US Dollar Falls Lower And Gold Breaks Out As ECB Chief Mario Draghi Promises To Do Whatever It Takes To Preserve The European Monetary Union Intact

Financial Market Report for the week ending July 27, 2012; this is seventeenth week of entry into the Second Great Depression.

1) … On Thursday July 26, 2012, the US Dollar, $USD, UUP, fell sharply, as the Washington Post reports European Central Bank vows to protect the euro, sending stocks sharply higher.   World Stocks, VT, rose 2%, and Commodities, DBC, rose almost 1%, on Thursday’s open, after remarks by Mario Draghi, the ECB’s chief, vowed to “do whatever it takes” to keep the continent’s monetary union intact.

The investment demand for gold has finally arisen as Gold, GLD, broke out of a triangle consolidation pattern and Silver, SIL, bounced up from a double bottom.

Exxon Mobil, XOM, rose 1.2% near to its March 2012 high as Reuters reports Exxon Mobil Profit Rises 49%; the ongoing two year chart of Exxon Mobil shows that it has vastly outperformed its peers and the S&P..

Amgen, AMGN, led Biotechnology, XBI, higher, but still below its recent high.

Next Era Energy, NEE, led Utilities, XLU, higher, but still below its recent high.

AT&T, T, led Telecom, IYZ, higher but still below its recent high.

Dividend Stocks, DVY, rose 1.0%

Coca Cola, KO, and Disney, DIS, led Consumer Services, IYC, rose 1.3% to resistance.

Home Depot, HD, led Retail, XRT, 0.9% higher to resistance.

Mortgage REITS, REM, traded 0.5% lower.

Energy Services CAM, NOV, PDS, SPN, OIS, EXH, led XES, and IEZ higher; SLB, HAL, BHI, OII, led OIH higher.

2) … On Friday, July 27, 2012, stocks surged as hopes increased that the Federal Reserve and the European Central Bank may provide further stimulus.

World stocks, VT, rose another 2% today, forming a diamond top reversal pattern..

Spain, EWP, Italy, led Europe, VGK, higher. South Korea, EWY, led Asia, EPP higher. Brazil, EWZ, Russia, RSX, and China, FXI, led the BRICS, EEB higher.

NBG, BCS, LYG, STD, DB, CS, UBS, led European Financials, EUFN, and Global Financials, IXG, higher. Raymond James Financial, RJF, led stockbrokers, IAI, higher,

Steel, SLX, and Energy Service, XES, IEZ, OIH, rose strongly.

Semiconductors, XSD, Homebuilders, XHB, and Financials, XLF, rose to strong resistance.

International Paper, IP, led Paper Producers, WOOD, higher.

ARII, CP, WAB, TRN, and GBX, led Transports, IYT, higher.

GDI, LNN, CNH, TEX, IR and MTW led Construction Equipment higher

ASH, LYB, ROC, KWR, WLK, KOP led Chemicals higher

AIMC, BGC, ROK, AMRC, and ETN, led Electrical Equipment higher.

Electric Utilities, PNW, NVE, SCG, DTE, NEE, lead Utilities, XLU, higher.

GPI, CRMT, AB, PAG, led Automobile Dealers highe and Automobile Parts Manufacturers AXL, JCI, DAN, TEN, MGA,, SMP, VC, MTOR, WBC,, PCAR, ALV, BWA MOD,TTM, WNC, rose strongly.

GILD, AMGN, ARIA, SGEN, led Biotech, XBI, to a triple top high.

Exxon Mobil, XOM, led Dividend Shares, DVY. to a double top high.

Wal-mart, WMT, Colgate Palmolive, CL, and Kimberly Clark, KMB, led consumer staples, XLP, to a new high..

The breakout of gold, GLD, caused gold miners, GDX, to rise 3.4% for the week.

