EurAnalysis

hi guys. i shouldnt actually be here again lol. i will explain once i am home again in a few days.i have set up a trade with e/u at 0.50 per pip thats half an english pound lol.it is set to kick in at 13232 at sell.I am telling you this so i can show fxmindset or who ever if they would like to know. If it loses i will then show you what suicide trading is lol. Happy trading all and take care

DJ MARKET TALK: EUR/USD Likely To Remain Range Bound Short Term - HiFX

Posted on 29 April 2012 17:33 | Dow Jones Newswires

2133 GMT [Dow Jones] The EUR/USD is likely to remain range bound this week, but political developments in Europe and data from the U.S. will be closely watched, HiFX senior trader Stuart Ive says. "It is going to be a very anticipated week" given the "usual sovereign debt doubts in the market," U.S. non-farm payrolls, French Presidential and Greek elections coming up, he says. He tips support for the pair on the day at 1.3160 and resistance at 1.3290. "The EUR has been broadly in a range and I don't think we are going to see anything different to that going into this week, unless we see some real shock, which may pull it outside the range," Ive says. The EUR/USD is at 1.3238 vs 1.3252 late Friday in New York. ([email protected])

All Day JPYhttp://www.forexfactory.com/images/m...liday_dark.gifBank Holidayhttp://www.forexfactory.com/images/m...etail_dark.gif

All Day CNYhttp://www.forexfactory.com/images/m...liday_dark.gifBank Holidayhttp://www.forexfactory.com/images/m...etail_dark.gif

http://dailyreckoning.com/ben-bernan...systemic-risk/

Snippets:

04/25/12 The paper dollar is now the single most important source of systemic risk to the financial system, the world economy, and the security of the American people.

That is the lesson of the past 100 years that Federal Reserve Chairman Ben Bernanke did not teach during his four lectures at George Washington University’s Graduate School of Business. Instead, he celebrated the importance of the extraordinary powers he and his fellow governors have to manipulate interest rates and the value of the dollar in the name of economic growth and stability.

In so doing, he ignored completely that the ever growing need for heroic interventions by the Fed is itself being created by the paper dollar system he celebrates.

This failure is all the more telling because Mr. Bernanke states up front that central banks perform two critical functions: The first is to “achieve macroeconomic stability.” By that, he generally means “stable growth in the economy, avoiding big swings, recessions and the like, and keeping inflation low and stable.” The second is to provide “financial stability” by either trying to prevent or mitigate financial panics or financial crises.
On both counts, the paper dollar system in effect since the final link between the dollar and gold was broken in 1971 has failed and failed miserably when compared to the results produced under the gold standard.


Read more: Ben Bernanke's Paper Dollar Embodies Systemic Risk http://dailyreckoning.com/ben-bernan...#ixzz1tTV0F6Pk

Since abandoning the last vestiges of the gold standard in 1971, inflation has averaged 4.4% a year. Nevertheless, various sectors of the economy have suffered Great Depression like deflations. For example, between 1980 and 1986, the price of oil fell 60%, and the price of agricultural commodities and farm land fell by double digits. Those deflations led to the major bank failures of the mid and late 1980s. And, of course, the most recent financial crisis was triggered by a 30% decline in home prices, a disaster for American families, banks and investors alike that ranks right up there with the hardships experienced during the Great Depression.

The net result is that without the guidance of the gold standard, the Fed and the paper dollar have become the leading sources of economic and financial instability. Since 1971, when President Nixon freed the Federal Reserve from the strictures of the gold standard, recessions have become more frequent, longer and deeper. From 1971 through 2010 (under the paper standard) unemployment averaged 6.3%, much worse than the 1947-67 (gold standard) average of 4.7%. We have since experienced the three worst recessions since the end of World War II, with the unemployment rate averaging 8.5% in 1975, 9.7% in 1982, and now above 8% for three years and counting.

Under the post-World War II gold standard, there were no financial crises that presented a systemic risk to the US economy. Since 1971, we have experienced the:

1. 1973 oil shock and international monetary crisis

1. 1979 oil shock and dollar crisis

1. 1982 Latin American debt crisis

1. 1984 banking crisis and effective nationalization of Continental Illinois Bank

1. 1987 stock market crash

1. 1989-91 S&L crisis and bailout

1. 1990 Japanese bubble collapse and banking crisis

1. 1994 Mexican peso crisis

1. 1998 Asian currency crisis

1. 2001 dot com crash

1. 2007-09 Housing collapse and international financial crisis

1. 2010-2012 European sovereign debt crisis

In addition, the massive increase in the Fed’s and other major central bank balance sheets since the first quantitative easing in 2009 has coincided with the slowest recovery ever — even worse than the recoveries experienced during the 1930s — and the fear of yet another break out in inflation.

