EurAnalysis

how many here trade gold? What is the daily pips range?

yep seems like that. With it being a post major news day I expect pretty good moves.

http://www.mybudget360.com/the-tippi...urrent-growth/

http://www.mybudget360.com/the-tippi...urrent-growth/

Total global debt addiction
The US is on a fast pass to breaching the debt ceiling yet again. This is bi-partisan type of event:
http://www.mybudget360.com/wp-conten...bt-ceiling.png
The issue above is that our total debt is now higher than our actual GDP. That is a problem. People sometime point to countries like Japan as an example of a nation with massive debt (around 200 percent of GDP) and use this as a best case. How is that? There economy has been stagnant for more than 20 years. They have major demographic issues hitting. Has anyone looked at their stock market?
http://www.mybudget360.com/wp-conten.../10/nikkei.png
The Japanese stock market is lower today than it was in 1984. Is this really the example we want to use as a “too much debt” doesn’t matter argument? Plus, they are a nation of savers and we are definitely not (1 out of 3 Americans has zero dollars to their name). The fact of the matter is we are globally on a debt addicted path. It is hard to remove debt from the market once it is already introduced. That is why the Fed with QE3 will need to keep adding program after program because now, the market is conditioned to mortgages rates that really defy any sort of open market program. Yet this action is having other reactions like crushing the standard of living of Americans merely for the sake of bailing out banks.
Total global debt is on an unsustainable path:
http://www.mybudget360.com/wp-conten...-Stock-1_0.jpg
Global debt is going to need to grow a stunning 97 percent in the next few years up to $213 trillion just to keep up with recent growth projections. Now this would not be an issue if GDP actually came hand and hand along with it. But that is not the case. Debt spending does not have the same impact as normal sustained growth. This is why in China you have millions of empty apartments and horrible investments in real estate because hot money is flowing everywhere just for the sake of growing GDP. This bubble will burst just like every other bubble has burst. In Europe you are seeing deflating housing markets from Holland, Ireland, and Spain.

http://www.project-syndicate.org/com...antonio-ocampo

NEW YORK – The United States Federal Reserve’s recent decision to launch a third round of “quantitative easing” has revived accusations by Brazil’s finance minister, Guido Mantega, that the US has unleashed a “currency war.” In emerging-market countries that are already struggling with the impact of rapid currency appreciation on their competitiveness, expansionary measures announced in recent weeks by the European Central Bank and the Bank of Japan have heightened the sense of alarm at the Fed’s decision.http://www.project-syndicate.org/def...8.portrait.jpgIllustration by Paul Lachine

CommentsView/Create comment on this paragraphMy sense is that both sides are right. The Fed was right to adopt new expansionary monetary measures in the face of a weak US recovery. Furthermore, tying it to improvements in the labor market was a particularly important step – one that other central banks, especially the ECB, should follow.

CommentsView/Create comment on this paragraphOf course, monetary expansion should be accompanied by a less contractionary fiscal stance in industrial countries. But the advanced economies’ room for fiscal maneuver is more limited than it was in 2007-2008, and America’s political gridlock has deepened, all but ruling out further stimulus through budgetary channels. Although the effectiveness of a new round of quantitative easing will be limited, as Mantega argues, the Fed had no choice but to act.

CommentsView/Create comment on this paragraphBut Mantega is also right. Given the role of the US dollar as the dominant global currency, the Fed’s expansionary monetary policy generates significant externalities for the rest of the world – effects that the Fed is certainly not taking into account. The basic problem is that there are essential imperfections in an international monetary system that is based on the use of a national currency as the world’s main reserve currency.

