Friday, April 3, 2009

Perhaps a Bronx Cheer For The G20 Would Be Best

People are lined up outside of banks and coin shops to sell their Gold and Silver.

The G20 summit has saved the world from financial Armageddon.

Banking stocks are the future of global wealth and investment.


Ah yes, the amusing euphoria surrounding another government induced pi-in-the-sky play to save the Global Financial System. Nothing was fixed and nothing has changed in the last 72 hours, despite what global leaders and the financial press may have told you. Do you really believe that the entire spectrum of global financial ills can be cured by a group of financially illiterate world leaders over dinner and morning coffee? Most certainly not.

Do you think these clown princes would come from points across the globe for a "Financial Summit" and walk away admitting failure and a lack of any concrete answers to the STILL growing financial crisis inundating the globe? Of course not. They have to appear to be doing something. Why? For one simple reason. If they appear to be doing something, they can [in theory] keep the confidence of the peoples of the World from deteriorating further.

The World Financial System is clearly broken. No effort was made of offered to fix or replace it with something new and sound. The global experiment to try and prop up and maintain a dead financial system will continue. A little makeup to put some color back in the cheeks of a cadaver, will not bring the dead back to life. Much as one might hope, neither will promises to better oneself or change ones behavior. The G20 is determined to continue with life support for the Global Financial System. The system is dead, and needs to be replaced. Denial. Death is hard to accept.

ECB chief says G-20 deal can restore confidence

PRAGUE (AP) -- European Central Bank President Jean-Claude Trichet said Friday that world leaders' call for a regulatory overhaul of the financial system was "everything we need to restore confidence."

Leaders from the Group of 20 major world economies said Thursday at their London summit that they would widen financial oversight and discourage excessive risk-taking to prevent a repeat of the crisis in the banking system that has crippled lending, trade and business activity.

"These decisions need to be implemented as swiftly as possible," Trichet told reporters after meeting with finance ministers from the 16 nations that use the euro. "Speed is of the essence and flawless implementation is of the essence now."

Geeze, isn't this a little bit like slamming the barn door shut "after" the horses are already out of the barn? Preventing "what's happened" from happening again is the least of your worries guys. What are you doing to fix the problem now? You give the problem lip service, you act as though the problem has been solved and is now forever behind us. It is not! It is staring us squarely in the face. New regulation? And end to banking secrecy? Closing tax havens? LOOOOOOOOOOOOL! How does this deal with what is happening right here and right now? How does this create jobs? How does this eliminate a mountain of toxic financial derivatives smothering the Global Financial system? How does this address growing "protectionism" with regards to world trade? How can you expect anybody to honestly believe that you clowns fixed anything over dinner and morning coffee? Look closely, another blip of false hope has goosed the global equity markets, we'll be back to reality within the farm on it.

G20 summit: the verdicts from the world's press
German papers were more circumspect in their coverage of the summit's outcome, saying that the G20 final communique would count for little if it were not followed by action in the coming months. Suddeutsche Zeitung said: "The cries of hurrah by the summit participants are no indication of the value of the meeting. There is no government leader who goes in front of the cameras and admits having failed.

"And so it was with the London finance summit, which observers called historic almost before it was over. Historic because the financial crisis is worse than anything the world has seen for decades. Only when the dust has settled, will it become clear what has been achieved," said Der Spiegel.

"The summit participants chose the easy way. Their decision in the foreseeable time scale to pump $5tn in the collapsing global economy could actually prove to be a historical turning point, but a turning point for the worse. The countries are fighting a crisis while at the same time creating the next big one."

Ah, a breath of truth from the press? The G20 accomplished nothing. Time will be the judge of that, as will the inflationary implications of the agreements announced.

Meltdown 101: What G-20 leaders said -- and meant
Leaders at the G-20 summit in London declared that "a global crisis requires a global solution." But that doesn't mean they are in agreement on just what the solution should be.

Here is a look at what they promised in their joint communique and what the grand phrases really mean.

WHAT THEY SAID: "We are undertaking an unprecedented and concerted fiscal expansion, which will save or create millions of jobs which would otherwise have been destroyed, and that will, by the end of next year, amount to $5 trillion, raise output by 4 percent and accelerate the transition to a green economy."

