Silver Manipulation Acknowledged By Government Christian Garcia GoldSilver.com $SLV

EZONE CRISIS: Bundesbank slaps restraining order on Merkel, fires torpedo at EU peripherals. [The Slog]

Victory for Bankfurt over Berlin as Weidmann retaliates on firewall question

Yesterday afternoon’s decision by the German Bundesbank to refuse acceptance of Greek, Irish or Portuguese sovereign/bank bonds has dealt a blow to the Eurozone which few informed observers think it can survive. With the help of sources, The Slog digs into what’s really going on here.

As The Slog has always maintained – and Parisian sources have consistently affirmed – there are really three Germanies at the moment: Merkel Germany, Schauble Germany, and Banker Germany. Banker Germany has been led for several months now by Jens Weidmann, the Bundesbank President; and as the Slog’s Bankfurt Maulwurf has been alleging for weeks, this last schism’s power is in the ascendancy. Schauble Germany consists of the Finance Minister and some of his aides: these are the leading players who have become increasingly pessimistic about ClubMed’s chances, while coming under more and more pressure from parts of the Bundestag and the Karlsruhe consititutional Court. Merkel Germany consists of Angela Merkel and the woefully uninformed German electorate.

Despite widespread scepticism earlier this month, The Slog also reported a detailed US-inspired plan to ‘amputate’ Greece as a source of debt contagion after close of business on 23rd March. I later added to this further detailexplaining that the US felt ‘double-crossed’ by Germany, having given the ECB’s Mario Draghi the dollars to underpin eurobanks, but not seen Brussels ‘deliver’ by pulling the plug on Greece. What’s now becoming clearer is that Washington hugely underestimated both the power of Jens Weidmann, and the rift between him and the ECB. They weren’t double-crossed: the State Department had its lines crossed.*

The EU in general – and very badly shaken markets – now face the reality of a Spanish situation getting worse by the day; an effective civil war inside the EU’s biggest player Germany; and Greek bonds that have been rendered worthless. As Greek newspaper Ekathimerini reports this morning:

‘The development is very serious as it means that even the new bonds issued by Athens to replace the old ones after the private sector involvement in the haircut will have too low a value. Already their difference in yield compared to German bunds, known as spread, has grown by more than 200 basis points in fewer than 20 days, climbing to 1,940 bps….the credibility of the new bonds issued is no different to that of the old ones they have replaced. What is more, Greek banks will need to gradually seek funding from other sources and not the Eurosystem, which is not at all an easy proposition.’

Late yesterday evening I got this comment from the Bankfurt Maulwurf:

“As I said, by the wintertime there will be no eurozone as we know it. Merkel is now increasingly alienated. My guess is that, based on her history and personality, the Chancellor will switch sides.” [ie, and privately accept that FiskalUnion is doomed with any ClubMeds inside it].

Read more on The Slog

Violence, Firebombings Erupt as Spain Announces €27 Billion Deficit-Cutting Plan; Spanish Economy Will Implode; Spain Headed for Bond Revolt and Bailouts [Mish]

By MIKE SHEDLOCK

My friend Bran who lives in Spain writes …

Hello Mish

Here are thoughts from the last couple of days on the strikes, protests, and violence in the wake of more austerity plans by Prime Minister Mariano Rajoy.

Pro-government news played down the strike to a virtual non-event, giving much criticism of the unions methods and exaggerations. Reality however, is that there is enough support by strikers to shape future politics, especially as austerity starts to bite.

The unions have promised to step up protests. The Indignado 15 Million Movement also protested, but separately from the unions.

One comment stuck out – German Chancellor Angela Merkel said the protests did not represent Spain. Maybe she was trying to be reassuring, but she is taking sides against maybe a million or so people of a foreign population, not very wise at best and otherwise agitating.

Spain Announces €27 Billion Deficit-Cutting Plan

MarketWatch reports Spain Announces €27 Billion Deficit-Cutting Plan

The Spanish government on Friday delivered what it called the biggest fiscal adjustment in the country’s democratic history, unveiling a 27 billion euro ($36 billion) deficit-reduction plan that includes sharp spending cuts across government ministries and higher taxes for corporations.

With images of nationwide demonstrations and strikes against labor reforms still fresh, the weight of the budget appeared to fall on big companies and government spending. Labor unions said nearly 1 million took part in Madrid’s rally alone Thursday evening.

Corporations will be asked to pay higher taxes this year, and their tax breaks will be reduced while the government said value-added-taxes would not rise. It said tax receipts for VAT would fall 2.6% as a result of weak growth in Spain.

Budget Minister Cristobal Montoro said all ministries would need to reduce their budgets by around 17% this year, which was slightly higher than expected, saving a total of up to €65.8 billion. Salaries for public workers will not be reduced, but will be frozen this year.

Electricity prices will rise 7%, to pay off a €24 billion electricity-tariff deficit that accumulated due to the difference between consumer prices set by the state and producer’s costs. Tariffs paid by electricity companies will rise 5%.

Austerity Measures Prompt Spanish Workers To Strike

NPR reports Austerity Measures Prompt Spanish Workers To Strike

Workers walked off the job in Spain on Thursday, halting public transport, closing schools and leaving hospitals with emergency staff only. The general strike was called by unions in response to the conservative government’s labor reforms, which let companies opt out of collective bargaining agreements and fire workers more cheaply. But more punishing austerity could still be to come, as Spain tries to whittle down its budget deficit under pressure from Brussels.

 

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Germany is Now Openly Engaging In Monetary Policies Against the ECB… What’s Next? [gainspainscapital]

March 30, 2012 By 

While the mainstream financial media and 99% of investors continue to believe that Germany will align itself with the EU, we’ve been pounding the table Germany will in fact look after its own interests rather than the EU’s and that it might in fact leave the Euro temporarily.

We’ll start with German Finance Minister Wolfgang Schauble, who was hinting that the EU was off-track in its policies and that Germany was focusing on a “political union” NOT a “monetary union” as far back as November 2011.