Of note on a monthly basis, Shanghai, CAF, and Japan, EWJ, are leading Asia, EPP, lower. Market Watch relates Japan’s deflation accelerated in June, as the core consumer price index fell 0.2% from a year earlier, compared to a 0.1% drop in May, according to government data Friday. The drop in core CPI, which strips out volatile fresh-food prices, outpaced a forecast 0.1% fall projected in a Dow Jones Newswires survey of economists. June’s core CPI was down 0.3% from May, while overall CPI fell 0.2% year-on-year and 0.5% month-on-month. Furniture and household utensils saw the largest price drop, falling 3.4% from a year earlier, while fuel, light and water led price gains, rising 3.5% from June 2011. The yen lost ground after the data release, with the U.S. dollar rising to ¥78.32, up from ¥78.22 just ahead of the numbers. More deflation makes the Bank of Japan more likely to expand its monetary easing,

The US Dollar, $USD, UUP, traded unchanged; and Commodities, DBC, rose slightly approaching strong resistance.

Bonds, BND, fell parabolically lower as Junk Bonds, JNK, and Emerging Market Bonds, EMB, rose to a double top high; and as the Zeroes, ZROZ, the 30 Year US Treasury Bonds, EDV, and the Ten Year US Government Notes, TLT, traded parabolically lower.

The Flattner ETF, FLAT, seen here in this ongoing Yahoo Finance Chart, traded lower and the Steepner ETF, STPP, traded higher, as the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, steepened.

Mortgage Backed Bonds, MBB, traded lower as the 30 Year Mortgage Rates rose from a record low.

Ten Year US Notes, TLT, traded lower sharply lower as the Interest Rate of the 10 Year Note, TNX, jumped higher.to 1.56% from its low of 1.40.

3) … In the news

Patrick Allen of CIti relates Greek Exit in 2013 now 90 percent probability, Citi says

Reuters reports ECB may take losses in Second Greek Debt Restructuring

Mike Mish Shedlock writes How long this round of “we are saved” euphoria lasts over non-comments remains to be seen, but I suspect not long.

Graham Summers relates If you think the ECB can contain this mess, you’re wrong. The ECB is out of ammo.
1)   The ECB hasn’t bought a single EU Sovereign Bond in 16 weeks.
2)   The ECB blew over €1 trillion via LTRO 1 and LTRO 2 only to find that a) the effects lasted less than two months b) the markets punished those banks that called on the ECB for aid (these requests were seen as public admissions of insolvency)
3)   If the ECB hits the print button and monetizes, Germany will walk. End of story. The word Weimar is still fresh in the German collective memory.  And the German population is already outraged by their country’s EU interventions, the risk of losing their AAA status, and the fact they’re now heading into a recession.
4)   Angela Merkel has told Draghi and others that there will not be Eurobonds as long as she lives. Unlike Draghi, she’s not bluffing.
5)   And finally, the ECB’s balance sheet is roughly $4 trillion. The EU banking system is $46 trillion. And EU bank derivative exposure is north of $200 trillion. How exactly can the ECB contain this mess?
It can’t. Draghi is pulling a classic Central Banker stunt: verbal intervention. If Draghi could in fact solve this mess, he would have already done so. The EU Crisis started in 2010 after all. And here we are, over two years later, and even Greece, which only comprises 2% of EU GDP, has yet to see its problems solved.
If the ECB cannot solve Greece’s problems, how on earth could it solve those of Spain or the entire EU for that matter?
The answer is obvious: it can’t. Europe is doomed.

The WSJ Blogs writes ECB finds a way to buy sovereign debt..

Ambrose Evans Pritchard writes The European Central Bank has opened the door to emergency support for the Spanish and Italian bond markets, setting off a blistering rally on bourses across the world.
Mario Draghi, the ECB president, vowed to do “whatever it takes” to save the euro within limits of its mandate. “Believe me, it will be enough,” he said in London.
Picking codewords instantly understood by traders, Mr Draghi said the violent spike in bond yields in recent days was hampering “the functioning of the monetary policy transmission channels” – the exact expression used to jusfify each of the ECB’s previous market interventions.
Yields on Spanish two-year debt plunged 72 basis points to 5.47pc in barely an hour, with comparable moves on Italian debt – easing the pressure before a string of debt auctions in Rome over coming days. The MIB index of stocks in Milan surged by 5.6pc. Madrid’s IBEX rose 6pc, the biggest jump in two years, led by an explosive rise in bank shares.
Mr Draghi’s comments came as Spain claimed backing from France and Germany for activation of the eurozone’s rescue fund (EFSF) to buy Spanish bonds, though this would require calling the Bundestag’s finance committee back from holiday for a vote. Action by the EFSF would provide “political cover” for the ECB to join the fray in a two-pronged attack.
“We’re firing on all cylinders: that is what has ignited the markets,” said Hans Redeker, currency chief at Morgan Stanley
Joint statements from Madrid, Paris and Berlin said market turbulence “does not reflect the fundamentals of the Spanish economy, or the sustainability of its public debt”. The wording seems scripted to clear the way for intervention.
The euphoria is unlikely to last long unless the ECB comes through with concrete action after its pre-holiday meeting next week. Angel Gurria, head of the OECD, honed in on Mr Draghi’s caveat, saying the legal constraints are the nub of problem. The ECB must “explore the flexibility of its mandate”, he said.
Others were blunter. Marc Ostwald from Monument Securities said Mr Draghi’s words were “cheerleading bluster”, while Gary Jenkins from Swordfish called them “a bluff to get through the summer”.
“Spain is very close to the precipice, and its pretty much game over already, ” said Mr Jenkins. “Today’s action was a short-covering rally. The real trick is get bond investors to come in alongside the ECB, and that is much harder.”

