Sunday, June 3, 2012


Gold's 4% gain Friday is the biggest day since January 2009.

DJ US May Payrolls +69K; Unemployment Rate 8.2%
Fri Jun 01 08:30:09 2012 EDT
WASHINGTON (Dow Jones)--U.S. job growth slowed sharply in May, the latest indication that the economy has lost momentum.


The leader of the Hope and Change Congregation had this to say:


Jibber-jabber, jibber-jabber....  More of the same from this old saw.

"It's not my fault!"

The list of blame for the floundering US [and global] economy, according to the Community Organizer In Chief, includes all but the obvious...THE MAN IN THE MIRROR!

Obama: Europe Crisis Starting To Cast Shadow On US 
By || June 1, 2012 at 18:20 GMT

by Brai Odion-Esene

WASHINGTON (MNI) – President Barack Obama on Friday said the raging
sovereign debt and banking crisis in the euro area is beginning to seep
across the Atlantic and “cast a shadow” on the U.S. economy.

“Our economy is still facing some serious headwinds,” Obama said in
remarks at the Honeywell Golden Valley Facility in Golden Valley,
Minnesota, where he renewed calls for Congress to act on his “To Do
List” to aid growth.

He pointed to the spike in gasoline prices a few months ago, which
– although now on a downward trend — “are still hitting people’s
wallets pretty hard.”

And more recently, the crisis in the eurozone “is having an impact
worldwide and is starting to cast a shadow on our own as well,” Obama

The economy is growing again “but it’s not growing as fast as we
want it to grow,” the president said.

The Bureau of Labor Statistics Friday reported that private
businesses added 82,000 jobs last month, and overall non-farm payroll
employment rose by 69,000. The unemployment rate saw a slight increase
from 8.1% in April to 8.2% in May.

Obama said the May employment data underlined that the economy is
still not creating jobs “as fast as we want.”

So there is still a lot of work to be done before the country gets
to where it needs to be, he said.

“All these factors have made it even more challenging — not just
to fully recover — but also lay the foundation for an economy that’s
built to last over the long term,” Obama said. “We knew the road to
recovery would not be easy, we knew it would take time.”

Still, “We will come back stronger, we do have better days ahead,”
the president declared.

Obama’s words echoed those of his top economic adviser, who earlier
Friday cautioned that the problems in the job market will not be solved

Council of Economic Advisers Chairman Alan Krueger said following
the release of the jobs data that the economy is growing but “it is not
growing fast enough,” and also cited the eurozone crisis and the sharp
rise in gas prices as “serious headwinds” to the economy.

“It is critical that we continue the President’s economic policies
that are helping us dig our way out of the deep hole that was caused by
the severe recession,” Krueger said.


Didn't this Prince of Fake I.D. Cards promise Americans that unemployment would not exceed 8% if they implored congress to pass his $800 Billion "stimulus package" immediately after his inauguration in January 2009?

Well, it is June 2012, and unemployment is still OVER that 8% line in the sand.

 “We will come back stronger, we do have better days ahead,”
the president declared.

Shake those pom-poms Mr. President Head Cheerleader Sir.

“It is critical that we continue the President’s economic policies
that are helping us dig our way out of the deep hole that was caused by
the severe recession,” Council of Economic Advisers Chairman Alan Krueger said.

So let me get a grip on this.  The President's economic policy is to dig our way out of a deep hole by digging the hole deeper?

US Debt Soars By $54 Billion Overnight, Closes May At Record $15,770,685,085,364.10

Submitted by Tyler Durden on 06/01/2012 16:32 -0400

There was one thing that the Roller-Upper-Of-Sleeves-In-Chief forgot to mention in his 1 pm rehearsed oratory today: the highlighted number below. And certainly the chart below showing the relative change in US GDP and debt. Since we can only assume the president was too busy pontificating on other very important things, we are happy to fill in the hole.

As of May 31:

Source: DTS

And the bigger picture:




Can a more pathetic picture of a washed up cheerleader be painted?

And then there are the cries for the Fed to quickly ride to the rescue of the plummeting equity markets.

