Financial Crisis

[12DrinkMore]

but you do labour under quite a few misconceptions - for instance in reality UK banks have to satisfy UK banking regulators reserve requirements, which in turn has to complay with the Basle banking accords - they can't as you incorrectly state "specify their own comfort level"

Bit pressed for time, but to answer this specific point

http://en.wikipedia.org/wiki/Reserve_requirement

The Bank of England holds to a voluntary reserve ratio system. In 1998 the average cash reserve ratio across the entire United Kingdom banking system was 3.1%.

[Gambles]

but you do labour under quite a few misconceptions - for instance in reality UK banks have to satisfy UK banking regulators reserve requirements, which in turn has to complay with the Basle banking accords - they can't as you incorrectly state "specify their own comfort level"

Bit pressed for time, but to answer this specific point

http://en.wikipedia.org/wiki/Reserve_requirement

The Bank of England holds to a voluntary reserve ratio system. In 1998 the average cash reserve ratio across the entire United Kingdom banking system was 3.1%.

Ok, Drink

I see the confusion.

That's the cash reserve ratio that you're looking at not the actual capital adequacy. FSA regulates implementation of Basel cap adequacy requirements in the UK not BoE. But there's a huge difference between capital adequacy and just holding physical coins and notes. Wiki page could definitely be much clearer and better written though (mind you, you're probably thinking that about my article).

This just highlights what a complex subject this is. We think that The Fed have deliberately manipulated something most people find too tortuous to bother following. They're manilulating the entire economy by operating in a tiny dark little corner where few people ever look....probably because they thought this was the easiest way to fix the immediate problems in Q3 08.

Have a good and safe weekend,

Paul

[flying]

This just highlights what a complex subject this is. We think that The Fed have deliberately manipulated something most people find too tortuous to bother following. They're manilulating the entire economy by operating in a tiny dark little corner where few people ever look....probably because they thought this was the easiest way to fix the immediate problems in Q3 08.

Very very true.............

You know when the crisis first started it was quite disconcerting to find out how many of US congress & senate knew very little about the whole system. I also did not know nearly what I know today about it but, I am not elected to keep tabs on things.

You would think the congress & senate had a intimate or at least working knowledge of it but they did not. It was truly embarrassing listening to some of their questions early on.

Edited March 12, 2010 by flying

[Gambles]

Very very true.............

You know when the crisis first started it was quite disconcerting to find out how many of US congress & senate knew very little about the whole system. I also did not know nearly what I know today about it but, I am not elected to keep tabs on things.

You would think the congress & senate had a intimate or at least working knowledge of it but they did not. It was truly embarrassing listening to some of their questions early on.

Scary....really scary!

We have a theory that the Fed were pulling the wool over POTUS' eyes. When he eventually realized, he brought in Volcker.

cheers,

Paul

[flying]

Very very true.............

You know when the crisis first started it was quite disconcerting to find out how many of US congress & senate knew very little about the whole system. I also did not know nearly what I know today about it but, I am not elected to keep tabs on things.

You would think the congress & senate had a intimate or at least working knowledge of it but they did not. It was truly embarrassing listening to some of their questions early on.

Scary....really scary!

We have a theory that the Fed were pulling the wool over POTUS' eyes. When he eventually realized, he brought in Volcker.

cheers,

Paul

Truly it is..........

I remember some admitting they actually thought the dollar was still backed by Fort Knox !

While I am all for the audit/abolishment of the FED. I do not hold out much hope that even if audited, these same elected officials will know what they are reading?

Not that they will read it mind you. I also remember many commented that they in fact did not even read the TARP when asked if they did. Many cited reasons like ...well it was too dang big...Or well we only had a limited time to read it...Says who?

The same fear mongers...Paulson, Obama, Bush et al' that said you don't want to see what will happen if you don't sign.

So sign & forego the reading because we say YOU need it.

The same group that after it failed at the Congress pushed it ahead to the Senate to show them how its done?

The same group who after getting it passed did the bait & switch & did not in reality pay off any of the debts that they claimed if were not immediately paid would collapse America?

Yet if they did read it they would have found such silly things as...

a requirement that health insurance companies provide more coverage for mental health services, a tax benefit for victims of the 1989 Exxon Valdez oil spill, even a tax exemption for makers of children's wooden arrows.

Jeezus !! They were in such a world changing looking into the abyss moment. Yet they had time for minutia?

Or was that along with many other pages of fill just added to insure the reading of it was insurmountable?

