Financial Market report for Friday June 15, 2012; this is the eleventh week of entry into the Second Great Depression.
The Connecticut Gold Coast is a bastion of wealth. Wikipedia relates the distinction of being called the wealthiest town in Connecticut is difficult to pinpoint exactly. It probably lies with either Darien, Greenwich or New Canaan, depending on which statistic you use. The Higley 1000, reports on The Gold Coast of Long Island. Long Island has 53 Higley 1000 neighborhoods that I have divided into four distinct geographic clusters.
Folks who live here are passing through peak wealth, as the death of fiat wealth occurred on June 1, 2012, when Mario Draghi announced that the Euro is no longer sustainable in its current form; it was at this time that gold, GLD, started to rise in value, and bonds, BND, has continued higher, with stocks, VT, higher, and commodities, DBC, and commodities turned lower.
Volatility, TVIX, fell lower again this this week after having fallen last week. The ratio of US Shares relative to US Stocks, VTI:USCI, is near an all time high and illustrates how overvalued stocks are at this time.
Neoliberalism provided many forms of valuable investments which came by prudently exercising investing discernment; but under Neoauthoritarianism, the only money good investments will be diktat and physical possession and ownership of gold. The price of gold is now trading above $1,600. Bullion Vault reports Gold price jumps again as Spanish, Italian bonds undo €1.1 trn LTRO. The chart of the gold ETF, GLD, shows its rise since June 1, 2012; gold is on a buy signal.
Mike Mish Shedlock writes Institutional Advisor Bob Hoye Explains Why Gold Miners are Winners During Deflation. But I comment that the chart of the Gold Miner, GDX, unlike Gold, GLD, shows a rise in a descending channel; I cannot recommend that one buy the gold mining stocks.
Spiritual wealth consists of the exceedingly great precious promises of God and comes from knowing the Present Truth, that is from understanding and having identity and experience out of the like precious faith of Jesus Christ, and manifesting in virtue, the moral excellencies of God … 2 Peter 1:1-12.
In today’s news
24/7 Wall Street relates Flint and Detroit ranked as America’s Most Dangerous Cities
Chris Marsden of WSWS reports SYRIZA’s Tsipras pledges to save Greek and European capitalism. SYRIZA head Alexis Tsipras chose a column in the Financial Times to pledge that his party will act as the saviour of the euro currency and a tax collector on behalf of the troika.
Patrick Martin of WSWS reports Crisis has thrown back US families 20 years. Median net worth has declined to the level of 1992.
Open Europe reports Weidmann warns that a euro exit would be worse for Greece than the rest of Europe. The FT reports that the EU is preparing to further ease the terms of the Greek bailout following Sunday’s election, although they may not offer the terms if the government is headed by SYRIZA. The plans include lower interest rates, extended repayment periods and EIB funds for Greece. The Greek stock market rallied yesterday amid expectations of a New Democracy victory. In a speech yesterday SYRIZA leader Alexis Tsipras continued his overt attacks on PASOK and New Democracy and hinted that he would not look to form a coalition with PASOK. Le Mondereports that Tsipras also said his first act would be to “exploit the ten days until the European summit on June 28 to lead a series of real negotiations” over Greece’s place in the euro.
In an interview conducted jointly with Corriere della Sera, El Pais, Publico and Kathimerini, Bundesbank President Jens Weidmann warned that any changes to the current programme in Greece would be “dangerous” and stressed that if it did exit the euro, although everyone would be affected, Greece would be “worse off than everybody else”. City AM reports that, according to a G20 aide, “The central banks are preparing for coordinated action to provide liquidity,” in case of a negative outcome from Greek elections. Eurozone finance ministers also stand ready to hold an emergency conference call on Sunday evening depending on the result.
Slovak Prime Minister Robert Fico told his country’s parliament yesterday that “If the Greeks do not meet the commitments they have made, do not meet their financial commitments, do not repay loans, Slovakia will demand that Greece leaves the eurozone.” Speaking in Bejing, Belgian Foreign Ministers Didier Reynders has warned that “the Greeks should no longer expect support if they decide to leave the euro after the elections”. FT Les Echos CityAM Kathimerini Reuters BBC Reuters 2 Kathimerini 2 Le Point Le Monde Trends WSJ EurActiv Telegraph Guardian IHT FT 2 Les Echos 2 CityAM 2 Welt Le Figaro WSJ 2 Süddeutsche Kathimerini 3
Hollande and Monti present united front as Germany plays down moves towards fiscal union. In a joint press conference following a meeting in Rome yesterday, French President Francois Hollande and Italian Prime Minister Mario Monti supported the creation of growth policies and debt mutualisation in order to tackle the eurozone crisis, despite German Chancellor Angela Merkel yesterday playing down the prospect of such measures. Bundesbank President Jens Weidmann said yesterday that Europe faced decisions “which can no longer be delayed”, but warned that a fiscal union could not be created without a “clear expression of willingness” from all populations involved. Weidmann also laid out his view of a possible fiscal union, stating that any countries which breached the budget rules would need to cede power to a central authority.