But why?  Fed stimulus, Quantitative Easing, is conducted to lower interest rates...right?

Hasn't Mr. market done a bang up job of that this week?  The 10 year Treasury closed at 1.43% Friday.  The 30-year below 2.5%.  Falling interest rates are clearly having NO positive effect on the equity markets.  In fact, these plunging interest rates appear to be exacerbating the fall in equities.

DJ POINT OF VIEW: QE3 Won't Matter, Rates Already Low

Fri Jun 01 11:04:39 2012 EDT


NEW YORK (Dow Jones)--Of course, the talk now turns to the Federal Reserve riding to the rescue of the U.S. economy.

Here's the problem, already cited by many observers: the market has done what any additional Fed monetary easing (code name: QE3) would maximally accomplish, lowering interest rates to induce more borrowing and increase economic activity.

News flash: the 10-year U.S. Treasury note yields about 1.5%. The overnight federal funds rate controlled by the central bank has stood at about zero for three-and-a-half years.

To further ease monetary policy after the disappointing May jobs data (69,000 new jobs) and mounting evidence of decelerating economic growth would only offer evidence the Fed has reached the limits of its power to spur growth.

Oh sure, another easing round might create a stir in the declining stock market for a time, but any real economic impact will be quite limited.

The reasons rates are so low in the U.S. are ominous. It's not just slowing economic growth and job creation here. It's the disheartening fear that is taking hold in Europe because of the banking/sovereign debt crisis. That fear is causing the distortions of capital flows that push us out of the mainstream of market behavior.

There have been negative yields on short rates in Germany. The safe-haven nations' debt prices are flying and yields are plummeting. The Fed policy makers are likely worried about helping keep the wheels attached to the global economic train and might act to ease further in that regard.

Low interest rates are supposed to stimulate borrowing, economic growth and job creation. But, as others have said, rates keep going lower but the rush is not on to borrow and grow. Too many other uncertainties are holding people and institutions back.

"I have long maintained that monetary policy is but one gear in the complicated gearbox that drives job creation," said Federal Reserve Bank of Dallas President Richard Fisher in a February speech.

QE3 or no QE3, the Fed already has fully greased its gear. The many other parts needed for job creation, including the need for a stable global financial system, are the ones inefficiently clanging aBOUT.

And just how much of this plunge in interest rates has to do with the crisis over at JP Morgan's CIO desk?
One wonders:

"A great urgent need has come for a rally to 1.5% in the TNX (10-year USTreasury yield) in order to save the IRSwaps from implosion."

Has this entire market "event" of the past week been bestowed upon us by the thugs at JP Morgan and their puppet master at the US Federal Reserve in order to cut the losses at JP Morgan?

Has a plunge in equities and a rally in US Treasuries been engineered by the banking cartel in an effort, however feeble, to avert a collapse of the global financial system that was launched by JP Morgan?


"Through a set of economic policies designed to bail out and subsidize failed and often fraudulent corporate enterprises, while actively promoting a false sense of confidence to support those policies, the public has become exposed, by those very people entrusted to protect them, to dangerously high levels of hidden counterparty risks.

The cautionary functions of the media, the political class, and the regulatory bodies have been routinely directed, distorted, and even silenced for the benefit of a highly compromised and increasingly self-serving elite. And this corruption has begun feeding on its own momentum, resulting in increasingly blatant examples of deception, distortion, and outright theft.

This is crony capitalism, and its inevitable credibility trap."



Bill Holder, GATA [Please Subscribe]

Will the REAL safe haven please stand up.

To all; the non farm payroll report came out this morning at a very weak 69,000 jobs. When you subtract the phantom 200,000+ jobs added by the "BLS fairies" we actually lost close to 150,000 jobs for the month. The stock markets around the world were already weak and have gotten weaker in response to this report. Yields on the "safe haven" 10yr Treasury Bonds have broken 1.5% on the downside. STUPID for so many reasons. Who in their right mind would lock this yield up for 10 years? Especially since inflation is running 5 times this yield? Savers? Yeah, well, screw all of them right? "We don't need no savers" as long as we have the Bernank's hands are on the levers of the printing press. Funniest of all things was to see Alan Greenspan on CNBC this morning followed by the markets getting shellacked everywhere.