The most important thing the Fed could do now to fulfill its two fundamental roles of providing for a stable economy and preventing financial crises would be to begin an orderly transition back to a dollar whose value was once again defined by a unit weight of gold — that is to make the dollar once again as good as gold. To do otherwise is to leave in place the fundamental source of systemic risk that no amount of increased regulation or oversight can correct — the inherent instability of today’s monetary system based on a paper dollar whose future value is unknown and unknowable.
Regards,
Charles Kadlec,
for The Daily Reckoning
http://dailyreckoning.com/files/2011...-Head-Shot.gif
Charles Kadlec

Mr. Kadlec is a member of the Economic Advisory Board of the American Principles Project, an author and founder of the Community of Liberty.

http://www.prudentbear.com/index.php...w?art_id=10658

Decoupling Myth Destroyed

 

1. by Michael Pento
2. April 26, 2012

I would have thought that the decoupling myth between global economies would have been completely discredited after the events of this past credit crisis unfolded. Back in 2007 and early 2008, investors were very slowly coming to the realization that the U.S.-centered real estate crisis was going to dramatically affect our domestic economy.

However, the prevailing view at the time was that the global economy—especially emerging markets—would be almost totally immune from any such slowdown. But the truth was that emerging market economies took America’s financial crisis directly on the chin, causing the Shanghai Composite Index to drop 70% in just one year.

Now investors are being told that the worsening sovereign debt crisis in Europe will leave the U.S. economy unscathed. The reason for the perma-bulls’ optimism is based on the fact that America doesn’t have a strong manufacturing base. In fact, manufacturing now represents just 10% of our once diversified and vibrant economy. Wall Street is now hoping that since we don’t make many things to export to Europe, our GDP won’t suffer a significant decline at all.

What investors have conveniently overlooked is the fact that 40% of the earnings of companies in the S&P 500 Index are derived from foreign economies. And the 17 countries that make up the eurozone have collapsed into recession. That wouldn’t be so bad if the 17-country European Union (EU) weren’t the second biggest economy on the planet. Recent data points illustrate that the worsening recession in Europe will continue to bring down global GDP.

Credit default swap prices on 15 western European countries shot up 26% in the last month and Spanish banks now have over 8% of loans that are non-performing—an 18-year high. European banks are keeping their governments afloat by loaning them money, which they in turn borrowed from the European Central Bank. That cannot be a viable or sustainable situation. Many European economies will suffer massive inflation and sovereign default—just as was the case in Greece—within the next two years.

But don’t rely on China to supplant falling demand from the eurozone economies. China’s economy is still driven by exports, which represent about 40% of their GDP. The problem here is that China’s largest customers are the U.S., Japan and Europe. The U.S. is mired in stagflation, while Japan’s growth is anemic at best and the EU is in recession.

The global slowdown will put further pressure on the U.S. economy and the earnings of multi-national corporations. Downward pressure on the U.S. economy is already becoming apparent. Data on home sales, industrial production, jobless claims and regional manufacturing surveys have all recently disappointed. U.S. productivity has fallen from 4% during 2010, to just 0.4% during all of 2011. S&P 500 earnings growth has already plummeted from 14% during 2011, to just a 3% annualized rate in Q1 2012.

The fact is that we have a global economy that is intricately intertwined. And at this juncture there is no such thing as decoupling. Because of this, it is my view that equity markets will fall significantly this summer, as earnings fall and PE ratios contract. That will be the primary catalyst that brings global central banks back into play.

The Fed, European Central Bank and Bank of Japan will most likely launch further quantitative easing later this year in an effort to combat falling stock prices.

Mr. Michael Pento is the President of Pento Portfolio Strategies and serves as Senior Market Analyst for Baltimore-based research firm Agora Financial.
Views are as of April 26, 2012, and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security.

Gross Domestic Product (GDP) is a broad gauge of the economy that measures the retail value of goods and services produced in a country.

http://www.gold-eagle.com/editorials...les042612.html

TOO STUPID TO THINK
TOO PARALYZED TO ACT
http://www.gold-eagle.com/images/clear.gif
Peter Souleles B. Com. LLB.
26 April 2012
http://www.gold-eagle.com/images/clear.gif

Many years ago when I was a teenager, my late father had a friend who was in his sixties. His name was Johnny and he was overweight. He was in conversation with my father one day when he started complaining how his fluctuating and ballooning weight required him to buy bigger pants every few months which in turn then required him to look through his wardrobe to find the pants that would fit him as his weight went up and down.


My dad admonished him and told him to lose weight and keep it off. Johnny said it was not possible. It was then that I threw in my two cents worth into the conversation:

"Have you ever thought of buying pants with an elastic waist and possibly one with an elastic waist and a cord that you could tighten when your weight drops a little?"

Well that was it. I had solved old Johnny's problem once and for all. I was feeling quite proud of myself. Needless to say my solution eventually killed Johnny because he kept growing until a fatal heart attack put him into a not so elastic coffin a couple of years later. Since then I have often wondered if he was buried wearing one of those elasticized pants as well.

