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QE 2 Gave Moneyness To Stocks And Junk Bonds … But Deleveraged Bonds And Gold Mining Stocks

1) …. Financial market report for the week ending January 14, 2011
Beginning in August the announcement of QE2 at Jackson Hole by Ben Bernanke, has driven the 30 Year Us Government Bonds, EDV, lower.

In November with the actual announcement of QE2, and then in December following Mrs Merkel’s call for a sovereign debt default mechanism, and the European Leaders meeting in summit on December 13, 2010 and failing to provide a comprehensive plan to address the sovereign debt and bank debt imbroglio, where the Leaders were described by John Mauldin in Safehaven article as kicking the can down the road, the gold mining stocks, GDX, deleveraged from the price of gold, GDX:GLD, and fell lower with the 30 Year US Government Bonds, EDV, as is seen in the chart of the HUI Precious Metals relative to US Treasuries, $HUI:$GOLD.

The 30 10 US sovereign debt yield curve, $TYX:$TNX, gave seigniorage to the HUI precious metal mining stocks, ^HUI for the last decade. A steepening yield curve over the years leveraged up the gold stocks. But a flattening yield curve, deleveraged the gold mining shares, as is seen in the chart of gold, GLD, the gold mining shares, GDX, the 30 Year US Treasuries, EDV and and the flattner ETF, FLAT.

Beginning in September 2010, the anticipation of QE 2 gave moneyness, that is seigniorage, to world stocks, VT, US Stocks VTI, the emerging market stocks, EEM, the BRICS, EEB, and the world small cap stocks excluding the US, VSS, the Russell 2000 growth shares, IWO, as well as to Junk Bonds, JNK.  

Selling of European shares, VGK, and selling of bonds, BND, created a  US Dollar liquidity trade, which  gave great moneyness to semiconductors, XSD, small cap energy shares, XLES, Dow energy service, IEZ, homebuilders, ITB, home improvement stores, such as Home Depot, HD, and Lowes, LOW, the too big to fail banks, RWW, mortgage finance, REM, and lately, international consumer discretionary, IPD, as well as oil, USO, which has rallied international energy service, OIH, energy, XLE, metal manufacturing, XME, and basic materials, IYM, such as coal, KOL, and water, FIW.

The financial sector, XLF, was taken higher by Mortgage REIT, NorthStar Realty Finance, NRF,  and America’s leading Bank of America, BAC.

Chemical Manufacturers such as Balchem, BCPC, LSB Industries, LSB, and NewMarket, NEU, soared and small cap energy producers such as Apco Oil and Gas, APAGF, roared. Synthetic manufacturer Georgia Gulf Corp, GGC, did quite well as did refiner Western Refining, WNR.

Note the contrast between Home Depot, HD, and Lowes, LOW, the former is likely topping out while the latter has entered an Elliott Wave 3 Down and is short sellable at 25.
Terry Barrett of Bloomberg reports economic recovery over the last year saw U.S. raw steel production rose 2.1 percent last week to 1.683 million tons from 1.648 million tons a week earlier, the American Iron and Steel Institute said. Compared with a year earlier, production is up 12.8 percent. Steel mills operated at 69.6 percent of capacity in the week that ended Jan. 1, up from 68.1 percent the previous week, according to the Washington-based organization.

But, the chart of steel, SLX, suggests that a market top has been achieved in the steel manufacturing companies. Steel wire manufacture, Insteel Industries, IIIN, is cresting at an Elliott Wave 2 up at price of 11.90. Steel manufacturer American Railcar Industries, ARII, appears on the verge of turning strongly down. Metal recycle Schnitzer Steel, SCHN, is in prime short selling territory at the price of 62.95, as is Commercial Metals Co, CMC, at 16.83, as is  Metalico, MEA, at 5.66.The combined chart of SCHN and CMC together with the S&P suggests that these should now be excellent fallers, greatly rewarding those who are short these volatile stocks. It was volatile base metal prices, DBB, that created an Elliott Wave 3 Down in a number of metal recycling stocks such as Metalico, MEA.

Three black crows appeared in the chart of US Steel, X, this last week as it fell strongly in an Elliott Wave 3 Down. Could it be that the US Steel Manufacturers that received Ben Bernanke’s QE hot money inflation will now be leading steel producers in a global sell off?  Are we about to see a stock run on steel stocks?

