi, the specter of monetary union in Africa has crashed to earth, too.

Tripoli’s thankfully deposed leader was a great advocate of forging African Monetary Union (AMU) by 2021 — a goal that was recently reaffirmed by African central bankers meeting in secret in a bomb-disturbed conclave in the Libyan capital.

Many African leaders have resolutely ignored the lessons of Europe’s misbegotten monetary adventure. Now, with the toppling of the North African dictator, the African currency dream — like many other Gadhafi fancies — has (with any luck) been consigned to the scrapbooks of history.

At the monetary gathering a few weeks ago in Tripoli, Gadhafi’s henchmen apparently locked the doors and declared the airport closed in a bid to force through agreement that the ill-conceived date of 2021 for introducing the Afro (with the headquarters of the African central bank to be based in Nigeria) was still valid. Desperate times, desperate measures.

Things have not got quite to that stage in Germany, the heartland of the euro EURUSD -0.19% . The airports are still open, and Angela Merkel has not yet resorted to encaging deputies in Bundestag committee rooms to cajole agreement on funding for Greece. But maybe we are not too far away.

The Bundesbank, the Germans’ final repository of financial orthodoxy, is maintaining a staccato throb of opposition to purchases of weaker country bonds by the European central banks. An unusually vehement article in the bank’s August monthly report, together with a speech last week by Jens Weidmann, the new president, spelled out the risks for parliamentary democracies if bailouts for weaker countries progressively bypass the normal mechanisms of democratic control. German lawmakers have taken the warnings to heart, demanding full scrutiny of new legislation to increase the powers and the scope of Europe’s EFSF rescue fund.

Thorough parliamentary control over euro bailouts is likely to be a minimum condition for the German Constitutional Court, which gives a preliminary judgment on Wednesday on lawsuits brought against assistance for struggling euro states from Europe’s creditor nations. With countries like Finland and Slovakia lining up to demand collateral from the errant Greeks, and the German press speculating about a euro-induced downfall of Chancellor Angela Merkel’s coalition government, the single currency’s woes have brought a touch of Gadhafi-style Götterdämmerung to Berlin.

Old alliances and long-established traditions are starting to buckle.

Germany’s leading business daily, Handelsblatt (a newspaper for which — to declare an interest — I have written a regular column for several years) is normally a staunch supporter of the euro. Shortly after the ECB started buying Greek bonds in May 2010, the newspaper launched a campaign to persuade readers (and several hapless journalists on the staff unfortunate to be in the office on the day that the editor hit on this particular wheeze) to purchase Greek sovereign debt to show European solidarity. All that has now come to an end. On Friday, the paper published what it called a “Titanic scenario” to illustrate a “worst case” outcome for monetary union, with Greece leaving the euro in April 2012, the German parliament turning down eurobonds and the euro splitting into southern and northern components in August.

What supreme flexibility! In Germany, previously outrageous predictions have now been recast as perfectly conceivable outcomes — entertained by people who, a year ago, would have scorned such projections as the height of lunacy. Just as with the Northern African despot’s collapse, under the pressure of circumstances, the unthinkable can, sometimes, actually happen.