Markets have become sensitive to the risk of “subordination” after the ECB and other EU bodies refused to take losses on holdings of Greek debt. Private creditors suffered bigger haircuts as a result.
Mr Jenkins warned that the purchases of Spanish and Italian bonds risk setting off further capital flight unless the ECB makes it “contractually clear” that it does not have senior status. “Investors will just try to get out,” he warned.
Critics say the ECB’s pin-prick purchases of Greek, Irish, Portuguese, Spanish and Italian bonds have fallen between two stools: enough to create subordination fears, without being enough to eliminate the risk of sovereign default. It would now take massive intervention by the ECB to repair the broken trust. Any such move would risk a showdown with the Bundesbank and its hawkish allies in the Teutonic bloc. “German resistance has risen over the past several months,” said Spiro Sovereign Strategy.

Elaine Meinel Supkis writes Congress mocks Ron Paul while Libor Scandal and debt scandals threaten world Banking. One of the most pathetic Washington Post stories about banking is the retirement of Ron Paul.  Bernanke and the corrupt members of the House Banking Committee all laugh at him while smugly patting themselves on the back…right in the middle of yet another of zillions of banking scandals.  The real scandal, of course, is the collapse of all sane oversight for bankers who then ran amok and by creating way, way too much credit, have caused the entire global banking system to collapse.

Ron Paul is right and his fellow House members are insane:  Dana Milbank: Ron Paul, fed up with trying to end the Fed – The Washington Post. “Policies never change. . . . No matter what the crisis is, we still do more of the same,” he lamented in what probably was his last public appearance with Bernanke before retiring from Congress at the end of the year. “I hoped in the past to try to contribute to the discussion on monetary policy, the business cycle and why it benefits the rich over the poor. And so far, my views have not prevailed, but I’ve appreciated the opportunity.”
For the fiery Paul, it was a subdued surrender. His colleagues — Democrats and Republicans alike — used this final hearing to honor Paul for his passionate service, treating him with the cautious affection one might use to address a crazy uncle.
“This may be his last committee meeting with the chairman of the Federal Reserve,” Chairman Spencer Bachus (R-Ala.) began. “And his leadership on the committee, especially during these hearings when we’ve had the Federal Reserve chairman appear before us, have certainly made the hearings more interesting and provided several memorable YouTube moments.” Many on the dais laughed, and even Bernanke smiled at the memory.
Oh yes, this is so, so funny.  HAHAHA.  Right!  Who is crazy here?  Ron Paul or the well-padded, well-fed clowns who created one of the worst banking messes in earth’s history?   True, dinosaurs didn’t have banks, the creation of banks is fairly recent in the geological record.  But the fact remains, after paying Congress to undo every single regulation imposed on banks after the 1929 crash, we had an identical series of crashes