It seems to me that the central banks of the world have adopted my elasticized waist solution and have continued to print not only money but also solutions that have simply not reined in continually expanding budgets and debt. In fact most of society is walking around with elasticized pants of some sort due to personal or business debt. Now this will all end badly when the world's financial system has a fatal heart attack or when the elastic breaks and we lose our collective pants. Let us be honest, all the QE's, LTRO's, ESM's etc are elastics that will one day snap because they are not solutions.

So what is to be done?

The answer is difficult because the existence of a fractional reserve system complicates matters quite significantly. Let me explain why this is so with an example. If you hold a piece of gold and look at yourself in the mirror you can still see one piece of gold. That to me is a gold standard because the image is the fiat dollar we all hold and the piece of gold is the image's backing. This is quite convenient because the fiat dollar (the image) is much lighter and easier to deal with.

What fractional reserve banking does though is quite wickedly clever. The person holding the gold holds another mirror behind the piece of gold and when you look into the mirror you can see an almost endless number pieces of gold. Everyone feels happy and the banker is even happier than everyone else because he lends out those images to all the cretins of this world and collects real interest on illusory images. Just remember - only the first image is real.

This is going to be an image that is going to be difficult to destroy because the process of removing fake images is called deleveraging and it can easily destroy the system if done incorrectly. At best we should only hope to rein in its growth.

Well the solutions to our debt soaked world are of two kinds. Those that you can proactively adopt and those that are imposed upon you. With the former you continue to be master of your fate and with the latter you become a slave. Iceland is an example of the former and Greece is a fine example of the latter.

The masters as well as the slaves of this world will still have to understand that this is a one off solution because if they fell into the trap of subsequently and constantly revaluing gold at an official level it would still lead to the same current mess.

In addition to a revaluation, the world therefore has to accept that unfunded liabilities are just images of images, that unbridled consumerism is not sustainable, that trade imbalances do not work out well for the creditor or debtor nations, that growing inequalities in income and assets between the have's and have not's are like pushing all the poor passengers on a bus to the last two rows or to one side which in turn causes a blow out or an accident, that trickle down economics is just a euphemism for the top 1% pissing down on the bottom 80%, that ZIRP and poor lending standards are anathema to economic stability, that unemployment is corrosive to society and so on and so forth.

The little man on the street may or may not understand the complexities of the world's finances but he does understand a repossessed house, a loss of his job and a hungry child. It is not within his power to recalibrate the system but it is within his power to rise up when he comes to his wits end.

The top 1% and the leaders of this world have both the income, the assets as well as control of the banking, legislative, judicial and policing apparatus to avoid such an outcome with a just and peaceful solution. In fact it is their moral and financial imperative to do so unless a complete meltdown and war are part of their master plan.

In addition, the world is going to have to pay-off the arms manufacturers to close most of their facilities or else give them a monopoly over some other peaceful and profitable activity, because these guys will not accept redundancy lying down. Let us not forget that had the slave owners of the south been compensated for releasing their slaves rather than starting a civil war, the final cost would have been much much smaller in both human and financial terms. But as one blogger recently said, "men are attracted to war just like moths are attracted to electric light globes."

Failing that, the masters of the system are going to have to figure out how to eliminate all of us baby boomers as we turn 65 so that unfunded liabilities and pensions can also be eliminated so as to allow the younger generation to have the chances that we had at their age and to avoid the world imploding in on itself. I call this the Final Solution - Part II.

Until the participants of this world decide whether to be proactive solution solvers on the one hand or cannibals and combatants on the other, the relative safety of gold and silver is perhaps the best material protection in an imperfect and material world.
What more can I say?


Peter Souleles
Sydney Australia

. Increase Economic Competition: The current economy along with the government and its regulators are wholly run my mega-cartels. No genuine competition exists anymore. In other words, the free market is dead and has been for a long time. Paul's advocacy of free-market economics is perhaps the most misunderstood of all his policies mainly because people view the economic tyranny we have today as the result of so-called "free markets". Nothing could be further from the truth.

Government regulators from the FDA to the EPA are run by mega-corporations who use regulations to prevent competitors from entering the marketplace. It's a scam to believe these agencies are looking out for the best interest of Americans. It's time to give small entrepreneurs the opportunity to compete once again; the bloated corporations wouldn't stand a chance against free competition. Ultimately, this issue is consistent with Paul's profound message of freedom. It must be applied to all aspects of our society, including the economy.



http://2.bp.blogspot.com/-7-19lH0ISv...orateState.png

http://www.bloomberg.com/news/2012-0...-measures.html

The euro remained lower against the yen after a two-day decline on speculation Spanish data today will show the nation’s economy shrank as the currency bloc’s debt crisis deepened.

The euro touched the weakest level in almost two years against the pound before the Spanish government holds a media briefing today to explain steps to cut its deficit. The Australian dollar remained higher after a three-day gain versus the U.S. currency on prospects Asian stocks will extend a global advance, boosting demand for higher-yielding assets.