CommentsView/Create comment on this paragraphThis problem was highlighted as far back as the 1960’s by the Belgian economist Robert Triffin, and, more recently, by the late Italian economist Tommaso Padoa-Schioppa. “The stability requirements of the system as a whole,” Padoa-Schioppa argued, “are inconsistent with the pursuit of economic and monetary policy forged solely on the basis of domestic rationales.”
CommentsView/Create comment on this paragraphIn particular, expansionary monetary policies in the US (indeed, in all advanced countries) are generating high risks for emerging economies. Because interest rates must remain very low in developed countries at least for the next several years, there are now strong incentives to export capital to higher-yielding emerging economies. But such capital inflows threaten exchange-rate overvaluation, rising current-account deficits, and asset-price bubbles, all of which have in the past led to crises in these economies.

http://321gold.com/editorials/russel...ell100812.html

http://www.realclearmarkets.com/arti...ion_99917.html


October 5, 2012
Central Banks Gone Wild: Money Is Now a Total Fiction

By Jeffrey Snider


For the most part the general public has distinct and sometimes divergent views on the Federal Reserve and the European Central Bank (ECB). Obviously, there are political and institutional differences that present both with unique challenges, meaning that what constraints apply to the Fed do not always apply to the ECB and vice versa. It certainly seems that way on the surface when the ECB pledges to buy an unlimited amount of troubled sovereign bonds to keep those nations from plunging into the Greek abyss, while at nearly the exact same moment the US central bank pledges to buy an unlimited amount of erstwhile untroubled mortgage products to theoretically create jobs.
Despite the operational idiosyncrasies of each central bank, they are entangled by something far more pivotal: operative theory. What I mean by operative theory here goes deeper than just their now-constant appeal to debasement. For all intents and purposes, global central banks view "money" as nothing more than "charta", a Latin word for "token".

The word itself is more meaningful than just its Latin etymology. In the early part of the 20th century, there was a school of thought advocating a full fiat system where money was nothing more than a creature of government whim. Through the power of taxation a government can essentially create currency or money from anything it wished: if government accepts sea shells as payment for taxes, sea shells become fiat money. In theoretical terms, if the government tomorrow declared this to be the case, suddenly sea shells have been given "value" through the creation of coercive demand enforced at the point of the figurative government gun.



http://ads.investingchannel.com/adta...85680900071%3F
Earlier this week, Andrea Enria, Chairman of the European Union's banking regulator, the European Banking Authority (EBA), was quoted by Bloomberg congratulating the banking system's continued revival and renewal:

"We want banks to hold on to and keep building capital. The key positive in the response of banks to this exercise is that 75 percent of the shortfall was raised by retaining earnings and other measures -- fresh capital."

There is more than just a rhetorical sleight of hand going on here. That statement may seem uncontroversial on its face since it is technically accurate in the accounting sense, but semantically the word "capital", which is the central focus, has a broader meaning than the generic application used by Mr. Enria.

It is absolutely true that European banks have increased their capital levels by about €200 billion since the mid-2011 stress tests, and have done so largely through retained earnings and "fresh capital". But that connotes successful business practices being applied on a systemic scale, where banks throughout the European continent have been swiftly rewarded for their business and market acumen. Yet, we know that to be an outright falsehood given the constant state of market upheaval and near-permanent monetary interventions, so how do we square the technically true accounting statement with the obvious market rejection of large proportions of European banking?

Into that void delves charta. Fresh capital in the modern monetary sense is a unit on an accounting statement, devoid of any larger connotation. For investors and the process of investing, however, accounting should have meaning - where a business gets its money matters greatly in the process of investment analysis. Since banks are nothing more than businesses in the intermediation industry, we rightfully expect "capital" success to have such positive meaning.

Perhaps the best example of this divergence in meaning is seen in the oldest banking concern in the world. Banca Monte dei Paschi di Siena SpA was in existence before Christopher Columbus sailed backward for India. The bank is commonly described as having survived ages of social upheavals, wars and Acts of God, but it may not survive the age of central bank activism having received bailouts in both 2009 and 2012.

Monte Paschi has been losing money due to a distinct lack of business acumen - first in investing far outside its comfort zone while trying to become a multi-regional bank on par with UniCredit and Intesa (the two largest banks in Italy, and two banks that are also routinely cited as systemic problems). That meant an aggressive expansion through mergers and acquisitions where bank "capital" was deployed in the purchase of other banks and their intermediary artifacts. Efficiently deploying capital requires paying a "good" price for "good" assets.

