Stage two: the Fitzpatrick numbers.

It might be useful to divide the developing situation into 3 stages.

Stage 1: the breakout of the precious metals. See recent posts.

Stage 2: The Fitzpatrick numbers.

Tom Fitzpatrick read the charts and predicted the following: a) if gold closes above 1,672 then it will rally to test 1,910.

b) if silver closes above 31.70 it will then test 33.

Today was a good day for the PMs and gold closed at 1,687.6 (above the Fitzpatrick number), but silver moved to 31.77 then sold beck down to 31.442. Still, it is close.

Most everyone believes that the PMs responded to Bernanke's speech at Jackson Hole, Wyoming. Bernanke hinted strongly (again) that the FED may ease if the numbers don't get better.

We have a busy schedule coming up, which I believe will set the stage for testing Larry's numbers. If that happens (and I believe it will) we will enter Stage 3.

Schedule of important events:
Sep 6, next week Thursday. ECB meeting. Expect bond purchase announcement.
Sep 7, Friday. US employment numbers.
Sep 13, FED monthly meeting. I believe the FED will announce more easing.
Sep 12, German Constitutional Court rules on legality of using German funds for bailouts.

China has already eased. Some Traders expect the ECB to purchase Portuguese and Spanish bonds. The Market expects the FED to ease. Bernanke is expected to be replaced by Romney (if he wins), so Bernanke has nothing to lose by easing now, i.e. between now and Sep 13.

Risks:
1. German Court ruling;
2. American fiscal cliff.
Here are the most recent graphs:

Spanish bank moves.

Spain has announced the restructuring of its banks. Here are the moves:

1. Troubled assets will be swept into a "bad bank"
2. The "bad bank" will have 10-15 years to liquidate them, esentially converting private bank losses into public debt.
3. Lending rules will be tightened.
4.Will be financedmostly from private capital.
5. Core requirement (good asset) raised to 9%.

Outflow from Spanish banks totaled E220B.

To ease or not to ease; that is the question.

There is an interesting article about how the FED and the ECB fake printing to influence the Markets:

http://seekingalpha.com/article/836411-beige-book-and-revised-gdp-make-more-qe-unlikely?source=email_the_daily_dispatch&ifp=0

What brought up this speculation? The immediate precursor for the article is the revised report that the economy grew by 1.7% instead of the previously reported 1.5%. The conclusion of the Author is that things are not bad enough to ease. Really? The growth needed for full employment is 3%. A growth of 1.7% is not much better than 1.5%.

We have heard speculation about QE3. So far, it is speculation aimed at sustaining the Stock Market.

How gold and silver are manipulated.

I have said in one of my posts that I will share with you what I find out about how the govt manipulated silver and gold price. Here is an important piece on how the govt is authorized to do it.

"streetmoney21 Comments (186) It's one thing to execute margin hikes in a timely manner to protect the market. It's manipulation when you have 5 margin hikes in one week where that has not happen[ed] for any other commodity (please correct me if I am wrong). If the COMEX had any integrity the margin hikes would have been done in a measure[d] way to not disrupt the market. In addition, the move by the CME was telegraphed to the banks as they shorted the market on the way down.




The gold and silver markets are highly manipulated and I challenge anyone to come up with a legitimate counter backed with tangible proof that can be seen by the public to the point I am about to make. No one has been able to do it so far and the highly believe the author of this article will not be able to come up with an intelligent response to my claim.



The Fourth Coinage Act was enacted by the United States Congress in 1873 and embraced the gold standard and demonetized silver. Silver was demonetized at the will of the Bank of California as they had key interests in controlling silver mines in the US and there is physical proof that money was paid to members of congress to include legislation in the act to in fact demonetize silver. This was the first key step to enslave every american citizen to a fiat currency. Gold became the only metallic standard in the United States, hence putting the United States de facto on the gold standard. Then in 1933, Executive Order 6102 had made it a criminal offense for U.S. citizens to own or trade gold anywhere in the world, with exceptions for some jewelry and collector's coins.The nail in the coffin was the United States Gold Reserve Act of January 30, 1934 required that all gold and gold certificates held by the Federal Reserve be surrendered and vested in the sole title of the United States Department of the Treasury.The Gold Reserve Act outlawed most private possession of gold, forcing individuals to sell it to the Treasury, after which it was stored in United States Bullion Depository at Fort Knox and other locations.Then the US government perpetrated a crime upon its citizens because the act changed the nominal price of gold from $20.67 per troy ounce to $35.



Profits were used to fund the Exchange Stabilization Fund to use such assets as were not needed for exchange market stabilization (protecting the US dollar).The Exchange Stabilization Fund (ESF) is an emergency reserve fund of the United States Treasury Department, normally used for foreign exchange intervention (market manipulation). This arrangement (as opposed to having the central bank intervene directly) allows the US government to influence currency exchange rates without affecting domestic money supply (A.K.A. Market manipulation).The Gold Reserve Act authorized the ESF to use its capital to deal in gold (SHORT THE GOLD AND SILVER FUTURES MARKET) and foreign exchange to stabilize the exchange value of the dollar. PROVE MY WRONG!



The ESF as originally designed is part of the executive branch not subject to legislative oversight. Decisions of the Secretary are final and may not be reviewed by another officer or employee of the Government. This means that the CFTC has no authority to monitor or regulate any transactions executed by the fund on the open market nor it's agents who execute the transactions for them (JP Morgan) hence the FT article about the silver manipulation case being dropped by the CFTC was recently published (done so in error).



Consistent with the obligations of the Government in the International Monetary Fund on orderly exchange arrangements and a stable system of exchange rates, the Secretary or an agency designated by the Secretary, with the approval of the President, may deal in gold, foreign exchange, and other instruments of credit (GOLD AND SILVER FUTURES CONTRACTS) and securities the Secretary considers necessary.



The markets are being suppressed to protect the dollar, which is being used by banks to rob american citizens of their wealth through inflation and income tax, all sanctioned and supported by the US government. Gold will be a tier 1 asset next year and commercial banks will be able to buy gold without having to keep reserves for it because it is consider[ed] zero liability. When banks start buying gold to use as collateral the price will soar and QE has nothing to do with this (China does as they continue to quietly stack 100's of tons of gold). People are waking up and understanding what is really going on hence the growing demand for physical gold and silver as the same crime is being committed globally.



This is why the CMEgroup allows gold and silver contracts to be settled in cash with details of the transactions not disclosed. If deliveries were mandatory prices would be a lot higher.