Wolfgang Schauble admits euro bail-out fund won’t halt crisis

Europe’s “big bazooka” bail-out fund is not ready and won’t stem the debt crisis that on Tuesday pounded Italy and the European Central Bank (ECB), admitted Wolfgang Schauble, Germany’s finance minister.

http://www.telegraph.co.uk/finance/financialcrisis/8924462/Wolfgang-Schauble-admits-euro-bail-out-fund-wont-halt-crisis.html

This is a pretty strong admission from the finance minister of the country that Europe looks to as a financial backstop. And the following is even more disconcerting for the future of the Euro:

          Seeing in Crisis the Last Best Chance to Unite Europe

MR. SCHÄUBLE said the German government would propose treaty changes at the summit of European leaders in Brussels on Dec. 9 that would move Europe closer to the centralized fiscal government that the currency zone has lacked. The ultimate goal, Mr. Schäuble says, is a political union with a European president directly elected by the people.

“What we’re now doing with the fiscal union, what I’m describing here, is a short-term step for the currency,” Mr. Schäuble said. “In a larger context, naturally we need a political union.”

Critics say the spending cuts German leaders have demanded from other countries are hurting growth across the Continent, in the process making debts only harder to repay. And his proposals to give the European Commission far-reaching powers to enforce budgetary discipline have been likened by skeptics in Britain to an invasive new “super state.” Even some euro supporters fear that Mrs. Merkel and Mr. Schäuble are talking about long-term changes while panicked investors and practiced speculators are tearing the euro to pieces right now.

“There is a limited transition period where we have to manage the nervousness on the markets,” Mr. Schäuble said. “If it is clear that by the end of 2012 or the middle of 2013 that we have all the ingredients for new, strengthened and deepened political structures together, I think that will work.”

He sees the turmoil as not an obstacle but a necessity. “We can only achieve a political union if we have a crisis,” Mr. Schäuble said.

http://www.nytimes.com/2011/11/19/world/europe/for-wolfgang-schauble-seeing-opportunity-in-europes-crisis.html?_r=1&pagewanted=2

 

Note that Schauble repeatedly emphasizes the goal of a “political union,” NOT a “fiscal union” or “monetary union.” Indeed, his one reference to a “fiscal union” is in the “short-term,” while stressing that in a “larger context” the EU needs a “politicalunion.”

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Cross-Border Martial Law: Stage 1

by Gary North

On Monday, April 2, the leaders of the United States, Mexico, and Canada will meet at what is billed as the North American Leaders Summit. Here is the agenda, as posted on the website of the White House.

On April 2, 2012, President Obama will host Prime Minister Stephen Harper of Canada and President Felipe Calderon of Mexico for the North American Leaders’ Summit (NALS) in Washington, DC. This meeting will build on wide-ranging and ongoing cooperation among the United States, Canada, and Mexico with a particular focus on economic growth and competitiveness, citizen security, energy, and climate change. The leaders will also discuss North America’s role in the Americas in anticipation of the Summit of the Americas in Cartagena, Colombia later in April, as well as other global economic, political, and security issues.

 

Note: This summit is preliminary to a hemispheric summit to be held later in April. Note these words: citizen security, energy, and climate change. Allow me to translate: police state, rationing, and regulation.

If you think I am exaggerating, consider the following.

TRILATERAL DEFENSE: STAGE 1

The Defense Department has posted a press release on steps leading up to this summit. A new system of multi-national defense has been created. It is called the North American Defence Ministry. Notice the way Defense is spelled: Oh, Canada! You can read the press release here.

According to the three Ministers of Defence, North America is facing threats so enormous that the three nations must work together to thwart them. But what nation is strong enough to offer such a threat? None is mentioned. Nevertheless, those threats are out there, the three ministers oi defense assure us.

The first meeting of what they call “the trilateral collaboration” was held in Ottawa. Here is what they decided.

 

By virtue of our geography, our peoples, and our trading relationship, our three nations share many defense interests. Threats to North America and the hemisphere are increasingly complex and require non-traditional responses. Building upon the trilateral collaboration under the North American Leaders Summit process, we share a determination to enhance our common understanding of those threats and of the approaches needed to address them.

 

It would be helpful to know what these “increasingly complex” threats to North America are. It would be even more helpful to know which “non-traditional responses” are being contemplated.

 

Our countries are committed to working together to address challenges in the region. We know that transnational threats require transnational responses.

 

That word, “transnational,” needs clarification. What are some of these transnational threats? What nation might be planning transnational threats against Canada and Mexico, as well as the United States? What nation has identified these three nations as enemies? I have heard of none.

It turns out that the threats do not come from nations. They come from SPECTRE. You remember SPECTRE, the SPecial Executive for Counter-intelligence, Terrorism, Revenge and Extortion. Sean Connery’s James Bond battled against SPECTRE. Well, maybe SPECTRE isn’t the threat it once was, but something like it is.

 

With this in mind, we have agreed to enhance our cooperation to support efforts to counter transnational criminal organizations and to respond to natural disasters in the hemisphere.

 

The trilateral collaboration is determined not to let these criminal organizations get the upper hand. Neither is nature: natural disasters in the hemisphere. We all remember what the hemisphere was almost wiped out by. . . . By. . . . By whatever it was. Back then. Never again!

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WHY THE MARKET SWEET SPOT IS ENDING [Pragmatic Capitalism]

By Comstock Funds on Pragmatic Capitalism

A growing number of indicators suggest that the market is running out of steam.  Equities have been in a temporary sweet spot where investors have been factoring in a self-sustaining U.S. economic recovery while also anticipating the imminent institution of QE3.  This is a contradiction.  If the economy were indeed as strong as they say, we wouldn’t need QE3.  The fact that market observers eagerly look forward toward the possibility of QE3 is itself an indication that the economy is weaker than they think. We can have one or the other, but we can’t have both.

At the same time the problems in Europe have been put on the back burner, giving the market some temporary relief—-and we do mean temporary—-from the relenting dire headlines that have often dominated the financial news.  This, too, is not likely to last very long.

