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“In times of stress, be bold and
valiant.”
Horace 65 BC-8 BC
The Financial Times published an article Sunday revealing details of a BIS
study and statements by the BIS chief economic adviser, calling it "a
pre-emptive blast before the banks launch their own lobbying effort on June
10."
Bankers’ ‘doomsday
scenarios’ under fire
Yesterday, from this FT article, Zero Hedge observed a possible rift between
the BIS and the $IMFS, stating, "Curiously one entity that has decided
to take on this "fire and brimstone" head on and to warn the
general population to ignore the bankers "doomsday scenarios" is
the bankers' bank, the BIS."
Bank Of International Settlements
Warns To Ignore Banker "Doomsday Scenario" Fearmongering And
Racketeering
In his latest newsletter, William Buckler describes how the $IMFS has been
pushing the ECB to print faster, more like the FED...
Fresh from his trip to China, US
Treasury Secretary Geithner spent two days in Europe. His
“mission” (which he accepted with open arms) was to urge the
European Union to translate the 750 Billion Euro bailout package they
announced on May 10 into “action”. Mr Geithner is not pleased
that while the money has been promised, little if any of it has yet been
actually spent.
“What markets want to see is action”, said Mr Geithner,
“the big lesson of the US financial crisis was that you have to act
quickly and with force.”
What has been seen as the sovereign debt crisis which has evolved in Europe
this year is an almost carbon copy of what was seen in the lead up to and the
aftermath of the Lehman bailout in late 2008. The difference is that the
European
“powers that be” were far more reluctant to bite the bailout
bullet than were their counterparts in the White House, the Treasury and the
Fed in September/October 2008. The Europeans took more than five months to
finally cave in and announce that they were going to drown the situation in
newly created paper. In the US, the deed was done over a weekend.
www.the-privateer.com
But German publication Der Spiegel tells us that it's not all 'cumbaya' in
Europe over this printing...
The European Central Bank has been
buying up Greek bonds by the bucketload, even though Athens is already
getting money from an EU rescue fund. German central bankers suspect a French
plot behind the massive buy-up -- after all, it gives French banks the
perfect opportunity to get rid of their Greek assets.
The senior members of the German central bank, the Bundesbank, regarded Axel
Weber with a look of anticipation. What would Weber, the Bundesbank
president, say about the serious crisis that had them all so worried, they
wondered? And what did he intend to do about it?
Weber said nothing and, as some who attended the meeting report, even his
facial expression was inscrutable. The Bundesbank president remained
stone-faced...
By buying up Greek debt, the ECB keeps the prices of the bonds artificially
high. French banks, in particular, benefit from this policy because it enables
them to sell their Greek bonds to the ECB, as an inexpensive way of cleaning
up their balance sheets. France's banks and insurance companies have a total
of about €80 billion in Greek government bonds on their books.
German banks, on the other hand, are not potential sellers, because they have
made a voluntary commitment to Finance Minister Wolfgang Schäuble to
hold their Greek bonds until May 2013.
Thus, in a roundabout way, the Bundesbank, by spending €7 billion to
purchase the Greek securities, has already made a substantial contribution to
bailing out banks in neighboring France.
It was ECB President Jean-Claude Trichet, a Frenchman, who, in an alarming
and provocative speech, initiated the extensive euro rescue package that was
approved on the weekend of May 8-9. And it was Trichet who yielded to massive
pressure from French President Nicolas Sarkozy and, soon afterwards, violated
a long-standing ECB taboo, namely that the central bank should never buy its
member states' debt. This, however, was precisely what Sarkozy had demanded
of his fellow European leaders, including German Chancellor Angela Merkel.
Weber, the Bundesbank president, voted against this measure in the ECB
council and criticized it the next day in an interview with the German financial
newspaper Börsen-Zeitung. For a central banker, this is a very clear
signal of dissatisfaction. But the Bundesbank president faces a dilemma,
because he hopes to take over as ECB president when Trichet's term expires
next year. The general consensus in the German government is that if he
continues to fight against the purchase of the bonds, his prospects for
securing the top ECB post will dwindle.
But many German central bankers expect Weber to remain steadfast and not give
in...
Every morning, the so-called Market Operations Committee (MOC) of the ECB
analyzes the situation. The committee, whose members the ECB does not
identify, supports the central bank in its monetary policy affairs, foreign
currency transactions and the management of currency reserves...
