Don Coxe - Get Ready, Banks to Collapse in Europe 

Today 40 year veteran, Don Coxe, told King World News “...the amounts involved are at mind-boggling levels,” in terms of what is needed for Europe’s governments and banks. Coxe, who is Global Strategy Advisor to BMO ($538 billion in assets), also said that European banks, “...have borrowed huge amounts of money, in dollars, under currency swap arrangements,” and “if banks start to go down, we know from 2008, when banks start to crumble, then the whole system falls.” Here is what Coxe had to say about the ongoing crisis: “Well, first of all we’ve got to stop using ‘billions’ because if there is going to be a fund that works, it’s going to have a ‘T’ (for trillions) on it. We are dealing with some very big numbers in the sense that Italy, although it’s not that big of an economy, it’s got the third largest amount of bond debt outstanding.”

I just don’t see where that’s going to come from because the European Central Bank doesn’t have money. The IMF has lined up $450 billion, including about $34 billion from China, but that’s not going to be dispensed if you realize that it would be swallowed up in a matter of weeks, and they would be back for more.

She (Christine Lagard) is not going to drain the IMF’s money. So they are going to say, ‘We don’t want the IMF to become purely a eurozone financing bureau.’ It was set up to handle emerging economies, not submerging, old European economies.

As for the European Stability Fund, that’s about $400 billion, and it’s pretty much spoken for. So I don’t know where this money is going to come from.

If I had to say what will burst the thing, it will be banks that do it. And if banks start to go down, we know from 2008, when banks start to crumble, then the whole system falls. You can postpone the collapse of a government, but you can’t postpone the collapse of a bank if the people are lined up outside and saying, ‘Give me my money.’

                                         ..............................  Don Coxe

How Does Gold Fare During Hyperinflationary Periods?

Inflation is a natural consequence of loose government monetary policy. If those policies get too loose, hyperinflation can occur. As gold investors, we'd like to know if the precious metals would keep pace in this extreme scenario.

...........................Contributed by Jeff Clark, Casey Research

Hyperinflation is an extremely rapid period of inflation, but when does inflation (which can be manageable) cross the line and become out-of-control hyperinflation? Philip Cagan, one of the very first researchers of this phenomenon, defines hyperinflation as "an inflation rate of 50% or more in a single month," something largely inconceivable to the average investor.

While there can be multiple reasons for inflation, hyperinflation historically has one root cause: excessive money supply. Debts and deficits reach unsustainable levels, and politicians resort to diluting the currency to cover their expenses. A tipping point is reached, and investors lose confidence in the currency.

"Confidence" is the key word here. Fiat money holds its purchasing power largely on the belief that it is stable and will preserve that power over time. Once this trust is broken, a flight from the currency ensues. In such scenarios, citizens spend the money as quickly as possible, typically buying tangible items in a desperate attempt to get rid of currency units before they lose value. This process increases the velocity of money, setting off a vicious cycle that destroys purchasing power faster and faster. 

The most famous case of hyperinflation is the one that occurred in Germany during the Weimar Republic, from January 1919 until November 1923. According to Investopedia, "the average price level increased by a factor of 20 billion, doubling every 28 hours."

Keep in mind that hyperinflation is not a rare event. Since Weimar Germany, there have been 29 additional hyperinflations around the world, including those in Austria, Argentina, Greece, Mexico, Brazil, Taiwan, and Zimbabwe, to name a few. On average, that's one every three years or so

Could this be an alternative?

Bitcoin is a decentralized electronic cash system that uses peer-to-peer networking, digital signatures and cryptographic proof so as to enable users to conduct irreversible transactions without relying on trust. Nodes broadcast transactions to the network, which records them in a public history, called the blockchain, after validating them with a proof-of-work system. Users make transactions with bitcoins, an alternative, digital currency that the network issues according to predetermined rules. Bitcoins do not have the backing of and do not represent any government-issued currency

The Bitcoin network came into existence on 3 January 2009 with the issuance of the first bitcoins.In the same month the creator, Satoshi Nakamoto, released the original Bitcoin client as open-source software.Prior to the invention of Bitcoin, electronic commerce systems could not securely operate without relying on a central authority to prevent double-spending. Nakamoto sidestepped this requirement for Bitcoin by employing a proof-of-work approach in a peer-to-peer network to reach consensus between peers on the validity of transactions.Bitcoin is a relatively new project under active development. As such, its developers caution that users should treat it as experimental software.

                                            .............................. Wikipedia

The lies of the EBA about how safe our banks are

All the banks have to do is create their own proprietary computer model with which to model their assets and their risk and like some bought and paid for oracle it tells the world the bank is more solvent and its assets less risky than anyone had suspected.