The U.S. economy has benefited over the last few months from the inability of seasonal adjustment factors to account for an exceedingly warm winter and the distortions introduced by the fact that the worst of the recession in 2008-2009 occurred in about the same months.  Although it is difficult to put a number on this, we suspect that the seasonal adjustments made the economy appear much stronger than it actually was, and that the payback is about to come.

Adding to these distortions, Fed Chairman Bernanke recently pointed out that Okun’s Law may have been a factor in the improving unemployment numbers.  Okun’s Law, based on empirical observation rather than theory, states that for every 2% change in GDP, unemployment changes 1% in the opposite direction.  Bernanke stated that at the worst of the last recession, unemployment increased by far more than it should have based on the decline in GDP.  Recently, however, unemployment dropped by far more than it should have in relation to the increase in GDP, and that this was payback for the prior distortion.  The takeaway is that the unemployment rate will not improve much in the period ahead, an assumption that is undoubtedly a major reason for the Fed’s continued caution on the outlook and promise of near-zero rates into 2014.

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Norway $610 bln wealth fund to cut Europe exposure – [Reuters]

Norway’s $610 billion sovereign wealth fund, Europe’s biggest equity investor, plans to sharply reduce its European exposure while raising investments in emerging markets and Asia-Pacific, the financeministry said on Friday.

Of its entire bond, fixed income and real estate portfolio, European investments will be “gradually” reduced to 41 percent from 54 percent, while Asia-Pacific’s share will rise to 19 percent from 11 percent, Finance Minister Sigbjoern Johnsen told a news conference.

“We’re reducing our European exposure because we see that economic development in the global economy is changing and this should also be reflected in our investment strategy,” Johnsen said. “Most likely we’ll have to sell some assets in Europe.”

As a result, the share of emerging markets in the fund’s total portfolio will rise to 10 percent from 6 percent and the share of the Americas and Africa will rise to 40 percent from 35 percent.

“It is just not possible to say how long this will take … it should be gradual and taking into account market circumstances,” ministry State Secretary Hilde Singsaas said.

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Gold Price Manipulation: Bullion, Gold Stocks Undervalued [ibtimes]

By MORAN ZHANG

Some industry experts believe the gold price has been artificially suppressed due to its strong impact on interest rates and government bond values, leaving many gold equities “significantly” undervalued.

One such expert is Bill Murphy, chairman of the Gold Anti-Trust Action Committee (GATA).

“It’s been an ongoing maneuver especially of late,” Murphy told the International Business Times. “There has never been an asset class that’s been going up 12 years in a row.”

Murphy believes the price of gold has been “artificially low for the past 12 years” as it has been manipulated by bullion trading banks, central banks with large gold holdings and the U.S. government.

“This gold cartel only allows gold to advance so much in a year,” Murphy said.

“When you own gold, you’re fighting every central bank in the world,” geopolitical analyst James G. Rickards told CNBC during a September 2009 interview.

Echoing Rickards’ view, Chris Powell, GATA’s secretary and treasurer, said last year, “Gold is a currency that competes with government currencies and has a powerful influence on interest rates and the value of government bonds.”

To support his remarks, Powell cited an academic study published in 1988 in the Journal of Political Economy by Lawrence Summers, then professor of economics at Harvard and since then a U.S. treasury secretary, and Robert Barsky, professor of economics at the University of Michigan. The study is entitled “Gibson’s Paradox and the Gold Standard.”

“This close correlation among gold, interest rates, and government bond values is why central banks long have tried to control — usually suppress — the price of gold. Gold is the ticket out of the central banking system, the escape from coercive central bank and government power,” Powell said.

“As an independent currency, a currency to which investors can resort when they are dissatisfied with government currencies, gold carries the enormous power to discipline governments, to call them to account for their inflation of the money supply and to warn the world against it,” Powell added. “Because gold is the vehicle of escape from the central bank system, the manipulation of the gold market is the manipulation that makes possible all other market manipulation by government.”

Paul Mylchreest, in his most recent issue of Thunder Road Report, offered a detailed analysis of what he sees as technically illegal and large scale manipulation of the gold market since the U.S. sovereign debt lost its “AAA” credit rating on Aug. 5, 2011.

Mylchreest, a former resource industry analyst, claims to show absolute proof of the existence of manipulation and how it is taking place. He used a succession of Kito daily gold price charts to back up his argument.

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Euro zone agrees bigger ‘firewall’ [irishtimes]

 

A higher euro zone bailout capacity is a pre-condition for most G20 countries to contribute more money to the IMF

Euro zone finance ministers agreed today on a temporary increase in their financial rescue capacity to prevent a new flare-up of Europe’s sovereign debt crisis, but markets may judge it too small to be convincing.

Austrian finance minister Maria Fekter said the 17-nation currency area would combine two rescue funds for a year to make more money available in case of emergency.

She put the total figure at some €800 billion, but that appeared to include money already spent to conjure up a more impressive headline number for investors.

“Obviously markets will only have confidence in us if we agree on a strong rescue fund,” Belgian finance minister Steve Vanackere told reporters.

“We can’t consider that the crisis is over. We must find a good middle way between those who seek a (maximum) firewall and those who want it kept to a minimum.”

A draft statement prepared for ministers and obtained by Reuters showed that in case of need before July 2013, the euro zone could combine the firepower of its two bailout funds to provide €940 billion rather than a planned €500 billion.

Ministers would allow the temporary €440 billion European Financial Stability Facility (EFSF) to continue to run for a year in parallel with the permanent €500 billion European Stability Mechanism (ESM), which starts work in July.

However, EU paymaster Germany favoured a smaller increase, and those figures included some €192 billion already paid or committed to Greece, Ireland and Portugal, plus money that could only be raised if euro zone states were to pay in more capital faster than planned to the ESM.

Ms Fekter said the residual €240 billion from the EFSF would be used as a reserve buffer while the two funds run in parallel and the ESM’s capital is being built up.