As crushing debt pushes US society deeper into serfdom gold and silver will continue to rise with no end in site out of the reach of ordinary citizens. Gold and silver are very misunderstood by many who try to write about it. Gold is more than just a metal and you have to [have a] deep and in depth knowledge to write good articles about gold."   AJ adds: The US and British governments control the price of gold and silver in order to be able to print fiat currency and engage in deficit financing. Buying on margin, shorting  and paper contracts allow the govt to rip us off.

Argentina: a land of learning disability.

Argentina is a land, a people that can not learn from the past. The country flirted with Peronist Socialism and when Juan Peron died, his wife Evita continued with running Argentina into the ground.

OK, u say, every country is entitled to make one bad a$$ mistake (haven't we elect Obama?). True, but Argentina is repeating the mistake. Like Evita Peron, Cristina Fernandez rose to power by being married to the President. In Gonzalez's case, the President was Nestor Kirchner (by keeping her maiden name, Fernandez signaled that she was a Left-winger).

During her first term, things went reasonably well. The Argentine economy grew fast and the consequences of an interventionist and Socialistic direction were covered up by growth. Fernandez was re-elected and had a popularity rating of 64%. That's when the ripples from Obama downsizing America started hitting Argentina. The economy slowed, unemployment began to rise and money printed to stoke the economy led to a rate of inflation of 20% annually. The government response? Forbidding private economists to report on inflation other than the government's phony numbers.

Gonzales' popularity sank by 30% this this August. Maybe Argentinians are learning to recognize the results, even if they are unable to avoid the mistake of electing a Leftist.

Stage is set for gold to soar.

It is getting hard to keep the lid on the news. And the news all points to gold moving up....unless the FED is content to watch deflation devour the US economy just before the election. Gold prices, IMO, can be stopped only by massive deflation.

Here is the case for gold increasing in price:

1. The technical breakout of gold and silver was massive.

2. Economic fundamentals. Europe's manufacturing and service index fell for the seventh straight month. Even Germany is barely growing. US Capital goods index contracted 3.4% in July, the largest decrease since 2009. The ECB has pledged to prevent the Euro unraveling and Bernanke promised further easing unless the economy showed some real improvement. It hasn't.

One caveat. The Markets have factored in some form of QE and if the QE is too small, the Stock Market will tumble. Maybe even the PM markets.

3. The political fundamentals. The Greek soap opera is on again. While PM Samaras pleaded for more time for Greece, the French President closed ranks with the Germans to reject further delay for Greece to implement agreed upon austerity. So, here comes the next bump in the soap opera. Germany's Economic Minister Roesler (who is head of the Free Democrats coalition partner of Chancellor Merkel) and Finance Minister Schaeuble all agree that Greece will get no further delay. However, the Greek coalition is held together by the promise that the government will ask for such conscessions.

Who will blink first?

Syria: part of a larger war.

While the Saudi king seeks to sooth the unrest among the general population by adding more government benefits, he will not grant any concessions to the eight percent of the population that is Shia. He takes seriously the warning by King Abdullah of Jordan back in 2004 of the danger of a Shia Crescent that would extend from the coast of Lebanon to Afghanistan. Hezbollah in Lebanon, Assad in Syria, and the Shia controlled government of Iraq form the links in the chain.




When the Arab Spring reached Syria, the leaders in Riyadh were given the weapon to break the chain. Appeals from tribal leaders under attack in Syria to kinsmen in the Gulf States for assistance could not be ignored. The various blinks between the Gulf States in several Syrian tribes means that Saudi Arabia and its close ally Qatar have connections that include at least three million people out of the Syrian populations of twenty-three million. To show how deep the bonds go, the leader of the Nijris Tribe in Syria is married to a woman from the Saud Family.



It is no wonder that Saudi Foreign Minister Prince Saud al-Faisal said in February that arming the Syrian rebels was an "excellent idea." He was supported by Qatari Prime Minister Hamad bin Jassim al-Thani who said, "We should do whatever necessary to help [the Syrian opposition], including giving them weapons to defend themselves." The intervention has the nature of a family and tribal issue that the prominent Saudi cleric Aidh al-Qarni has turned into a Sunni-Shia War by promoting Assad's death.



The Saudis and their Qatar and United Arab Emirate allies have pledged one hundred million dollars to pay wages to the fighters. Many of the officers of the Free Syrian Army are from tribes connected to the Gulf. In effect, the payment of wages is paying members of associated tribes.



Here, the United States is not a welcomed partner, except as a supplier of arms. Saudi Arabia sees the role of the United States limited to being a wall of steel to protect the oil wealth of the Kingdom and the Gulf States from Iranian aggression. In February of 1945, President Roosevelt at a meeting in Egypt with Abdel Aziz bin Saud, the founder of modern Saudi Arabia, pledged to defend the kingdom in exchange for a steady flow of oil.



Since those long ago days when the U.S. was establishing Pax Americana, the Saudis have lost their trust in the wisdom or the reliability of American policy makers. The Saudis urged the U.S. not to invade Iraq in 2003 only to have them ignore Saudi interests in maintaining an Iraqi buffer zone against Iran. The Saudis had asked the U.S. not to leave a Shia dominated government in Baghdad that would threaten the Northern frontier of the Kingdom, only to have the last American soldiers depart in December 2011. With revolution sweeping across the Middle East, Washington abandoned President Mubarak of Egypt, Saudi Arabia's favorite non royal leader in the region.



Worried by the possibility of Iranian sponsored insurrections among Shia in the Gulf States, the Saudis are asserting their power in the region while they have the advantage. For thirty years, they have been engaged in a proxy war with the Islamic Republic of Iran. Syria is to be the next battlefield, but here, there is a critical difference from what were minor skirmishes in Lebanon, Yemen, and elsewhere. The Saudis with the aid of Qatar, and the UAE is striking at the core interests of Tehran; and they have through their tribal networks the advantage over an isolated Islamic Republic.



Tribal and kinship relations are being augmented by the infusion of the Salafi vision of Islam that is growing in the Gulf States. Money from the Gulf States has gone into the development of religious centers to spread the fundamentalist belief. A critical part of the ideology is to be anti-Shia.



Salafism in Saudi Arabia is promulgated by the Wahhabi School of Islam. The Wahhabi movement began in the eighteenth century and promoted a return to the fundamentalism of the early followers of the Faith.



The Sauds incorporated the religious movement into their leadership of the tribes. When the modern state of Saudi Arabia was formed, they were granted control of the educational system and much else in the society in exchange for the endorsement of the authoritarian rule.



When the Kingdom used its growing wealth in the 1970s to extend its interests far from the traditional territory in the battle against the atheistic Soviet Union, the Wahhabi clergy became missionaries in advancing their ideology through religious institutions to oppose the Soviets. More than two hundred thousand jihadists were sent into Afghanistan to fight the Soviet forces and succeeded in driving them out.