Well, almost everywhere. As I mentioned, Treasury yields are down (prices up) but the only buyers are the swap/carry trading JP Morgan's of the world and of course "the Bernank". But wait, there is one other asset class that up today, yes I know you know, precious metals. Gold is up some $60 (nearly 4%) and Silver up .80 cents (roughly 3%). Platinum is up a token $12 but EVERYTHING else is down and down hard. Oil is down over $3, equities are down 2-3% while many sovereigns and lower rated debt is being tossed.

So much for the market recap, what I really want to point out is that we are in the "safe haven zone" now. This "safe haven zone" is now occupied by two asset classes, Treasury securities and real money. They are diametrically opposed to each other. By absolute definition, one has to be 100% wrong and the other 100% correct. Since we live in a fiat world, Treasuries by definition are "fiat". Years past when the Dollar was still Gold backed, this safe haven zone could logically accommodate both Treasuries and Gold. In today's world, it is one or the other, it cannot be both. It cannot even be part one or part the other, it is all in one way or the other...period.

Using your noggin that is filled with common sense and logic, will the ultimate safe haven be Treasury bonds or Gold? Will it be Gold because "it" by definition IS money or...Treasuries that are being over issued, over owned, "bought" essentially by the seller which comically enough just so happen to be insolvent entities. Hmmm? Which one is the real safe haven? Which one will be liquid, have value and save your ass when the stock markets, FOREX markets, banking systems, economies and societies all collapse into a scrap pile? Yes, I think you understand.

But lets rewind exactly 3 months and one day "Leap day". Gold got slammed. It got slammed every time the word "Greece" was mentioned, it got slammed whenever we had a "risk off" day. For that matter, it got slammed whenever "they" felt like it. This can be done within the paper markets on a short term basis, it cannot be done long term. The purpose in case you were wondering for the last 3 months of COMEX paper hanging of Gold? To retard it's price so that when it takes off (because of the required massive liquidity injections), it does so from a "hole". Very nice for short term "perceptions", in fact it worked pretty well judging by the amount of fear and loathing of Gold over the last couple of months. Long term however, the artificial setbacks mean nothing, nothing at all.

As I mentioned, Gold and Treasuries are diametrically opposed in a fiat system. By definition one will be 100% correct and the other 100% wrong. In real terms, another way of saying this is that one will go to infinity and the other to zero. One will be priceless and the other worthless. Knowing that one can (is) be created for free and the other actually costs labor, capital and time to create, again, guess which one can never be worthless? This is where we are folks, we are entering "safe haven season" because all of the spin, lies and fraud are coming home to roost. It will not be much longer before a $60 move in Gold like today will be thought of as close to "unchanged" for the day.

On a side note, please don't get too giddy when we start seeing $100, $200 or even $500 days in Gold. This will be a sign that the complete and final collapse of the financial system is near, "society" itself I fear will not be too far behind. Regards, Bill H.

The Fed Is Playing With Fire

June 1, 2012, at 7:04 pm
by Jim Sinclair in the category General Editorial | Print This Post | Email This Post

Dear CIGAs,

QE to infinity is for certain. About that there is no question whatsoever. It cannot be avoided.

Operation twist is a damn joke stimulation wise. At this point in time it is a dark joke.

The Fed is playing with something worse than fire. That fire is posted in a video today on This video references a worldwide financial crisis that if it starts cannot be stopped by any power on the planet.

They are already easing up on the rhetoric. The Fed will downright panic as the world’s economies go from slow to dropping out of sight. That is what is on the plate tonight, this night, right here and now.

Safety only exists in gold bullion and in the outrageously depressed good gold shares now shorted out of sight.

Fed Will Likely Weigh Rosengren’s Call for Stimulus
By Joshua Zumbrun and Jeff Kearns – Jun 1, 2012 3:50 PM ET

Federal Reserve policy makers this month will consider joining Boston Fed President Eric Rosengren’s call for renewed stimulus after a report today showed unemployment rose to 8.2 percent in May, economists said.

