EU slams US credit rating 'oligopoly'

From: AlJazeeraEnglish | Jul 14, 2011

While the US finds itself in danger of a credit ratings downgrade due to a national debt crisis, a number of European countries have seen their status fall even further.

Stand & Poor's, Moody's and Fitch - the three largest US-based credit rating agencies - have been criticised by European policymakers who say they have been too quick to downgrade indebted EU states during the euro zone debt crisis.

Rainer Bruederle, the head of German Chancellor Angela Merkel's coalition partners in parliament, has put forward a proposal on Friday to to launch a privately funded, independent European agency to break the dominance of the three main US houses, according to Handelsblatt, a German newspaper.

"Trust in the statements of the opinion-oligopoly of the three largest U.S. agencies is one of the reasons that risks in financial markets became known too late," the business daily quoted him as saying.

Weekend Chillout

This weeks posts seem to be dominated sadly by fear,hate and war - something the band The Byrds tried to teach us about in 1965.

Turn, Turn, Turn ~ The Byrds

A time to build up,a time to break down
A time to dance, a time to mourn
A time to cast away stones, a time to gather stones together

To Everything (Turn, Turn, Turn)
There is a season (Turn, Turn, Turn)
And a time to every purpose, under Heaven

A time of love, a time of hate
A time of war, a time of peace
A time you may embrace, a time to refrain from embracing

CrossTalk with Jim Rogers

by RussiaToday on Jul 15, 2011

Does the eurozone need to promote more fiscal responsibility? Is Italy too big to fail? Can the EU afford a Greek default? And isn't it already bankrupt? Can new institutions and profound restructuring save the currency? CrossTalking with Scheherazade Rehman, Jim Rogers and Dennis Gartman.

Ron Paul on U.S. Credit Rating, Debt Ceiling and Gold

Gold Rises as Dollar Index Falls on Concern Over Debt Talks

From Bloomberg:

Gold climbed for a ninth straight day amid concern the U.S. is getting closer to losing its top credit rating. Oil rallied, extending a third consecutive weekly advance, and the Standard & Poor’s 500 Index rose amid gains in energy and technology shares.

Gold futures added 0.3 percent to $1,593.80 an ounce at 4 p.m. in New York and have risen 7.5 percent since July 1. The Dollar Index slumped 0.2 percent as eight banks failed European Union stress tests. Crude jumped 1.6 percent to $97.24 a barrel. The S&P 500 added 0.6 percent, leaving it with a 2.1 percent drop for the week.

U.S. House Republicans plan a vote next week on a measure to cut spending, cap expenditures and condition a $2.4 trillion increase in the debt ceiling on passage of a constitutional amendment to balance the budget. While the plan may pass in the Republican-led House, it won’t in the Democratic-controlled Senate, said Representative Steny Hoyer of Maryland, the House’s No. 2 Democrat. The vote offers no immediate resolution to talks aimed at reaching a deal by an Aug. 2 deadline........read on

Bernanke - 'US default would be disastrous'

From RTE:

The US central bank chief has said that a debt default would be a disastrous 'self-inflicted wound' and that lawmakers must heed the downgrade warnings of ratings agencies.

Federal Reserve chairman Ben Bernanke warned the protracted battle in Congress over raising the debt ceiling, less than three weeks before the country's spending commitments could force it into default, was endangering its top-rated credit reputation.

'We're already seeing threats of downgrades from rating agencies,' Bernanke told the Senate Banking Committee.

'This is a tremendous asset of the United States - the quality and reputation of our Treasury securities - and we benefit from it with low interest rates,' he said in semi-annual testimony to Congress.

'So I would urge Congress to take every step possible to avoid defaulting on the debt or creating even any significant probability of defaulting on the debt.'

Ratings agency Standard & Poor's warned US lawmakers privately that it would downgrade the country's debt if the Treasury Department is forced to prioritise payments because Congress does not raise the debt limit, a congressional aide told Reuters news agency.