There is no longer a Soviet Union to confront. Today, the enemy is the Islamic Republic of Iran with what is described by the Wahhabis as a heretical form of Islam and its involvement in the Shia communities across the region. For thirteen centuries, the Shia have been kept under control. With the hand of Iran in the form of the Qud Force reaching into restless communities that number as many as one hundred and six million people in what is the heart of the Middle East, the Saudis see a desperate need to crush the foe before it has the means to pull down the privileged position of the Saud Family and the families of the other Gulf State rulers.



The war begins in Syria where we can expect that a successor government to Assad will be declared soon in the Saudi controlled tribal areas even before Assad is defeated. The territory is likely to adopt the more fundamentalist principals of the Salafists as it serves as a stepping stone to Iran Itself. It promises to be a bloody protracted war that will recognize no frontier and will know no limits by all of the participants.



By. Felix Imonti for Oilprice.com



You can reach Felix at: feliximonti@gmail.com



AJ adds: When I first read about this escalating conflict, I thought the Author was nuts. However, subsequent events added to the analysis. The Shia and the Sunni are at war with each other. From a strictly geopolitical calculation this has short term benefits: Islam will maybe split and the Jihad will turn on itself internally. However, war is never good and the participants can unite against the rest of us. The Salafis are brutal thugs, same as the Shia nutcases.

What is alarming is the lack of understanding in Washington in dealing with Islamic countries. Jimmy Carter had conveyed Iran into the hands of the Shia nutcases led by the Ayatollah Khomeni. George Bush had left a Shia-dominated Republic in Iraq and O'Bungle contributed to the rise of the Muslim Brotherhood in Egypt. Leaving Iran to develop atomic weapons is a sure way of promoting atomic war in the Middle East.

To us non-Muslims, it is almost incomprehensible that the Shia and the Sunni should fight over who should have been Muhammed's successor centuries ago. I suppose that Muslims found the religious war between Catholics and Protestants just as incomprehensible.

Gold and silver - where to now?

OK, so gold and silver have broken out of the wedge pattern on the upside. Where to now? Will the Bull Market in precious metals resume or will the bouillon banks beat the price down again by an avalanche of paper contracts?

According to a couple of experts who know this trade, Central Banks (especially the Chinese) pick up every ounce of gold that they get their hands on. The same experts also tell that the bouillon banks have rented a lot of gold (and contracts to deliver it have been sold) so that there is a shortage of 2,500 TONS of gold. That gold is gone.

We do not know how far the bouillon banks will jeopardise the financial system and its integrity. The technicians tell us that once gold crosses $1,710/oz, it's past the next resistance. For silver, the corresponding number is $33/oz.

Europe: the weight of indecision.

Investors did not miss the fact that ECB action on bond buying has been postponed. Italian 10 year bonds went up .102 to 5.80%, while corresponding Spanish bond rate went up to 6.48%.

To add to the already complicated financial mass, Germany is on track to demand a speedup of not only fiscal integration, but political integration as well. Actually, I don't see a demand for greater political integration. What I see is a German demand to keep deficits within certan bounds - these bounds to be administered by some kind of new court.

Markets, politicians move.

We have seen the minutes of the FED. They talked of easing, but how and when is not spelled out. The Stock Market responded by pulling back from some of the losses. The gold market responded by rallying to 1,653. If it closes above 1,660 then gold is off to the races. 

What about the prediction of James Dale Davidson that the US Dollar's use date will run out on Sep 23? Right now I see nothing on the horizon that would justify this prediction.

Except.

The German constitutional court will render its decision on Sep 12. Is it constitutional for Germany to provide funds to bail out other European countries? Without German participation, the mechanics of the bailouts will shatter. How will they make the ECB or the ESM issue more currency to continue the bailouts?

The Greek bailout and the Spanish refinancing wait like walls in front of the people kicking the can down the road.

Greeks plead for time.

Luxembourg PM Jean-Claude Juncker is in Greece today to meet with Antonin Samaras. Ahead of the meeting Samaras issued a plea to Europe to give "Greece air to breathe," meaning, allow Greece more time to implement the changes demanded by the EU. Whether Greece is allowed the asked for changes or not the situation is hopeless.

What Greece needs is a reduction in the public sector, lowering taxes and easing of regulations. What they are pleading for is going slower on reducing the deficit, meaning that they want to continue with current practices a little longer; i.e. two years longer.

The Markets turn.

This is an important week in terms of Markets and market directions. What we have seen so far is a surge in commodities that came from big money entities reacting to expected inflation. Yesterday, the Grain Index hit an all time high, surpassing the 2008 high. The Continuous Commodity Index pushed through 56630, a potent resistance level. HUI, the mining index went past 440 and is reaching the resistance level of 460. Silver shot past 29 and is heading to 30. If it closes above 30 there is little resistance. Silver supplies are low again. Both, oil and gold are up, but the US Dollar is above 82 again.

What  does this add up? Some money bags are betting that deflation has run its course  and that the next trend is inflation. The action is in its early hours so p-rices could be choppy for a while.

Spanish bond worries ease - for now.

Spain's bond rates dropped after Mario Draghi (Pres, ECB) declared that the ECB will do what it takes to save the Euro. Spain was able to raise E5.6B at the latest auction; 12 month bonds pay 3.070 and 18 month bonds pay 3.335%.

Will this continue? Will the ECB do the bond buying while the Bundesbank complains? Did Draghi bluff?

We won't know untill October when Spain auctions E9.04B in long term and E24.16B in short term bonds.

Meanwhile, the US Dollar dropped below 82 and gold surged to 1,640/oz. The Markets are betting that the ECB will ease.

Silver's breakout is confirmed.

The precious metals have been in a correction mode for almost a year. Some Pundits (scarcely containing their glee) declared that the gold bubble had burst and that gold reached its top at 1,900/oz. These Pundits tried to convince us that people preferred dollar bills (of which an endless amount can be printed) to gold.

The correction, which grew into a mini bear Market, is just about over.As in 2008, silver is leading the breakout:

The first breakout occurred in July while the MACD was still negative and rising.The second breakout occurred yesterday, along with the MACD moving to positive territory. One Analyst pegged the required close at 27.30 and silver moved past that.

For gold to break out, it needs to close above 1,630. If it does, then it will rapidly advance because of the shorts squeeze that is expected at 1,700.

Europe: travel plans pick up.

The increase in the travel of European leaders tells us that important decisions are in the air.

Monday (today). Guido Westervelle, German Foreign Minister is meeting with Dimitris Avramopoulos of Greece in Germany.

Thursday: Francois Holland goes to Germany to meet with Angela Merkel.

Friday: Angela Merkel is meeting with Antonis Samaras (Greek PM) in Berlin.