Metal manufacturing, XME, saw a strong 2.1% fall on Friday January 14, 2010.

Coal, KOL, had a 2.1% fall on Friday January 14, 2011 as US based ANR Natural Resources, ANR, fell 7.7% and Arch Coal, ACI, fell 4.0%. These US based natural resource stocks saw plenty of the Ben Bernanke dollar liquidity cool aid; and it appears now that the hot money flow that came in with QE2, is quickly going out.  And thus we see a rumble in the metal sector of the basic material stocks with recyclers, producers and the suppliers turning lower.  

This as Ben Sharples of Bloomberg reports:  “Coal used by steelmakers may jump to $330 a ton, compared with first-quarter contract levels of $225 and a spot price of $280, amid shortages caused by Australia's floods, Bank of America Merrill Lynch said.”

Community Banks, QABA, jumped 2.9% higher on Friday, January 14, 2011; the chart suggests that its gains cannot be sustained. This means that the six percent gain Cathay Bancorp, CATY, cannot be maintained and that it is a short selling opportunity at 17.31.

Credit provider Nelnet, NNI, rose this week; but appears to be cresting in an Elliott Wave 2 up, and poised for a downturn. The Leveraged Buyouts, PSP, rose strongly

The Morgan Stanley Cyclical Index, $CRC, has been strong but appears to have put in a  top on January 12, 2011.  Consumer goods component, Goodyear Tire, GT, and transportation component, R,  have both sold off and represent short selling opportunities.

North American machine tool manufacturer Flow International, FLOW, benefited from QE 2 liquidity, but is cresting in an Elliott 2 Wave up and ready to enter an Elliott Wave 3 Down.

Pharmaceutical Holders, PPH, appears topped when its chart is compared with its components  JJN, PFE, MRK, ABT, BM , LLY. Salix Pharmaceuticals, SALX, entered an Elliott Wave 3 Down on January 4, 2011, and sold off 5 percent on January 14, 2010. Akron, AKRX, is poised to sell off at 5.74. The chart of Biotech and Genome, PBE, with a wave 2 up cresting at 21.67, suggests that the age of profitable investing in many pharmaceutical and biotechnology companies is now done and over.

Short selling opportunities still abound in the consumer services sector, with Darling Industries, DAR, primed to sell at 12.78.

Consumer discretionary leader Winnebago, WGO, is a great short selling opportunity at 15.39. There is an end to all cycles, and an Elliott Wave 2 up is being achieved in Winnebago at the current time; soon it will be hasta la vista baby to this recreational vehicle manufacturer.   

The chart of OYO Geospace Corporation, OYOG, a designer and manufacturer of instruments and equipment used in the acquisition and processing of seismic data, as well as in the characterization and monitoring of producing oil and gas reservoirs, shows that it has just entered into an Elliott Wave 3 Down and is prime short selling material at 91.13. This stock got lots of inflation courtesy of the Fed Chairman, and now it is in a strong deflationary wave down which will reward those who have gone short and who are going short.

The chart of Avid Technology, AVID, is similar to that of OYOG, in that it appears to be rushing up into an Elliott Wave 2 up; that is cresting up, and this portends a fall lower soon.

This year, the small cap pure value shares, RZV, compared to the small cap pure growth share, RZG, RZV:RZG has turned lower, suggesting that a market top is being achieved.

Even Utilities, XLU, and International Utilities, DBU, rallied this last week, with debt ridden NextEra Energy, NEE, rising parabolically. All appear to be putting in Elliott Wave 2 highs, which will bring an Elliott Wave 3 Down.  

Wind Energy, FAN,  S&P Clean Energy, ICLN, has risen in January. Nasdaq Clean Energy, QCLN, has risen to a new high, with solar, TAN, and nanotechnology, PXN, rising parabolically.  

Shares in asset management companies, The Blackstone Group, BX, and Blackrock, BLK, just like those in MGM Resorts, MGM, networking, IGN, and semiconductors, XSD, have gone parabolically higher. Patrick Cole of Bloomberg reports:  “Against a backdrop of exhibits at New York’s Museum of American Finance highlighting the U.S.’s financial history, Blackstone Group LP Chairman Emeritus Peter G. Peterson told patrons and supporters of the museum that the country’s future could be harmed by its national debt.  ‘I think the American dream is threatened,’ Peterson, 84, said … ‘It’s very important that we start educating the country about why this is important.’ The U.S. has accumulated more than $14 trillion of debt and had a $1.3 trillion budget deficit in the fiscal year”

Large cap value shares such as Exxon Mobil, XOM, Citigroup, C, and Bank of America, BAC, rose strongly this week, taking International Dividend Payers, DOO, and International Financials, IXG, higher.