There are “no real underlying fundamentals that are supporting the euro at these levels,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk-management company. “I’m fairly bearish on Spain and the broad euro zone as a whole.”

The euro was little changed at 106.39 yen at 7:21 a.m. in Singapore from the close in New York on April 27 when it lost 0.6 percent. The 17-nation currency slid to 81.34 U.K. pence, the weakest since June 2010, before trading at 81.35 pence, 0.2 percent lower from the end of last week. The euro fell 0.1 percent to $1.3240. The dollar gained 0.1 percent to 80.35 yen.

Japan’s markets are shut today for a national holiday.

Marta Fernandez, Spain’s deputy budget minister, and Antonio Beteta, deputy minister for public administration, are due to hold the press conference today on deficit measures.

The Spanish economy, the fourth-biggest in the euro region, shrank 0.4 percent in the first three months of this year from the fourth quarter when it contracted 0.3 percent, according to economist estimates. The figure is due today.

The Australian dollar was at $1.0455 from $1.0471 after having risen 1.5 percent in the past three days. The MSCI All- Country World Index of shares advanced 0.4 percent on April 27.

And Now To Technicals...

http://www.finviz.com/forex_charts.ashx?t=EURUSD&tf=m5

Timeframe: 5 minute | hourly | daily | weeklyhttp://www.finviz.com/gfx/nic2x2.gifhttp://www.finviz.com/fx_image.ashx?...13276341243750

Thank you, this week is full of fundamentals that we will give us the light to know where we go. I will see the market now...

Hi Zakir, I am presently in Karnataka, originally from Kolkata (Calcutta)

If u have placed pending sell @ 1.3232 it is not an good idea.

Month-End closing plus Bank Holidays ... this week could have some unusual moves.

http://a0.twimg.com/profile_images/1...eam_normal.png DailyFXTeamMember ‏ @DailyFXTeam



CHINA ECON: China Leading Index falls to 100.52 in March from revised-down 100.69 in February










7:46 PM - 29 Apr 12 via Echofon

I am off until Frankfort open and I see we had a bump up to 1.3242 and all is quiet. Trade well and use a Trade Plan...

Watch Risk On or Risk Off and Price of Gold which is at $1,664.35 now spot price on my platform.


Bonus Coverage...

Dow Jones analysis of CFTC data indicates net Swiss franc short position increased 22% to $2.3 Billion.

Dow Jones analysis of CFTC data indicates net US Dollar long position decreased 13% to $18.8 billion.

Really? Then I know you from 1985. I'll let you scratch your head over that one! LOL! Small world we live in...

Cheers!

http://www.zerohedge.com/news/must-r...rd-best-option

A MUST READ - He Is Part Of The System And His Position Is Now Clear To All Including The Federal Reserve.

The Federal Reserve Bank of New York has invited some of its public critics to visit the bank to unburden themselves of their criticisms. On March 12, it was Jim Grant's turn. The text of his remarks follows. (highlights ours)




Piece Of My Mind

My friends and neighbors, I thank you for this opportunity. You know, we are friends and neighbors. Grant’s makes its offices on Wall Street, overlooking Broadway, a 10-minute stroll from your imposing headquarters.

For a spectacular vantage point on the next ticker-tape parade up Broadway, please drop by. We’ll have the windows washed.

You say you would like to hear my complaints, and, on the one hand, I do have a few, while on the other, I can’t help but feel slightly hypocritical in dressing you down. What passes for sound doctrine in 21st-century central banking—so-called financial repression, interest-rate manipulation, stock-price levitation and money printing under the frosted-glass term “quantitative easing”—presents us at Grant’s with a nearly endless supply of good copy.

Our symbiotic relationship with the Fed resembles that of Fox News with the Obama administration, or—in an earlier era—that of the Chicago Tribune with the Purple Gang. Grant’s needs the Fed even if the Fed doesn’t need Grant’s.

In the not quite 100 years since the founding of your institution, America has exchanged central banking for a kind of central planning and the gold standard for what I will call the Ph.D. standard. I regret the changes and will propose reforms, or, I suppose, re-reforms, as my program is very much in accord with that of the founders of this institution. Have you ever read the Federal Reserve Act? The authorizing legislation projected a body “to provide for the establishment of the Federal Reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper and to establish a more effective supervision of banking in the United States, and for other purposes.” By now can we identify the operative phrase? Of course: “for other purposes.”

You are lucky, if I may say so, that I’m the one who’s standing here and not the ghost of Sen. Carter Glass. One hesitates to speak for the dead, but I am reasonably sure that the Virginia Democrat, who regarded himself as the father of the Fed, would skewer you. He had an abhorrence of paper money and government debt. He didn’t like Wall Street, either, and I’m going to guess that he wouldn’t much care for the Fed raising up stock prices under the theory of the “portfolio balance channel.”

It enflamed him that during congressional debate over the Federal Reserve Act, Elihu Root, Republican senator from New York, impugned the anticipated Federal Reserve notes as “fiat” currency.