The Libor Investigation Close To Making Arrests: Report.  The criminal charges would come alongside efforts by regulators to punish major banks with fines, and could show that the alleged activity was not rampant in the banks.
“The individual criminal charges have no impact on the regulatory moves against the banks,” said a European source familiar with the matter. “But banks are hoping that at least regulators will see that the scandal was mainly due to individual misbehavior of a gang of traders.”…
Reuters previously reported that more than a dozen current and former employees of several large banks are under investigation, including Barclays Plc, UBS and Citigroup, and have hired defense lawyers over the past year as a federal grand jury in Washington, D.C., continues to gather evidence.
So, the guys at the top, the Bilderberg gang who created this entire mess, the guys who bribed British and American politicians to eliminate all banking regulations and rules will not be punished????  How insane is that?
Arresting the near-powerless underlings is like putting the prison guards on trial at Nüremberg while letting the Nazi leadership go to Argentina.  Once again, displaying their immense political power bought by donating money to elections and hiring retired politicians to deliver speeches, the super-rich, Super-powerful bankers will skate away with billions in personal loot after exploiting loopholes they, themselves, created in the laws to give out credit at false interest rates based on near-zero capital.

The underlings working for these criminal bankers are going insane:  ‘Frustrated’ UBS broker arrested after ‘smashing windows with a slingshot and marbles’ | Mail Online.   A hot-shot investment banker, 58, has been arrested, accused of wrecking havoc in Los Angeles.
Michael Poret has allegedly been driving around and shattering windows since the beginning of the year, using a slingshot to fire marbles and nuts at buildings. Police said he must have ‘got a thrill from it’…
Poret was first arrested in Encino on July 3 after police officers spotted a slingshot in his car during a traffic stop for a vehicle code violation. A subsequent search of the vehicle turned over brass knuckles, knives and slingshot projectile. The 58-year-old was suspended from his post as vice president of investments at UBS Financial Services after his arrest. He had worked there for three years after being headhunted while at Merrill Lynch.

The moral degradation of our banking community is due to the entire ‘greed is good’ and sense of personal entitlement that has warped the mental health of everyone involved.  It isn’t just Britain and the US, the other banking catastrophe in the troika of first world banking giants is the moral and mental collapse going on in Japan:  Fitch downgrades three major Japanese banks ‹ Japan Today: Japan News and Discussion
Fitch said Friday it cut the credit rating of three of Japan’s biggest banks over concerns about Tokyo’s ability to support the financial sector, after the nation’s sovereign debt rating was also cut.
The ratings agency lowered its rating by one notch to ‘A-’ from ‘A’—the seventh highest on a 22-rating scale—for Mitsubishi UFJ Financial Group (MUFG), Mizuho Financial Group (MHFG), and Sumitomo Mitsui Financial Group.
In the same statement, Fitch said it also lowered its rating for Sumitomo Mitsui Trust Bank to the same level as the major banks.
The credit bubble in Japan happened when the yen suddenly shot up in value versus the dollar when the US demanded Japan bring its currency into compliance with trade values.  This did nothing for the immense and continuous trade deficit the US runs and still runs with Japan.  It did create a deceptive banking situation which the bankers there exploited and thus ran up one of the biggest real estate bubbles in the history of finance. At the time.  Then the US proceeded to have a bubble even bigger than the Japanese bubble.  Japan is running everything in the red now including, for the first time since the 1970′s, a trade deficit.

Like the US, the Japanese political system is thoroughly and totally corrupt and completely incapable of even the smallest reforms of anything nor is able to respond to the series of terrible collapses including the collapse of all of society there.  Which takes me back to the US Congressional corruption news:  Financial Scandal Scorecard – NYTimes.com
And where were the regulators? “Subcommittee investigators found that the OCC” — that’s the Office of the Comptroller of the Currency, which is the nation’s primary bank overseer — “had failed to take a single enforcement action against the bank, formal or informal, over the previous six years, despite ample evidence” of money laundering, reads the report.
Good lord!  Who, pray tell, destroyed the regulation powers of the OCC?  Why, the Wall Street bankers and their buddies in the South and Midwest who met at Jekyll Island to plot the killing of this regulator!  They created the Federal Reserve which is a private consortium of bankers with minimal regulation from Congress! All of whom laughed at Ron Paul on Friday.  All the OCC could do was detail the immense rapid growth of the Derivatives Beast!  Which they dutifully did.  And which Congress ignored.  The people who defanged the OCC are generations of politicians who wanted the OCC dead and powerless.