Saturday: Samaras is to meet with Francois Holland in Paris.

Next Wednesday: In Athens, Samars is meeting with Jean Claude Juncer (PM of Luxemburs, who is Chairman of EU Finance Ministers).

Up, up and away.

Confusion about Spain.

Spain's Economics Minister called for ECB purchase of Spanish bonds at 4.55%. On that news the 10 year Spanish bond rate fell to 6.300%, down 0.143. The Bundesbank criticized any bond buying by the ECB.

Important Market turns just ahead?

Larry Edelson's latest Market Letter is out. Please do not think that I do not respect Larry, I think he is a great chartist. But! he has this thing about having predicted certain things and he will not change his mind, even if it is obvious he is wrong with one exception.

He had predicted a couple of years ago that the DOW would fall to 9,500. It didn't. Then he announced that the DOW has entered a bull market that would see it to 21,000. It did not happen. Now he predicts that the DOW will take a correction before it goes up any more.

If anything, his reading of the gold market is even murkier. His one note symphony is that gold will fall below 1,400 and maybe even lower, before it resumes its rise. He completely ignores that China buys every ounce of gold it can get below 1,600/oz.

We do not know much of the gold for sale the Chinese managed to to gobble up. What we know is that supposedly China mined 20% of its gold in the ground this last year and continues at that pace. All that gold stays in China. Hong Kong authorities report that Chinese shipments of gold through regular channels exceeded 600 tons last year and this year's figures are higher than that. The Chinese are working on establishing the Yuan as the world's reserve currency and they intend to have it backed by gold.

On another note, check out the Miss Universe winner, Miss China. Besides being one beautiful woman, she has hands that could play Liszt etudes with ease.

The failure of Alternative Energy.

Wind power is very inefficient and would not exist as such were it not for the hefty subsidy given to it by gullible governments. Not counting the large number of bird kills that the monstrous machines cause. Wait a minute you say, did they not use wind power in the Netherlands? Yes, they did for centuries for grinding grain and pumping water on the range. But, industrial use? Forget about it. The most insidious aspect of wind power is the placement of the wind mills. These are installed by the dozens and migratory birds have a hard time avoiding them. Individual wind mills of the past were small and relatively slow moving.

The failure of solar power is even more evident. China had cornered the solar market by underpricing everyone else and the Chinese are finding out that selling products at near cost is NOT a good business practice.

Many of the smaller Chinese companies are out of business or have shut down production. The biggest ones are bankrupt, too.Suntech has a debt of $3.55B, Yingli a debt of $3.33B, LDK Solar $6B. The healthiest company is Trina with a debt of $1.08B and cash on hand of $490M. American alternate power companies are bankrupt, too: Solyndra, Ener 1, Beacon Power, Abound Solar, Spectra Watt and Eastern Energy have two things common: Obama supporters that got big subsidies and they are all bankrupt.

If we had a reasonable President and a Congress, they would push for the development of natural gas, shale oil and nuclear power.The technology is there, only the sabotage by the EPA and Democrats stand in the way of US energy independence and even enough income to pay off most of the National Debt. Unfortunately, the Democrats want high priced energy as part of their economic plan of making people dependent on government payments.

Kalifornia Nightmarin.

The announcement seems bad enough: Moody is to review the financial rating of all (nearly 450) California cities. Moody estimates that nearly 10% of California cities are bankrupt and may seek Chapter 9 protection. There are important considerations for cities to maintain solvency. Otherwise they can not sell bonds to finance construction of public works.

A generation ago, in the days of Ronald Reagan, California was a Republican State. It was solvent. What happened?

California became overran with illegal aliens amnestied into citizens by the consent of Ronald Reagan. Work ethic died. Welfare rolls exploded. The new citizens are in fact still Mexicans. They do not speak English and they expect El Patron (Democrat leaders) to give them jobs, income, even if a pittance. And the contemporary Democrat Party is home of all the fruits and nuts, but not the Party of entrepreneurs. Democrats love an electorate that is content with little in exchange for unwavering party loyalty.

California today is no longer an American State. It  is composed of a majority of unassimilated Mexicans, laced with a seething mix of other minorities. There are islands of Republican remnants that have withstood the tide of dumming down - for the time being. Obama plans to mint another 16-60 million new citizens to destroy the Republican Party. It will be the end of the United States. Californians have escaped California by moving to Texas, Arizona and other States. If Obama succeeds, there will be no escape.

Is Spain to ask for a bailout?

The rumor is that Spain is going to ask officially for a bailout on Monday, the twentieth. Ten year Spanish bond rate went down today to %6.443, down 0.081.

What is it like to do business in Spain today? Well, the unemployment is 25%, 50% among the youth. Spain's commercial real estate market has come to a screeching halt, going from 58 transactions in Q1 to 3 transactions in Q2. It may be better in Italy that went from 56 transactions in Q1 to 2 transactions in Q2.

The rumor is that the ECB will buy up short term Spanish bonds and leave the long term bonds alone. This would be a form of QE for Spain. Another rumor is that Central Banks are planning co-ordinated efforts to stimulate economies.

Let's remember that our FED does not need to print more money, the banks will do it. It is known as the "multiplication factor." Banks can use their reserves and loan out 10X as much money. All they need is an OK from the FED, which means Helicopter Ben. The FOMC does not control what the FED does. Their vote is merely advisory and Helicopter Ben will decide.

European pulse.

Bloomberg Businessweek


News From Bloomberg

AJ begins: What are clear are these: 1. Europeans want to preserve the EU; 2. And the Euro, if possible. 3. Germany wants the profligate spending of some European countries to stop, while the countries involved want to continue to live on borrowed money. Canada is a mixed bag as a model. After its two Conservative parties united, the real Conservative ideas of Western Canada have been watered down. Enough of it survived to bring Canada back from the brink. That is what appeals to Chancellor Merkel.

Tweet Facebook LinkedIn Google Plus 0 Comments Email Print http://www.businessweek.com/news/2012-08-16/merkel-cites-canada-as-debt-deficit-model-in-europe-s-crisis

German Chancellor Angela Merkel renewed her call for austerity as crucial to tackling financial turmoil in the euro area, praising Canada’s economic example as she returned to the crisis fight after her summer vacation.



Merkel, facing European pressure to ease bailout terms and allow shared debt, and from global partners to do more to stop contagion, used a visit to Canada as the stage for her first public comments in a month on the crisis. She hailed Canada’s budget discipline, promotion of economic growth and “not living on borrowed money” as models for the 17-nation euro region.



“This is also the right solution for Europe,” Merkel said at a reception in Ottawa late yesterday before talks with Prime Minister Stephen Harper, according to a transcript posted on the German government’s website. “I will report on our political will to overcome the euro crisis and on our determination in Europe to band together for a common currency.”