Fiat, indeed! Glass snorted. The nation was on the gold standard. It would remain on the gold standard, Glass had no reason to doubt. The projected notes of the Federal Reserve would—of course—be convertible into gold on demand at the fixed statutory rate of $20.67 per ounce. But more stood behind the notes than gold. They would be collateralized, as well, by sound commercial assets, by the issuing member bank and—a point to which I will return— by the so-called double liability of the issuing bank’s stockholders.
http://www.zerohedge.com/sites/defau...%20chart_0.jpg
If Glass had the stronger argument, Root had the clearer vision. One can think of the original Federal Reserve note as a kind of derivative. It derived its value chiefly from gold, into which it was lawfully exchangeable. Now that the Federal Reserve note is exchangeable into nothing except small change, it is a derivative without an underlier. Or, at a stretch, one might say it is a derivative that secures its value from the wisdom of Congress and the foresight and judgment of the monetary scholars at the Federal Reserve. Either way, we would seem to be in dangerous, uncharted waters.

As you prepare to mark the Fed’s centenary, may I urge you to reflect on just how far you have wandered from the intentions of the founders? The institution they envisioned would operate passively, through the discount window. It would not create credit but rather liquefy the existing stock of credit by turning good-quality commercial bills into cash— temporarily. This it would do according to the demands of the seasons and the cycle. The Fed would respond to the community, not try to anticipate or lead it. It would not override the price mechanism— as today’s Fed seems to do at every available opportunity—but yield to it.

My favorite exposition of the sound, original doctrines is a book entitled, “The Theory and Practice of Central Banking,” by H. Parker Willis, first secretary of the Federal Reserve Board and Glass’s right-hand man in the House of Representatives.

Writing in the mid-1930s, Willis pointed out that the Fed fell into sin almost immediately after it opened for business in 1914. In 1917, after the United States entered the Great War, the Fed set about monetizing the Treasury’s debt and suppressing the Treasury’s borrowing costs. In the 1920s, after the recovery from the short but ugly depression of 1920-21, the Fed started to implement open-market operations to sterilize gold flows and steer a desired macroeconomic course.

“Central banks,” wrote Willis, glaring at the innovators, “…will do wisely to lay aside their inexpert ventures in halfbaked monetary theory, meretricious statistical measures of trade, and hasty grinding of the axes of speculative interests with their suggestion that by doing so they are achieving some sort of vague ‘stabilization’ that will, in the long run, be for the greater good.”

Willis, who died in 1937, perhaps of a broken heart, would be no happier with you today than Glass would be—or I am. The search for “some sort of vague stabilization” in the 1930s has become a Federal Reserve obsession at the millennium.

Ladies and gentlemen, such stability as might be imposed on a dynamic capitalist economy is the kind that eventually comes around to bite the stabilizer.

“Price stability” is a case in point. It is your mandate, or half of your mandate, I realize, but it does grievous harm, as defined. For reasons you never exactly spell out, you pledge to resist “deflation.” You won’t put up with it, you keep on saying—something about Japan’s lost decade or the Great Depression. But you never say what deflation really is. Let me attempt a definition. Deflation is a derangement of debt, a symptom of which is falling prices. In a credit crisis, when inventories become unfinanceable, merchandise is thrown on the market and prices fall. That’s deflation.

What deflation is not is a drop in prices caused by a technology-enhanced decline in the costs of production. That’s called progress. Between 1875 and 1896, according to Milton Friedman and Anna Schwartz, the American price level subsided at the average rate of 1.7% a year. And why not? As technology was advancing, costs were tumbling. Long before Joseph Schumpeter coined the phrase “creative destruction,” the American economist David A. Wells, writing in 1889, was explaining the consequences of disruptive innovation.

“In the last analysis,” Wells proposes, “it will appear that there is no such thing as fixed capital; there is nothing useful that is very old except the precious metals, and life consists in the conversion of forces. The only capital which is of permanent value is immaterial—the experience of generations and the development of science.”

Much the same sentiments, and much the same circumstances, apply today, but with a difference. Digital technology and a globalized labor force have brought down production costs. But, the central bankers declare, prices must not fall. On the contrary, they must rise by 2% a year. To engineer this up-creep, the Bernankes, the Kings, the Draghis—and yes, sadly, even the Dudleys—of the world monetize assets and push down interest rates. They do this to conquer deflation.

But note, please, that the suppression of interest rates and the conjuring of liquidity set in motion waves of speculative lending and borrowing. This artificially induced activity serves to lift the prices of a favored class of asset—houses, for instance, or Mitt Romney’s portfolio of leveraged companies. And when the central bank-financed bubble bursts, credit contracts, leveraged businesses teeter, inventories are liquidated and prices weaken. In short, a process is set in motion resembling a real deflation, which then calls forth a new bout of monetary intervention. By trying to forestall an imagined deflation, the Federal Reserve comes perilously close to instigating the real thing.