I as in one of We The People am as much to blame. We let these congress critters & Senators sit up there & make or I should say not make checks & balances on our behalf. Yes perhaps we were too busy with our nose to the grindstone trying to keep up with living & paying taxes. Yet it is we the people who were also complacent.

Hopefully many have woke from their slumber dreaming sweet dreams that our government actually still represented us.

[Naam]

I remember some admitting they actually thought the dollar was still backed by Fort Knox !

While I am all for the audit/abolishment of the FED. I do not hold out much hope that even if audited, these same elected officials will know what they are reading?

i wonder why you are so obsessed with Fort Knox Flying. it doesn't make a flying farts difference whether the existing amount of gold tallies with the official records or (if ever audited) one finds a lonely Double Eagle. the (official) $300bb are not even enough to cover U.S. debt held by Russia and Brazil, not to talk about the big creditors Japan and China.

so, where's the (audit) beef pray tell?

[flying]

I remember some admitting they actually thought the dollar was still backed by Fort Knox !

While I am all for the audit/abolishment of the FED. I do not hold out much hope that even if audited, these same elected officials will know what they are reading?

i wonder why you are so obsessed with Fort Knox Flying. it doesn't make a flying farts difference whether the existing amount of gold tallies with the official records or (if ever audited) one finds a lonely Double Eagle. the (official) $300bb are not even enough to cover U.S. debt held by Russia and Brazil, not to talk about the big creditors Japan and China.

so, where's the (audit) beef pray tell?

I'm not obsessed with Fort Knox...Although I doubt it holds any where near what they say after 50 years + of no independent audit. I also realize their 8000 supposed/claimed tons would not compete with the printing/digitized output of USD.

I merely mentioned it was funny that some elected officials actually thought the dollar was backed by gold. I would think they would at least no that much is not true.

The audit I spoke of was in regards to the FED & where the beef went

Edited March 13, 2010 by flying

[sokal]

I remember some admitting they actually thought the dollar was still backed by Fort Knox !

While I am all for the audit/abolishment of the FED. I do not hold out much hope that even if audited, these same elected officials will know what they are reading?

i wonder why you are so obsessed with Fort Knox Flying. it doesn't make a flying farts difference whether the existing amount of gold tallies with the official records or (if ever audited) one finds a lonely Double Eagle. the (official) $300bb are not even enough to cover U.S. debt held by Russia and Brazil, not to talk about the big creditors Japan and China.

so, where's the (audit) beef pray tell?

The gold price will just have to adjust to cover those debts, we all know the US cant pay them off. That is why Fort Knox matters.

[lannarebirth]

I remember some admitting they actually thought the dollar was still backed by Fort Knox !

While I am all for the audit/abolishment of the FED. I do not hold out much hope that even if audited, these same elected officials will know what they are reading?

i wonder why you are so obsessed with Fort Knox Flying. it doesn't make a flying farts difference whether the existing amount of gold tallies with the official records or (if ever audited) one finds a lonely Double Eagle. the (official) $300bb are not even enough to cover U.S. debt held by Russia and Brazil, not to talk about the big creditors Japan and China.

so, where's the (audit) beef pray tell?

The gold price will just have to adjust to cover those debts, we all know the US cant pay them off. That is why Fort Knox matters.

I sincerely hope you don't have all your assets riding on that possible outcome.

[MJP]

Is the price of tungsten up or something?

I remember some admitting they actually thought the dollar was still backed by Fort Knox !

While I am all for the audit/abolishment of the FED. I do not hold out much hope that even if audited, these same elected officials will know what they are reading?

i wonder why you are so obsessed with Fort Knox Flying. it doesn't make a flying farts difference whether the existing amount of gold tallies with the official records or (if ever audited) one finds a lonely Double Eagle. the (official) $300bb are not even enough to cover U.S. debt held by Russia and Brazil, not to talk about the big creditors Japan and China.

so, where's the (audit) beef pray tell?

The gold price will just have to adjust to cover those debts, we all know the US cant pay them off. That is why Fort Knox matters.

[Gambles]

I remember some admitting they actually thought the dollar was still backed by Fort Knox !

While I am all for the audit/abolishment of the FED. I do not hold out much hope that even if audited, these same elected officials will know what they are reading?

i wonder why you are so obsessed with Fort Knox Flying. it doesn't make a flying farts difference whether the existing amount of gold tallies with the official records or (if ever audited) one finds a lonely Double Eagle. the (official) $300bb are not even enough to cover U.S. debt held by Russia and Brazil, not to talk about the big creditors Japan and China.

so, where's the (audit) beef pray tell?