Merkel returns to the global stage as the crisis enters a new phase. Germany’s supreme court will rule on the legality of Europe’s permanent rescue fund next month, when Greece’s international creditors are due to report on progress in meeting bailout targets. Italy and Spain meanwhile have yet to decide if they’ll request help from the European Central Bank to lower borrowing costs.



‘Becoming Clear’

“It is becoming clear that the ECB purchases have to be conditional on the implementation of austerity and structural reform measures in that country,” Citigroup Global Markets analysts led by Juergen Michels said in a note to clients today.



Greece, on its second rescue program after triggering the crisis in late 2009, may run out of road at the end of the year. Greek Prime Minister Antonis Samaras’s government probably can’t come up with enough austerity measures even if creditors extend the time line as his coalition wants, according to Citigroup. That means an end to international funding “looks very likely” after the next audit set for December, it said.



Merkel is due to host French President Francois Hollande on Aug. 23, Paris-based Agence France-Presse reported today, one day before Samaras travels to Berlin for talks. Italian media have reported that Prime Minister Mario Monti is due in the German capital on Aug. 29. Spanish Prime Minister Mariano Rajoy has said that Merkel will visit Madrid on Sept. 6.



Threshold Passed

Italian 10-year bond yields advanced 7 basis points to 5.81 percent as of 1:55 p.m. in Berlin, while equivalent Spanish debt fell 7 basis points to 6.51 percent. Spanish 10-year bond yields reached a euro-era high of 7.62 percent on July 24, past the threshold that prompted Greece, Portugal and Ireland to seek bailouts. German 10-year bonds yielded 1.52 percent today.



Merkel, as leader of Europe’s largest economy and the biggest single contributor to euro-region bailouts, is facing calls from Italy and Spain to pool debt to bring down bond yields, from Greece to back an easing of its austerity timetable and from the ECB for politicians to take the lead in fighting the crisis. President Barack Obama, Canada and major developing countries are also pressing Europe to stamp out the crisis that’s weighing on the global economy.



“They need to do much more,” Canadian Finance Minister Jim Flaherty told reporters yesterday before Merkel arrived. “We have been clear for several years that not only should the European countries take overwhelming concerted action to take control of the situation, but also that the European countries have more than adequate resources to do so.”



Merkel and Harper plan to hold a joint news conference at 5 p.m. Berlin time. Later today, Merkel is due to visit an ocean research center in Halifax on her trip back to Berlin.



To contact the reporter on this story: Tony Czuczka in Berlin at aczuczka@bloomberg.net



To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

The lull before the storm.

There are several crises brewing and coming to a head:

1. The debt crisis in Europe.
Several threads to this:
a) Greece is due for a E30B tranche in September because it can not pay its bills. German politicians threaten to block it, because Greece has not met previously agreed upon conditions.
b) The legality of the European Stability Mechanism (ESM) is being litigated through the German Supreme Court;
c) Spain is going to formally ask for a bailout for its central govt and regional govts.
d) Spanish bond rates fell as Spanish banks have used their bailout money to buy govt bonds.

2. The crisis in Syria.
Is this the beginning of the war between Shiites and Sunnis? Syria is ruled by members of the Alewite sect that is a rogue Shiite derivative. The rebels are Sunnis. The Sunnis are supported by Turkey and the Saudis and for some obscure reason the Russians are supporting the Alewite govt. Iran is also in the Alewite camp. The conflict is now spreading.
a) A Lebanese group has begun to kidnap Sunnis from other nationalities in Lebanon.
b) Saudi Arabia, Quatar and the UAE ordered its citizens to leave Lebanon.
c) The rebels are receiving aid and men from former Lybian fighters. Other Sunni are on the way.

3. The coming Israeli attack on Iran.
See previous post.

4.The Obama regime's alarming moves.
The Obama regime is soliciting bids on 1.4B hollow point bullets. Detention centers are also being renovated. The regime intends to sign up illegals and have them vote in the election. If this happens Obama's opponents will not accept the outcome. The regime has asked the Army to prepare to fight opponents.

The "secret" Israeli memo on Iran attack.

BBC has published an article today on the subject.


"Richard Silverstein - the American blogger who says he has been given the text of a memo outlining Israel's plans for a strike on Iran's nuclear facilities - is clear about what he thinks it is.



He says it came from a senior Israeli politician - a former minister - and he describes it as a "sales pitch", used by Prime Minister Benjamin Netanyahu and Defence Minister Ehud Barak to try to win round sceptical members of Israel's divided inner security cabinet.



The text supplied to the BBC is just that - text.



There is no document as such and thus it is impossible to verify if it is indeed an Israeli cabinet paper of some kind. But its purpose for Mr Silverstein is clear.



He believes it was passed by a serving officer to the politician and then leaked by him precisely to alert the outside world to the scale of Israel's military plan to strike at Iran and thus to reduce its chances of ever happening.



An unprecedented public debate is underway in Israel on the wisdom of launching an attack against Iran. And this leaked document, whatever its source, and whatever its original purpose, has become an element in that debate.



'Paralyse the regime'

The document itself is striking in both the scale and scope of the military operation that it proposes.



It also employs a range of technologies, many of which we have known that the Israelis are developing, but this document suggests that they are battle-ready and fully operational.



The leaked text suggests that an Israeli operation would begin with a massive cyber attack against Iran's infrastructure, to "paralyse the regime and its ability to know what is happening within its borders".



Ballistic missiles would be fired at Iranian nuclear targets, albeit with conventional non-nuclear warheads. Cruise missiles would be fired from Israeli submarines in the Gulf.



It has long been assumed that Israel's small force of German-built Dolphin-class submarines has been adapted to fire cruise missiles, though it is not clear if these are a version of the US-made Harpoon or a derivative of the much longer range Israeli-built Popeye.





It is not clear if Israel's submarine-launched cruise missiles are a version of the US-made Harpoon According to the text, it will not be just the main Iranian nuclear facilities that are struck, but command-and-control systems; research-and-development facilities and the residences of senior personnel in the nuclear and missile development apparatus.



'Futuristic battle plan'

After the first wave of attacks the Israeli memo suggests there will be a rapid assessment of the damage done by satellite, after which manned aircraft will go in to attack "a short-list of those targets which require further assault".



At almost every stage Israel will be using key technologies and weapons systems that it has developed itself, including what the memo describes as equipment that "will render Israeli aircraft invisible"; technology that it has not even shared with its US ally. [Sharing such tech with the Obama regime is equivalent to handing it to the enemy. Consider:1. US stealth helicopter secret is lost in the attack on Osama bin Laden; 2. US stealth drone misteriously lands in Iran; 3. Mach 6 test plane is sabotaged and lands in sea. Obama gave orders to prevent destroying the tech in cases 1. and 2.]