The economist Hyman Minsky laid down the paradox that stability is itself destabilizing. I say that the pledge of a stable funds rate through the fourth quarter of 2014 is hugely destabilizing. Interest rates are prices. They convey information, or ought to. But the only information conveyed in a manipulated yield curve is what the Fed wants. Opportunists don’t have to be told twice how to respond.

They buy oil or gold or foreign exchange, not incidentally pushing the price of a gallon of gasoline at the pump to $4 and beyond.

Another set of opportunists borrow short and lend long in the credit markets. Not especially caring about the risk of inflation over the long run, this speculative cohort will fund mortgages, junk bonds, Treasurys, what-have-you at zero percent in the short run. The opportunists, a.k.a. the 1 percent, will do fine. But what about the uncomprehending others?

I commend to the Federal Reserve Bank of New York Financial History Book Club (if it doesn’t exist, please organize it at once) a volume by the British scholar and central banker, Charles Goodhart. Its title is “The New York Money Market and the Finance of Trade, 1900-1913.” In the pre-Fed days with which the history deals, the call money rate dove and soared. There was no stability—and a good thing, Goodhart reasons. In a society predisposed to speculate, as America was and is, he writes, unpredictable spikes in borrowing rates kept the players more or less honest. “On the basis of its record,” he writes of the Second Federal Reserve District before there was a Federal Reserve, “the financial system as constituted in the years 1900-1913 must be considered successful to an extent rarely equaled in the United States.” And that not withstanding the Panic of 1907.


My reading of history accords with Goodhart’s, though not with that of the Fed’s front office. If Chairman Bernanke were in the room, I would respectfully ask him why this persistent harking back to the Great Depression? It is one cyclical episode, but there are many others. I myself draw more instruction from the depression of 1920-21, a slump as ugly and steep in its way as that of 1929-33, but with the simple and interesting difference that it ended. Top to bottom, spring 1920 to summer 1921, nominal GDP fell by 23.9%, wholesale prices by 40.8% and the CPI by 8.3%. Unemployment, as it was inexactly measured, topped out at about 14% from a pre-bust low of as little as 2%. And how did the administration of Warren G. Harding meet this macroeconomic calamity?

Why, it balanced the budget, the president declaring in 1921, as the economy seemed to be falling apart, “There is not a menace in the world today like that of growing public indebtedness and mounting public expenditures.” And the fledgling Fed, face to face with its first big slump, what did it do? Why, it tightened, pushing up short rates in mid-depression to as high as 8.13% from a business cycle peak of 6%. It was the one and only time in the history of this institution that money rates at the trough of a cycle were higher than rates at the peak, according to Allan Meltzer.

But then something wonderful happened: Markets cleared, and a vibrant recovery began. There were plenty of bankruptcies and no few brickbats launched in the direction of the governor of the New York Fed, Benjamin Strong, for the deflation that cut an especially wide and devastating swath through the American farm economy. But in 1922, the first full year of recovery, the Fed’s index of industrial production leapt by 27.3%. By 1923, the unemployment rate was back to 3.2%. The 1920s began to roar.

And do you know that the biggest nationally chartered bank to fail during this deflationary collapse was the First National Bank of Cleburne, Texas, with not quite $2.8 million of deposits? Even the forerunner to today’s Citigroup remained solvent (though for Citi, even then it was a close-run thing, on account of an oversize exposure to deflating Cuban sugar values). No TARP, no starving the savers with zero-percent interest rates, no QE, no jimmying up the stock market, no federal “stimulus” of any kind.

Yet—I repeat—the depression ended. To those today who demand ever more intervention to cure what ails us, I ask: Why did the depression of 1920-21 ever end? Given the policies with which the authorities treated it, why are we still not ensnared?

If you object to using the template of 1920-21 as a guide to 21st-century policy because, well, 1920 was a long time ago, I reply that 1929 was a long time ago, too. And if you persist in objecting because the lessons to be derived from the Harding depression are unthinkably at odds with the lessons so familiarly mined from the Hoover and Roosevelt depression, I reply that Harding’s approach worked. The price mechanism is truer and enterprise hardier than the promoters of radical 21st-century intervention seem prepared to acknowledge.

In notable contrast to the Harding method, today’s policies seem not to be working. We legislate and regulate and intervene, but still the patient languishes. It’s a worldwide failure of the institutions of money and credit.

I see in the papers that Banca Monte dei Paschi di Siena is in the toils of a debt crisis. For the first time in over 500 years, the foundation that controls this ancient Italian institution may be forced to sell shares. We’ve all heard of hundred-year floods. We seem to be in a kind of 500-year debt flood.

Many now call for more regulation— more such institutions as the Treasury’s brand-new Office of Financial Research, for instance. In the March 8 Financial Times, the columnist Gillian Tett appealed for more resources for the overwhelmed regulators. Inundated with information, she lamented, they can’t keep up with the institutions they are supposed to be safeguarding. To me, the trouble is not that the regulators are ignorant. It’s rather that the owners and managers are unaccountable.