The gold price will just have to adjust to cover those debts, we all know the US cant pay them off. That is why Fort Knox matters.

I sincerely hope you don't have all your assets riding on that possible outcome.

Monday's Daily Update will be about our ideas of the short and long run prospects for the gold price - assuming of course that more governments don't interfere with free ownership of gold again.

Totally agree that elected politicians in most countries are out of their depth. This is exacerbated when they're being advised by appointed public servants who have their own agendas. This is a major concern! Financial model complexity has gone off the scale and too much of this has happened off the radar. Heck, the Wall Street CEOs have all admitted that they didn't understand the details and the extent of risk.

I believe that most countries don't provide gold audits not just USA, so let's hope global gold reserve estimates are more reliable than global oil reserve estimates are reputed to be! I think that I'm right in saying that the US holds more gold (their own and that of other countries) in the NY Fed's depositary than in Kentucky these days?

One interesting point is the potential for gold transfer - Asian central banks generally hold relatively little of their reserves in gold - their gold purchases over coming years could be the biggest gold story!

cheers,

Paul

[churchill]

The short term price should connect with the USD / If that strengthens gold may fall - However markets may still rise - The next market correction will probably come when markets start to focus on the USD and we get a more serious currency crisis , with USD , EURO , GBP AND YEN looking weak gold may be one option along with Asian Currencies ?- Then IMO Gold will rise / Bernanke and Co will try to juggle markets in the mean time to keep stocks positive and perhaps if they are very lucky avoid a melt down /

But if there is panic the USD may rise as all else falls - So above all perhaps Asian curencies are the safest bet ?

[churchill]

Trichet Says Rating Firms Will Respect ‘Courageous’ Greece Plan

“At this stage my working assumption is the Greek government decision will be convincing,” Trichet said in an interview yesterday with Bloomberg Radio before delivering a speech at Stanford University, near Palo Alto, California.

http://www.bloomberg.com/apps/news?pid=206...gnW3k&pos=2

Bailout will they won't they ?

Germany unaware of Greek bailout, EU says no deal

http://uk.finance.yahoo.com/news/germany-u..._medium=twitter

[Gambles]

The short term price should connect with the USD / If that strengthens gold may fall - However markets may still rise - The next market correction will probably come when markets start to focus on the USD and we get a more serious currency crisis , with USD , EURO , GBP AND YEN looking weak gold may be one option along with Asian Currencies ?- Then IMO Gold will rise / Bernanke and Co will try to juggle markets in the mean time to keep stocks positive and perhaps if they are very lucky avoid a melt down /

But if there is panic the USD may rise as all else falls - So above all perhaps Asian curencies are the safest bet ?

good calls, Churchill

couldn't have put them better

;-)

but I doubt that they can avoid meltdown ultimately

cheers

Paul

[Naam]

I remember some admitting they actually thought the dollar was still backed by Fort Knox !

While I am all for the audit/abolishment of the FED. I do not hold out much hope that even if audited, these same elected officials will know what they are reading?

i wonder why you are so obsessed with Fort Knox Flying. it doesn't make a flying farts difference whether the existing amount of gold tallies with the official records or (if ever audited) one finds a lonely Double Eagle. the (official) $300bb are not even enough to cover U.S. debt held by Russia and Brazil, not to talk about the big creditors Japan and China.

so, where's the (audit) beef pray tell?

I'm not obsessed with Fort Knox...Although I doubt it holds any where near what they say after 50 years + of no independent audit. I also realize their 8000 supposed/claimed tons would not compete with the printing/digitized output of USD.

I merely mentioned it was funny that some elected officials actually thought the dollar was backed by gold. I would think they would at least no that much is not true.

The audit I spoke of was in regards to the FED & where the beef went

is that really the case? are you talking about congress men or senators?

[flying]

is that really the case? are you talking about congress men or senators?

Yep I believe it was congress critters but it would not surprise me to find a senator or two.

Will try to find the article.

[flying]

I think that I'm right in saying that the US holds more gold (their own and that of other countries) in the NY Fed's depositary than in Kentucky these days?

One interesting point is the potential for gold transfer - Asian central banks generally hold relatively little of their reserves in gold - their gold purchases over coming years could be the biggest gold story!

cheers,

Paul

Yes the Manhattan underground vault hold more than Kentucky. But as you said the NY branch is holding other folks gold too.

