Monday, June 11, 2012

Spain has a ... what?

Then, riding on his white horse, full of authority and charm, comes President Obama. Knowing already what the outcome of the European talks over the weekend would be, on Friday he tells them they really do need to approve this banking plan for Spain. Obama gets the kudos for seemingly pushing the Europeans into a decision and also looks tough in election year. Oh dear, why do we put up with these politicians.

Spain has a bailout, no wait, an injection of funds, um no, a loan; oh dear, that's not right; a recapitalisation, now that's getting close; it's a big word after all. Truth be known, no one knows what the heck this is anyway. Let's just call it a gift. Ah yes, US$ 126 billion gift. No conditions (Spain couldn't agree on or fulfill them anyway), no collateral (none going, all those unwanted houses built are worthless and rotting)

Will all this calm the stormy markets? Maybe. Gold and silver may go up on renewed enthusiasm for risk. Gold equals risk, now there's a weird one. But the markets are weird anyway. How can this market be called such when all market participants do all day is wait for the next statement from some central banker. Sounds like central planning to me, but then the word for that system would be called ...(now look away if you are offended)... communism.

This Spanish 'fund' is a continuation of a plan that started with the bust of 2007/8. Try to fool the market that all is well and we have the tools to fix it. Well, they haven't fixed it or fooled some. They extend and pretend. This latest escalation is a frightening one.

Why? We are now at the stage where money printing is going to go full-steam. The train-wreck will be enormous in it's consequences. I hate to sound doom and gloom, but we are headed for a collapse in this current monetary system worldwide. Just think though, this situation would probably be righting itself naturally had the aurthorities kept their political noses out of the market. The recovery since 2007 might have even been robust by now.

Anyway, behind the scenes on this latest 'thing' for Spain is an old fashioned bank run. Pure and simply. When you have a system like fractional reserve banking, all you need is a wee panic before banks run out of cash. This happened in Spain over the last couple of weeks. Euros flooded out of the system to US Bonds, Swiss francs and to German banks. Spanish banks didn't have the means to raise cash beyond the capital reserves they held for deposit withdrawals. When they needed to sell assets to get that cash, the cupboard was bare. Well, actually, the balance sheet said the collateral existed, but everyone knows those figures are rigged. When the light of day was shone upon them, those asset values were found wanting.

What next? Simple. More 'gifts' to infinity.

Gold in New Zealand dollars: $2051.59 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $36.71 per oz
Previous all-time high: $59.19
per oz (30 Apr, 2011)

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