Small cap revenue shares rose strongly this week, RWJ, taking companies such as World Acceptance, WRLD, and EZ Corp, EZPW, zooming up.

Dow Health Care Providers, IHF, Design Build, PKB, Dow Jones Internet, FDN, and Nasdaq Internet, PNQI, Network stock, IGN, rose strongly

Yet a sell off has come telecom, VOX, retail, XRT, environmental services, EVX, and the Shanghai shares, CAF, as well as to the BRICS, EEB, especially China, YAO, on credit tightening and India, INP, on a telecommunications scandal and destructive inflation. Nalco Services, NLC, exemplifies one of the environmental companies that are now selling off, it is a short selling opportunity at 30.58

Mike Mish Shedlock writes Chinese Bank Lending Spree Continues; $75 Billion New Loans First Week in January Alone; Inflation Gone Amuck

Bloomberg reports:  “China’s vehicle sales jumped 32% in 2010 as government stimulus measures and economic growth helped the nation stay the world’s largest auto market for a second year. Total auto sales rose to 18.06 million, while passenger-car deliveries gained 33% to 13.8 million … Sales of cars and light trucks in the U.S. gained 11% to 11.6 million in 2010, according to researcher Autodata Corp.”

Automobile Manufacturer Ford, F, rose 2% this week. Johnson Controls, JCI, 0.2%, American Axle, AXL, 14%, AutoLiv, ALV,  2.9%,  Ceradyne, CRDN, 3.9%, TRW Holdings, TRW, 7.2%. To see such excitement in the individual charts as well as the combined charts of TRW, CRDN, ALV, XL, JCI, F with an average of 70% since QE 2 was announced in August is frankly alarming as it suggests that there could be a sudden reversal.

Small cap industrial shares, XLIS, leader Belden, BDC, has entered into an Elliott Wave 3 Down Sell off, and represents an excellent short selling opportunity at 37.58.

Latin America, LATM, is poised on the edge of head and shoulders pattern, and thus suggests that a number of Latin America stock should be sold short; this includes Grupo Televisa, TV, at a price of 26.00 as does ASR at a price of 56.46.   

The head and shoulders pattern in disk drive manufacturer, Quantum, QTM, suggests a short selling opportunity at 3.80.  

Internet Capital Group, ICGE, has fallen to the edge of head and shoulders pattern at 13.34, suggesting a short selling opportunity.

Gold, GLD, Is a currency, and like any other currencies It rises and falls with regard to central bank policies. Gold has come under selling pressure as it has been rising strongly for the last ten years on the 30 10 US Soveign Debt Yield Curve, $TYX:$TNX, as well as on carry trade investment.

As there has been a strong US Dollar liquidity trade, Yen based carry trade investing has failed.

This has caused a fall in the gold commodity currencies, the South African Rand, SZR, and the Australian Dollar, FXA, as the Yen, FXY, has fallen lower in January. The sell in the Yen, FXY, is now destabilising.    

The South African Rand Yen Carry Trade, SZR:FXY, has unwound, causing disinvestment in South Africa shares, EZA. The Australian Dollar Yen Carry Trade, FXA:FXY, that is the AUD/JPY, has unwound, causing disinvestment in Australian shares, EWA,  and even the Australian Small Caps, KROO.  The Optimized Carry ETN, ICI, entered an Elliott 3 Wave Down in late December 2011. The USD/JPY has risen this year, and its inverse, the JYN has fallen this year.

A strong Canadian Dollar, FXC, has brought rewards to those invested in Teck Resources, TCK;  but the chart of this North American resource company appears to have been achieved at 63.75.