Meanwhile, due to banking scandals in London and the many offshore royal tax havens, the British people are seeing their social system shredded.  This is very unpopular.  Now the biggest welfare queen on earth is Queen Elizabeth and her royal brood is being cut out of the payola:  Royal family members may lose guards – Telegraph  The cost of providing security for members of the Royal family and VIPs was disclosed for the first time in internal police budget figures in 2010, when it was put at £113.5 million a year, or £310,000 a day.

Doug Noland writes Monetary Madness. In commemoration of M2 surpassing $10.0 TN for the first time – not to mention the unfolding confrontation between ECB President Draghi and Germany’s Bundesbank – this week’s CBB will focus on Monetary Analysis.  It is worth noting that M2, the Fed’s narrow measure of “money” supply, surpassed $1 TN for the first time in 1975.  It made it past $2 TN in 1983, $4TN in 1997, $8 TN in 2008 and $9 TN in April 2011.  M2 has inflated another Trillion during the past 15 months. (M1 is approaching 2 TN). To set the backdrop, it is worth noting that early economic thinkers were obsessed with money.  These days, monetary analysis is little more than a footnote in contemporary economic doctrine.  Generations ago, great minds were trying to come to grips with monetary phenomena.  They came to appreciate that money and Credit had profound impacts on economies and societies, although throughout history even the most astute struggled with the complexity of it all.  These days, “monetary stimulus” is seen as good for the markets and, yes, good again for GDP.  Inflation, if it ever were to return, is not so good.  Today’s monetary analysis is not good but it is shallow.

I’ve for years posited that we live in an extraordinary period of “global wildcat finance.”  Fiat electronic Credit – much of it marketable debt instruments – has expanded unlike anything previously experienced.  In the “developed” West, inflated real and financial assets were a primary inflationary consequence.  In China and “developing Asia,” an unprecedented expansion of manufacturing capacity was integral to the incredible inflation of incomes and wealth.  As for fundamental “nuances” of this monetary and economic Bubble, one can point to so-called “globalization,” the explosion of computer and communications technologies, enterprising financial innovation, deregulated Credit and speculation, and monetary policy activism.

Myriad forces worked to break the traditional link between monetary excess and rapidly rising consumer prices.  The “developing” world, enjoying access to unlimited cheap finance, built manufacturing capacity to inundate the world with manufactured goods and technology products.  Global financial excesses allowed developed nations to indulge in cheap imports by issuing endless IOUs, while transforming economic systems from production-based to Credit-driven consumption and services.  And the seeming New Paradigm victory over “inflation” emboldened New Age central bankers.  They unwittingly nurtured an epic monetary inflation, and as this Credit Bubble has begun to buckle they have moved with extraordinary force to sustain it.

The eurozone is today locked in a disastrous monetary crisis.  The marketplace simply no longer trusts the liabilities issued by some its members.  Analysts continue to lambast European officials for failing to learn from our successful navigation through the 2008 crisis.  This is flawed analysis.  Europe is suffering from a late-cycle sovereign debt crisis.  In ‘08/’09, U.S. policymakers enjoyed unprecedented demand for Treasury (and even agency) debt securities.  Through the massive issuance of federal government debt along with Federal Reserve monetization, the U.S. system was able to sustain ongoing Credit growth.  U.S. non-financial debt expanded $1.9 TN in 2008 and, despite huge mortgage write-downs, U.S. non-financial Credit still grew almost $1.1 TN in 2009.  With federal debt expanding a then record $1.4 TN, total non-financial debt expanded 3.1% in 2009.  Washington was willing to jeopardize the creditworthiness of federal debt and the Fed was willing to risk its reputation – and a downward spiral was thwarted.  A new phase of monetary inflation was commenced, this time through the massive injection of federal government and Federal Reserve finance.

There are unappreciated costs associated with injecting such massive sums of unproductive Credit into a (maladjusted) system, which I return to below.  Today, because they now lack creditworthiness in the marketplace, Spain and Italy no longer have the capacity to inject sufficient new Credit into their economic systems.  This is a potentially devastating dynamic, as the lack of sufficient ongoing monetary inflation is illuminating deep structural economic impairment following years of Credit excess and attendant maladjustment.