Bond market players questioned whether the likely compromise would provide sufficient money to help Spain, the euro zone’s number four economy, if it needs a bailout to overcome a banking crisis due to the collapse of a real estate bubble.

The residual EFSF funds – about €240 billion – could only be called on if the ESM, which will initially have €200 billion available to lend, ran out of money to finance a new bailout during that period.

Countries sharing the euro have already agreed to adopt more strictly enforced balanced-budget rules in an effort to convince markets that their public finances will be sustainable.

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A policy of mass destruction [physorg]

A new analysis showing how the radical policies advocated by western economists helped to bankrupt Russia and other former Soviet countries after the Cold War has been released by researchers.

The study, led by academics at the University of Cambridge, is the first to trace a direct link between the mass privatisation programmes adopted by several former Soviet states, and the economic failure and corruption that followed.

Devised principally by western economists, mass privatisation was a radical policy to privatise rapidly large parts of the economies of countries such as Russia during the early 1990s. the policy was pushed heavily by the, the World Bank and the European Bank for Reconstruction and Development (EBRD). Its aim was to guarantee a swift transition to capitalism, before Soviet sympathisers could seize back the reins of power.

Instead of the predicted economic boom, what followed in many ex-Communist countries was a severe recession, on a par with the  of the United States and Europe in the 1930s. The reasons for and skyrocketing poverty in Eastern Europe, however, have never been fully understood. Nor have researchers been able to explain why this happened in some countries, like Russia, but not in others, such as Estonia.

Some economists argue that mass privatisation would have worked if it had been implemented even more rapidly and extensively. Conversely, others argue that although mass privatisation was the right policy, the initial conditions were not met to make it work well. Further still, some scholars suggest that the real problem had more to do with political reform.

Writing in the new, April issue of the , Lawrence King and David Stuckler from the University of Cambridge and Patrick Hamm, from Harvard University, test for the first time the idea that implementing mass privatisation was linked to worsening , both for individual firms, and entire economies. The more faithfully countries adopted the policy, the more they endured economic crime, corruption and economic failure. This happened, the study argues, because the policy itself undermined the state’s functioning and exposed swathes of the economy to corruption.

The report also carries a warning for the modern age: “Rapid and extensive privatisation is being promoted by some economists to resolve the current debt crises in the West and to help achieve reform in Middle Eastern and North African economies,” said King. “This paper shows that the most radical privatisation programme in history failed the countries it was meant to help. The lessons of unintended consequences in Russia suggest we should proceed with great caution when implementing untested economic reforms.”

Mass privatisation was adopted in about half of former Communist countries after the Soviet Union’s collapse. Sometimes known as “coupon privatisation”, it involved distributing vouchers to ordinary citizens which could then be redeemed as shares in national enterprises. In practice, few people understood the policy and most were desperately poor, so they sold their vouchers as quickly as possible. In countries like Russia, this enabled profiteers to buy up shares and take over large parts of the new private sector.

The researchers argue that mass privatization failed for two main reasons. First, it undermined the state by removing its revenue base – the profits from state-owned enterprises that had existed under Soviet rule – and its ability to regulate the emerging market economy. Second, mass privatization created enterprises devoid of strategic ownership and guidance by opening them up to corrupt owners who stripped assets and failed to develop their firms. “The result was a vicious cycle of a failing state and economy,” King said.

To test this hypothesis, King, Stuckler and Hamm compared the fortunes between 1990 and 2000 of 25 former Communist countries, among them states that mass-privatised and others that did not. World Bank survey data of managers from more than 3,500 firms in 24 post-communist countries was also examined.

The results show a direct and consistent link between mass privatisation, declining state fiscal revenues, and worse economic growth. Between 1990 and 2000, government spending was about 20% lower in mass privatising countries than in those which underwent a steadier form of change. This was the case even after the researchers adjusted for political reforms, other economic reforms, the presence of oil, and other initial transition conditions.

Similarly, mass privatising states experienced an average dip in GDP per capita more than 16% above that of non mass-privatising countries after the programme was implemented.

The analysis of individual firms revealed that among mass-privatising countries, firms privatised to domestic owners had greater risks of economic corruption. Private domestic companies in these  were 78% more likely than state-owned companies to resort to barter rather than monetary transactions. This was revealed to be the case after the researchers had corrected the data for firm, market and sector characteristics, as well as the possibility that the worst performing firms were the ones privatised.

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Why Does The Department Of Homeland Security Need 450 MILLION Hollow Point Bullets?

Somebody out there has decided that the Department of Homeland Security needs a whole lot of ammunition.  Recently it was announced that ATK was awarded a contract to provide up to 450 MILLION hollow point bullets to the Department of Homeland Security over the next five years.  Is it just me, or does that sound incredibly excessive?  What in the world is the DHS going to do with 450 million rounds?  What possible event would ever require that much ammunition?  If the United States was ever invaded, it would be the job of the U.S. military to defend the country, so that can’t be it.  So what are all of those bullets for?  Who does the Department of Homeland Security plan to be shooting at?  According to the U.S. Census, there are only about 311 million people living in the entire country.  So why does the Department of Homeland Security need 450 million rounds of ammunition?  Either this is an incredible waste or there is something that the Department of Homeland Security is not telling us.

I could understand if the U.S. military was ordering ammunition in this quantity.  When you fight wars you can go through ammunition very rapidly.

But the Department of Homeland Security is only supposed to be shooting at people very rarely.

It simply does not make sense that they would need so much ammunition.

The following is an excerpt from the official press release about this deal between ATK and the Department of Homeland Security….

ATK announced that it is being awarded an Indefinite Delivery/Indefinite Quantity (IDIQ) agreement from the Department of Homeland Security, U.S. Immigration and Customs Enforcement (DHS, ICE) for .40 caliber ammunition. This contract features a base of 12 months, includes four option years, and will have a maximum volume of 450 million rounds.

