John Embry - The US will default on its debt

John Embry discusses the eventual default on the US debt and the Greece crisis with Eric King of King World News.....listen here

Bob Chapman: Central Bank Gold holdings are bogus

Weekend Chillout

This weekend's chillout is inspired by the rush to Gold by both the Greeks and the Chinese.

So what else could I have chosen but "Rush, Rush", by Paula Abdul:

Black Swans from New Normal

By Jim Willie:

Mohammed El-Erian is given credit for the phrase 'The New Normal' to mean an altered state of perceived instability within the normalcy realm, as in crisis being called normal, like endless crisis. As buddy Jim Mess in Europe says, just like trying to redefine what debt default is, it sounds like high octane prevarication. El-Erian is considered one of the good guys. He served capably at Harvard University on the management team of the giant multi-$billion endowment fund. At PIMCO, he worked on the team to direct the biggest bond fund in the world to turn its back on the entire USTreasury Bond complex. In fact, their Total Return Fund, its flagship bond fund, is net short on USTreasurys as a group. That means they own a raft of Credit Default Swaps for USGovt debt default and an assortment of other vehicles like the TNX and TYX that track the 10-year and 30-year bond yield. They recognize an asset bubble when they see one, and even invest in Gold.

The other person relevant to the article title is Nassim Taleb, who coined the term Black Swan. Generally it refers to the extreme oddity that passes through view, shows up on the radar, the extreme warning signal being dire, but is largely ignored by the masses, regarded as the exception or outlier event. THE BLACK SWAN HAS BECOME THE NATIONAL BIRD!! When a few black swans appear, the alert analysts pay heed and express their warnings. When an armada of black swans appear, the message is clear. A systemic failure is in progress, and the important foundations are crumbling. In 2009 and 2010, it was clear that numerous black swans were sighted and identified. In 2011, something highly unusual and extraordinary has occurred. The black swans can be organized into groups. They are numerous within each important economic and financial camp. The Armada of Black Swans, well organized into regiments, has become dominant enough to be considered the New Normal. During the global financial crisis (which has earned a widely used GFC acronym), tragically the state of crisis has become an engrained latticework on the reality mosaic. A quick review at a high level should cause alarm, except for the gradual pathogenesis that dictates the pace of systemic failure in progress. If the list below were presented as a Wall Street Journal forecast in 2006, the author would have been subjected to laughter, derision, and mockery. Yet here and now, the organized groups of black swans are visible everywhere one looks. Worse, they are carrying nuclear slingshots, and excrete highly toxic green blobs into the liquidity streams that we have grown so dependent upon.

QE TO INFINITY
Quantitative Easing will continue for obvious reasons. Many were outlined in the last two articles. The QE2 will continue seamlessly, extending beyond the June 30th deadline. It will change in complexion slightly to become QE3, with some added twists like to include some municipal bonds. Later the entire financial initiatives will morph into a Global QE, since all major central banks will face the same plight. They will all purchase USTreasury Bonds or face extinction, in order to support their own balance sheets. The credibility of the US Federal Reserve has undergone major damage. In the next year, it will be totally destroyed. The factor ignored by many analysts is that the USFed balance sheet has expanded recklessly, and insolvency is its unavoidable condition. If the US housing market does not revive, then the US banks will go deeper into insolvency, carrying perhaps two million homes on their books at some point in the future. The resulting effect on the USFed balance sheet is permanent ruin. The USFed does have owners, and they cannot be pleased. The turnaround in the housing market never occurred. Its prospects look worse with each passing month. If the USGovt or the Elite operating as handlers for the captive USGovt decide to convert private property into collectivized syndicate ownership, and use their Fannie Mae device as agent for the process, then perhaps the USFed might serve as a facilitator to the vast Collectivism project. The United States Government might someday own the majority of homes in the nation, maybe even commercial buildings and shopping malls too. The disenfranchised can always go camping, guided by a emergency team.

ARMADA OF BLACK SWANS
Consider the following black swan specimens, each of which is astounding, each alarming, each serving as one more added element to the ruined situation. The swan organization is admittedly rough, but the regiments are put in sensible order. Any small handful of these signals would qualify as forewarning a profound crisis. Not anymore, since crisis is the new normal. Not anymore, since black swans adorn the entire landscape. A healthy white swan gradually suffers from toxic exposure, quickly to turn black from a fast acting decay process. Apologies for overlooking at least a dozen other important other black swans, as time and space did not permit the exhaustive catalogue process. Emphasis was given to the United States ponds and its migratory bird population.

