Wednesday, April 11, 2012

Money Printing Madness Right Now

So we thought the recovery was on, did we?

How about we peruse a few stories from the mainstream media and blogosphere today and attempt to get to the truth.

The IMF is suggesting this today. "State-sponsored debt forgiveness plans for the most hard-hit families (should be looked at). Although the policies might initially be expensive, they would be beneficial by reinvigorating consumer spending and helping the economy"

Simply put, the IMF is putting an idea out there for governments to pay down mortgage debt for it's citizens thereby forgiving that debt and putting money in pockets for spending.

Oh dear money printing to infinity, Zimbabwe-like. The madness.

This from the Telegraph.  "Italy's leading MIB index plunged 5pc and Spain's Ibex fell 3pc amid fears that the eurozone's third and fourth biggest economies were in the grip of a deadly and uncontrollable spiral of debt and recession.

The borrowing costs of both "sinner states" soared. The yield on Italy's benchmark 10-year bonds jumped to 5.7pc, heading into the danger zone that is considered unsustainably high. The equivalent Spanish debt climbed to 6pc. Meanwhile, the yield on safe-haven German bunds was pushed to an almost record low of 1.6pc. UK gilts benefited, too, dropping to 2pc.

The yields reflected a level of fear on the bond markets not seen since the fraught period before Christmas when traders bet that the eurozone could collapse."

Italys' economic stats are looking grim, with a 1.5% contraction this year. Did anyone really believe the official 0.4 % figure anyway? So an economy contracts and debt is still rising. How does that math add up when repayment time comes around? It doesn't. More LTRO money for Italy a-coming. Printing by any other name.

So also for Spain, a mess by anyones' definition.

And don't forget Potugal. How could we. I hope I'm not boring you with all this negativity, but Portugese Banks borrowed a hefty €100 billion from the European Central Bank in February and March. Nobody else wants to touch the debt of these countries with barge-pole. The only source is now Central Bank funding. At the extreme risk of being repetitive...more printing for Portugal.

Oh, and sorry, but then there is Australia. The golden boy of the commodities boom. Debt in Australia is now going exponential. A media report states, "the Australian government lifted the debt ceiling from $75 billion to $200 billion two years ago. Then, in the middle of last year it lifted the ceiling again to $250 billion. With $11 billion in borrowing this year alone, the government is on pace to hit the ceiling soon, at which point they will obviously raise it again."

I could go on, but you get the idea. No real production of wealth is happening to cover the increasing debt. Does this ensure a type of QE3 from the Federal Reserve, the bailouter for the world?

You bet.

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Silver in New Zealand dollars: $39.02 per oz
Previous all-time high: $59.19
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