The FT reports that Italy will look to sell off some state assets to boost its reform plans with two funds being set up and managed by the state financing agency to purchase assets from the central government. Moody’s last night downgraded five Dutch banks and warned of a Greek exit from the eurozone and further fiscal consolidation in the Netherlands. Inflation in the eurozone fell to 2.4% in May, its lowest level for a year. FT WSJ FT 2 FT 3 FT 4 Le Figaro CityAM BBC Le Figaro Les Echos La Tribune WSJ 2 Irish Times Irish Independent Le Figaro 2 Les Echos 2 Le Monde Le Monde 2 Telegraph Telegraph 2 Welt
Handelsblatt: ECB set to be given supervisory powers over eurozone banks. Handelsblatt reports that support is growing for the ECB to take over supervisory authority over eurozone banks, with German Chancellor Angela Merkel joining the French government and central bank in backing the move, although the Bundesbank reportedly has reservations. The decision could be made as soon as June 28 and 29 at the next summit of EU leaders. The decision could spell the end for the current EU banking regulator, the London based European Banking Authority, with an EU diplomat quoted as saying that “the EBA would no longer have a reason to exist”. The paper also cites UK Treasury Minister Mark Hoban as saying that “the ECB would be the appropriate supervisor of eurozone banks”, whereas expanding the role of the EBA would threaten conflicts between eurozone and non-eurozone members.
Handelsblatt Les Echos
Mats Persson: Will the UK use its veto over banking union to gain single market safeguards? … Osborne: we will not oppose greater eurozone political integration. Open Europe’s Director Mats Persson writes on his Telegraph blog that “the UK cannot take part in the banking union itself: politically, it would involve a massive transfer of powers to the EU, which no British government will go anywhere near [however] inherent in the creation of a full-scale banking union is the fragmentation of the EU single market… the political dilemma for the UK government is clear: is it prepared to use another veto to block a banking union absent UK-specific safeguards – risking being perceived as hampering efforts to save the euro? Or will it simply nod through potentially game-changing proposals, risking the wrath of its backbenchers?”
In an opinion piece for Le Figaro, UK Chancellor George Osborne writes that resolving the eurozone crisis will require “greater transfers between richer and poorer member states; pooling resources, potentially through the creation of eurobonds; a common safety net for banks, ensured by a banking union; greater oversight and restrictions on budgetary and financial policies”. He adds that “As an EU member outside of the euro zone, the UK considers that this process is of immense importance… We will not oppose greater political integration at a eurozone level”. He argues that “it is reasonable for EU member states outside of the eurozone and the banking union seek to obtain safeguard clauses” as “the UK, which has an important financial sector, would be unable to take certain measures to protect its taxpayers and financial stability if it had to comply with regulation introduced by eurozone countries”. Osborne stresses “Far from seeking exemptions…we hope to further integrate the single market”.
Telegraph blogs: Persson Economist: Charlemagne FT Editorial FT: Stephens FT: Mallaby WSJ Review & Outlook WSJ: Pissarides et al. WSJ: Rallo IHT: Redwood Telegraph: Warner Telegraph: Blair Open Europe research
Date for German vote on fiscal treaty and ESM finally set. The Bundestag is set to vote on whether to ratify both the fiscal treaty and the ESM treaty on the afternoon of June 29 after Chancellor Merkel returns from the EU leaders’ summit in Brussels. The Bundesrat, the upper house of the German parliament, will also hold a vote in a specially convened session later in the evening, allowing Germany to ratify the ESM two days before the eurozone’s new permanent bailout fund is supposed to officially come into force. However, the opposition and government are still holding talks over the concessions necessary for the opposition to lend its support to the measures.
Welt Reuters ARD Le Figaro Reuters 2 Le Figaro 2
Euro Intelligence provides the best on reporting and analysis in its daily email briefing, which I recommend that one purchase; it relates Spanish yields shoot through 7%. Spanish bond yields have continued to deteriorate, making a fully-fledged EFSF/ESM programme for Spain likely; Italian bond yields are also now well above 6%, as the markets are doubting Italy’s sustainability as well;
while southern Europe is burning, Angela Merkel gets in front of the Bundestag to list everything she does not want, including eurobonds and deposit insurance;ESM-banking licence, and the right to inject equity;but Hollande is opposed to Merkel’s designs for political union; of those proposals, Merkel indicated that she could support the principle of ECB bank supervision; Weidmann says his vision for a fiscal union consists of an automatic loss of sovereignty for countries that breach the fiscal rules; Alexis Tsipras said that if Spain can get €100bn without conditions, why can Greece not get the same, and stay in the euro; Antonis Samaras is portraying the political choice on Sunday as one between the euro and the drachma; France, meanwhile, is drawing up its own austerity programme.