Once upon a time—specifically, between the National Banking Act of 1863 and the Banking Act of 1935—the impairment or bankruptcy of a nationally chartered bank triggered a capital call. Not on the taxpayers, but on the stockholders. It was their bank, after all. Individual accountability in banking was the rule in the advanced economies. Hartley Withers, the editor of The Economist in the early 20th century, shook his head at the micromanagement of American banks by the Office of the Comptroller of the Currency—25% of their deposits had to be kept in cash, i.e., gold or money lawfully convertible into gold. The rules held. Yet New York had panics, London had none. Adjured Withers: “Good banking is produced not by good laws but by good bankers.”

Well said, Withers! And what makes a good banker is more than skill. It is also the fear of God, or, more specifically, accountability for the solvency of the institution that he or she owns or manages. To stay out of trouble, the general partners of Brown Brothers Harriman, Wall Street’s oldest surviving general partnership, need no regulatory pep talk. Each partner is liable for the debts of the firm to the full extent of his or her net worth.

My colleague Paul Isaac, who is with me today—he doubles as my food and beverage taster— has an intriguing suggestion for instilling the credit culture more deeply in our semi-socialized banking institutions.

We can’t turn limited liability corporations into general partnerships. Nor could we easily reinstate the so-called double liability law on bank stockholders. But what we could and should do, Paul urges, is to claw back that portion of the compensation paid out by a failed bank in excess of 10 times the average wage in manufacturing for the seven full calendar years before the ruined bank hit the wall. Such a clawback would not be subject to averaging or offset one year to the next. And it would be payable in cash.

The idea, Paul explains, is twofold. First, to remove the government from the business of determining what is, or is not, risky—really, the government doesn’t know. Second, to increase the personal risk of failure for senior management, but stopping short of the sword of Damocles of unlimited personal liability. If bankers are venal, why not harness that venality in the public interest? For the better part of 100 years, and especially in the past five, we have socialized the risks of high finance. All too often, the bankers who take risks don’t themselves bear them. By all means, let the capitalists keep the upside. But let them bear their full share of the downside.

In March 2009, the Financial Times published a letter to the editor concerning the then novel subject of QE. “I can now understand the term ‘quantitative easing,’ wrote Gerald B. Hill of Stourbridge, West Midlands, “but . . . realize I can no longer understand the meaning of the word ‘money.’”

There isn’t time, in these brief remarks, to persuade you of the necessity of a return to the classical gold standard. I would need another 10 minutes, at least. But I anticipate some skepticism. Very well then, consider this fact: On March 27, 1973, not quite 39 years ago, the forerunner to today’s G-20 solemnly agreed that the special drawing right, a.k.a. SDR, “will become the principal reserve asset and the role of gold and reserve currencies will be reduced.” That was the establishment— i.e., you—talking. If a worldwide accord on the efficacy of the SDR is possible, all things are possible, including a return to the least imperfect international monetary standard that has ever worked.

Notice, I do not say the perfect monetary system or best monetary system ever dreamt up by a theoretical economist. The classical gold standard, 1879-1914, “with all its anomalies and exceptions . . . ‘worked.’”


The quoted words I draw from a book entitled, “The Rules of the Game: Reform and Evolution in the International Monetary System,” by Kenneth W. Dam, a law professor and former provost of the University of Chicago. Dam’s was a grudging admiration, a little like that of the New York Fed’s own Arthur Bloomfield, whose 1959 monograph, “Monetary Policy under the International Gold Standard,” was published by yourselves. No, Bloomfield points out, as does Dam, the classical gold standard was not quite automatic. But it was synchronous, it was self-correcting and it did deliver both national solvency and, over the long run, uncanny price stability. The banks were solvent, too, even the central banks, which, as Bloomfield noted, monetized no government debt.


The visible hallmark of the classical gold standard was, of course, gold—to every currency holder was given the option of exchanging metal for paper, or paper for metal, at a fixed, statutory rate. Exchange rates were fixed, and I mean fixed. “It is quite remarkable,” Dam writes, “that from 1879 to 1914, in a period considerably longer than from 1945 to the demise of Bretton Woods in 1971, there were no changes of parities between the United States, Britain, France, Germany—not to speak of a number of smaller European countries.” The fruits of this fixedness were many and sweet. Among them, again to quote Dam, “a flow of private foreign investment on a scale the world had never seen, and, relative to other economic aggregates, was never to see again.”


Incidentally, the source of my purchased copy of “Rules of the Game” was the library of the Federal Reserve Bank of Atlanta. Apparently, President Lockhart isn’t preparing, as I am—as, may I suggest, as you should be—for the coming of classical gold standard, Part II. By way of preparation, I commend to you a new book by my friend Lew Lehrman, “The True Gold Standard: A Monetary Reform Plan without Official Reserve Currencies: How We Get from Here to There.”