Earlier this week, with Spanish and Italian yields spiking higher and their markets turning illiquid, the European debt crisis was again spiraling out of control – only months after the ECB implemented its latest $1.3 TN liquidity facilities.  And, once again, acute financial stress has provoked tough talk.  ECB president Draghi Thursday morning stated, “…the ECB is ready to do whatever it takes to preserve the euro… Believe me, it will be enough.”  German Finance Minister Schaeuble said he supported Draghi’s statement, while Chancellor Merkel and President Hollande came forward Friday with their own “bound by the deepest duty” to do everything to protect the euro.  And then there was this afternoon’s unconfirmed report that Mr. Draghi is prepared to present a “game changing” multi-prong plan at next week’s European Central Bank governing council meeting that will include ECB bond purchases and a banking license for the ESM.

Shifting 180 degrees from earlier in the week, rather than fearing Credit collapse the markets moved quickly in anticipation of yet another crisis-induced bout of monetary inflation.  And, seemingly, only the Bundesbank remains capable of taking a measured approach.  Friday morning (before afternoon reports of a Draghi’s “game changer”), from a Bundesbank spokesperson:  “There haven’t been any changes in our positions on bond purchases of the Eurosystem, bond purchases by the EFSF, or giving a banking licence to the ESM… The Bundesbank has repeatedly expressed in the past that it views bond purchases critically because they blur the line between monetary and fiscal policy… The Bundesbank continues to view the SMP [securities market program] in a critical fashion.  The mechanism of bond purchases is problematic because it sets the wrong incentives…  A banking license for the bailout fund would factually mean state financing via the printing press and would be a fatal route, which therefore is prohibited by the EU treaty.”

No doubt about it, the Bundesbank is increasingly isolated.  They are at odds with most European politicians and they are at odds with other central bankers.  They are clearly not on the same page with Mr. Draghi.  And no group of government officials anywhere more clearly appreciates myriad risks associated with monetary inflations.  The German/“Austrian” view of economics just has a very different perspective, and it goes way beyond some fixation on Weimar hyperinflation.  The focus is on how real wealth is created and how wealth is destroyed.  Monetary inflations are powerfully destructive.  And as a deepening European crisis applies incredible pressure on politicians throughout the region – certainly including Germany’s Merkel and Schaeuble – I suspect the Bundesbank will hold its ground.  They are both right on the analysis and have the support of the German people.  They understand that the German economy cannot support the massive debt of the entire eurozone.

Throughout already volatile global debt, equities, currencies and commodities markets, things have turned only more unstable. And there is no doubt in my mind that ongoing monetary injections – albeit European, American, Chinese, or others – come with the cost of increasingly unstable – I would argue perilously dysfunctional – global financial markets.  And there should be little doubt where Mr. Draghi was directing his “trust me, it will be enough” tough talk (kind of reminded me of, “go ahead, make my day”).  The Europeans believe hedge fund and other speculator bets against their bonds, stocks and euro currency are a major contributing factor to the region’s woes.  There wasn’t an issue back when speculators were leveraged long Europe’s (Greece’s, Spain’s, Italy’s, etc.) securities during the upside of the cycle.

This week demonstrated an even more powerful “risk on, risk off” dynamic.  For lack of attractive alternatives, ongoing global monetary injections ensure only more “money” flows to the global leveraged speculating community.  From there, the bets on red or black – either on or against policymakers’ capacity to sustain global risk market Bubbles – become bigger by the week.  Draghi and European policymakers this week hit the panic button – and those with bearish hedges and bets were again forced to run for cover.  Risk on wins again.

And as policymaking turns increasingly desperate, it is almost guaranteed that “risk on, risk off” turns only more unwieldy.  Indeed, it is clear at this point that the more global policymakers turn to monetary inflation to thwart the downside of the Credit cycle the greater the amount of fuel injected into a dangerous global speculative Bubble.  In anticipation of next week’s scheduled Federal Reserve and ECB meetings, CNBC’s Steve Liesman today referred to “Monetary Madness.