The bank lost €4.7 billion in 2011, in large part due to writedowns on goodwill created by that unwise capital deployment. In 2007, for example, Monte Paschi bought Banca Antonveneta, another Italian concern that has been a dead weight, loss-producer nearly from the moment the deal closed. Because of the hefty premium the bank paid, creating the accounting ledger of goodwill, these writedowns of goodwill flowed onto the income statement as losses, thus effectively destroying that deployed "capital" or "money".

Destruction of capital has been acute at Monte Paschi in 2012, moreso than perhaps any other bank outside of Spain. When told by the EBA to raise "fresh capital" of at least €3.27 billion earlier this year, the bank found it had no access to it, and not for lack of trying. Apparently, market investors have determined that Monte Paschi is not a good intermediary of money and found it undeserving of fresh money injections that would satisfy the accounting notion of capital.

Without prospects for capital, Monte Paschi was "forced" into Tremonti bond sales with the Italian federal government. Facing a June 30 deadline imposed by the EBA, the Italian government first capped its purchase of these bonds at €2 billion, but as with so many things about political interventions (money is meaningless, after all), by August 23, the total was increased to €3.4 billion. Tremonti bonds are a special class, amounting to a hybrid security that is both debt and equity, thus qualifying to be treated as "capital" for the accounting statements. These bonds require the bank to pay the Italian government somewhere above 8.5% interest in any profitable years. In any year where the bank loses "money" in the course of normal operation, the bonds convert into equity - at book value! In other words, the Italian government will be covering the bank's future losses on past lending at about five times the current market price of the company's stock.

But unbridled expansion ambitions have not been the only source of negative capital for Monte Paschi. According to the Washington Post, the bank's chief executive, Fabrizio Viola, said last month that, "The problem of Monte Paschi was the fact that over the last two years, they invested a lot, in my opinion too much, in the government portfolio," before adding, "It was not a prudent decision." While this speaks to the lack of business acumen in operating a business that is supposed to create positive capital, it also squares the charta circle.

The bank is being rescued by a government in which it loses "money" by investing in that same government. Worse, the "capital" provided by the government is essentially provided by "money" invested by the bank itself through all those bond purchases (by last estimate, Monte Paschi had about €25 billion in Italian sovereign bonds on its balance sheet). This is all well and good, fully satisfying the requirements of all the accounting and national banking regulations in existence. There is nothing illegal here, no statutory fraud nor impropriety. Charta really is the meaningless accumulation of units of account, regardless of source.

This theoretical application in the case of Monte Paschi is by no means unique. While these accounting details are not widespread, the charta infestation has become endemic on a systemic level. And while Monte Paschi exemplifies some of the "fresh capital" that Mr. Enria alluded to, those retained earnings are certainly more problematic. For the most part, capital obtained by retained earnings has been built on the back of ultra-low interest rates created by the ECB's monetary injections. A good portion of European banks, particularly the larger "core" banks, enjoy the privilege of near-zero (in the case of normal monetary operations), low-cost extended maturity (in the case of the LTRO's) and favorably priced (in the case of the SMP) "money" that was created by nothing more than the digital account expressions of expanding the ECB balance sheet.

Of course ultra-low interest rates are not unique to Europe as the United States has been under the thumb of ZIRP for nearly four years - with another three already planned and communicated. Ben Bernanke himself earlier this week addressed the rebuild of retained earnings in the United States through ZIRP. Perhaps far more explicit than the ECB, the Fed Chairman was essentially arguing that increasing the number of charta directly increases the number of employed Americans, therefore providing some purpose to the government monopoly of money.

The full context of that argument, however, argues that "money" is far more meaningful than just the government's imprimatur or eligibility for taxation extinguishment. In addressing ZIRP, Chairman Bernanke acknowledged the flipside of rebuilding the banking system's collective retained earnings:

"My colleagues and I know that people who rely on investments that pay a fixed interest rate, such as certificates of deposit, are receiving very low returns, a situation that has involved significant hardship for some.
However, I would encourage you to remember that the current low levels of interest rates, while in the first instance a reflection of the Federal Reserve's monetary policy, are in a larger sense the result of the recent financial crisis, the worst shock to this nation's financial system since the 1930s. Interest rates are low throughout the developed world, except in countries experiencing fiscal crises, as central banks and other policymakers try to cope with continuing financial strains and weak economic conditions.