At one level it all reads like a futuristic battle plan out of a Tom Clancy novel.



There is nothing in the leaked text about how Iran might respond, nor anything about the potential for a regional war, which could embroil Israel on its northern border should Iran's ally Hezbollah rain down missiles on Israeli cities.



The proposed mission is huge and with potentially far-reaching consequences. We know that most of the Israeli top military command and intelligence chiefs are sceptical about bombing Iran now.



They don't so much question Israel's ability to conduct such a mission - though the scale and scope of what is proposed in the leaked text sounds as though it would test Israel's military machine to its limit.



They fear of wider ramifications in a febrile and unstable region.



They wonder at what exactly the gains would be?



A delay in Iran's nuclear development programme, yes, but for how long?



And above all, they fear the damage that a unilateral Israeli decision to attack Iran might have on the Israel-US relationship, especially if such an attack went ahead so close to a US presidential election in November.



The debate is in full swing. Some analysts suggest that Israeli leaders are preparing Israeli public opinion and indeed the outside world for a strike.



The two key players, Mr Barak and Mr Netanyahu, insist that if the fateful decision has to be made, they will not flinch.



Israel's security cabinet is well qualified in military matters, though at this stage it is said to be almost evenly divided on the merits of a strike.



Of course, the differences of opinion and the airing of the arguments itself sends a signal to Tehran, to Washington and anywhere else that may be listening.



The leaked text may or may not be a precis of Israel's battle plans.



But it is now an integral part of the increasingly feverish national debate and a debate that resonates well beyond Israel's own borders.

Senior Merkel ally sends warning to Greece.

Says the article in Al Reuters:

http://www.reuters.com/article/2012/08/13/us-germany-greece-idUSBRE87C09H20120813

Of the 300 conditions imposed on Greece, 210 remain unfulfilled according to the last report. The Merkel ally warns Greece that failure to carry out agreed on changes will result in Germany vetoing the next bundle (Tranche) of handout due in September. CITI puts the chance of Greece leaving the Euro at 90%. German politicians (along with others) are already planned to aid Greece so it can remain in the EU but leave the Euro block.

Greece can not leave the Euro without defaulting on its debt, re-establish the drachma and revalue its currency down so it can restore its economy.

And Central Banks commit to inflation.

Boston FED President Erik Rosengren predicts that the FED will stop paying interest on bank reserves and commit to an open ended QE, starting with QE III and Rosengren casts one of the votes. The current FED policy is a disaster. Having increased the amount of dollars by $2T, the FED has the banks keep $1.5T in reserve. Not only that, but the FED keeps interest rates and gold artificially low. The result is not good: 1. it allows the Obama regime to borrow money at virtually no interest; 2. it inflates the currency without the benefit of allowing the extra currency to stimulate nominal GDP by allowing inflation to rise; 3. it exports our troubles and forces the world to devalue its currencies, disrupting international trade.

How will we know if the FED has changed its policy?

We will know by watching the gold price. Larry Edelson still forecasts a drop in gold price below $1,500, followed by a huge rally. According to Larry, gold would have to close above $1,770 to start a new rally, which would be the sign that the FED changed its policy. According to KWN, gold would have to close above $1,630 and silver above $28.30. That would push XAU to 170 and HUI to 465 (these are mining share indexes).

Frankly, I thought that the FED would ease in July. It did not. Which continues to commit us to deflation, higher unemployment and a slide toward a recession.

Currencies race to the bottom

from Bloomberg

Just three months after the biggest developing economies sold dollars to support their currencies, policy makers from Colombia to China are moving to weaken exchange rates and revive exports as the International Monetary Fund forecasts the slowest trade growth in three years.



Colombian Finance Minister Juan Carlos Echeverry urged the central bank on Aug. 3 to boost minimum dollar purchases from $20 million a day, saying the country needs “more ammunition” to drive down the peso in the global “currency war.” The Philippines banned foreign funds from deposit accounts and unexpectedly cut interest rates in July as the peso hit a four- year high. In China, authorities lowered the yuan reference rate to the weakest since November, which according to Citigroup Inc. will create “headwinds” for other Asian currencies.



After spending more than $59 billion in foreign reserves in May and June to stem currency depreciation, developing nations are reversing policies as the European debt crisis outweighs the risk of faster inflation. South Korea and Chile may weaken exchange rates to make their exports cheaper, according to UBS AG. The IMF estimates global trade will expand at the slowest pace since 2009.



“Policy makers will become more aggressive,” said Bhanu Baweja, a London-based strategist at UBS. “The currency strengthening is in contrast with the state of the economy. That argues for much weaker foreign-exchange rates.”



Currency Swings

Options traders are bracing for wider currency swings in some emerging markets in coming months. The gap between implied volatility on one-year and three-month options for the South Korean won widened to a 10-year high of 2.85 percentage points on July 12, from 1.96 percentage points two months earlier, according to data compiled by Bloomberg.



Bank of America Corp. lowered its end-September forecast for the yuan on July 25 to 6.45 per dollar from 6.30, saying “downside growth and disinflationary risks” may prompt China to let its currency depreciate. The new forecast represents a 1.4 percent decline from yesterday’s close.



“People aren’t expecting currency appreciation from emerging Asia anymore,” said Albert Ma, a Taipei-based bond fund manager at PineBridge Investments LLC, which oversees $67 billion of assets globally. “These countries are mainly export- oriented. They’d want their currencies to be weak when the global economy is going this bad.”



Just three months ago, policy makers were taking steps to prop up exchange rates when emerging-market currencies, as measured by JPMorgan Chase & Co.’s ELMI+ Index, lost 5.9 percent in May, the most since September.



Debt Crisis

As the deepening European debt crisis led investors to retreat from developing nations, central banks drew on foreign- exchange reserves to limit declines, causing a combined $19.7 billion drop that month in Brazil, Russia and India, official data show. China’s holdings, the world’s largest at $3.24 trillion, fell $65 billion in the second quarter.



Since May, the ELMI+ index has climbed 4.4 percent as European policy makers pledged to tackle the crisis and record- low yields on U.S. Treasuries and German bunds spurred demand for riskier assets. Emerging-market bond funds have taken in more than $46 billion this year, surpassing the $43 billion of inflows in the whole of 2011, according to JPMorgan.



Central Banks

Chile’s peso advanced to the strongest level since September on Aug. 9, approaching levels that prompted the central bank to buy dollars in 2008 and 2011. The peso declined for a second day yesterday, falling 0.6 percent.