Jana Randow and Matthew Brockett, Courtesy of Bloomberg News  write in Wall Street Pit,  Draghi said to hold talks with Weidmann on bond purchses. European Central Bank President Mario Draghi will hold talks with Bundesbank President Jens Weidmann in the coming days in an effort to overcome the biggest stumbling block to a new raft of measures including bond purchases, two central bank officials said.
Having secured the backing of governments in Spain, France and Germany, Draghi is now seeking to win over ECB policy makers for a multi-pronged approach to reduce bond yields in countries such as Spain and Italy, the officials said on condition of anonymity because the talks are private.
Draghi’s proposal involves Europe’s rescue funds buying government bonds on the primary market, flanked by ECB purchases on the secondary market to ensure transmission of its record-low interest rates, the officials said. Further ECB rate cuts and long-term loans to banks are also up for discussion, one of the officials said.
The euro strengthened, and was up 0.4 percent on the day at $1.2337 as of 6:49 p.m. in London. U.S. stocks rallied and gold futures extended gains.
Draghi is trying to put together a game changer in the battle against the sovereign debt crisis, and winning Weidmann’s support would enable him to present a united front to financial markets. Draghi flagged the intervention yesterday, saying the ECB will do whatever it takes to preserve the euro. The Bundesbank responded today by reiterating its opposition to ECB bond purchases.

Draghi will speak with Weidmann before the ECB’s Governing Council convenes in Frankfurt on Aug. 2, the officials said. He has also reached out to other ECB policy makers in an effort to build consensus, they said. A Bundesbank spokesman declined to comment.
An ECB spokeswoman said in an e-mailed statement that it is usual practice and nothing special for Draghi to meet or talk with members of the Governing Council. She declined to comment on the content of any talks.
Draghi has already secured the endorsement of Germany and France for a plan to reduce bond yields in Spain and Italy, which are threatening the existence of the euro.
German Chancellor Angela Merkel and French President Francois Hollande echoed Draghi’s language after a telephone conversation today, pledging to do everything to protect the single currency. The two largest euro-area economies are “bound by the deepest duty” to keep the 17-nation currency bloc intact, Merkel and Hollande said in a joint statement. The WSJ reports Ms. Merkel and Mr. Hollande released a statement saying they are “determined to do everything to protect it, (the Eurozone) “
“German support increases the credibility of an ECB intervention immensely, as otherwise markets would have to fear a subsequent down-scaling of the policy action,” said Christian Schulz, senior economist at Berenberg Bank in London. “If the ECB is credible enough, bond yields would stabilize without the ECB buying many bonds at all.”

The yield on Spain’s 10-year bond dropped to 6.74 percent today from 7.62 percent on July 24 as markets rallied on Draghi’s signal of ECB intervention.
While granting a banking license to Europe’s permanent rescue fund, the European Stability Mechanism, is a long-term aim of Draghi’s, it is not part of the immediate crisis plan, one of the central bank officials said.
Government bond purchases have seen two German policy makers quit the ECB. ocal opponent Axel Weber stepped down as Bundesbank president last year and ECB chief economist Juergen Stark retired at the end of 2011. Both complained that the bond program blurred the line between fiscal and monetary policy and relieved pressure on governments to enact reforms.
A spokesman for the Frankfurt-based central bank said in a statement read over the phone earlier today that there haven’t been any changes in its position on bond purchases. The Bundesbank has repeatedly said in the past that it views such buying critically because it blurs the line between monetary and fiscal policy, he said.

The Telegraph reports ECB could take haircut on Greek bonds in ‘last chance’ plan. Central banks across Europe are facing more huge losses under the terms of last-ditch efforts being made by EU authorities to keep Greece in the eurozone by slashing the country’s debt exposure.

Business Insider relates Europe is running out of time, will decide on measures within days. German Chancellor Angela Merkel and Italian Premier Mario Monti “agreed that Germany and Italy will do everything to protect the eurozone” in a phone conversation Saturday, German government spokesman Georg Streiter said, a statement that was echoed by Monti’s office.
That was nearly identical to a statement issued Friday by Merkel and French President Francois Hollande, which followed Draghi’s comments.
Though they didn’t pledge any specific action, the comments raised expectations that the ECB might step in to buy Spanish and perhaps Italian government bonds to lower the countries’ borrowing costs, which have been worryingly high in recent weeks. Another possibility might be for the eurozone’s temporary rescue fund, the European Financial Stability Facility, to buy bonds.
“What measures we will take, we will decide in the coming days,” Jean-Claude Juncker, the Luxembourg prime minister who also chairs meetings of the eurozone finance ministers, or eurogroup, was quoted as telling the German daily Sueddeutsche Zeitung. “We no longer have any time to lose.” Italy and Spain have the eurozone’s third- and fourth-largest economies, respectively, behind Germany and France.
Merkel and Monti agreed that decisions made by last month’s European Union summit “must be implemented as quickly as possible,” Streiter said, again echoing Friday’s Merkel-Hollande statements.