It’s a little rich, my extolling gold to an institution that sits on 216 million troy ounces of the stuff. Valued at $42.222 per ounce, the hoard in your basement is worth $9.1 billion. Incidentally, the official price was quoted in SDRs, $35 to the ounce—now there’s a quixotic choice for you.

In 2008, when your in-house publication, “The Key to the Gold Vault,” was published, the market value was $194 billion. Today, the market value is $359 billion, which is encouraging only if you personally happen to be long gold bullion. Otherwise, it strikes me as a pretty severe condemnation of modern central banking.


And what would I do if, following the inauguration of Ron Paul, I were sitting in the chairman’s office? I would do what I could to begin the normalization of interest rates. I would invite the Wall Street Journal’s Jon Hilsenrath to lunch to let him know that the Fed is now well over its deflation phobia and has put aside its Atlas complex.

“It’s capitalism for us, Jon,” I would say. Next I would call President Dudley. “Bill,” I would say, pleasantly, “we’re not exactly leading from the front in the regulatory drive to reduce the ratio of assets to equity at the big American financial institutions. Do you have to be leveraged 89:1?” Finally, I would redirect the efforts of the brainiacs at the Federal Reserve Board research division. “Ladies and gentlemen,” I would say, “enough with ‘Bayesian Analysis of Stochastic Volatility Models with Levy Jumps: Application to Risk Analysis.’ How much better it would please me if you wrote to the subject, ‘Command and Control No More: A Gold Standard for the 21st Century.’” Finally, my pièce de résistance, I would commission, staff and ceremonially open the Fed’s first Office of Unintended Consequences.

Let me thank you once more for the honor that your invitation does me.

Concerning little Grant’s and the big Fed, I will quote in parting the opening sentences of an editorial that appeared in a provincial Irish newspaper in the fateful year 1914. It read: “We give this solemn warning to Kaiser Wilhelm: The Skibbereen Eagle has its eye on you.”

Kno's Comments: An Absolutely Brilliant Presentation By A True American.

I have read every word of his speech and I hope you did also. We cannot by ourselves change anything however to stay ignorant to the truth serves you no good purpose.

I am now finally off to bed for 4 hours or so of sleep. Good Night...

http://www.zerohedge.com/news/europe...contagion-peak

In yet another 2011 déjà vu moment, Europe’s bank funding window is slamming shut again (the catalyst that brought the 2011 Euro crisis vintage to its heights). Nowhere is this more evident than when comparing monthly debt issuance in the first 4 months of 2012 to the previous two years. Sadly, even despite taking place while the LTRO effect was front and center, Europe still was unable to match prior year debt. Fine, the skeptics will say, this simply means that there is less debt maturing and thus less need for new issuance… And the skeptics would be wrong. As charts two and three demonstrate, this is broadly correct for only 4 countries, of which 3 still have their own currencies (coincidence). The balance is a sorry sight, with Germany, Spain and Italy seeing nearly EUR100 billion in net unrolled redemptions just Year to Date alone! As UBS very poignantly points out, “It is difficult to see this as anything other than contagion from the latest variant of the euro crisis.”

Total debt issuance YTD 2012 and compared to 2010 and 2011:
http://www.zerohedge.com/sites/defau...Bank%201_0.jpg
Total YTD debt issuance by country:





http://www.zerohedge.com/sites/defau...bank%202_0.jpg

So as the contagion tsunami once again rises to its summer-time crescendo, the market will be quite curious which banks provide the best target practice in a world where suddenly shorting European banks is once again allowed (for how much longer we wonder). And once again courtesy of UBS (which is quite happy to present other banks’ dirty laundry in a smart redirection effort punctuated by the following footnote: “Note: data on UBS is publicly disclosed”) we show readers which banks have once again lost all capital markets access and are most heavily reliant on the ECB as a “key component of the financing structure”
ECB is the primary liquidity lifeline in absolute terms for the following banks:
http://www.zerohedge.com/sites/defau...Bank%204_0.jpg
Same in relative terms, as a % of funded assets.
http://www.zerohedge.com/sites/defau...Bank%205_0.jpg
To the banks mentioned above, we just want to say ‘no hard feelings’: we leave you with UBS’ conclusion on what is certainly inevitable, and will allow you to kick the can down the road at least one more time as y’all get bailed out one more time.
We see a significant possibility of the need for further ECB intervention in coming weeks and months to provide extra funds the financial system and sovereign in Spain, while the debate over banking reconstruction takes place… The market is unlikely in our view to provide the authorities the time to deliver solutions without further official support.
Translated: expect the next Euro-contagion peak within the “coming weeks and months.”

1000pips a week!? how?... If I coul get that in 6 months I'd be thrilled (though I prefer the per week time frame lol)

You buddy seriously have a war with Forex ... lol

CHARGE!!!!! lol

stick with your own method and find out the problems within it, have a cool mind ..that's it