WHAT THEY MEANT: The words in the communique were strong but in reality the major countries did not pledge any additional efforts on government spending or tax cuts to boost their own economies.

WHAT THEY SAID: "We are determined to reform and modernize the international financial institutions to ensure they can assist members and shareholders effectively in the new challenges they face."

WHAT THEY MEANT: The G-20 leaders pledged a significant expansion of resources for the International Monetary Fund and other international lending institutions -- a boost of more than $1 trillion. They're not just writing a trillion-dollar check, though -- much of the support would be in the form of credit lines from the United States and other wealthy countries that the IMF could draw upon if the global crisis becomes more severe and greater resources are needed to prop up emerging economies.

WHAT THEY SAID: "We will not repeat the historic mistakes of protectionism of previous eras."

WHAT THEY MEANT: The problem with this repeated pledge: By one estimate, 17 of the nations at the Washington meeting, including the United States, have already acted to protect domestic industries during the current downturn.

G20 Takes Aim at Currency Devaluation
The Group of 20 wealthy and developing nations agreed Thursday not to pursue competitive currency devaluations, a vow that analysts said could make it more difficult for individual countries to weaken their currencies to support their economies.

In the joint statement issued at the end of their two-day summit, G20 leaders said they "will refrain from competitive devaluation of our currencies and promote a stable and well-functioning international monetary system."

A stronger currency has the same net effect as a monetary tightening, which threatens to undermine central banks' easing efforts. A weaker currency helps exporters by making their goods more attractively priced in overseas markets and boosting the value of their repatriated profits. It also makes imported goods more expensive, giving domestic manufacturers an edge in their own markets.

While these conditions are certainly appealing to countries seeking to prop up their sagging economies, the G20's vow means that any countries who take explicit steps to do so risk inviting global wrath.

"Unless they want to face fierce criticism by the other 19 countries, I think that all G20 nations will hold their pledge against competitive devaluation," said Kathy Lien, director of currency research at GFT.

"This means that Switzerland and to some degree the U.K. as well will not be allowed to artificially push their currencies lower either through verbal or physical intervention and that is negative for the dollar," she said.

And what would a G20 meeting be without dragging out the old warhorse, IMF Gold sales. As if this were new news. LOL, the IMF has been talking this talk for almost two years now.

G20 supports IMF's plan to sell 403 tons of gold
NEW YORK (MarketWatch) - Leaders from the Group of 20 nations Thursday endorsed the International Monetary Fund's plan to sell 403 tons of gold to raise funds to support the world's poorest countries.

The G20 vowed in its statement to "use the additional resources from agreed IMF gold sales for concessional finance for the poorest countries."

The endorsement suggests that the IMF's gold sales plan is likely to be approved by its member countries later this year.

The IMF has been planning to sell gold since as early as 2007 to diversify its revenues and strengthen its balance sheet. But the plan needs to be approved by an 85% majority vote from its 185 members.

The U.S., which has 17% voting power in the fund, essentially holds veto power. The U.S. government has informed the IMF that Congressional authorization by law is required before it is able to support the plan.

The U.S. Treasury announced last year that it will seek authority from Congress. The U.S. administration has seemed supportive, both for expanding the IMF's role as well as helping its long-term funding challenges. This makes the proposed IMF gold sales much more likely.

Hussein Allidina, an analyst at Morgan Stanley, said in a note Thursday that he expects the IMF to implement the sales over the next few years, "but do not believe that this presents a strong negative risk to gold prices - as it will be 'orderly' and maybe even off market."

If member countries approved the gold sales, the IMF can find ready buyers in countries with low gold reserves, especially Russia and some Asian countries such as China, Taiwan, and India.

According to the IMF's plan, the gold selling will be implemented in coordination with major central banks to minimize the impact on the market.

And of course, this "news", along with the certain collusion of the CRIMEX, brought the price of Gold down yesterday despite a major ass whuppin laid upon the US Dollar. Isn't it odd that EVERY commodity was up yesterday, including Platinum and Palladium, but Gold and Silver were down. Gold and Silver, the two true currency alternatives were down yesterday, shocking!
Let's not forget the fact that EVERYTHING announced in the G20 statement as it relates to "money" was highly inflationary for hard assets going forward.

