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  • Trichet the fiscal magician conjures with the usual smoke and mirrors
    The president of the European Central Bank has dismissed suggestions that its decision to buy government bonds might stoke inflation and urged nations to implement programs that will put them in a "sound fiscal situation."

    Jean-Claude Trichet said in an interview with the German daily Handelsblatt, published Friday, that risks to European taxpayers won't arise from the new eurozone rescue package "if all governments concerned are faithful to all their commitments."

    He stated that the ECB was not embarking on quantitative easing, that it would withdraw the liquidity that they will inject mainly through "tendering term deposits" whatever "tendering" means.

    To this I would say that:
    1. No EU country has ever towed the fiscal line in the past and as past results are indicative of future performance, there is no reason to believe that they are going to tow the line now, especially when for many, their political positions will be placed under the same pressure as Greece, where BTW just yesterday a bomb went off outside the jail where members of the ex military junta are held.

    2. Locking the liquidity in a term deposit "jail", only means that you are pushing the release of the liquidity into the future. You may be able to soak it up temporarily, but you are not "sterilizing" it. The problem therefore does not go away, the inflation risk is still there. So all that is happening is that he is storing up latent liquidity and therefore latent inflation.

    3. All that liquidity which is locked up will earn interest and that interest has to be paid by somebody and for every Euro spent on paying a debt, a Euro cannot be invested in growth or spent in the economy, unless more debt is incurred.

    4.A quick review of the ECB's own framework, shows that the methods which it intends to use have never been tried before which to me is like offering the terminal cancer patient a few final experimental drugs.

    Like the members of the Fed, the idea is evidently to keep your job by keeping the problems in the air and then hopefully pass them on to a successor before they collapse around you.

    All the risks that are fueling gold, do not dissipate just because the witchdoctor says that they do.





    Disclosure: Long Gold
    May 14 7:15 AM | Link | Comment!
  • Did CNBC's Jeoff Cutmore get muted when talking about gold competing with fiat currencies?
    Maybe it was my television or just a coincidence. The spot on the new gold highs started quite well on this mornings (12/05) Squawk Eox Europe, then Jeoff Cutmore (who I reckon is a bit of rebellious Austrian school follower) began to veer into "no no" territory by starting a conversation on the subject of gold being a currency and a competitor with the fiat currencies on national television.

    Bravely and gingerly Geoff pushed past the acceptable boundaries of financial news broadcasting for the small investor and went into discussing the undiscussable. Then, quite suddenly, in mid sentence the tv went mute for some 10 seconds. After which with some ermmming and rrring Geoff and the rest quickly veered off the road less traveled and back into the mainstream agenda of the day.

    It was a little too coincidental and so it caught my attention. It was also quick and I am trying to verify that it happened, did anybody notice it on their end? Did anybody get it recorded? Can somebody upload the clip. It happened somewhere between 07:45 and 08:00 GMT + 1

    If true and verifiable, are we really so nervous about a systemic failure that we need to cut off news anchor's mid sentence? Wow! Better pile on more gold!




    Disclosure: Long Gold
    May 12 3:48 AM | Link | Comment!
  • Jean Claude trashes his Parent's Paris apartment and rings up Ben
    With no parents around Jean Claude is having a party and he is thinking of bringing out another keg of beer, just as it was drawing to a close. Nick the unemployed greek government worker and Javier the out of work construction worker are happy to go on with the party, they have nothing to do tomoorow in any case. Richard is about to leave saying that he has had too much to drink already. Franz on the other hand,  is not so sure, he knows he has to get up in the morning, but a party is a party!, The others convince him not to think about tomorrow, let us not remind ourselves of the huge hangover which we will have to deal with and lets not dwell too much on how trashed Jean Claude's apartment will be when the party is finally over.

    Jean Claude and all the partygoers know that the party has already destroyed most of his Ikea furniture in any case, so he figures what the hell! "Dominique, lets get the other Keg of beer out!", "yuhu!!!, yeaaahhh!" shrills Dominique

    Whilst Dominique has gone to get the keg, JC calls up Ben in New York, his reckless party animal buddy from uni. Ben is also having a wild party. Ben has got a tab with Budweiser with some dodgy credentials so he has obtained loads of booze really cheaply and JC can hear the music thumping and pumping in the backround. They joke about how Ben has no furniture at all on account of his Vegas lifestyle.

    JC knows its going to be a huge, huge hangover and asks Ben if he knows of any hangover cures, apart from Ben's usual answer which is to "take a very stiff drink with a raw egg  when you wake up".

    Ben answers that he has heard that you cant get rid of the hangover, but by drinking 2 or 3 glasses of water before he goes to bed, it will soften the blow, and make you feel like everything did not crash. Ben says that he is instructing his party buddies to put in these "stop measures" so that the fall wont be as noticeable.

    Before JC gets back to the party, Ben jokes that JC might be able to soften the blow of the hangover, but he will still need another trip to Ikea, in order to replace all that trashed stuff.

    The next day Jean Claude and Dominique opt for "take a very stiff drink with a raw egg  when you wake up", maybe they will try the water idea at next weeks party


    Disclosure: Long gold
    May 11 4:39 AM | Link | Comment!
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