A second observation is that savers often wear many economic hats. Many savers are also homeowners; indeed, a family's home may be its most important financial asset. Many savers are working, or would like to be. Some savers own businesses, and--through pension funds and 401(k) accounts--they often own stocks and other assets. The crisis and recession have led to very low interest rates, it is true, but these events have also destroyed jobs, hamstrung economic growth, and led to sharp declines in the values of many homes and businesses. What can be done to address all of these concerns simultaneously? The best and most comprehensive solution is to find ways to a stronger economy. Only a strong economy can create higher asset values and sustainably good returns for savers."

Forget that second paragraph where the Chairman essentially blames George Bush (or at least that he believes the stain of 2008 continues to haunt the real economy four years later) and then commits the logical fallacy of "everybody else is doing it". What is the meat of his argument is the third paragraph, that low interest rates are the only way to achieve a "stronger economy", and by extension, the only way for interest rates, and thus the returns on money and real savings, to eventually rise again. Because ZIRP is only achieved through increasing the number of monetary units, connecting the logical dots here, the only way to get a strong economy and "normal" returns on savings capital is through charta ideology. Savers of real capital have no choice but to suffer in the backdoor socializing of bank losses in order for the economy to recover - though the suffering is real to date, the recover part is conspicuously absent.

This philosophy thoroughly upends capitalism. The entire premise of capitalism is the efficient deployment of capital; capital having full meaning absent in the sense of modern money. Capitalists create capital through successful deployment of "money", turning that "money" into true wealth of productive enterprise. That successful deployment of money creates additional capital that can be "monetized" in asset markets, but the number of new monetary units has no basis in trying to predict or determine successful business acumen. That is the traditional role of intermediation.

Chartalism in this form is nothing more than a theory that capital can easily be replaced by mere monetary units, as if there is no information content relevant to economic efficiency stored in the flow of capitalized money. Past success in the form of stored "earnings" or "money" is, following this line of inquiry, eminently replaceable by determined government planning. In that way, money is now flowed or channeled on the basis of poor past performance rather than on the basis of good expected future performance.

In the past four years, central banks have attempted to resurrect economic health by adding new charta to the system with perfect exclusivity biased to institutions and businesses that have destroyed their past stores of capital, despite the very visible fact that said destruction of capital is the quintessential measure of real economy inefficiency. If the destruction of money has meaning, then so does the creation of money, or at least the methodology of determining how money is acquired. Bernanke's theory, shared by all the major central banks on this globe, is that economies can only recover when capital is disadvantaged in favor of meaningless money. This is not just the theory he espouses in public speeches, it is the operative theory put in practice by central banks in every major economy.

The primacy of meaningless money is such that the entire system of savers, the majority of which have created actual capital and acquired value, need to be hamstrung by ZIRP in favor of institutions that destroyed real capital in the inefficient pursuit of the very policies that central banks directed in the first place. Success is to be shunned and disfavored in the socialized and institutionalized process of debt creation from the very firms that have proven beyond a doubt that they are not capable of maintaining economic efficiency. The ascendancy of chartalism is the only manner in which such a backward system could actually exist.

Unfortunately, real economies run not on meaningless money, but on sustainable and efficient success. All of these banks and central banks need to emulate the ideals cleverly conjured and portrayed in the Smith Barney TV commercials of decades past, when firms used to "earn" their money. The capital on a bank's balance sheet at one time (before fiat money and transcontinental wholesale money markets) denoted success at intermediating the pool of savings, turning past success into additional future success in a virtuous circle that is the hallmark of every thriving economy in history. In short, money is supposed to be about winners and losers. Economies need to reward the virtue of economic winners and delete the societal and systemic cost of the losers. Without monetary meaning, there is no sorting process of winners and losers; there are only losers that are supposed to take comfort in the vacuous experimentations of academic central bankers that passes for progress and evolution.

More than anything, human nature needs value and meaning in money. Maybe central bankers should try their hands at investing without any meaning to money and capital - it doesn't work. Try as they might, particularly with reducing economic agents to mathematical equations and models, modern mainstream economics has tried to dehumanize the economic and financial system. It certainly makes economics appear more scientific, but ultimately that is just the cloak of self-delusion - models are not science.