Jim Sinclair can sum up the "threat of IMF Gold" sales like no other can:

So Much Ado About So Little
"A sale of 12.9 million ounces of gold as ‘probably the most viable’ option to ensure the long-term funding of the IMF. Proceeds would be used for an interest-bearing endowment." –WSJ, 26 February 2008.

12.9 million ounces of gold at $906 per ounce, as I write, is slightly less than $12.4 billion. The Chinese would buy $12.4 billion in gold with a telephone call.

Central banks would be willing to buy twice or even ten times that amount.

How foolish the IMF and Gordon Brown have been in gold. Both sold to major buyers at historic lows in price. Brown sold at $248 and the IMF started their sales at $106 in the 70s.
What in the world are you worried about?

Their sales at any amount will, as in the past, be an enduring monument to their lack of acumen in knowing the gold price.

In fact they are both the two dumbest gold haters that exist.

What are you worried about? Listen to your intellect, not your emotions.

IMF gold available for sale is worth less at $906 than 1% of the amount of monetary stimulation done by the US Fed and the US Treasury.

The financial news media have made every effort to keep the focus on the G20 meeting in hopes diverting focus from the ills that persist in the economy and the Global Financial System. By this time next week they will be unable to ignore the truth that nothing was fixed by these clown princes. The reality is simple: The Global Economy is in a death spiral, job losses are mounting at a record pace, housing prices show no sign bottoming, commercial real estate is on the brink becoming the next banking catastrophe, the Federal Reserve is printing money to buy the Treasury's debt, and inflation a quickly gaining a presence in this cauldron of financial destruction.

Jobless rate bolts to 8.5 percent, 663K jobs lost
WASHINGTON (AP) -- The nation's unemployment rate jumped to 8.5 percent in March, the highest since late 1983, as a wide range of employers eliminated a net total of 663,000 jobs.

The Labor Department's report is fresh evidence of the toll the recession has inflicted on America's workers and companies.

The latest tally of job losses, released Friday, was slightly higher than the 654,000 that economists expected. The rise in the unemployment rate matched expectations.

Since the recession began in December 2007, the economy has lost a net total of 5.1 million jobs, with almost two-thirds of the losses occurring in the last five months.

The deterioration in the jobs market comes despite a few hopeful signs recently that the recession -- now the longest since World War II -- could be easing.

As the economic downturn eats into their sales and profits, companies are laying off workers and resorting to other cost-saving measures. Those include holding down hours, and freezing or cutting pay, to survive the storm.

The average work week in March dropped to 33.2 hours, a new record low.

ISM: Service sector shrinks for 6th straight month
NEW YORK (AP) -- A private trade group's measure of the strength of the services sector shrank for the sixth straight month in March, and at a faster pace than expected, as job losses mount.

A services index from the Institute for Supply Management, a Tempe, Ariz.-based trade group of purchasing executives, fell to 40.8 last month from 41.6 in February. Economists surveyed by Thomson Reuters expected the index to edge up to 42.

Any reading below 50 indicates contraction.

"We haven't stopped free-falling," said Joel Naroff, president of Naroff Economic Advisors.

The report is based on a survey of the institute's members in 18 industries. It covers such indicators as new orders, employment and inventories. About three-quarters of Americans work in service-providing industries such as hotels, retail, education and health care.

Businesses' new orders, which presage any recovery in hiring and production, fell to 38.8 from 40.7 in February.

Employment shrank for the 14th time in 15 months, dropping to 32.3 from 37.3 in February.

Recession Puts a Major Strain On Social Security Trust Fund As Payroll Tax Revenue Falls, So Does Surplus
The U.S. recession is wreaking havoc on yet another front: the Social Security trust fund.

With unemployment rising, the payroll tax revenue that finances Social Security benefits for nearly 51 million retirees and other recipients is falling, according to a report from the Congressional Budget Office. As a result, the trust fund’s annual surplus is forecast to all but vanish next year — nearly a decade ahead of schedule — and deprive the government of billions of dollars it had been counting on to help balance the nation’s books.

While the new numbers will not affect payments to current Social Security recipients, experts say, the disappearing surplus could have considerable implications for the government’s already grim financial situation.

How about a Bronx cheer for the G20?

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