                                             ……… David Malone

How Expensive are US Treasury Bonds? 

The key driver for valuing Treasury bonds at the moment is the utility they offer as a form of collateral among banks loaning money to each other. So with Europe’s debt markets in even greater turmoil now than when Greece’s debt got a “haircut” last year, T-Bond prices are zooming up once again to the top of the 3-decade rising trend channel.
 

When does this end? Tom’s guess is “when the Fed’s inflation of the money supply turns into actual consumer price inflation.”
                                                       …………. Tom McClennan

John Mauldin On Deflation, Inflation, And What Comes Next

While synchronized swimming may be an event (if an odd one) at this summer's London Olympics, a synchronized global slowdown is not an event in which you want to get a medal. We looked at a spate of bad data last week, and we got even more this week. Lost in the bad employment data this morning was the news out of Asia. Australian manufacturing is clearly in a recession. India is posting its slowest growth in nine years. China is on the edge of a downturn in manufacturing. Unemployment is rising all over Europe and is much worse than in the US. German (!!!) credit default swaps are rising and are now higher than in 2008! Bank deposits in Europe are contracting at a faster rate than at any time in the last 14 years (the farthest back I can find data).
                                                ................ John Mauldin

HERE COMES QE3

Vincent Reinhart, Morgan Stanley's chief U.S. economist, thinks there's an 80 percent chance that a new quantitative easing program is announced at the June 19-20 FOMC meeting.

                                                 ............................. Sam Ro

Warning: Bear Market in Progress

The Dow Jones industrial Average recorded a high of 13,279.32 on May 1, 2012. This Dow high was not confirmed by the Transports. The two averages then turned down and broke below their April lows. This action confirmed that a primary bear market is in progress — it was a textbook bear signal. I consider the April-May action to be a continuation of a primary bear market that started on October 9, 2007 with the Dow at 14,164.53. We are now dealing with the latter part of the primary bear market that began in 2007. Subscribers should now follow a course of utmost caution.

As for gold, I think it will be under pressure for a while, but before this bear market is over, gold will embark on a major bull move.

……..Richard Russell.

THE OUTLOOK FOR GOLD....

… there is some very important news on gold, something not getting much publicity. In January the news was that India had an agreement with Iran to buy oil with the payment from India in gold. Now we hear that China has made a similar agreement with Iran. This signals that the “bullion banks” together with the western central banks, are losing control over the gold market.

Gold is now being monetized. China has decided that it will not be ruled by the BIS (Bank for International Settlements), which is the “central bank for central bankers.” China makes it clear that it will not be dictated to. Other central banks will now see that they must increase their gold holdings as gold is re-entering the global payment system. The bullion banks have very big short positions in gold. Eventually they will have to close those positions. That could produce the parabolic move in gold that we have mentioned for some time..

                                                    ...............…. Bert Dohmen.

James K Galbraith: We Told You So

Like many Americans, I was doing everything I could to help elect Barack Obama…. To economists in my own circle, it had long been clear that the financial crisis then unfolding was an epic event. … In August 2007 we knew the meltdown had begun…. …. …. The meeting had no political connection, but one result was a long memorandum, which I sent in early July to the Obama team. I do not know whether, or by whom, my memo was read. Not the slightest word came back. Yet the memo disproves the notion that nobody knew. To the group in Paris, three months before Lehman, what I wrote was obvious. It was our consensus view.

                                    ...............................James K. Galbraith

The End Game: 2012 And 2013 Will Usher In The End" - The Scariest Presentation Ever?

The problem is not Government debt per se. The real problem is that the $70 trillion in G10 debt is the collateral for $700 trillion in derivatives… 

Yes, that equates to 1200% of Global GDP and it rests on very, very weak foundations 

From an EU crisis, we only have to join one dot for a UK crisis of equal magnitude. 

And then do you think Japan and China would not be next? 

And then do you think the US would survive unscathed? 

That is the end of the fractional reserve banking system and of fiat money. 

It is the big RESET. 

Bonds will be stuck at 1% in the US, Germany, UK and Japan (for this phase). 

The whole bond market will be dead. 

Short selling on bonds - banned 

Short selling stocks – banned 

CDS – banned 

Short futures – banned 

Put options – banned 

All that is left is the Dollar and Gold 

We have around 6 months left of trading in Western markets to protect ourselves or make enough money to offset future losses. 

Spend your time looking at the risks of custody, safekeeping, counterparty etc. Assume that no one and nothing is safe. 

After that…we put on our tin helmets and hide until the new system emerges 

  

.............................. Raoul Pal