Indonesia shares, IDX, have plummeted as Diana Bisara of Reuters reports in article Bank Indonesia’s Core Inflation Stance Spooks Investors, Economists: Investors and analysts alike have offered a sour reaction to Bank Indonesia’s confidence that core inflation will not surpass 5 percent and rising food prices can be controlled. “Inflation is fast becoming a prominent issue in Indonesia,” Wellian Wiranto, an economist at HSBC, said in a report on Friday. Aldian Taloputra, an economist at Mandiri Sekuritas in Jakarta, echoed the worries, saying, “The market is worried by the increasing prices of food and rice in Indonesia. Rice is the staple for Indonesia’s 235 million people. “We really don’t know how long this rainy season will last. Bad weather will worsen the inflation outlook as it may disrupt crops of rice and other commodities.” Strong investment inflows pushed the rupiah up 5 percent last year, helping mitigate inflation by making imports cheaper. Rising food costs helped drive annual December inflation to a 20-month high at 6.96 percent. President Susilo Bambang Yudhoyono said on Thursday that possible steps to avoid a food crisis included waiving taxes for rice and cooking oil, maintaining sufficient stockpiles and preventing smuggling or hoarding.”

Gregory Meyer, Javier Blas and Jack Farchy of the Financial Times report:  “The world has moved a step closer to a food price shock after the US government surprised traders by cutting stock forecasts for key crops, sending corn and soyabean prices to their highest level in 30 months.  The price jump comes after the UN’s Food and Agriculture Organisation warned last week that the world could see repetition of the 2008 food crisis if prices rose further. The trend is becoming a major concern in developing countries.  While officials are drawing comfort from stable rice prices, key for feeding Asia, they warn that a sustained period of high prices, especially in grains such as wheat, would hit poorer countries. Food price hikes have already led to riots in Algeria and Mozambique. ‘Stocks of corn and soyabean are at incredibly tight levels ... and the markets are surging to incredibly strong prices,’ Chad Hart, agricultural economist at Iowa State University, said.”

Peru, EPU, showing three black crows, and Chile, ECH, have sold off significantly since the fist of the year on the volatile price changes in copper, JJC as well as on concerns that the drop in the Baltic Dry Index, $BDI, may be suggesting order insecurities.

In as much as QE 2 gave moneyness to stocks and junk bonds, as well as commodities, DJP, and US Commodities, USCI, with the latter rising more than the former.

But with deleveraged sovereign debt and gold mining stocks, it is reasonable to say that Quantitative Easing II has monetized US sovereign debt and cased a crack up boom in stocks, junk bonds, and commodities.

Said another way, Ben Bernanke’s Quantitative Easing has resulted in the United States loosing its debt sovereignty and has given seigniorage to investments globally.  

Did your portfolio get the Ben Bernanke inflation, that is stimulus? Do you thing it might be time to take profits? I disclose that I am invested totally in gold bullion; I recommend the same for all.

And this week, a positive Euro Yen carry trade, the EUR/JPY, FXE:FXY, manifested on news that Portugal had success in selling its bonds: this rallied the European Shares, VGK, and the European Shares, EUFN, and the European Small Cap Dividend Shares, DFE, as well as rallied World Government Bonds, BWX, and International Corporate Bonds, PICB.

The Swedish Krona, FXS, is a volatile currency; the Swedish Krona Yen Carry Trade, FXS:FXY, rose strongly taking Sweden, EWD, up 6 percent this week. The five days of almost a vertical move seen in the Swedish Yen Carry Trade demonstrates the quickness and power of carry trade investing.

Given that the gold mining stocks, GDX, have sold off with the US 30 Year US Government Bonds, EDV, and the 10 to 20 Year US Government Bonds, TLT, and given that the Retail Stocks, XRT, Environmental Services, EVX, and leading Industrial Small Cap stocks, such as Belden, BDC, have sold off as well, and given that three black crows have appeared in a major sell off of the Municipal bonds, MUB, and given that the India, INP, shares have turned lower, I make the case that the world has pivoted from  …. the age of leverage and investment growth …. and into …. the age of deleveraging and investment contraction.

Matt Walcoff and Lynn Thomasson of Bloomberg report:  “Following the advice of equity analysts may be perilous for your profits. Companies in the Standard & Poor’s 500 Index that analysts loved the most rose 73% on average since the benchmark for U.S. equity started to recover in March 2009, while those with the fewest ‘buy’ recommendations gained 165%. Now, banks’ favorites include retailers and restaurant chains, the industry that did best in last year’s rally and that are more expensive than the S&P 500 compared with their estimated 2011 profits”

Restaurant Equipment Manufacturer, Middleby, MIDD, is topping out and represents a good short selling opportunity in as much as the restaurant industry is turning over.