ATK was the incumbent and won the contract with its HST bullet, which has proven itself in the field. The special hollow point effectively passes through a variety of barriers and holds its jacket in the toughest conditions. HST is engineered for 100-percent weight retention, limits collateral damage, and avoids over-penetration.

“We are proud to extend our track record as the prime supplier of .40 caliber duty ammunition for DHS, ICE,” said Ron Johnson, President of ATK’s Security and Sporting group.

But this is not the only kind of ammo that the DHS is placing an order for.

Business Insider is also reporting that the Department of Homeland Security is seeking to buy 175 million rifle ammunition rounds….

We’ve also learned that the Department has an open bid for a stockpile of rifle ammo. Listed on the federal business opportunities network, they’re looking for up to 175 million rounds of .233 caliber ammo to be exact. The 223 is almost exactly the same round used by NATO forces, the 5.56 x 45mm.

This all comes at a time when gun sales are absolutely going through the roof in the United States.

Gun manufacturer Sturm, Ruger & Co. recently announced that it would be suspending new orders until May because it received orders for more than one million guns during the months of January and February.

The following announcement about this suspension of sales comes from their official website….

  • The Company’s Retailer Programs that were offered from January 1, 2012 through February 29, 2012 were very successful and generated significant orders from retailers to independent wholesale distributors for Ruger firearms.
  • Year-to-date, the independent wholesale distributors placed orders with the Company for more than one million Ruger firearms.
  • Despite the Company’s continuing successful efforts to increase production rates, the incoming order rate exceeds our capacity to rapidly fulfill these orders. Consequently, the Company has temporarily suspended the acceptance of new orders.
  • The Company expects to resume the normal acceptance of orders by the end of May 2012.

Since Barack Obama first took office, gun sales in America have risen to extraordinary levels.

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Jitters Hit Europe Bond Markets [WSJ]

By TOMMY STUBBINGTON And NEELABH CHATURVEDI

LONDON—Euro-zone bond markets Thursday received their first jolt since the Greek debt exchange was clinched earlier this month, with Italian and Spanish bond yields soaring due to a combination of pressures.

The sell-off in Italian debt pushed yields to their highest levels in a month, evaporating the gains made since the second of the European Central Bank’s three-year liquidity operations in February, in which the ECB poured more than a half a trillion euros into the financial system. Italy had distanced itself from Spain in bond markets in recent weeks but Thursday’s rout sparked nervousness across financial markets and served as a reminder that the crisis in the euro zone is far from over.

The two-year Italian government bond yield rose by 0.38 percentage point to 2.69% while the yield on the benchmark 10-year bond climbed 0.16 percentage point to 5.24%, according to Tradeweb. In Spain, the two-year yield rose by 0.16 percentage point to 2.54%, while the 10-year yield climbed by 0.16 percentage point to 5.45%.

Bonds issued by heavily indebted euro-zone countries had already fallen on Thursday as a nationwide general strike challenged the Spanish government’s austerity program and signs of waning risk appetite dampened demand for risky assets.

Haven Dutch bonds also came under slight pressure as the country’s deadlocked budget negotiations unnerved investors.

“There is no money supporting the market. We’re seeing big profit-taking while domestic investors are sitting on the sideline,” said the head of trading at a primary dealership.

Traders noted selling by investors to lock in the sharp gains made in peripheral euro-zone debt since the turn of the year. Italian government bonds have been one of the best-performing sovereign bonds in 2012, helped enormously by the ECB’s cash boost as banks gorged on cheap funds and parked money in government debt.

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Italian bank loses €4.51 Billion but claims no ill effects

By Associated Press, Published: March 29

MILAN — Shares in Monte dei Paschi di Siena, the world’s oldest running bank, plunged by nearly 11 percent on Thursday after it posted a massive loss of €4.7 billion ($6.2 billion) in 2011.

The Italian bank, which was founded during the Renaissance in 1472, said the losses were mainly due to charges taken to deal with the impact of Europe’s debt crisis and the economic slowdown. It wrote down the value of its assets by €4.51 billion, including €1.3 billion in bad loans.

Because the write-down is an accounting move, it will have no impact on cash-flow, liquidity, or future earnings potential, the bank claimed.

Investors were nevertheless shaken, sending shares in the company 11 percent lower to close at €0.32.

The bank’s foundation, a nonprofit organization that holds a controlling stake in the financial firm, has proposed that former UniCredit CEO Alessandro Profumo take over as chairman. Profumo lost his post at UniCredit in 2010, amid an uproar over Libyan authorities’ acquisition of an increased stake in the bank, Italy’s largest by assets.

Director general Fabrizio Viola said the appointment would be “a signal of the bank’s relaunching.”

Monte dei Paschi management planned to meet with unions on Friday to discuss measures to cut costs for 31,000 employees by some €80 million. The bank has said it would try not to cut jobs, having already cut salaries for top managers.

It said the talks would focus on the impact of Premier Mario Monti’s pension reforms, which postpones the retirement of some 800 bank employees.

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BRICS summit videos

The BRICS summit has wrapped up in India. Creating an alternative global lender and stepping away from the dollar as a reserve currency were among their main objectives.

 

 

 

 

Chicago bans anti-war march during NATO Summit [RT]

A judge has rejected the demands of anti-war activists for a march to be held in Chicago during a NATO summit planned for November. The activists say the city’s arguments against the march defy logic.

Anti-war activists filed a request to court after their initial demands for a march to be rescheduled were rejected by the City of Chicago.

Andy Thayer, an activist leader, says he will still be marching on May 20, the day the NATO summit opens.

I can say definitively we are marching on May 20,” he noted, as quoted by Reuters. “We will hold a peaceful protest.

The anti-war demonstrators originally planned to hold a march on May 19, the day another meeting of global leaders, the G8 Summit, closes in Chicago. However, when the summit’s venue was changed to Camp David, the activists decided to move their march a day forward to coincide with the start of the NATO summit.

But this request was rejected by the Chicago Transportation Department.

The department wrote back to Thayer, saying there were not enough on-duty police officers or other employees authorized to regulate traffic.