The won, which reached a four-month high on Aug. 9, strengthened 0.1 percent today. Malaysia’s ringgit gained 0.2 percent after touching its strongest level since May on Aug. 7.



The currencies are rebounding as slowing exports drag down economic growth in developing countries. The global trade expansion will ease to 3.8 percent this year, from 5.9 percent in 2011 and 12.8 percent in 2010, according to the IMF. China’s export growth collapsed to 1 percent in July from an average 18 percent over the past seven years as demand from Europe, the country’s largest trading partner, declined.



“We have a growth problem in the global economy,” Michael Ganske, the head of emerging-market research at Commerzbank AG in London, said in a phone interview. “Emerging-market central banks can’t let their currencies appreciate on the back of portfolio flows to the point it kills exports.”



‘More Diverged’

With Asian and Latin American currencies down about 9 percent since their peak in July 2011, policy makers aren’t worried about their nations’ losing competitiveness, said Kieran Curtis, who helps oversee $4 billion in emerging-market debt at Aviva Investors Ltd. in London.



“We haven’t seen particularly broadly based intervention,” Curtis said. “I don’t think they are all seriously concerned about the currency strength. It’s more diverged.”



All except four of 25 emerging-market currencies tracked by Bloomberg have weakened over the past 12 months. Brazil’s real lost 20 percent against the dollar in that period as the Hungarian forint fell 15 percent.



In Colombia, it’s a different story. The 26 percent gain in the peso since 2008 threatens to undermine local industry and farmers. Flower growers cut 30,000 jobs in the past seven years because of the peso’s rally, according to the Association of Colombian Flower Exporters. Echeverry said Aug. 8 that he has asked the central bank to double its daily dollar purchases to $40 million.



“We are in a currency war, and those who don’t fight lose,” he said in an interview in Bogota on Aug. 3.



Philippine Regulations

In the Philippines, the central bank tightened rules on capital inflows last month by prohibiting foreigners from parking funds in so-called special deposit accounts. Policy makers also cut the benchmark interest rate by a quarter- percentage point on July 26 to a record 3.75 percent, a move that Deputy Governor Diwa Guinigundo said will help “temper” peso gains. The currency’s 4.6 percent advance versus the dollar this year is the best performance in Asia. The peso fell 0.1 percent today.



South Korea, which sent a combined 44 percent of its overseas shipments to China, the U.S. and the European Union last year, will step up monitoring foreign purchases of won- denominated debt, Shin Hyung Chul, director general of the treasury bureau at the Ministry of Strategy and Finance, said in an Aug. 8 interview in Seoul.



Overseas Holdings

Overseas investors boosted bond holdings by 1.4 trillion won ($1.2 billion) to a record 89.7 trillion won in July, or 17 percent of the total outstanding, government figures show.



After keeping its currency little changed during the 2008-2009 financial crisis, China has allowed the yuan to depreciate this year. The central bank set a reference rate of 6.3456 on Aug. 13, the weakest level since November. The daily fixing, around which the currency is allowed to fluctuate by as much as 1 percent, was reduced 0.7 percent in the past three months, the most since a peg ended in 2005.



The Czech Republic’s central bank may weaken the koruna by about 10 percent against its trading partners to help the export-led economy recover from recession, according to Bank of America. A 10 percent depreciation will lead to as much as a 5- percentage-point increase in exports, Mai Doan, a London-based economist, wrote in a report to clients on Aug. 6.



Fed Purchases

Pressure for emerging-market currencies to appreciate may persist as central banks in developed nations boost monetary stimulus to revive growth, according to Frances Cheung, a strategist at Credit Agricole CIB in Hong Kong.



The Federal Reserve said Aug. 1 it will pump fresh funds into the economy if necessary to bolster growth. European Central Bank President Mario Draghi said the following day that policy makers will buy shorter-maturity government securities to help quell turmoil in the region’s debt markets.



The U.S. central bank bought $2.3 trillion of mortgage and Treasury debt from December 2008 to June 2011 in two rounds of so-called quantitative easing, sending the dollar to record lows against its trading partners. In response, countries from Brazil to China bought dollars to curb their currency rallies, boosting foreign reserves in the eight largest developing economies 46 percent in the three years through 2011, according to data compiled by Bloomberg.



Developing countries “don’t want a strong currency, losing export momentum and losing domestic momentum,” said Phillip Blackwood, who oversees $2.9 billion in emerging-market debt as a managing partner at EM Quest Capital LLP in London. “They want to boost GDP as much as possible. A weaker currency is another measure they can use.”

Did the Treasury bubble burst?

Socialist democracies in Europe, as well as the United States, are routinely running budget deficits. The deficits are incurred to cover inefficient programs in the areas of medicine, retirement pensions and other social programs designed to secure votes.

The problem with the accumulating deficits is that the interest on it automatically adds to a nation's cost, so that if there is a recession, the deficit works against the stimulatory effect of quantitative easing. There is another problem that arises from this. If the interest rises on the debt, it soon begins to consume a large part of the revenue. For example, the National Debt now stands at $16T and still rising steeply. Ten year Treasury notes brought in 0.014% annual interest which works out as $224B annually. As the interest rate rises to 6%, the total interest on the Debt rises to $16Tx.0.06 or $960B annually. At a 7% interest, the interest on the Debt is $1.12T. Added to the deficit of $1.3T, the sum of the deficit and the interest equals the Federal government's revenue.

The FED has been buying Treasuries, creating the biggest financial bubble the world has ever seen. At a 1.4% return annually, the suckers who put their money in Treasuries had lost 2.6% at the government's official reckoning of 4% annual inflation and 6.6% at the unofficial reckoning of 8% inflation. As the fact dawns on would be bond purchasers, they demand higher returns to compensate for future inflation. But, higher return signifies the bursting of the Treasuries bubble. Here is the latest graph on the return on Treasuries:

Without further QE, Treasury interest rates will rise steeply. If there is a third QE, then inflation will really take off.

Spanish and Italian 10 year bond yields are dropping again, because their banks are buying the country's bonds. This pushes the banks toward insolvency and increase their deficit, because interests paid increase.

Europe: strains show in rhetoric.

An AP story describes the strains that are beginning to show in the handling of Europe's debt crisis:

http://www.barchart.com/headlines/story.php?id=5867256

Europe consists of social democracies. In practical terms this means that Socialism has become the accepted norm even for political parties that are nominally non-Socialist and Socialism brings with it a great deal of inefficiency. Political parties then curry favor with the voters by borrowing money. They were warned about the Day of Reckoning and that day is now here. Now it is a struggle between the more profligate and the less profligate as to who will pay. The fact is that the debt can not be managed without either a default or printing more money. It is very difficult, if not impossible, to reform the countries overnight in order to make them and their banking system solvent.