USTREASURY BOND SWANS

• USGovt debt ceiling standoff, with actual violations
• Over 75% of USTreasurys auctioned bought by the USFed in debt monetization
• Turnaround from primary bond dealers to POMO repurchase by the USFed is 3 weeks
• Foreign banks form 12 of 21 primary bond dealers
• PIMCO owns no USTreasury Bonds, even short
• Global boycott of USTBond by creditors, some net sellers
• Foreign creditors owns the majority of USGovt debt
• A fixture of $1.5 trillion annual USGovt deficits
• Greenspan and David Stockman warn of USGovt debt catastrophe
• USMint officers admit Fort Knox has been shut down for 30 years, as in zero gold

USFED SWANS

• QE permanence, otherwise called QE to Infinity, worked into standard policy
• Bank of England urges more bond buying
• Cost of money 0% for two full years, implication being destroyed capital
• Chairman regards monetary hyper-inflation as being zero cost
• Ron Paul pushes for a USFed audit, an end run to pay down USGovt debt
• USFed owns more USTBonds than any other creditor
• Competing Currency War has Euro weakness mean USDollar as all circle the toilet

USGOVT SWANS

• USGovt could shut all operations but still be have a budget deficit
• USGovt could confiscate all income but still have a budget deficit
• USGovt must cover AIG payouts on Greek Govt debt default from CDSwaps
• US Postal Service stops all payments into their pension system
• New York Fed refuses to disclose the destination of $6.6 billion missing from Iraqi Reconstruction Fund
• Federal Worker Pension Funds and G-Funds confiscated (called borrowed)
• USMint runs out of gold & silver metal to make coins

COMEX SWANS

• GATA Gold Rush 2011 in London Savoy Hotel on August 4th will feature the COMEX whisteblower Andrew Maguire
• Silver futures contracts settled almost exclusively in cash, often with 25% vig bonus
• Gold & silver futures contracts often settled with GLD & SLV shares
• Umpteen margin increases for gold & silver futures contracts, but reductions in USTBond futures contract margin requirements
• Brent versus West Texas crude oil price has a $20 spread
• Every time Bernanke assures US financial markets, gold & silver rise in price
• Elimination of Over The Counter gold & silver contracts due in mid-July

BANK SWANS

• Chronically insolvent USFed and EuroCB, balance sheets ruined
• FASB accounting rules permit banks to grade their own test exams
• Stress Test for banks had almost no stress, a sham
• Shadow housing inventory held by banks over one million homes
• Wall Street firms in court on the defensive, JPMorgan foreclosed soldiers
• Wall Street firms banned in Europe on bond securitization and issuance
• Strategic mortgage defaults by homeowners on the fast rise
• Gold holdings by tyrant Arab rulers targeted by New York & London banks
• War over Libya grabbed $90 billion in Qaddafi money by New York & London
• PIGS sovereign debt default in Europe to have impact ripples that reach US banks
• Standard & Poors reminds the players what constitutes a debt default
• No liquidation of big US or London or European banks since Lehman Brothers
• Much of dull US population believes the propaganda that Gold is a bubble

USECONOMY SWANS

• USEconomic indexes fall off the cliff, see Philly Fed, Empire State, ISMs
• Rampant systemic insolvency in banks, homes, federal government
• US housing resumes its powerful bear market
• US land title system in the disintegration process, see MERS on mortgage titles
• Unemployment at 20% across the Western world, economic misery index hit 30%
• USGovt economic stimulus never contains stimulus
• Shrinking US trucker industry from $4 gasoline and diesel
• China begins to export price inflation to the United States
• Killing state worker union pensions as part of the state budget shortfalls
• Gulf of Mexico off limits for oil drilling
• 1 in 7 Americans is on Food Stamps, whose debit cards are good JPMorgan business

FOOD & WEATHER SWANS

• Food price inflation is staggering but denied
• Floods across Midwest & Plains states to interrupt with planting & harvest
• Australian floods have interfered with coal industry and agriculture
• Big volcanoes like in Chile and Iceland disrupt weather and air travel

EUROPEAN SWANS

• German bankers at war with Euro Central Bank
• Germans abandon the EuroCB, leaving it to Goldman Sachs, see Draghi
• Spanish banking system has yet to write down much on housing credit assets
• Portugal, Italy, and Spain sure to follow Greece into a debt default
• Belgium has had no government for a full year
• Ireland prints more money per capita than the USFed