Perhaps central banks have re-invented an achievable means to a healthy economy with meaningless, inhuman tokens, but the results of the past four years, particularly 2011 and so far in 2012, are rather conclusive and unambiguous doubts. It's easy to blame fiscal profligacy for all the current ills, but such bad habits were borne and nurtured by money without any real meaning in the first place - intermediation removed from its eponymous task. Chairman Bernanke, Andrea Enria and Mario Draghi would be hard pressed to know the difference, however, since their accounting arrangements of all the new tokens make it difficult to discern anything economically meaningful at all. The word debasement itself is not just a semantic accident; it literally means to reduce status or esteem - very human concepts. Welcome to the world where capital, in a still nominally capitalist system, is as pliable and fictionable as TV advertising.



Jeffrey Snider is the Chief Investment Strategist of Alhambra Investment Partners, a registered investment advisor.

http://globaleconomicanalysis.blogsp...Trend+Analysis)


Merkel Protected by 6,000 Police; Expect Huge Anti-Austerity Protest; Greece Needs Time and Money (And Something Else)




German chancellor Angela Merkel is visiting Greece this week in an alleged show of solidarity. Reuters notes it will take 6,000 police to protect her.

German Chancellor Angela Merkel will tell Greeks she wants to keep their country in the euro when she visits Athens this week, but she faces a hostile reception from a people worn down by years of austerity and recession.

Many Greeks blame Merkel, who has publicly chastised them for much of the past three years, for the nation's plight. Opponents, some of whom have caricatured her as a bullying Nazi, have promised protests on Tuesday during her first visit to Greece since the euro zone crisis erupted there in 2009.

"She does not come to support Greece, which her policies have brought to the brink. She comes to save the corrupt, disgraced and servile political system," said Alexis Tsipras, who leads the opposition Syriza alliance. "We will give her the welcome she deserves."

About 6,000 policemen will be deployed in the capital for her 6-hour visit, turning the city centre into a no-go zone for protest marches planned by labour unions and opposition parties.

"We don't want her here," said Yannis Georgiou, 72, who has seen his pension cut by one third. "We will take to the streets against austerity and against the government. Maybe Merkel will hear something and see what we're going through."

Solidarity? Really?

Is Merkel's visit really a show of solidarity? Solidarity between whom? Between politicians conspiring to screw Greeks for the benefit of banks?

Merkel Arrival in Athens to Be Met by Anti-Austerity Protesters

Bloomberg reports Merkel Arrival in Athens to Be Met by Anti-Austerity Protesters

“Mr. Samaras said we should welcome Mrs. Merkel as she deserves,” said Alexis Tsipras, the head of Syriza party, which finished second in the June elections and has urged workers, the unemployed and young people, to join the rallies. “We completely agree.”

Read more at http://globaleconomicanalysis.blogsp...qPODT6C8cp3.99

http://globaleconomicanalysis.blogsp...mf-trojan.html


IMF Ready to Plunder Spain; IMF's Latest Trojan Horse Offer; English-to-English Translations




IMF chief Christine Lagarde says IMF ready to help Spain.

The International Monetary Fund stands ready to help Spain in multiple ways if Madrid seeks its aid, IMF chief Christine Lagarde said in a newspaper interview published on Wednesday.

"If Spain wants it, we could help in diverse ways, for example by simply auditing and monitoring reforms negotiated with its European partners without the IMF participating in financing," Lagarde told French daily Le Figaro.

"But we could also play a role in financing," she added.

Reflections on Translations

I frequently translate articles from Spanish, German, Italian and other languages. However, the biggest syntactical changes occur in seldom-offered elsewhere, yet, badly-needed English-to-English translations.

As a public service announcement, the Mish translation of the above statements by Lagarde is the same as the title of this post "IMF Ready to Plunder Spain".

IMF Trojan Horse

Any time the IMF offers money or help, it is an offer best refused. I have written about this before and offer this 2010 flashback To Ireland With Love

http://1.bp.blogspot.com/_nSTO-vZpSg...ith%2BLove.png

Mentally cross out "Ireland" and write in "Spain".