Hollande propose a euro master plan to fellow governments. According to Le Monde, Francois Hollande is about to propose a euro masterplan in a letter to the fellow governments of the eurozone. Concerning the ECB the French president wants to go further than Angela Merkel. Hollande would like the ECB to become the euro area banking supervisor, but it would also be in charge of the deposit guarantee fund. Additionally the ESM should get unlimited financial firepower via a banking licence that would allow it to refinance itself at the ECB. Also the ESM should be able to recapitalize banks directly without going through governments. Hollande also wants to draw up a roadmap that would lead to the introduction of Eurobonds within ten years. In order to solve Europe’s short term debt problems the president is in favour of setting up a debt redemption fund as proposed by the German “wise men”. Hollande is open to Merkel’s idea of transferring sovereignty to the European level but he is eager to do so only if necessary and without any federal grandstanding. Therefore his advisors avoid talking about new euro institutions and merely say that France is ready to build the “appropriate institutions”.
Merkel warms up to the idea that the ECB should supervise euro area banks. Angela Merkel yesterday publicly endorsed the idea that the ECB should become the supervisor of euro area banks, Financial Times Deutschland and Handelsblatt report. “I would not have anything against the European Central Bank taking over a stronger role and getting supervisory competences”, the chancellor said in her speech in the Bundestag. There appears to be the beginning of convergence between Germany and France on the issue because Francois Hollande also supports a supervisory role for the ECB and wants to make proposals in this sense at the EU summit. Vitor Constancio on Tuesday said the ECB was ready to become the supervisor of the 25 largest cross-border systemic banks.
Weidmann outlines his roadmap for a “stability oriented fiscal union” It is quite hard to say the following with a straight face, but here it goes. Jens Weidmann yesterday outlined the conditions for what he calls a “stability oriented fiscal union”, Frankfurter Allgemeine Zeitung reports. The countries need to agree to strict budgetary and fiscal rules that must be supervised and enforced by a European authority, the Bundesbank president said. “In case a country does not comply with the budgetary rules the national sovereignty would automatically be transferred to a European level so that meeting the targets can be guaranteed”, Weidmann told his audience. The European authority would then be able to impose either higher taxes or spending cuts that it would be able to enforce against the parliamentary majority of the concerned country. If this condition is fulfilled a fiscal union with common liability in the context of a banking union or commonly backed Eurobonds is a viable option for Weidmann. He insisted that such a development would need to be democratically legitimized by an “expression of the will” of all the populations of the countries concerned. Also EU treaties and national constitutions needed to be amended accordingly so that the new rules are firmly anchored and cannot be changed with simply majority votes, Weidmann said.
French government prepares measures to get the deficit under control. According to Les Echos, the French government is preparing a set of measures to be presented in July with the aim to contain the deficit, Les Echos reports. As was promised during the election campaign the wealth tax and the inheritance tax will be increased. Also the tax breakes on overtime work and other tax breaks are likely to be scrapped. Later in the year the government wants to propose legislation with the aim of taxing equally work revenues and capital gains. Jean-Marc Ayrault has repeatedly hinted that France’s dire budgetary situation required additional efforts but he has refused to spell out what he planned to do ahead of the crucial run-off parliamentary elections this Sunday.
Mariano Rajoy now wants a full eurozone federation with tax raising powers. El Pais reports, the volatile Mariano Rajoy, who seems to have returned from his football game, now supports a fully federal Europe, with banking and fiscal union, tax-raising powers, and the transfer of sovereignty to the centre. It is fair to assume that he did not coordinate this position with Hollande or anybody else.
Germany is on course to ratify the ESM and fiscal pact before the end of the month. According to Frankfurter Allgemeine Zeitung talks between the Angela Merkel’s coalition and the opposition SPD and Greens have progressed, which makes a ratification of the fiscal pact and the ESM by the end of June the most likely scenario. There were no agreements on details but Volker Kauder and Frank-Walter Steinmeier, respectively chief whip of the Christian democrats and the social democrats, lauded the progress in the talks. One important element is that the government supports a financial transaction tax that could be introduced within the EU framework of enhanced cooperation with nine or more EU countries participating. A scenario is now that Bundestag will ratify the fiscal pact and the ESM on June 28 just ahead of the EU summit which will start later that day. Süddeutsche Zeitung however reports that there is still resistance among some SPD governed federal states that have to ratify the fiscal pact and the ESM in Bundesrat, Germany’s second chamber. The states want to extract financial concessions from the federal government in exchange for their agreement with the pact, the paper reports.
Political Press EU reports Economic governance package explained. In autumn 2010 the EU agreed to tighten financial supervision … and Prague Leaders Magazine reports MEPs to pass economic governance ‘two-pack’ The two-pack builds on the ‘six-pack’, a group of economic governance regulations that entered into force on 13 December 2011.