[jazzbo]

I merely mentioned it was funny that some elected officials actually thought the dollar was backed by gold... When I merely pointed out that some gold-bug monetary expert being quoted by one of the 'usual suspects' thought that trees were being cut down to print paper money -- all $US is printed on paper made from cotton and/or linen -- I guess that was not so funny.

[Gambles]

is that really the case? are you talking about congress men or senators?

Yep I believe it was congress critters but it would not surprise me to find a senator or two.

Will try to find the article.

Yes the Manhattan underground vault hold more than Kentucky. But as you said the NY branch is holding other folks gold too.

Now I'm getting really scared. Not so much surprised but that feeling when your worse fears are confirmed....I'd kind of have to put my hands over my eyes and squint at the article through my fingers

Thought so about Manhattan but hadn't checked recently what's supposed to be where - speaking of which there are elements in tomorrow's update that the conspiract theorists will love!

cheers,

Paul

[Gambles]

I merely mentioned it was funny that some elected officials actually thought the dollar was backed by gold... When I merely pointed out that some gold-bug monetary expert being quoted by one of the 'usual suspects' thought that trees were being cut down to print paper money -- all $US is printed on paper made from cotton and/or linen -- I guess that was not so funny.

No, it wasn't remotely comparable at all.

It was interesting though.

[jazzbo]

Not comparable: Elected officials are fair game but libertarian fiat-mongers are not.

[sokal]

I remember some admitting they actually thought the dollar was still backed by Fort Knox !

While I am all for the audit/abolishment of the FED. I do not hold out much hope that even if audited, these same elected officials will know what they are reading?

i wonder why you are so obsessed with Fort Knox Flying. it doesn't make a flying farts difference whether the existing amount of gold tallies with the official records or (if ever audited) one finds a lonely Double Eagle. the (official) $300bb are not even enough to cover U.S. debt held by Russia and Brazil, not to talk about the big creditors Japan and China.

so, where's the (audit) beef pray tell?

The gold price will just have to adjust to cover those debts, we all know the US cant pay them off. That is why Fort Knox matters.

I sincerely hope you don't have all your assets riding on that possible outcome.

you don't get it.

[sokal]

The short term price should connect with the USD / If that strengthens gold may fall - However markets may still rise - The next market correction will probably come when markets start to focus on the USD and we get a more serious currency crisis , with USD , EURO , GBP AND YEN looking weak gold may be one option along with Asian Currencies ?- Then IMO Gold will rise / Bernanke and Co will try to juggle markets in the mean time to keep stocks positive and perhaps if they are very lucky avoid a melt down /

But if there is panic the USD may rise as all else falls - So above all perhaps Asian curencies are the safest bet ?

Gold has been over 1100 even after the dollar went from 74 to 80.

[Gambles]

Not comparable: Elected officials are fair game but libertarian fiat-mongers are not.

actually I wasn't thinking so much of who made the gaffe (although personally I am much more worried about what the knowledge levels are of the elected officials who make the really important decisions that affect our lives and our futures) so much as that one issue is a basic fact which really has a material bearing on understanding how the US economy works whereas the other just seems to me to be an arcane piece of trivia that doesn't affect anything. Decisions makers who understand (or not) the former affect the outcome of the global economy. Commentators who know (or not) the latter might affect the outcome of a game of trivial pursuit or a pub quiz.

Unless I'm missing something, it isn't really comparable....but it is interesting.

[jazzbo]

The only point you might be missing Kuhn G. is that on this forum it is OK to take a whack at Dr. Ben Bernanke, Dr.Paul Krugman, Barney Frank, or PM Brown but if you were to refer to Dr. Gary North and his ilk as RW fundamentalist wackos the usual-suspects would be on the warpath.

[Naam]

..."the usual-suspects would be on the warpath."

[Gambles]

The only point you might be missing Kuhn G. is that on this forum it is OK to take a whack at Dr. Ben Bernanke, Dr.Paul Krugman, Barney Frank, or PM Brown but if you were to refer to Dr. Gary North and his ilk as RW fundamentalist wackos the usual-suspects would be on the warpath.

I'm never very good at picking up on etiquette!!

[Gambles]

meanwhile as promised:-

part 1 of a 2 parter........

Dear all,

Please find below the latest daily update from MBMG International.