Rosengren said the Fed should further its full-employment mandate and extend beyond June a program known as Operation Twist, which lengthens the average duration of bonds on its balance sheet. He spoke before the Labor Department today said the U.S. added 69,000 jobs in May, the fewest in a year, pushing the yield on 10-year Treasury notes to a record low.

“The May report does significantly raise the odds of further easing from the Fed,” said Dean Maki, chief U.S. economist at Barclays Plc in New York and a former Fed economist. “There will be a case made at the June meeting for easing.”

By calling for new stimulus, Rosengren aligned with the view of Chicago Fed President Charles Evans. Any setback in the job market is also a chief concern of Chairman Ben S. Bernanke, who said in April the Fed may provide more accommodation should unemployment fail to make “sufficient progress towards its longer-run normal level.” Fed policy makers plan to meet June 19-20.

Today’s employment report “does change the game, certainly in terms of Operation Twist,” said John Silvia, chief economist at Wells Fargo & Co. in Charlotte, North Carolina. “Because the slowdown in the economy has been fairly rapid compared to what they expected, they’ll go ahead and extend Operation Twist.”


Any part of this is possible post June 2012.

This is what the US Fed is playing chicken with for some PR reason only.



Eric Sprott: The Real Banking Crisis, Part II

Tyler Durden's picture

From Eric Sprott and David Baker of Sprott Asset Management

The Real Banking Crisis, Part II

Here we go again. Back in July 2011 we wrote an article entitled "The Real Banking Crisis" where we discussed the increasing instability of the Eurozone banks suffering from depositor bank runs. Since that time (and two LTRO infusions and numerous bailouts later), Eurozone banks, as represented by the Euro Stoxx Banks Index, have fallen more than 50% from their July 2011 levels and are now in the midst of yet another breakdown led by the abysmal situation currently unfolding in Greece and Spain.


Source: Bloomberg

On Wednesday, May 16th, it was reported that Greek depositors withdrew as much as €1.2 billion from their local Greek banks on the preceding Monday and Tuesday alone, representing 0.75% of total deposits.1 Reports suggest that as much as €700 million was withdrawn the week before. Greek depositors have now withdrawn €3 billion from their banking system since the country's elections on May 6th, seemingly emptying what was left of the liquidity remaining within the Greek banking system.2 According to Reuters, the Greek banks had already collectively borrowed €73.4 billion from the ECB and €54 billion from the Bank of Greece as of the end of January 2012 - which is equivalent to approximately 77% of the Greek banking system's €165 billion in household and business deposits held at the end of March.3 The recent escalation in withdrawals has forced the Greek banks to draw on an €18 billion emergency fund (released on May 28th), which if depleted, will leave the country with a cushion of a mere €3 billion.4 It's now down to the wire. Greece is essentially €21 billion away from a complete banking collapse, or alternatively, another large-scale bailout from the European Central Bank (ECB).

The way this is unfolding probably doesn't surprise anyone, but the time it has taken for the remaining Greek depositors to withdraw their money is certainly perplexing to us. Official records suggest that the Greek banks only lost a third of their deposits between January 2010 and March 2012, which begs the question of why the Greek banks have had to borrow so much capital from the ECB in the meantime.5 Nonetheless, we are finally past the tipping point where Greek depositors have had enough, and the past two weeks have perfectly illustrated how quickly a determined bank run can propel a country back into crisis mode. The numbers above suggest there really isn't much of a banking system left in Greece at all, and at this point no sane person or corporation would willingly continue to hold deposits within a Greek bank unless they had no other choice.

The fact remains that here we are, in May 2012, and Greece is right back in the exact same predicament it was in before its March 2012 bailout. Before the bailout, Greece had approximately €368 billion of debt outstanding, and its government bond yields were trading above 35%.6 On March 9th, the authorities arranged for private investors to forgive more than €100 billion of that debt, and launched a €130 billion rescue package that prompted Nicolas Sarkozy to exclaim that the Greek debt crisis had finally been solved.7 Today, a mere two months later, Greece is back up to almost €400 billion in total debt outstanding (more than it had pre-bailout), and its sovereign bond yields are back above 29%. It's as if the March bailout never happened… and if you remember, that lauded Greek bailout back in March represented the largest sovereign restructuring in history. It is now safe to assume that that record will be surpassed in short order. It's either that, or Greece is out of the Eurozone and back on the drachma - hence the renewed bank run among Greek depositors.