The Bundesbank's representative on the MOC is Joachim Nagel, head of the
central bank's markets department. In closed-door sessions, he and his fellow
committee members determine when and for what amounts the ECB and the
euro-zone central banks, in concerted actions, buy up the government bonds of
highly indebted euro countries to support their prices and thus maintain
yields at a tolerable level.
The central bankers have informally agreed on what constitutes this tolerable
level. The MOC's goal is to manipulate the markets in such a way that bond
prices level off at the values that were in place on April 9, before
investors, fearing that the governments could default on their bonds,
launched into a massive sell-off of the securities...
German
Central Bankers Suspect French Intrigue
Slightly off topic (but not really), Axel Weber and the Bundesbank have a
history of protecting German gold reserves from profligate disposal. (See the
first two speeches linked here.) This is a trait that may also be
shared by the BIS. (See: "The Gold Man" at the
BIS)
Regular readers know that ANOTHER, clearly a European central banking insider
(at least to me it is clear), told us about a definite coolness between the
BIS and the US dollar support faction (US/UK/IMF/Wall Street), what I term
the $IMFS, as far back as late 1997. On this topic, the following is a post
that might be of interest to some of you. Posted by Capt. Goodvibes here...
Kohler speculation.
A little detour into some speculation on my part here, but the resignation
today of German president Kohler has caught my attention.
german-president-resigns-effective-immediately
Köhler became president in 2004
and was elected for a second five-year term in 2009. The former head of
the International Monetary Fund was the first non-politician to become
German head of state. He is a member of Merkel's conservative Christian
Democrats and was nominated for the presidency by the CDU with the backing of
their coalition partners, the pro-business Free Democrats.
As a former IMF head, it may be that
he is/was a dissenting voice within the German government, in the context of
the thoughts of Another. Another's contention was that there were essentially
two competing spheres of influence in the economic world:
1. $IMF (US/UK/Japan)
2. BIS (Europe/Saudi/China etc.)
The IMF faction support a move to SDRs to replace $US as world reserve
currency, should change be needed.
The BIS faction favour instead a move to Gold, physical, free market. And ECB
mark their gold reserves to market.
Another said:
Date: Sat Mar 07 1998 13:19
ANOTHER (THOUGHTS!) ID#60253:
A Noble Purpose, This Oil For Gold
[...]
In a very real "currency sense", oil will be devalued in terms of
gold. As one makes a currency weaker by increasing the money units per ounce
of gold. Oil will become very cheap in gold, as the amount of gold paid per
barrel will fall dramatically as compared to today's ratio. There will be
much more than enough gold worldwide to quantify a "world oil
currency". To that end, the world paper "reserve currency" at
use in that time, will continue to be traded for oil at an extremely low
price relative to today. The only change will be the addition of a "unit
of real value" added to each trade, a "world oil currency",
gold! However, in terms of today's currencies, gold will be
"upvalued" to perhaps $10,000 to $30,000 an ounce. So as not to
rewrite what is already an excellent piece on this coming readjustment, I
will repost part of Mr. Allen ( USA ) 's perfect article on the subject along
with his requested changes per his :
Date: Mon Dec 15 1997 11:06
Allen ( USA ) ID#246224:
Date: Sun Dec 14 1997 18:59
Allen ( USA ) ( More ruminations re: ANOTHER's recent posts ) ID#255190:
Last one on this topic until more ANOTHER posts. I'm not sure that it would
be necessary to have that large a cabal in on the "offer" of oil
for gold. Given the rather small market in gold in comparison to
oil/currencies it would only take one or two well endowed oil states to pull
this off. Here's why.
Let's say the Saudi's have been accumulating gold through the back door (
approx. 5,000 tonnes ) . They sell say 20 Mln Bbl oil a day. Close enough. At
one ounce of gold per thousand Bbl oil that's 10,000 ounces of physical gold
per day. That's a lot of physical gold.
The first few moments after the Saudi's proposal to trade oil for gold at a
very steep discount of 1000 Bbl/oz ( approx. 1.5% of current US$ price )
there would be roars of laughter. One fast thinker after another would think
"Hey. I buy some gold at $300/oz, trade for oil to receive 1 Mln Bbl,
then sell the 1 Mln Bbl for US$ 10 Mln. Net profit is
$10,000,000-$300,000=$9,700,000. Easy money." .