The chart of the US Dollar, $USD, has found support at 79. Might it be that the US Dollar will rise this next week, and the Euro, FXE, fall lower. I believe the bond vigilantes will be be calling the interest rate on the 30 Year US Government Bond, $TYX, up from the region of 4.4 and 4.5, and the interest rate on world government bonds higher as well, causing world major currencies, DBV, and emerging market currencies, CEW, to fall lower. And that the US Dollar will rise and fall in waves of competitive currency devaluation at the hands of the currency traders.   

Madelene Pearson and Jay Shankar of Bloomberg reports:  “Record imports of gold by India show the central bank may be losing the battle to tame inflation, spurring investors to sell government bonds. Shipments into Asia’s third-biggest economy may have increased to 800 metric tons from 557 tons in 2009 and exceeding the previous all-time high of 769 in 2007, according to Ajay Mitra, managing director for … the World Gold Council… ‘Gold is being used as a store of value to protect against never-ending inflation,’ Ritesh Jain, the head of fixed income at Canara Robeco Asset Management said: ‘Inflation is the biggest concern in the minds of investors and savers.’”

2) …. Agricultural commodity inflation is causing carry trade investment in farms to achieve food security.
Yazad Darasha of Zawya Gulf News reports Governments around the world have declared war on galloping food-price inflation and have instituted various means to put a lid on simmering social unrest.
UAE Economy Minister Sultan Bin Saeed Al Mansouri told the Federal National Council yesterday that the nation is investing in farms abroad, especially in Vietnam, Cambodia, Egypt, Pakistan, Romania and America to secure food supplies and protect itself from price fluctuations. He said the UAE is also in “serious negotiations” on agricultural investments with other countries including Australia and Indonesia.

In India, Prime Minister Manmohan Singh convened a cabinet meeting to discuss rising food prices, especially onions, which drove India’s annual food inflation to 18.32 per cent for the week ended December 25. Saudi Arabia said it will increase wheat reserves to cover a year instead of six months. Indonesia said it will scrap the import duty on wheat, soybeans and livestock feed.

Algeria’s government suspended customs duties and tax on imports of sugar and cooking oil after riots erupted last week. Bangladesh has launched a drive to distribute rice and wheat to the poor and Ethiopia has instituted price caps.

King Abdullah II of Jordan has instructed Prime Minister Samir Rifai to take “immediate and effective measures” to protect the poor and middle-class citizens.

The South Korean government said it would increase the supply of 16 items including vegetables, meats and fish.

Central bankers warned on Monday that rising prices in fast-growing economies were an increasing menace to global economic recovery. The Group of 20 nations also promised action on food prices, which have already pushed food inflation in countries such as Brazil, China and India into double digits.

3) … The euro will only survive if the power of national governments is destroyed, political commentator Peter Osbourne of The Telegraph writes. Europe is moving towards greater integration which necessitates loss of sovereignty, French prime minister, François Fillon communicates. I ask will a Chancellor, that is a Sovereign, arise to rule Europe, perhaps someone who has been honored with the Charlemagne Prize, German, Karlspreis; full name originally Internationaler Karlspreis der Stadt Aachen.

Someone had to say it, so Peter Osbourne chief political commentator of The Telegraph, came forward on January 13, 2011 to relate The only way to save the euro is the destruction of its members:  

“Since the coronation of Charlemagne as Holy Roman Emperor in 800 AD, there have been numerous attempts to unify Europe. Philip II of Spain, Louis XIV, Napoleon and Hitler all came tantalisingly close to success, but all ultimately failed. Today a fifth attempt is under way through the European Union.

Though not associated with a single great or powerful man, the ultimate objective of the EU is otherwise more or less familiar to students of European empires: no internal boundaries; a single currency; one parliament; one central government; one army; one foreign policy and a single political unit stretching from the Atlantic to the Urals.

The 27 nations that currently comprise the EU would merge into one huge state, accounting for a population of some 500 million, approximately one fifth of global wealth and an even higher percentage of the world’s trade. Such a nation would take its place alongside the United States and China as a superpower.

This project, in its way both noble and visionary, is surprisingly close to realisation. Many people fail to grasp this point because they have been distracted by the headlines on financial pages signalling daily woe and disaster for the eurozone countries.

But these setbacks were long ago foreseen by the architects of the EU. Jacques Delors, the French politician who more than anyone else was the architect of the single currency that is used today, is a highly intelligent man. He was warned many times by critics such as Margaret Thatcher that it was hopelessly premature to set up a monetary union without full political unification. He knew very well there would be problems.