Meanwhile, in Spain, bank depositors have been pulling money out of the recently nationalized Bankia bank, which is the fourth largest bank in the country. Depositors reportedly withdrew €1 billion during the week of May 7th alone, prompting shares of Bankia to fall 29% in one day.8 The Bankia run coincided with Moody's issuance of a sweeping downgrade of 16 Spanish banks, a move that was prompted over concerns related to the Spanish banks' €300+ billion exposure to domestic real estate loans, half of which are believed to be delinquent.9 The Spanish authorities were quick to deny the Bankia run, with Fernando JimĂ©nez Latorre, secretary of state for the economy stating, "It is not true that there has been an exit of deposits at this time from Bankia… there is no concern about a possible flight of deposits, as there is no reason for it."10 Funny then that the Spanish government had to promptly launch a €9 billion bailout for Bankia the following Wednesday, May 24th, an amount which has since increased to a total of €19 billion to fund the ailing bank.11 Deny, deny some more… panic, inject capital - this is the typical government approach to bank runs, but the bailouts are happening faster now, and the numbers are getting larger.

The recent bank runs in Greece and Spain are part of a broader trend that has been building for months now. Foreign depositors in the peripheral EU countries are understandably nervous and have been steadily lowering their exposure to Eurozone sovereign debt. According to JPMorgan analysts, approximately €200 billion of Italian government bonds and €80 billion of Spanish bonds have been sold by foreign investors over the past nine months, representing more than 10% of each market.12 The same can be said for foreign deposits in those countries. Citi's credit strategist Matt King recently reported that, "in Greece, Ireland, and Portugal, foreign deposits have fallen by an average of 52%, and foreign government bond holdings by an average of 33%, from their peaks."13 Spain and Italy are not immune either, with Spain having suffered €100 billion in outflows since the middle of last year (certainly more now), and Italy having lost €230 billion, representing roughly 15% of its GDP.14

As we've stated before, no matter what happens in the Eurozone, the absolute worst case scenario for the authorities is a bank run. It terrifies all involved, because they can spiral out of control faster than governments can react to stop them, save for the most Draconian measures. They also prompt banks to liquidate whatever assets they can, revealing the truth about what their "assets" are actually worth. In this environment, no one wants to find out what the market will really pay for them. We're seeing this now in Spain, where according to Bloomberg, "Many Spanish banks are avoiding property sales so they don't have to "mark to market" valuations. Instead, they're giving developers new loans to pay debt coming due to prevent defaults."15 Sound familiar? We're now at the point where a bank run in one Eurozone country could quickly seize up the entire system - not just in Greece or Spain, but throughout the entire Eurozone and beyond. Greek and Spanish banks are just like all the others; they operate with leverage ratios averaging 25x their equity capital. They are all so overleveraged that it takes very little in deposit withdrawals to cause instantaneous liquidity issues. This is why we'll likely see another ECB-induced printing program announced (with a new abbreviation, hopefully) before a broader bank run can take root. The Eurozone authorities simply cannot risk the consequences of bank runs in countries like Spain, Portugal or Italy, which are far too big to bailout for the over-stretched ECB. It's not about Greece staying or leaving the European Union anymore, it's about the bailout ability of European banking system to survive the impact of massive money transfers.

Nothing is really being solved here, and everyone knows it. We're essentially in the same place we were when the crisis erupted back in 2010, only now there's more total debt outstanding. Bank of Canada Governor Mark Carney remarked in a December 2011 speech that "the global Minsky moment has arrived", and it's now plain for all to see.16 The "Minsky moment" refers to the work of Hyman Minsky, a deceased American economist who developed theories on how debt accumulation eventually leads to financial crises. You don't have to be an economist to understand the crux of Minsky's theories. As an economy grows it takes on increasing amounts of debt. The point eventually comes when the cost of servicing that debt can no longer be met by that economy's productive capacity - that's the Minsky Moment, and we're watching it play out all over the world today. When Greek bond yields spiked back in February 2012, bond investors looking at the country's €368 billion of debt outstanding, its population of 11 million people, and its nominal GDP of $312 billion realized that it couldn't possibly work. There was no way Greece could pay the interest on its debt load. There was no way the bond market could keep pretending everything was ok, like it currently does with the UK, US and Japan… for now.

