Monday, August 29, 2011

Dark Clouds on the Horizon

When walking to work this morning, I noticed dark clouds in the east. Darker and more forboding than usual. Angry even, perhaps ready for a bit of vengeance.

Vengeance? Yes, after the media debacle of the so-called 'mad-max' hurricane Irene you wonder if the weather gods might get angry and throw some real bad stuff at us.

But mostly, you wonder why we listen to the main-stream media. Even my kids were saying the reporting on Irene was a beat-up and asking what is really going on Dad that we aren't hearing about.

Anyway, let us shift focus from my weather storm in the east this morning and head west and go over some of the reasons why dark financial clouds brood in that direction with the latest news.

Bailout fatigue, and even hysteria, is setting in 'big-time' in Germany. Angela Merkel faces dissent from her own fragile coalition for ongoing funding of European bailout funds. Furthermore, in a weeks time, Germany's constitutional court rules on whether the €440bn rescue fund (EFSF) breaches Treaty law or undermines German fiscal sovereignty. If Germany doesn't come to the party, the European monetary union could be over.

Finland has said no more bailouts for Greece unless there is collateral. In other words, no more gifts from our taxpayers, we need something of yours in return should you default. Now that's going to make the European air a little colder.

Greece has sought emergency funding for it's banks. The PIIGS virtually can't borrow anymore money from the markets. The risk is too great for lenders. The only winners will be those who have shorted PIIGS debt. (But good luck getting anything from their insurance on this debt).

The ECB is borrowing, through currency swaps, from the Federal Reserve Bank.

In the US, long-term treasury debt is soaring at rates last seen before the GFC in September 2008. Gold back then, decreased in price when this occurred. Now, gold is increasing in value in most currencies.

And further afield, east even, the Russian Central Bank is trying a gold confiscation swifty on it's citizens by setting up a scheme whereby Russians can use their physical gold as collateral and swap it with roubles plus 7% interest. Good luck with ever getting that gold back.

China's economy is definitely in bubble territory. Inflation is rampant and the west isn't buying much stuff anymore.

The financial markets are chaotic. The large up and down swings in stocks and gold are symptomatic of the speed wobbles before a crash. Just look at the markets before the 1929 stock market crash. Furthermore, so much depends on what the Fed says now, markets can't make rational decisions.

There is not a lot of good news in the financial world at present. Real news means hard work, not just sending a junior reporter to the streets on New York, with bit of rain in the background for dramatic effect, to sensationalise a weather event that was never going to happen as predicted.

Gold in New Zealand dollars: $2175.43 per oz
Previous all time high: $2319.47 per oz (23 Aug, 2011)

Silver in New Zealand dollars: $49.37 per oz
Previous all time high: $59.19
per oz (30 Apr, 2011)

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The Anglo-Far East Company
The Original Private Gold and Silver Bullion Custodian
Your reference: an-001
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