But Mr Delors saw these problems as opportunities – what have been called “beneficial crises”. These economic crises, he believed, could be exploited by the European governing class to expedite with extra urgency and dynamism their over-riding project of integration, and the creation of a single European state.

An understanding of this background is essential for anyone wishing to come to terms with yesterday’s speech in the City of London by the French prime minister, François Fillon. Most of the guests listening to Mr Fillon would surely have expected at the very least a substantial measure of alarm and contrition in the wake of the devastating setbacks for eurozone countries such as Greece and Ireland over recent months.

Yet there was no sign of retreat, or even judicious contemplation. Mr Fillon could hardly have been more bullish, upbeat or confident. “Europe is at a historic turning point,” declared the unchastened French premier. “The real question right now is whether to keep building on this adventure, or whether we leave it at that.”

His answer could not have been clearer: “We are going to move towards greater integration.” That means a deepening of the common social and economic regime which already binds Europe – as well as one potent extra element. Governments are to be stripped of their ability to tax and spend according to the democratic demands of their own voters. Instead (though Mr Fillon did not explain this), their budgets will be set for them by a greatly empowered common European government in Brussels.

It must be acknowledged that, strictly within his own terms, Mr Fillon is right. There is only one way to save the euro, and it is finally to resolve the problem so lucidly analysed by Mrs Thatcher in her conversations with Mr Delors 20 years ago. Europe cannot survive with a single currency but a pluralist and diverse political system. So long as member states enjoy local autonomy, the currency is guaranteed to collapse. The euro will only survive if the power of national governments is destroyed.

It is this basic fact which makes the year 2011 such a critical year in the history of Europe – or “a historic turning point”, to use Mr Fillon’s potent phrase. European leaders have no choice but to act at once. If they leave political and economic structures as they are, the single currency will collapse very quickly and the European project will follow.

So 2011 is the year of the “beneficial crisis”, when the EU will try to exploit short-term economic hardship in order to eliminate the powers of national governments and to create a new pan-European political structure. If it succeeds, it may go on to become a great world power. If it fails, it will start to revert to a collection of nation states.

European leaders are fully aware they face this moment of decision. Two of the most basic ingredients of this new order were first discussed at a meeting between Angela Merkel and Nicolas Sarkozy last October, as the scale of the Irish financial crisis was starting to become apparent.

Mrs Merkel and Mr Sarkozy accepted that it was no longer possible to respond to eurozone crises in the ad hoc way with which they had responded to the Greek meltdown of May 2010. They recognised the need to create a new and more enduring structure. They decided that this meant, first, the creation of a massive fund to bail out failing members of the eurozone (later agreed at a European summit). Second, they discussed (but did not agree) the creation of common eurozone government bonds.

These would prevent the markets focusing on the solvency of embattled individual states. Instead, traders would be obliged to focus on the creditworthiness of the eurozone as a whole. As a result, the kind of crisis which afflicted Greece and Ireland last year, and threatens Portugal today, would be prevented.

In theory, these new structures would work easily. But they mark a fundamental and revolutionary change in the structure of the EU. Mr Delors’s Maastricht Treaty envisaged each member state taking responsibility for its debts. The common bail-out fund and eurobond set out by Mrs Merkel and Mr Sarkozy abandon that principle, though Germany has yet to fully acknowledge this killer point.

Once implemented, all member states (and Mrs Merkel in particular is agonisingly aware of this) will take responsibility for each others’ debts. From that moment, Europe will transform once and for all into one country. This is the historic turning point Mr Fillon was discussing yesterday, and he asked for Britain’s assistance. David Cameron pledged that Britain “will be a helpful partner”. But our true interests lie elsewhere. Europe is our greatest trading partner and we have a visceral interest in its prosperity and growth.

Already the dogmatic adherence of the European elite to the single currency has had a devastating impact on many eurozone countries, converting Greece and Ireland (to quote my colleague Ambrose Evans-Pritchard) into economic protectorates of Brussels, a fate likely to befall Portugal and Spain.

The act of a true friend would have been to warn Mr Fillon against digging himself and Europe into a deeper hole. Meanwhile, our Government would be wise to lecture bankers, not about the size of their bonuses, but about the scale of their exposure to European sovereign debt.”