 

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Another index starkly highlights German oppression of its Euro Group neighbours [Martin Cole]

By Martin Cole on http://ironiestoo.blogspot.com/

The Euro Currency crisis has surely shown to all of Germany’s supposed partners withion the common currency that “solidarity” and “partnership” have no meaning in a German concept. Unemployment figures within Germany, just announced, have fallen by 180% more than a cross section of economists anticipated, according to this report from Reuters!

All this against a backdrop of housing price collapse and mass youth exodus from Ireland, a General Strike in Spain, looming default in Greece and Portugal and puppet governments having been installed in Italy and Greece.

Those responsible, have sent their finance ministers to Brussels to again consider the next steps in the further destruction of European democracy over the course of today and tomorrow. Bismark would be proud!

Read on http://ironiestoo.blogspot.com/

How to Prevent Other Financial Crises [Taleb]

By Nassim Nicholas Taleb and George A. Martin

This article argues that the crisis of 2007–2008 happened because of an explosive  combination of agency problems, moral hazard, and “scientism”—the illusion that  ostensibly scientific techniques would manage risks and predict rare events in spite  of the stark empirical and theoretical realities that suggested otherwise. The authors  analyze the varied behaviors, ideas and effects that in combination created a financial
meltdown, and discuss the players responsible for the consequences. In formulating a  set of expectations for future financial management, they suggest that financial agents  need more “skin in the game” to prevent irresponsible risk-taking from continuing.

Let us start with our conclusion, which is also a simple policy recommendation, and one that is not just easy to implement but has been part of  history until recent days. We believe that “less is more” in complex systems—
that simple heuristics and protocols are necessary for complex problems as  elaborate rules often lead to  “multiplicative branching” of  side effects that cumulatively  may have first order effects.  So instead of relying on thousands of meandering pages of  regulation, we should enforce  a basic principle of “skin in  the game” when it comes to  financial oversight:  “The captain goes down  with the ship; every captain  and every ship.”
In other words, nobody  should be in a position to  have the upside without sharing the downside, particularly  when others may be harmed. While this principle seems simple, we have  moved away from it in the finance world, particularly when it comes to  financial organizations that have been deemed “too big to fail.”

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Transcript: Federal Reserve Chairman Ben Bernanke Interview with Diane Sawyer [Credit Writedowns]

By 

DIANE SAWYER: So you’ve been teaching the class. Just curious what– what’s– is there a question that made you stop and think the most as you’re teaching?

CHAIRMAN BERNANKE: Well– you know, I’m talk– I’m tackling– a big topic which is the role of the Fed in thefinancial crisis. And it was a good opportunity just to think through the– what happened in the last few years. And the theme of the lectures is that, you know, you can make sense of it all if you look to history. I– I was a student of the Great Depression as an academic and I think some of the lessons– the mistakes that were made– during the Great Depression are very helpful in thinking about our response to the– the recent crisis. And I think we avoided some of the most important mistakes.

DIANE SAWYER: And what’s the biggest less– difference in the lesson we have to learn from this recession and the Depression?

CHAIRMAN BERNANKE: Well, the Federal Reserve and other policymakers made, I think, two principle mistakes in the ’30s which led to such– a disastrous and deep– depression across the world. And the first was– monetary policy. The Fed did not ease monetary policy sufficiently. We had a deflation in the United States, prices were dropping at about 10% a year which is very unhealthy for an economy. And secondly the Fed didn’t do enough to stop the financial system from– from crashing. We had almost 10,000 banks fail in the United States in the 1930s. So I think those were the two big mistakes.

DIANE SAWYER: And as– Americans what’s the lesson we should take away from this recession?

CHAIRMAN BERNANKE: Well– again from the perspective of policy what we needed– what the Fed needed to do– was to use monetary policy constructively to help the economy recover and to do what was necessary to keep the– financial system stable and keep it from falling apart– which we did. And– I think we averted what would have been the– really terrible outcomes– like those of the 1930s. Now, for Americans– I think we need to take a look at our economy and think about the role of the financial system– when it’s gonna generate growth for our economy going– forward. And a lot of– questions have risen lately about– education, skills and do we have the skills that will both create– a more balanced income distribution to help people across the range of– of– occupations and– and areas to– to– earn better livings and also to compete internationally. So I think those are some of the areas that we’ll be having to look at as a country going forward.

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Sometimes, Money Printing Sets The Stage For Lower Prices

By  on iBankCoin

Not all printing is inflationary.

I know, what I have just said must resonate as nothing short of heresy amongst most of your ranks.  You’ve been worshipping at the altar of currency devaluation for so long now you probably can’t even begin to fathom life without the dogma.  What would you do, if separated from your ceaseless chanting and repetitious arguments?

But I’ll say it again; not all money printing inevitably leads to higher prices.  Sometimes, money printing sets the stage for much, much lower prices.

For instance, look no further than the U.S.’s own banking system.  There is to be witnessed the very contact point for where all this currency is going.  It is the direct beneficiary of free money.  Yet, how are things fairing for them?

Revolving credit, the kind you usually find most prevalent with business, is dropping consistently.  While perhaps the numbers of U.S. dollars in circulation is forming a record apogee, the velocity of money continues to drop.  Banks have fewer and fewer outlets to invest all that free money into.

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Ben Bernanke and the Case of the Missing Jobs

by Gary North

Bernanke’s speech on March 26 began with a familiar analytical error. Specifically, he continued to give the impression that the Federal Open Market Committee (FOMC) is the cause of today’s low short-term interest rates. It isn’t. The .25% rate is the result of Federal Reserve policy, but not FOMC policy. The FED pays commercial banks .25% on excess reserves. If it did not pay an interest rate of .25%, the rate would be even lower. He always gives the impression that, without the FED’s intervention, rates would be higher.

 

The causes of today’s low rates are the widespread decisions of commercial bankers to hold excess reserves with the FED, which is what the FedFunds rate reflects. Banks are not borrowing overnight money from other banks in order to meet bank reserve requirements set by the FED. They do not need the money. They have plenty of excess reserves. So, because there is no rival demand for this money, banks put their money with the FED, which pays .25%. Better to earn something than nothing.

