In the End, Central Banks Flood the System with Paper

JOHANNESBURG - Amid rioting in the streets of Athens, the Greek parliament finally approved the austerity package required in order to secure the EUR 130 billion second bailout from EU/IMF. Out of 300 lawmakers, a total of 199 voted in favour of the bill and 74 against. However, Greece still has to present the full details of the package on Wednesday at an extraordinary meeting of Eurozone finance ministers who must decide whether to approve the second aid package for Greece.  The EU Economic and Monetary Affairs Commissioner Rehn said he’s “confident” that Greece has done enough to ensure it receives the bailout.

Gold to Remain Strong as Rates Remain “Exceptionally Low”

U.S. Global Investors - After prices fell 10 percent in December, many investors wondered if the bull market in gold was running out of steam. That was before Federal Reserve Chairman Ben Bernanke swooped in with a “red cape” and fired the bulls back up. Since the Fed reassured the world that interest rates will remain at “exceptionally low levels” for another two years, gold has jumped more than three percent.

UBS described the situation simply, “if investors needed a (further) reason why they should be long gold now, they got it yesterday … a more accommodative policy is a very good foundation for gold to build on the next move higher.”

To gold bugs, two more years of near-zero, short-term interest rates means negative real interest rates are here to stay, and this has historically been a strong driver for higher gold prices.

Adrian Ash: Deflation, Gold, and the Dollar

LONDON (BullionVault.com) - So 2012 will mark the fifth anniversary of the global financial crisis. There’s little reason to think it’s reached its end yet. Merry Christmas.

Banking and household leverage in the rich West has barely ticked lower from the credit bubble’s historic peak of 2007. Financial leverage has only been reduced by a fraction, while governments have been stuffed like a French goose with that new debt spurned by the private sector since 2008.

Ranting Andy: MF Global – The Beginning of the End of Paper Markets

RANTING ANDY – It’s Monday morning, and I couldn’t be more ready to RANT.  My job is to keep you aware of the dangers around you, which increase with each passing day.  And some days on more than others, such as TODAY!

Don’t let the fact that a SUNDAY NIGHT SPECIAL wasn’t required the past few weekends, as they will be returning with a vengeance in the coming months, more likely before the end of 2011.  This weekend alone saw waves of “horrible headlines” highlighting the collapse of the European Union, and now it looks like the U.S. economic implosion is about to retake center stage.  Given the broad, intimidating list of such headlines, I am going to start today by going through them, before getting to my topic of the day – the long-term ramifications of the MF Global collapse.

Gold – Commodity, Currency or Something Else?

A recent analysis by Julian Jessop in London examines whether gold should be considered a commodity or a currency and feels that for the moment at least it meets the parameters of indeed equating to a currency.

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Invest in Gold, Silver, Platinum, and Oil to Protect Against Subsequent Dollar Collapse

PETALUMA, CA (The Gold Report) - 

The Gold Report: Richard, last month, you made a presentation at the Casey Research/Sprott Inc. “When Money Dies” Summit entitled “The War that Will Kill the Dollar.” You explained that the corrupting influence of power had sent our country’s leaders shopping for war, disregarding Westphalian respect for sovereignty and hastening the collapse of society. What are the signs that we are reaching a critical point? And, is there any way we can change course?

Richard Maybury: You can see the signs very clearly in the Middle East and North Africa. The Federal government is involved in several wars there that have nothing to do with America. One of the best examples is Libya. U.S. officials are taking credit for Moammar Gadhafi’s death just a year after they were bragging about having tamed the threat. Now Libya is a mess. It will very likely be taken over by some sort of Islamic government that isn’t going to be very friendly to America.

TGR: Why do we, as a country, do this? If it’s not going to end well for us, what’s the economic or political reason to get involved?

RM: The U.S. government gets into wars in far corners of the world that have nothing to do with America because the leaders like getting into wars. That is how presidents achieve greatness in the history books. A president has no prayer of going down in history as great unless he has won a war. Look at Mount Rushmore. All four presidents featured there won wars. That seems to be the number one criteria historians use for deciding whether someone is a great president. It constitutes an automatic incentive to go out looking for wars.

Ranting Andy: Derivatives Destroying the World

 RANTING ANDY – Another day, another microscope on the financial world. 

Today has started out calm, as once again the world (aided by the omnipresent PPT) is focused on “Will it?, Won’t it?” regarding the Greek bailout, and  ”Is it?, Isn’t it?”a “credit event” as pertains to the CDS market. 

Yesterday’s market decline was attributed to Greek politicians insisting on a referendum to decide whether to accept the proposed bailout plan, throwing a monkey-wrench into the formerly “controlled” situation.  Obviously, if Greece votes against accepting the severe austerity terms involved, it will exit the EU, default on its debt, and create a “credit event” sparking a chain of bank destruction across the Western world, PARTICULARLY in the U.S., where 97% of all derivative contracts are written (can you say JP Morgan?).

Ranting Andy: Individualism

RANTING ANDY – The global economy is like the train at the end of Back to the Future III, careening down the track at 88 miles per hour en route to its inevitable crash into Clayton Ravine.  No matter what sticks and stones are placed on the track to slow its momentum (such as FAKE bailout schemes, such as we saw last week, and “Yenterventions”, as we see this morning), the train will inevitably crash, and do so in spectacular fashion.  This is why it is GUARANTEED that PHYSICAL Precious Metal prices will rise until a new gold standard is forced upon the world by the litany of collapsing currencies.

George Maniere: Today Europe Promised Us a Profitable Christmas

InvestingAdvicebyGeorge – On Wednesday night EST, Euro zone leaders struck a deal with private banks and insurers for them to accept a 50 percent loss on their Greek government bonds under a plan to lower Greece’s debt burden and try to contain the two-year-old euro zone crisis.

The agreement was reached after more than eight hours of hard-nosed negotiations involving bankers, heads of state, central bankers and the International Monetary Fund and aims to draw a line under spiraling debt problems that have threatened to unravel the European single currency project.

Under the deal, the private sector agreed to voluntarily accept a nominal 50 percent cut in its bond investments to reduce Greece’s debt burden by 100 billion Euros, cutting its debts to 120 percent of GDP by 2020, from 160 percent now.

George Maniere: Silver Waits to Begin Breakout

InvestingAdvicebyGeorge – To 250 million people in 51 countries throughout the world, the word for money is the same word as the word for silver.  Silver literally means money. According to Noble Laureate Milton Friedman, the majority of monetary metal throughout history has been silver, not gold. Gold is the money of kings while silver is the money of gentlemen.

Before we make a case for silver being money, let’s take a look at what is money?  I believe money is the grease or oil that lubricates the supply lines that bring goods and services to where they are needed. Without money our economy would be reduced to barter.  The problem with barter is that you would not only have to find someone that has what you want but he would also have to have what you want in return. Let’s face it, in this modern world of infinite goods and services this would be a complete disaster.

So no matter what we use as a medium of exchange be it gold, silver, paper or sea shells we need an unrestricted supply of money to keep the economy lubricated. Money is a unit of storage or a proxy for value that must be something completely different from what is being exchanged. This is why money must float freely in value to coincide with the law of supply and demand.