CHINESE SWANS

• G-8 Meeting is pushed aside, as the Anglos deal with broad insolvency
• G-20 Meeting takes center stage in a power play, led by China and the BRICs
• China buys discounted PIGS sovereign debt, to redeem later in central bank gold
• Chinese FX reserves exceed $3 trillion held in sovereign wealth funds
• China owns most world major ports, as part of a strangulation process
• China conducts the great Idaho experiment, toward re-industrialization of America

HIDDEN SWANS

• Swiss faces hundreds of $million lawsuits, for refusal to deliver Allocated gold
• Saudi Arabia cuts new deal for Persian Gulf security protection, see Petro-Dollar
• Citigroup has high hidden exposure to Greek Govt debt default
• Chinese anger over reneged USGovt gold & silver lease, as part of the Most Favored Nation granted status, has motivated its extreme pursuit of precious metals
• Containers hold $300 to $500 billion in EuroNotes at Greek port warehouses
• Internet strides light years ahead of USGovt regulatory hounds at syndicate offices

GOLD & SILVER BREAKOUT IN ALL CURRENCIES
The great spring 2011 precious metals consolidation is coming to an end. In no way is the Quantitative Easing program coming to an end, otherwise known as hyper monetary inflation. Printed money is being abused to cover bank insolvency and to redeem toxic bank assets. The central banks are taking down the QE billboards. They will continue with their debt monetization in order to manage the financial system collapse in an orderly manner. As David Malpass adroitly said on Bloomberg Financial News, the debt monetization known as quantitative easing will quietly become an integral but hidden part of the USFed monetary policy. The central bank must find a way to cover the $200 billion in monthly USTreasury auctions, to roll over the obligated primary bond dealer inventory, and to lap up the mountain of toxic mortgage bonds that prevent an all-out cave-in of the bank balance sheets. The reality is that nothing has been fixed, nor attempted in solution. The grotesque insolvency of banks, households, and government is the marquee message. Without continued monetization, the system would collapse rapidly and disorderly. However, with continued monetization, with a QE chapter by another name or conducted behind the same curtains, the system will collapse in a gradual and orderly manner. The USFed has no more credibility. Witness the early stage of another uniformly applied global Gold bull market breakout.

The Gold price has hit record highs in the British Pound Sterling, where their banks are insolvent, their economy is in reverse, price inflation is ramping up, and their currency is facing grandiose debasement. The SterlingGold price smells monetary ruin. The global breakout is manifested first in the most broken non-American locations, since the spring ambush orchestrated in the COMEX has put huge pressure on foreign currencies. The Competing Currency War still leads the desperate USFed officials to slam foreign currencies and to place financial press attention on their declines.

The EuroGold price smells monetary ruin. The attention has been squarely on the Greek battle to avoid debt default. Every news story about the USEconomy faltering is following immediately by a story of Greek bailout impasse or Athens challenge to ingest suicidal austerity pills or riots on the Athens streets. The differentiation of EuroBonds with greatly varying bond yields has permitted the Euro to trade on speculative merit. The Greek default threat surely pushes down the Euro. But the prospect of a higher Euro Central Bank interest rate leaves speculators to buy the Euro, since proper pricing mechanisms are in place on the sovereign bond yields. The European investors are clearly flocking to Swiss banks on the paper investment side, but their pursuit of Gold is enormous. The Euro Monetary Union is running on fumes. The pain in Spain is hardly on the wane. The Gold price will rise and break out soon enough.

The YenGold price smells monetary ruin. The situation in Japan is terrible, complicated, and tragic. The advent of trade deficits will aggravate the outsized cumulative debt burden on the nation. The paradox is starting to show itself. Their trade deficits will force the national insurance firms and banks, even the Bank of Japan, to sell existing US$-based assets in a political compromise. They do not want to monetize more debts. They do not want to create worse federal budget deficits. They will compromise by selling foreign assets to finance the reconstruction and dislocation costs. The paradox will manifest itself with a rising Yen currency in the face of worsening deficits in every conceivable crevice. As their nation slides into a sea of red ink, the salt on the wounds coming in the form of price inflation, the Gold price will rise and break out soon enough.

Last to break out will be Gold in US$ terms. The Gold price smells monetary ruin on home turf, not to be deceived by any USFed head fakes. Perhaps a sudden awakening to the obvious continuation of QE2 and merge into QE3 could enable a Gold breakout in double quick fashion, ahead of other currencies. Much more stability is seen in the Gold price rise in US$ terms, as the destruction is more stable, the monetary ruin more understood, the federal budget debate more openly futile, and the national insolvency more publicized. The early May high of 1563 will easily be surpassed, all in time. The impetus might be QE163 or a liberated USGovt deficit from a raised debt limit or a failed USTreasury auction or a big US bank failure or a spike in mortgage rates or a plummet in housing prices or a longer parade than the current stream of miserable USEconomic data. The Gold price rose toward $1550 following the vacant FOMC meeting on Wednesday, where the main purpose was to put us to sleep.

Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a PhD in Statistics. His career has stretched over 25 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at www.GoldenJackass.com . For personal questions about subscriptions, contact him at JimWillieCB@aol.com

Libyan update: NATO chief rejects Italian call for ceasefire

Gold rush as sales surge predicted

From The China Daily:

BEIJING - Gold's luster is continuing to attract rising domestic demand and China will continue to "outperform" other countries in private consumption of the precious metal, with sales growth remaining above 20 percent over the next two years, an industry expert said.

Gold rush as sales surge predicted

The amount individual buyers purchase as an investment is expected to surge two-fold annually, Zhang Bingnan, secretary-general of the China Gold Association, said.

And the government's gold reserves are "far from enough", and should be increased to fend off global financial risks, he said.

According to the China Gold Association, domestic gold sales grew 21.26 percent to 571.51 tons last year from 2009.

Since the international financial crisis China has led growth in gold sales worldwide.

This is set to continue in the coming years as the "average holding of gold by individuals is still too small and the nation's rapid economic growth will further stimulate consumption and investment", Zhang said.

"Demand for gold, mostly driven by investment, will grow at least 20 percent this year," he said.....read on

Greece, IMF & EU agree to 5 year austerity plan

From WSJ.com:

BRUSSELS—Greece has agreed to a five-year austerity package with the European Union and the International Monetary Fund that could clear the way for a new bailout loan if Greece's Parliament approves the measures, an official said late Thursday.

"We have a deal after the Greek government agreed to more spending cuts and some higher taxes," the official, who had direct knowledge of the talks, told Dow Jones Newswires.

The official said the deal was reached after Greek Finance Minister Evangelos Venizelos agreed to lower the minimum taxable income for Greek taxpayers to €8,000 ($11,500) from €12,000 previously.

The deal also depended on Greek agreement on a special crisis levy on all taxpayers, ranging between 1% and 5%, depending on income.....read on

Gold May Advance on Europe Debt Woes

From Bloomberg:

Gold may gain as concern about Europe’s debt woes and sustained record-low interest rates in the U.S. spur demand for the metal as an alternative investment, a survey found.

Twelve of 16 traders, investors and analysts surveyed by Bloomberg, or 75 percent, said bullion will rise next week. Two predicted lower prices and two were neutral. Gold for August delivery was down 1.3 percent for this week at $1,519.70 an ounce by 11 a.m. yesterday on the Comex in New York. It reached a record $1,577.40 on May 2.

European Central Bank President Jean-Claude Trichet this week said danger signals for financial stability in the euro area are flashing “red” as the debt crisis threatens to infect banks. Policy makers decided to keep the Federal Reserve’s balance sheet at a record to spur the economy after completing $600 billion of bond purchases this month and repeated they will keep borrowing costs low “for an extended period.”

Gold will be supported “due to continuing sovereign-debt and currency risk,” said Mark O’Byrne, executive director of brokerage GoldCore Ltd. in Dublin. The Fed’s “ultra-loose monetary policies and zero percent interest rates are to continue for the foreseeable future,” he said. “This is a continuing positive for gold prices.”.......read on

Amazing video from a car swept up in Japanese Tsunami

Gold Convertibility To Save The Euro?

From Forbes:

Professor Robert Mundell urges gold convertibility for the euro, the currency which he fathered, as well as for the dollar. This is a major step forward. Thought leaders are abandoning “old monetarism,” which was vainly fixated on quantity. Even its chief proponent, Milton Friedman, acknowledged old monetarism as unsuccessful in a 2003 interview with the Financial Times. An emerging “new monetarism” is quickly taking its place — one that focuses on the quality, not quantity, of money.

Empirical data suggest that the gold dollar represents the epitome of quality. As Forbes’ own Steve Forbes advised the presidential candidates last week, the “debate should be focused on what the best gold system is, not on whether we need to go back on one.”.....read on

Keiser Report: Greece Resistance Special

by RussiaToday on Jun 23, 2011

This time Max Keiser and co-host, Stacy Herbert, report on IMF dowgrades, zombie consumers and a financial circus. In the second half of the show, Max talks to Professor Steve Keen about the Greek debt crisis and Minsky's moment.