THE LABOR MARKET

His speech focused on the rate of unemployment, as well it should. This rate is also called the “Presidential incumbent’s chance in election years.” In the post-World War II era, an unemployment rate above 7% at the time of the election is the kiss of death.

Bernanke said this: “We have seen some positive signs on the jobs front recently, including a pickup in monthly payroll gains and a notable decline in the unemployment rate.” The unemployment rate is 8.3%. “That is good news.” For Republicans, yes. Not for Obama.

 

Importantly, despite the recent improvement, the job market remains far from normal; for example, the number of people working and total hours worked are still significantly below pre-crisis peaks, while the unemployment rate remains well above what most economists judge to be its long-run sustainable level.

 

Correct on both points. “Of particular concern is the large number of people who have been unemployed for more than six months.” Also correct. Not having anything else to do, they are likely to vote in November.

He raised the question of whether this unemployment is cyclical or permanent. He defines “cyclical” as every Keynesian does, that is, incorrectly: the result of a temporary lack of aggregate demand. “Is the current high level of long-term unemployment primarily the result of cyclical factors, such as insufficient aggregate demand. . . .?”

The cause of high unemployment is not insufficient aggregate demand in general. Rather, it is the high aggregate demand to stay home and watch TV. The problem is that some of the unemployed workers refuse to work for lower (non-labor union) wages. They do not want available jobs. Other unemployed workers are no longer worth the minimum wage. They cannot find jobs. All of them are getting paid not to work by the federal government’s unemployed workers’ bailout program, called unemployment insurance, which the government keeps extending.

He also mentioned “a worsening mismatch between workers’ skills and employers’ requirements.” He did not mention the key phrase, which every economist should always use when discussing gluts: “at the prevailing market price.” Had he done so, his audience would have expected him to discuss prevailing market wages in specific labor markets. He did not want to do this. To do so would point to the causes of unemployment: government interference with wages.

 

If cyclical factors predominate, then policies that support a broader economic recovery should be effective in addressing long-term unemployment as well; if the causes are structural, then other policy tools will be needed. I will argue today that, while both cyclical and structural forces have doubtless contributed to the increase in long-term unemployment, the continued weakness in aggregate demand is likely the predominant factor. Consequently, the Federal Reserve’s accommodative monetary policies, by providing support for demand and for the recovery, should help, over time, to reduce long-term unemployment as well.

 

Bernanke was justifying the FED’s inflationary policies, which bankroll the Federal government, which in turn spends the newly counterfeited money to “increase aggregate demand.” This has been the Keynesian solution ever since 1936. It will be the Keynesian solution forever. The Keynesian sees unemployment in terms of insufficient aggregate demand, which means insufficiently large federal deficits and insufficiently inflationary central bank policies.

Jobs are increasing in the private sector, he said. Layoffs are moderating in the public sector. But currently, hours worked are 4% less than in 2007. The job market remains weak, he said. Private sector employment is down by 5 million jobs. But the population has increased. The unemployment rate was 3 percentage points above its average over the past 20 years. Let me put it another way. The difference between 8.3% and 5.3% is 3 percentage points. What percent of 5.3% is 3%? It is about 57%. That means that the present unemployment rate is 57% above what has been normal for 20 years. Put this way, the present unemployment rate in 2012, over three years after the recession began, is a disaster.

“Moreover, a significant portion of the improvement in the labor market has reflected a decline in layoffs rather than an increase in hiring.” In short, the job-creation process is not recovering. “Taking the difference between gross hires and separations, the net monthly change in payrolls during this period was, on average, less than 100,000 jobs per month – a small figure compared to the gross flows.”

OKUN’S NON-LAW

We need more hiring, he said. Quite true. How will this come about? With more rapid economic growth. Terrific. How will this growth take place?

 

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Barack Obama’s grovelling before the Russians is an embarrassment

By  on The Telegraph

Ronald Reagan, together with Margaret Thatcher, stood up to Moscow, and brought the Soviet Empire to its knees. In contrast, Barack Obama has gone on his knees to grovel before the Russians. The exchange between President Obama and his Russian counterpart Dmitry Medvedev in Seoul was a display of supplication before a major strategic adversary on an issue of great importance for US national security – missile defence. The private conservation was picked up on microphone, and relayed by ABC News correspondent Jake Tapper:

President Obama: On all these issues, but particularly missile defense, this, this can be solved but it’s important for him to give me space.

President Medvedev: Yeah, I understand. I understand your message about space. Space for you…

President Obama: This is my last election. After my election I have more flexibility.

President Medvedev: I understand. I will transmit this information to Vladimir.

The US President has tried to downplay the remarks, according to a report by The Wall Street Journalwhich quotes him as saying:

“I don’t think it’s any surprise that you can’t start that a few months before presidential and congressional elections in the United States, and at a time when they just completed elections in Russia,” Mr. Obama said Tuesday as he as sat down to meet with Mr. Medvedev and the president of Kazakhstan. “This is not a matter of hiding the ball.”

Barack Obama’s comments are disturbing on several levels. First, they display a willingness to placate America’s enemies, and cede ground over issues of national interest. Second, Obama is linking foreign policy decision-making to the timetable of the US presidential election, openly telling the Russians that he will deliver when he is no longer constrained by seeking re-election. This demonstrates contempt for the American people, suggesting that what he tells the Russians may be completely different to his message at home. Third, they reveal a dismissive approach towards America’s friends in eastern and central Europe, as well as US allies in the Gulf states, who must be wondering now if they will be sold out next.

President Obama’s remarks should be viewed against a backdrop of an astonishing surrender to Moscow over Third Site missile defence in September 2009, where he dropped plans for missile defence installations in Poland and the Czech Republic in the face of Russian opposition, a move that was seen as a betrayal of US allies.