Greece clearly needs another large-scale bailout, and we think they'll get one. Greece's exit from the Eurozone represents a Lehman-like scenario to the global banking system - why wait to see what carnage it will unleash? It's always easier to print money, and printing another couple €100 billion is nothing compared to the trillions that have been printed since last November. Where this will get tense, however, is when the market acknowledges the Minsky moment in a larger EU economy, like Spain or Italy. As we go to print, Spanish bond yields are now trading back above 6.5%, signaling the market's non-confidence in the country's ability to back-stop its own banking system. Spain has a population of 47 million, a GDP of roughly $1.3 trillion, national debt of roughly $1.1 trillion, debt owed to the ECB and various bailout funds totaling €643 billion, and now, a banking system that also appears close to collapsing.17 Their Minsky Moment has already arrived, and it's simply a matter now of how the market will react to it, and how long it takes the ECB to come to Spain's rescue.

Without a doubt, the most counterintuitive aspect of the Greece/Eurozone debacle has been its impact on the price of gold. Gold is now back below $1600 for the third time since August 2011; each time has coincided with severe banking stress within Greece and the broader Eurozone. Some pundits have suggested that various European banks are selling gold to raise liquidity, and this would make sense if the Eurozone banks had gold to sell, but we cannot find any evidence of large physical sellers out of Europe. Also, ever since the unlimited US-dollar SWAP agreement was launched in November 2011, USD liquidity has not been the key issue in Europe - rising sovereign bond yields and deposit withdrawals have. On the contrary, the selling pressure in gold once again appears to be expressed primarily through the futures markets, which are highly levered and rarely involve any physical transactions involving actual bullion. The futures market sell-off also appears to be waning now, since the European banking crisis has provided central banks with a politically-palatable excuse to take action if it deteriorates any further.

The recent gold price has been particularly frustrating given the continuation of bullish demand trends out of China. China posted another record Hong Kong gold import number in March of 62.9 tonnes. Gold imports into China have now totaled 135.5 metric tonnes between January and March 2012, representing a 600% increase over the same period last year.18 We don't have to connect the dots here - China is stockpiling the precious metal while investors in the West scratch their heads wondering why the spot price is so low.

Source: UBS, Bloomberg

Non-G6 central banks have also continued to accumulate physical gold, with the latest reports revealing another 70 tonnes of gold purchases completed in March and April by the central banks of Philippines, Turkey, Mexico, Kazakhstan, Ukraine and Sri Lanka.19 We won't bore you with the exercise of annualizing those numbers and comparing them to the annual global mine supply, but suffice it to say that the fundamentals still remain firmly intact. It's now simply a matter of improving sentiment towards gold in the West, and if the current banking crisis in Europe gets any worse, or if we see another large-scale policy response, it will likely happen on its own accord.

Although the last eight months have not played out the way we would have expected for gold, they have played out the way we envisioned for the banks. The question now is how long this can go on for, and how long gold can remain under pressure in a banking crisis that has the potential to spread beyond Greece and Spain? So much now rests on the policy responses fashioned by the US Fed and ECB, and just as much also rests on what's left of European citizens' confidence in their local banking institutions. Neither of these things can be precisely measured or predicted, but we continue to firmly believe that depositors in Greece and Spain will choose gold over drachmas or pesetas if they have the foresight and are given the freedom to act accordingly. The number one reason we have always believed gold should be owned, and why we believe it will go higher, is people's growing distrust of the banking system - and we are now there. We will wait and see how the summer develops, and keep our attention firmly focused of the second phase of the bank run now spreading across southern Europe.

Got Gold You Can Hold?
Got Silver You Can Squeeze?


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