4) …  European Federalists met in conference the week ending January 14, 2011 to organize and plan for a European Superstate.
On January 13, 2011, The European Parliament published the article Joschka Fischer: European states must “combine interests” for common good, Mr. Fischer was born 1948 in Germany, is a prominent Green politician, was Foreign Affairs Minister 1998-2005 under Gerhard Schröder, is creator and member of the think tank European Council on Foreign Relations, and is currently political advisor for the Nabucco pipeline. He was at the European Parliament Wednesday, 12 January, to take part in a conference organized by the Spinelli Group entitled “The United States of Europe – Towards a Transnational Society?

An avowed federalist on European matters, Mr Fischer used the conference to call for greater European unity and for Europe to “combine our interests” to weather the economic storm.

He said: “I am still optimistic however, that the crisis will lead Europe to establish an economic union. I see no alternative.” And was asked: What should the Europe of the future resemble? He replied: “It’s very simple. Every day we are losing part of our sovereignty to the emerging powers. Yet we still wonder if we should abandon our sovereignty (in favour of the EU) or not. We are losing that sovereignty anyway! It’s just that it is going to non-European powers in the East (like China). We are losing importance and losing our position. The world is changing dramatically and the question that Europeans must answer is what will be the place of Europe in ten years. Europe must be strong. This will only be possible if we combine our interests. It’s laborious but it is possible if we exercise our sovereignty in a common manner. The aim would be to enter the “United States of Europe”, a true association of democratic states that pool their sovereignty. But our national identities continue to exist and the United Nations will continue therefore to play a strong role.”

Matic Bitenc attended the conference and wrote in article The Unites States Of Europe Debate:  “Thus I was very pleased to take advantage of that fact when I received an invitation to a debate about European federalism organised by the Spinelli group in the European parliament in Brussels. The Spinelli group is an assembly, mostly consisting of European politicians and officials who believe that the solution to the global challenges facing us all is a more tightly integrated European Union, preferably along federalist lines. While that alone might not have gotten me to come, the names of Joschka Fischer, Daniel Cohn-Bendit and Jean-Marc Ferry on the debate panel provided the much needed motivation.

Joschka Fisher I think really got to the crux of the transfer of sovereignty debate. He started out by bringing attention to the fact that the transatlantic West is losing its global supremacy it held for so long. While that might be something that even the birds on the roof are already singing, as we say in Slovenia, understanding the effect of that process on national sovereignty is crucial. The core and substance of sovereignty is basically autonomous power. Can you take a decision and bring it to fruition in reality? With the economic and political rise of Asia, Europe is losing its clout in the world and its decisions matter less globally if they are even realised. National sovereignties are many times an illusion. Effectively sovereignty is being transferred to Asia with an economic process, whether we like it or not. Case in point being the Copenhagen climate summit where EU countries were left out of the room and USA and China were the ones really discussing things. Thus we should reach over our petty nationalisms that keep us from pooling sovereignty further in the European Union. Only so will we be able to regain the European influence in the world, by speaking in one voice. This principle applies not only directly to foreign policy but to almost every other area, economy, research, anything with global implications really. As Jean-Marc Ferry wisely pointed out, that’s why globalisation is probably the main “selling point” of the European Union for the 21st century, much like keeping peace in Europe was after the second World War and most of the 20th century.

The debate was interesting, even-though I get the feeling the participants could have listened and actually interacted with each other more. Was it fruitful? Well, despite the completely full auditorium it seemed to me that they were preaching to the choir of already convinced. debates like this are only useful if they lead to some concrete action from the mindshare gained. While I have my doubts, I do hope the Spinelli group with its high-placed members has some more of concrete action up their sleeves.”

I want to go back just a short period in time to November 2, 2010 to reference Centurean2’s article The time of the homogenous nation-state is over – Van Rompuy, where the leader is quoted as saying: “We have together to fight the danger of a new Euro-scepticism. This is no longer the monopoly of a few countries. In every Member State, there are people who believe their country can survive alone in the globalised world. It is more than an illusion: it is a lie! The time of the homogeneous nation-state is over.”

And I reference the September 1, 1996 Lindsay Jenkins report which identified the Godfather of the European Union: Altiero Spinelli. “Few in Britain have heard of the Italian Leninist and former Stalinist, Altiero Spinelli. Yet federalists at the heart of the European Union fully recognise the importance of Spinelli’s contribution to the creation of the European Union. His impact on the birth of the European Super State has been momentous.