 

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EU – EFSF & ESM – A whole lot of nothing

By TF Market Advisors

A quick look at the headlines:

€200 billion already committed.  So the EFSF has already committed €200 billion.  So far I only see €63 billion of debt issued by the EFSF, so they have at least another €137 billion to fund.  The bulk of their issuance so far is back to back with a they made to Greece, hardly the best collateral.  For now I’m going to assume that there is no overcollateralization requirement and just €200 billion has been committed, but if the 165% overcollateralization is in place, then that would really be €300 billion of “guarantees” used up.

The “Permanent” facility would be allowed to run in conjunction with the EFSF.  As far as I can tell, basically each and every country would need to approve this.  Most countries seemed to have only approved a maximum amount of support that could be allocated between the EFSF and ESM.  Will they really all sign on for more?  I find it hard to believe that Finland will be excited by the prospect since they already negotiated their way out of standard EFSF and into some form of collateralized lending.  Slovenia had enough trouble the first time around, so why would they want to?  Cypress seems to be getting dragged down by the Greek economy.  Poor little Estonia must be wondering when the Eurovision song contest got all mixed up with this Eurozone concept.

For now, let’s assume that every country approves running the ESM in conjunction with what has already been committed (I find it hard to believe that everyone will agree, but let’s just make it easy for now).  Then the EU has €500 billion of new money to play with – allegedly.  It has all become such a blur, but the ESM had the same concept of “stepping out” members and potential overcollateralization that I am not sure that €500 billion is achievable.  I think it is only a headline, but again, let’s pretend they can get to €500 billion.

Okay, let’s make a capital call for the full amount.  I will assume it is based on the same percentages as EFSF with the 3 stepping out members.  Italy, please pay €96 billion.  Spain, we need €64 billion from you.  Where exactly are Spain and Italy going to get that sort of money to pre-fund the deal?  They aren’t.  That is the big scam here again.  It is “self-insurance”.  The vehicle will not be pre-funded in a meaningful way since the countries don’t have the money to put up.  There may be some amount of paid-in capital, but it will be small.  Then the ESM, just like the EFSF (which may still need to issue €137 billion) will issue bonds whenever it needs money, and only use the “capital calls” in extreme circumstances.  This is actually far worse than having the money up front – as problematic as that may be, because this plan will shift virtually the entire burden to Germany and France if it ever gets used.

Let’s say that Spain finally decides it needs money and actually “steps” out.  When each of Greece, Portugal, and Ireland used the EFSF facility for money, they “stepped” out.  That is both reasonable and logical.  But what does that mean to France and Germany?  With Spain participating, they had to put up €145 billion and €109 billion respectively.  If just Spain steps out when they need money, the contribution rates for the other countries goes up.  Now Germany, France, and Italy are on the hook for €167 billion, €125 billion, and €110 billion.   Let’s now assume that when push comes to shove the Finns and all the small contributors decide to “step out” too.  The problem is getting to big and they realize they are just hurting themselves more by participating than they would be affected by actual defaults.

 

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ARE THERE ANY CURRENCIES BACKED BY GOLD?

by SIMON BLACK

Dumbfounded.

That’s the only way to describe the reaction that future historians will have when they look back and study the utter perversion that is our global financial system.

We live in a time when a tiny handful of people have their fingers on a button that can conjure trillions of dollars, euro, yen, and renminbi out of thin air. In the United States, it comes down to one man. Just one.

With a single decision, he controls the lever that dominates the entire economy. When you control the money, you control everything– financial markets, consumer prices, risk perceptions, investment habits, savings rates, hiring decisions, pay raises, sovereign debt, housing starts, etc.  One man.

This irrational, arrogant system presupposes by design that a central banker is smarter than everyone else; that markets are incapable of determining appropriate risk and value; that he is more effective at allocating our time, capital, and labor than we are.

Future historians will probably also be dumbfounded when they see how long people allowed worthless, unbacked fiat paper to pass as money.  It’s extraordinary that most people today happily accept a digital abstraction of paper currency controlled by a single individual as ‘valuable’.

It was more than 5,000 years ago that primitive commodity money was used in Mesopotamia, and it’s been over 3,000 years since metal coins began circulating.  For more than 99.2% of human civilization, money actually meant something… right up until 1971 when Richard Nixon ended any remaining link between the dollar and gold.

Ever since, the US government has refused to acknowledge precious metals as money… yet if the Treasury’s financial statements are to be believed, Uncle Sam is still holding  261,498,900 troy ounces of gold. Let’s dismiss the tungsten possibilities for now and presume that it’s real gold. At today’s prices, the value would be about $437 billion.

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Trendlines intact, but showing bearish divergences. $RUT $SPX

Nothing to add. Charts say it all.

No word – no problem: NYC educrats ban dinos, Halloween and aliens [RT]

The political correctness dictatorship in the US has turned against dinosaurs and aliens. Dozens of other topics on city-issued tests have also been banned by New York teachers who seem to believe a problem disappears if a word is exterminated.

The list of “distracting topics” has provoked a debate over correctness going totally crazy.

The Department of Education has submitted a list of 50 forbidden words to companies competing for the chance to revamp New York’s citywide standardized tests.

Those are given to students throughout the year to measure progress in English, math, science and social studies.

The list of banned words is astonishing. Dinosaurs were thrown out, for example, as they call to mind evolution, which might upset fundamentalists. Birthdays shouldn’t be mentioned because they aren’t celebrated by Jehovah’s Witnesses.

Halloween appeared on the “black list” as it suggests paganism.

Dancing’’ is taboo, because some sects object. However the city took pity on ballet which is an exception. It somehow turned out apparently, ballet doesn’t hurt anyone.

Creatures from outer space,” junk food and, mysteriously, “homes with swimming pools” are less lucky.

Terrorism was considered too scary. Poverty is on the forbidden list as well as words that suggest wealth because they could make kids jealous.

Divorces, as well as diseases are also set to be forbidden in order to not traumatize kids having relatives who split from spouses or are ill.

 

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(AFP Photo / Getty Images)

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