Gold is a conundrum lately. We've held the yellow metal in varying degrees within our client portfolios since it was priced at less than $300 per oz. Thanks to some judicious increasing and decreasing of our exposures and opportunistic allocation between bullion, derivatives and gold equities, we've managed to achieve excellent added attribution from our gold exposures. But lately it's been troubling us. Our portfolios reduced gold exposure back in November at $ 1100 per oz because gold has been behaving like a risk asset. Long term the problems inherent in all major currencies provide a frame for comments by MBMG's portfolio co-advisor, Martin Gray, that gold should be seen as an alternative currency and one that has far less problems than the majors. Short term that should also be tempered with Martin's view that "I wouldn't chase gold at current prices" and that he's still looking for significant pullbacks as buying opportunities.

So long term attractive but short term, possibly overpriced? We asked MBMG's commodity advisor, Jeremy Charlesworth to update the gold outlook that he gave us when he visited Bangkok in January:

"Many of us believe Gold will reach much higher levels in the years ahead. When Gold takes off Jewellery demand and industrial demand (which is pretty small at the best of times) will become totally irrelevant. It will all be about investment demand and central bank buying. (The Central Banks doing the buying will be those far away from the credit issues).

If John Sheehan's scenario wins the day then, at some point, those who are predicting $10,000 Gold may be proved right. My guess is not quite as apocalyptic but we will have Gold rising year on year with sharp setbacks along the way - maybe $3000 one day but not this year.

The early warning signs will be a collapse in currency values, each dodgy currency being taken down one by one and then eventually the USD will be under attack.

When and if that happens then we will see Gold rising by $300 to $500 a day for several days!"

We agree. Frankly anything could happen but if you held a gun to our heads we'd hope for some kind of benign 'normality' for the next few months. Then a significant downward pressure on asset prices (including gold) is likely to co-incide with a rally in the Dollar. Timing is impossible to guess but H2 10 seems to be the best bet. At the end of this a major weakening in the Dollar is likely to play out with gold being the major beneficiary and Asian currencies also doing well.

But 2010 is the year when anything not only can happen but at some stage it probably will and strategies shouldn't be built around long term predictions. There's a high chance that at least one part of that story won't go to plan and portfolios have to be ready for if and when that happens. Whatever the asset class, be light on your feet.

Enjoy your day!

Once again, very best regards,

MBMG International

Please Note: While every effort has been made to ensure that the information contained herein is correct, MBMG International cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG International. Views and opinions expressed herein may change with market conditions and should not be used in isolation.

[Abrak]

Please Note: While every effort has been made to ensure that the information contained herein is correct, MBMG International cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG International. Views and opinions expressed herein may change with market conditions and should not be used in isolation.

The bar for posting on this thread is so unbelievably low (actually it is well below ground) that attaching notes implying that a posting might contain errors or views that might be vague, variable or even lack coherency is definitely unneccessary and in fact implies a degree of credibility to other postings that do not contain this warning, which is totally inappropriate.

P.S. It would also seem natural to assume your proviso given the statement that 'But 2010 is the year when anything not only can happen but at some stage it probably will'

Edited March 15, 2010 by Abrak

[12DrinkMore]

This topic has interested me for a while.

The obligations of holding tight fiscal policies is crushing the economies of Greece and Ireland. The required massive reduction in government spending, coupled with the need to deflate wages and prices in order to become more competitive with the Germans is a battle which will leave the countries desolate. In the rush and euphoria to join in the the big EUR-party, gaily abandoning sovereign currencies and acceding to the will of the humongous and hugely expensive Euro-Politicians, obviously too little consideration was given to the long term implications of holding a single currency, effectively removing the devaluation option.

From the Irish

http://www.sbpost.ie/commentandanalysis/sh...euro-46642.html

The ECB has published a paper on the "Withdrawal and Expulsion from the EU and EMU"

http://www.ecb.int/pub/pdf/scplps/ecblwp10.pdf

Although the transition would be fraught, at least I can now see how the mechanics would work.

1. Form a National Bank

2. Issue a National Currency

3. Insist on all taxes being paid in the National Currency

So even if the Euro was also in circulation, the new national currency through the taxation system would be credible and allow the government to regain control of its fiscal and monetary policies.

I wonder if the wannabee EU countries are reviewing their applications? Proabably not, as the politicians are, as usual, in it for themselves and their Euro-Parliament gravy train aspirations, and it must be so easy to sell the integration to the hoi palloi as "we'll be as successful as the Germans". Unfortunately to be as successful as the Germans you also have to adopt the German mentality, not just associate yourself with them....