The IMF was not out to "help" Ireland. Rather the IMF was out to plunder Ireland for the benefit of banks in the UK, Germany, and France. The same Trojan Horse setup applies today.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com/

Read more at http://globaleconomicanalysis.blogsp...a1xOrso1a3H.99

Timeframe: 5 minute | hourly | daily | weeklyhttp://finviz.com/gfx/nic2x2.gifhttp://finviz.com/fx_image.ashx?euru...52491272101250

ok... 2937 anyone???


http://clip2net.com/s/2nfRM

Good morning fellow traders.

Before I get started today, I would like to extend a very happy Thanksgiving day to my Canadian friends and a happy Columbus day to my American friends. Please take this day to spend some time with your loved ones. The markets will still be here tomorrow.

Friday's US Non-Farm Payroll report came in pretty much as expected on the headline number with +114K net jobs created. However, the surprise came in on the unemployment rate with a 0.3% drop from 8.1% to 7.8%. As I mentioned in my post on Friday, a headline number of between +100K and +150K is what is required to maintain the unemployment rate at current levels. So how did the unemployment rate drop? It's quite simple really... the actual number of unemployed people is never really reported every month. If it was, then the unemployment rate would probably be around 15%. Instead the number reported only includes those unemployed people who were actively seeking employment in the 4 weeks prior to the report. Therefore it does not include those who have given up looking for work, even if only temporarily. On Friday I mentioned that such a drop in unemployment without an increase in net jobs created would likely be risk negative. Apparently the markets had a different idea, but as you can see from the charts, that hopium didn't last long.

Today there is only one major risk event we need to be concerned with. It is the Eurogroup meeting of finance ministers in Brussels. Although the agenda for this meeting is full of not so exciting items, the focus is expected to be on the issues of Spain and Greece. Therefore we should expect much verbal diarrhea today from various Eurozone finance ministers as they sound off their take on the situation. Beyond that, I'm not expecting much as the US and Canada are on holidays.

From a technical perspective, price has already completely erased Friday's gains and dropped below the psychologically significant 1.3000 level. Next support levels come in at 1.2950/60, followed by 1.2900/10. A move below the 1.2900 handle will pretty much confirm a lower top at Friday's 1.3070 high. On the top side, I am watching Friday's high as the next significant resistance, followed by the 1.3120 target of the yet to be completed inverted Head & Shoulders pattern I also pointed out last week. It may in fact fail to complete the pattern if price drops back down below the key 1.2900 support.

In a nutshell, being a news driven day and a holiday in the US, moves may be sudden and exaggerated in either direction on low volume. Therefore extra vigilance and caution is recommended today.

Be well and trade safe.

Pete Jackson's Order Board:

EUR/USD: Bids 1.2950/60 (real money, sovereigns, M/E), sell stops through 1.2945. Offers 1.3010/30 (Swiss/ Dutch names) and 1.3055/65 probable buy stops through Fri high 1.3072.

Today's Euro FX Option Expiries @ 14:00 GMT:

EUR/USD: 1.2970, 1.3000, 1.3025, 1.3050, 1.3100

E/U H4:

Why stop there? Let's get below 2900 That would make me a very happy bear.

Good morning Wulf and Happy Columbus Day.

Hey Wulf..seems we had a good start to the week I'm with u on the 37 but there are a couple of levels we need to breach first...after this TL breaks then 62 & 42 support levels need to go too... I think she's sucking the short term bears in for a ride back to 314..TWT

312

GM PT - we might get a bounce, so keep smiling....

Henry/PT I agree... I wont exit till price tells me to flip....

Im in agreement with the zones... we need a legit bounce though from one of the aforementioned areas... we keep just kinda slugging through support since NFPs... I figured we would get the follow through from the positive NFP's today... who knows how far it will take us?

Yes... The 38 retrace but should enough bla bla from u know who drive her thru that I don't think the 314.. level will wont to know anything about it & send her packing back down...

Frankie looks fairly bullish just it did'nt get demand in 2960'ties.. So London may do it..

It is more likely that bearish sentiment will continue until one of the EZ finance ministers walks up to a microphone and says "The Euro is irreversible"

I would like it to continue after 3015