Everyone at once turns to the gold market to buy, which promptly shuts down.
Now no one is laughing. Because everyone realizes that gold is now worth at
least $10,000 per ounce and no one is prepared for that revaluation. Whoever
has gold now has 66.67 times the purchasing power in that stockpile. What
appeared to be a stupid offer has now become a complete revaluation of all
gold stockpiles vs all currencies. [...]
Mr. Allen ( USA ) ,
Another thanks you for this thinking. It should be read by everyone with an
interest in this area. It should also be studied by students wishing to learn
of market dynamics. We also offer this piece as an addendum to the above,
also by the same author.
Date: Mon Dec 15 1997 10:49
Allen ( USA ) ( Quick Note to JTF re: 23:05 post - US$ oil float ) ID#246224:
US$ price of oil is floating. The "proposal" to offer oil for gold
at say 1000 Bbl/oz is far below the present float price in US$. The gold
market is SO SMALL that if the oil nation that made this proposal was pumping
enough oil the gold market would be swamped by oil buyers who were looking to
make a few ( !! ) US$ on the discrepancy in price. In effect this would
revalue gold by inserting an entire different group of buyers into the gold
market who have ALOT of money.
The 'timing' of Kohlers exit just
seems suspicious, is all I'm saying.
At this particular point, when one never knows what may be about to happen
next.
Another small story brought to my attention by Capt. Goodvibes was this...
JEDDAH, Saudi Arabia (AFP) - German
Chancellor Angela Merkel landed Tuesday in Saudi Arabia for talks with King
Abdullah after calling for Gulf nations to help press Iran over its nuclear
drive, a German official said.
Merkel flew into the Red Sea port of Jeddah for a day of meetings on
bilateral and regional issues and a visit to the country's new co-educational
science university.
She arrived from Abu Dhabi, where she called on the United Arab Emirates and
Gulf countries to encourage a nuclear-free Iran and support Middle East peace
efforts.
"When we look at the regional situation and the situation of the UAE, we
can see how strong the interest for a peaceful solution in the Near East is,
but also for an Iran that does not look for nuclear weapons," she told
reporters.
"Gulf countries and in particular the UAE play an important role in the
peace process in the Middle East and of course in relation with Iran,"
the German leader said.
Germany's secretary of state for the economy, Bernd Pfaffenbach, told AFP
that Iran figured prominently in a meeting between Merkel and the Emirati
president, Sheikh Khalifa Ben Zayed Al Nahayan.
Talks in oil giant Saudi Arabia were expected to focus on similar issues when
Merkel meets with King Abdullah and his court late Tuesday.
Merkel in Saudi Arabia after
raising Iran sanctions in UAE - Jordan Times
And here's one last story of stress I'll leave you with. From the Sunday
Times, Greece urged to give up euro...
THE Greek government has been advised
by British economists to leave the euro and default on its €300 billion
(£255 billion) debt to save its economy.
The Centre for Economics and Business Research (CEBR), a London-based
consultancy, has warned Greek ministers they will be unable to escape their
debt trap without devaluing their own currency to boost exports. The only way
this can happen is if Greece returns to its own currency.
Greek politicians have played down the prospect of abandoning the euro, which
could lead to the break-up of the single currency.
Speaking from Athens yesterday, Doug McWilliams, chief executive of the CEBR,
said: “Leaving the euro would mean the new currency will fall by a
minimum of 15%. But as the national debt is valued in euros, this would raise
the debt from its current level of 120% of GDP to 140% overnight.
“So part of the package of leaving the euro must be to convert the debt
into the new domestic currency unilaterally.”
Greece’s departure from the euro would prove disastrous for German and
French banks, to which it owes billions of euros.
McWilliams called the move “virtually inevitable” and said other
members may follow.
“The only question is the timing,” he said. “The other
issue is the extent of contagion. Spain would probably be forced to follow
suit, and probably Portugal and Italy, though the Italian debt position is
less serious.
“Could this be the last weekend of the single currency? Quite
possibly, yes.”
Please discuss. Connect dots. Add dots. Subtract dots.
Oh, and welcome to June, the month of stress relief.
FOFOA
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