The EU is straining because the rules call for wide consultation and lenghty processes to deal with the problem. But, the countries in trouble are running out of time.

Today's humor.

Guy goes into a bar in Louisiana where there's a robot

bartender! The robot says, "What will you have?" The guy says,

"Whiskey." The robot brings back his drink and says to the man,

"What's your IQ?" The guy says," 168." The robot then proceeds to talk

about physics, space exploration and medical technology.



The guy leaves, . . . but he is curious . . . So he goes back into the

bar. The robot bartender says, "What will you have?" The guy says,

"Whiskey." Again, the robot brings the man his drink and says, "What's

your IQ?" The guy says, "100." The robot then starts to talk about

Nascar, Budweiser, the Saints and LSU Tigers.



The guy leaves, but finds it very interesting, so he thinks he will

try it one more time. He goes back into the bar. The robot says, "What

will you have?" The guy says, "Whiskey," and the robot brings him his

whiskey. The robot then says, "What's your IQ?" The guy says, "Uh,

about 50."

...

The robot leans in real close and says,

"SO, . . . you people . . . still happy . . . with Obama?"

Is the ECB bluffing?

Mario Draghi told us last week that the ECB will do whatever it takes (within its mandate)  to save the Euro. Not so fast said the folks at the Bundesbank. Draghi wanted the ECB to buy Italian and Spanish bonds to bring down bond rates, so these two countries can finance their deficits. NOT SO FAST, said the Germans, but they were outvoted.

Mario Monti (Italian PM) had warned that the Euro can not survive with Italy and Spain paying bond rates currently in effect.

Egon Von Greyerz of Switzerland thinks the Central Banks (including the FED) are bluffing: making statements to bring down bond rates, but not following through. What we see is a chaotic situation. On the one hand, the ECB's charter forbids it to interfere in the financial matters of each member, but on the other hand, if the ESM is given bank status, then it can buy bonds, create money, just like the ECB. Will such a move require German consent? Spanish banks are insolvent and if they fail they will bring down the whole house of cards.

The US is heading down the same path. The FED manipulates the interest rate, but if the interest rate would move to 6%, the total interest we owe would rise to $1T/year. The FED faces an insoluble problem. If it continues to promote deflation by keeping down gold prices, nothing it does via QE has much of an effect except on the Stock Market. If the FED let's inflation rise, interest rates will rise and the cost of managing the debt will put us in the position of Italy and Spain.

Sean Broderick (Weiss) throws in the towl.

Sean changed his REC: SELL FSM and go short on gold. So, what happened to gold? It went up $18.

Manipulation, manipulation.

Manipulating the Markets has become so ubiquitous that there is hardly a mention of it any more. However, there is a cost to these manipulations. First, the direct cost, which is significant. Banks can hold the price of gold down by selling delivery contracts, but they have to fork over the money in fiat currency for the price of those contracts. So what, you say? They can print the currency. Yes, they can, but it reduces their ability to use printing to stimulate the economy. Not even speaking of the harm manipulation does by reducing the efficiency of capital allocation by a free market.

Manipulation is done for economic and political reasons. For example, Mr Mario Draghi, President of the ECB, let it be known that the ECB will do whatever it takes to save the Euro and did not rule out buying Italian and Spanish sovereign bonds. Just this declaration has dropped the interest demanded on Italian 10 year bonds to 6.04%, down .279 and Spanish bond rate to 6.848%, down .317. These are large changes. Will the ECB do it? YES, shout the pundits. Maybe (and within the mandate of the ECB, whatever those are), says Mr Draghi and NO, say members of the Bundesbank. This kind of song and dance does not really solve the problem, it just manipulates.

Then there is the matter of interest rates, the value of the US Dollar and gold price. I hardly need to point out that the FED manipulates interest rates, because they actually admit it doing it. What is harder to see is why the US Dollar goes up, while interest rates are kept artificially low. Low interest rates should reduce the value of the US Dollar, but it went up. The explanation we are offered is that Europe is buying the Dollar. That is possible, but what is much more likely is that the FED is buying currency other than the Dollar.

Interest rates controlled by the FED are artificially low, which raises the interest rate on gold, since that is not kept low by the FED. The result? Low gold prices and continuous deflation that weighs on the economy.

The reporting of unemployment is nothing short of a mockery. Pundits are breathlessly reporting a job creation of 163,000 for July, much better than anticipated. Obama's policies working? Hardly. According to the figures, unemployment actually went up. If we examine the reported figures, we get a very uncertain picture. Due to "seasonal adjustment and the births/deaths ratio, the statisticians added 429,000 to the jobs column. This would make the actual change in job numbers 163,000-429,000 or a job loss of 266,000. No wonder the economy is reported as weak. How can we trust the figures is they are manipulated like this? In other countries, where jobless figures are not manipulated, unemployment is 25%, 50% among the youth. Our unemployment figures are close to 23%.

ECB: a paper tiger

Mario Draghi, President of the ECB, had to eat humble pie today and admit publicly that indeed he does not have the authority to do what he wants to do. And the Bundesbank let it be known that Monti will not be allowed to do whatever he wants to, that the ECB needs authorization from European politicians.

Markets reacted sharply and immediately. Yields on Spanish 10-year bonds jumped to 7.165% (up .433) and Italian 10 year bond yield had jumped to 6.327% (up .396). Stock Markets took a hit as Italian PM Mario Monti announced that Italy will ask for a bailout. The Spanish PM dodged the question.

Larry's predictions are looking better as both the FED and the ECB refused to print and gold has dropped $18/oz so far.

Divergence in opinions rises.

If you read Vince Martin's column in Seeking Alpha, you come away with the idea that those who believe that gold price is controlled are hopelessly deluded conspiracy nuts. If you read the comments from Weiss Research, you see that this organization comes down firmly on both sides of the issue: Larry Edelson forecasting a sharp drop in gold and silver, while Sean Broderick is giving a buy signal on gold and the PM miners. King World News is uniformly bullish, writing about the coming big rally in PMs. And if you look at gold prices, you see precious little change:

There is also diversion of opinions re the Stock Markets. People follow the action in the Industrials and also what is considered the World Stock Index, the WDOW. Here is the DOW:

We see a slow and steady advance, neither a fast breakout, nor a crash. If we look at the World Industrials, we see a similar trend:

Some people may wonder about my statements that the Obama regime intends to destroy the US economy and replicate the Roosevelt years of a severe Depression and Democrats winning re-election. Here is the proof of that:

Figuring on the Taxmageddon coming next year (the Bush tax cuts expiring and ObamaCare taxes) the economic course is clear if Obama gets re-elected: the worsening of the current recession. The goal of the regime is to make people more dependent on govt handouts.