The warning undercuts an argument made by some Republicans that the country's credit rating would not be affected as long as the Treasury Department made debt service a priority over other obligations.

Earlier, Chinese credit ratings agency Dagong put US sovereign debt on negative watch for a possible downgrade, following a similar move by Moody's yesterday.....read on

James Dines - 'Silver is going to $300 - $500 per oz'

I spoke to Mr Dines late last year at the Sydney Gold Symposium, a delightful bloke and very un-reconstructed as he had a "escort" level "assistant" in an extremely short cocktail dress. I also had him autograph one of my PAMP 1kg silver bars, he had never done that before which gave him a laugh.

James Dines (of The Dines Letter) talks to Eric King of King World News about the rush out of paper into things.......listen here

Return of the Gold Standard as world order unravels

By Ambrose Evans-Pritchard
From the UK Telegraph:

On one side of the Atlantic, the eurozone debt crisis has spread to the countries that may be too big to save - Spain and Italy - though RBS thinks a €3.5 trillion rescue fund would ensure survival of Europe's currency union.

On the other side, the recovery has sputtered out and the printing presses are being oiled again. Brinkmanship between the Congress and the White House over the US debt ceiling has compelled Moody's to warn of a "very small but rising risk" that the world's paramount power may default within two weeks. "The unthinkable is now thinkable," said Ross Norman, director of thebulliondesk.com.

Fed chair Ben Bernanke confessed to Congress that growth has failed to gain traction. "Deflationary risks might re-emerge, implying a need for additional policy support," he said.

The bar to QE3 - yet more bond purchases - is even lower than markets had thought. The new intake of hard-money men on the voting committee has not shifted Fed thinking, despite global anger at dollar debasement under QE2.

Fuelling the blaze, the emerging powers of Asia are almost all running uber-loose monetary policies. Most have negative real interest rates that push citizens out of bank accounts and into gold, or property. China is an arch-inflater. Prices are rising at 6.4pc, yet the one-year deposit rate is just 3.5pc. India's central bank is far behind the curve.

"It is very scary: the flight to gold is accelerating at a faster and faster speed," said Peter Hambro, chairman of Britain's biggest pure gold listing Petropavlovsk.

"One of the big US banks texted me today to say that if QE3 actually happens, we could see gold at $5,000 and silver at $1,000. I feel terribly sorry for anybody on fixed incomes tied to a fiat currency because they are not going to be able to buy things with that paper money."

China, Russia, Brazil, India, the Mid-East petro-powers have diversified their $7 trillion reserves into euros over the last decade to limit dollar exposure. As Europe's monetary union itself faces an existential crisis, there is no other safe-haven currency able to absorb the flows. The Swiss franc, Canada's loonie, the Aussie, and Korea's won are too small.

"There is no depth of market in these other currencies, so gold is the obvious play," said Neil Mellor from BNY Mellon. Western central banks (though not the US, Germany, or Italy) sold much of their gold at the depths of the bear market a decade ago. The Bank of England wins the booby prize for selling into the bottom at €254 an ounce on Gordon Brown's orders in 1999. But Russia, China, India, the Gulf states, the Philippines, and Kazakhstan have been buying.....read on

US debt ceiling talks continue to drag on

Italy's money supply plunge flashes red warning signals

From The UK Telegraph
By Ambrose Evans-Pritchard

"Real M1 deposits in Italy have fallen at an annual rate of 7pc over the last six months, faster than during the build-up to the great recession in 2008," said Simon Ward from Henderson Global Investors.

Such a dramatic contraction of M1 cash and overnight deposits typically heralds a slump six to 12 months later. Italy's economy is already vulnerable – industrial output fell 0.6pc in May, and the forward looking PMI surveys have dropped below the recession line.

"What is disturbing is that the numbers in the core eurozone have started to deteriorate sharply as well. Central banks normally back-pedal or reverse policy when M1 starts to fall, so it is amazing that the European Central Bank went ahead with a rate rise this month," Mr Ward said....read on