Writing in his book The United States of Europe, Spinelli recommended “set[ting] up a few simple federal institutions, which must be solid, irrevocable [a word we have heard many times since] and easily understood. It will not be necessary to trouble much with individual national problems. The federation would provide the necessary internal order to which progressive forces would naturally adjust and from which they would derive their future character.”

“Between March and June 1944 five meetings were held in ‘t Hooft’s house. The participants signed the International Federalists’ Declaration, which was edited by the Italians and based on the Ventotene Manifesto. They wanted “to go beyond the dogma of the absolute sovereignty of the state and unite in a single federal organisation. The lack of unity and cohesion that still exists between the different parts of the world will not allow us to achieve immediately an organisation that unites all civilisations under a single federal government. At the end of the war one will therefore have to be content with setting up a universal organisation of a less ambitious kind, but one able to develop in the direction of federal unity.”

5) …. Irish Central Bank prints €6.4bn, bringing the total amount it is owed by Ireland’s banks to €51bn.
Donal O'Donovan writes in January 15, 2011 The Irish Independent article Irish Central Bank Steps Up Its Cash Support To Irish Banks Financed By Institution Printing Own Money In Amount of €6.4bn  

Emergency lending from the ECB to banks in Ireland fell in December, the first decline since January 2010, but only because the Irish Central Bank stepped up its help to banks.

The Irish Independent learnt last night that the Central Bank of Ireland is financing €51bn of an emergency loan programme by printing its own money.

ECB lending to banks in Ireland fell from €136.4bn in November to €132bn at the end of December, according to the figures released by the Irish Central Bank yesterday. At the same time, the bank increased its emergency lending by €6.4bn, bringing the total it is owed to €51bn.

The latest data does show a levelling off in demand for the loans. Emergency lending to banks shot up €16bn in November, but overall demand for the loans only increased by €2bn in December when ECB and Irish Central Bank figures are combined.

However, the figures also provide the latest evidence that responsibility for funding Ireland's broken banks is being pushed increasingly back on to Irish taxpayers. The loans are recorded by the Irish Central Bank under the heading "other assets".

A spokesman for the ECB said the Irish Central Bank is itself creating the money it is lending to banks, not borrowing cash from the ECB to fund the payments. The ECB spokesman said the Irish Central Bank can create its own funds if it deems it appropriate, as long as the ECB is notified.

News that money is being created in Ireland will feed fears already voiced this week by ECB president Jean-Claude Trichet that inflation is a potential concern for the eurozone.

However, a source at the ECB said the European bank is comfortable that the amounts involved are small enough not to be systemically significant. The ECB has been lending money to banks in Ireland at just 1pc, as long as the banks can put up acceptable collateral.

The volume of those loans surged from €95bn in August 2010 to €136.4bn in November, as Irish banks repaid their bondholders without being able to refinance in the private sector. The ECB loans prevented banks that could not raise funds from the private sector running out of cash after repaying their own lenders and meeting deposit withdrawals.

December's fall in ECB lending was the first decline since January 2010. The ECB total includes loans to Irish banks and banks operating out of the IFSC.

Around 66pc of the ECB loans have been made to domestic Irish banks, according to Michael Cummins of Glas Securities. The ECB is known to be keen to wean Irish banks off its loans, but the increase in lending from closer to home shows banks are still not able to access funds in the private sector.

The data released by the Central Bank of Ireland included details of a €12.3bn "fine-tuning operation" by the bank. The data suggests the €12.3bn has been loaned out by the bank on a short-term basis.

It was the first time any such transaction has been recorded over the December period since 2003. A spokesman for the Central Bank said the transaction had been flagged by the ECB in September.

He said the ECB said it would carry out three "fine-tuning operations", including one on December 23. These operations are aimed at smoothing out any disruption that might occur when the ECB's regular six-month and 12-month lending deals with banks end and have to be refinanced.

People in the market said the large scale of the latest "fine tuning" is likely to be down to the difficulty of rolling over large amounts of debt over Christmas.

Commentary: I would think that such action by the Irish Central bank would cause a further run on Ireland’s banks as well as cause the interest rate on the bank debt to continue to skyrocket; any bond investor in Ireland’s banks, wealthy or poor, who has not lost his shirt, will do so. Now I have insight as to why Ireland’s stock market crashed and have insight why the UK had to participate in the recent Ireland bailout.