Mike Mike Shedlock writes Implications of the German Court ruling. On September 12, the German constitution court is expected to rule on the ESM as well as the fiscal treaty chancellor Angela Merkel signed in March. Is it any wonder ECB president Mario Draghi is loathe to do anything but talk before the court meets?
Should the court rule both are OK, eurocrats like Jean-Claude Juncker will immediately seek to change what the ESM can do, including the use of leverage. Given that Germany is better off outside the eurozone, and the eurozone is arguably better off without Germany, hopefully, the constitutional court will say it’s time to put all of this to voters, including whether Germany should stay in the eurozone. Unfortunately, I expect the court will OK both the ESM and the Merkozy treaty, but give further warnings to Merkel and the ECB that 500 million euros is the limit

4) … Bible prophecy foretells of a global Eurasia War in Syria, Iran, Israel, Turkey, and Russia; and the establishment of regional governance as a replacement for the Anglo American Hegemony that has governed the world since the late 1700s.

Zero Hedges relates G 20 and ECOFIN meeting in mid September relates
13-14 September: G20 Finance Ministers and Central Bankers meeting. In Mexico; and
14 September: ECOFIN meeting. This is very likely the finance ministers meeting when adjustments to Greece’s second loan programme will be considered. The remaining EUR23bn recapitalisation of the Greek banks is due to complete by the end of September, assuming a positive review of the loan programme

Ambrose Evans Pritchard writes of a possible Mega Keynesian answer to the European sovereign debt and banking crisis. Markets seem persuaded that Chancellor Angela Merkel has given Mr Draghi a green light for radical action with her latest vow to save the euro, and specifically her call for all EU institutions to “fulfil their duties”. One might equally conclude that her throw-away acquiescence – before retiring to Bayreuth and then the Alps – signifies that nothing much has changed. So prepare for further foolish half-measures. The ECB’s earlier purchases of Greek, Irish, Portuguese, Spanish and Italian bonds were a textbook case of how not to proceed, violating the “Powell Doctrine” of overwhelming force: too timid to lower yields for long or reduce default risk, yet enough to push private investors down the creditor ladder.

Subordination matters, as pension funds (yours and mine) learned to their cost in Greece when EU bodies refused to share the pain of default. Remaining private holders were forced to absorb all of Europe’s losses as well as their own, suffering a 75pc haircut. Theft, you might say, and thieves usually steal again.
Unless Mr Draghi buys bonds on a mass scale he will merely accelerate capital flight – already running at €50bn or 5pc of GDP each month from Spain, according to Credit Suisse.
Much the same logic applies to the purported bail-out of Spain by the old rescue fund (EFSF) – denied in any case by Madrid and Berlin – since the markets do not believe assurances that the fund will forgo its senior status when push comes to shove.
Once a rescue begins for Spain, it must inevitably escalate towards €400bn to offset the “sudden stop” in private funding, and that in turn must surely pull Italy into the cauldron. Nomura says the combined needs of Spain and Italy amount to €1.1 trillion over three years. The money does not exist. Any attempt to raise such sums on the open market would expose the bluff behind the bail-out machinery. Mr Cailloux expects the two countries to require sovereign rescues “within weeks”. Citigroup’s Willem Buiter thinks both will be in full EU-IMF Troika rescues by the end of the year. If so, brace for trouble, because demands on this scale will push bail-out fatigue in Germany, Holland and Finland to breaking point. Only the ECB has the firepower and speed to halt a catastrophic replay of 1931 before the year is out.

Eric Margolis in Lew Rockwell asks Has the US Given Israel a Green Light To Attack Syria? and relates the road to Tehran runs through Damascus; I comment that according to Ezekiel 38, Damascus will be the epicenter of a Global Eurasia War.

Spain is an insolvent nation filled with insolvent banks and rebellious regions. Greece and now Spain have lost their monetary sovereignty. After Financial Armageddon, a global credit bust and financial collapse, foretold in bible prophecy of Revelation 13:3, the way forward will be by decree of regional leaders. The diktat money system will rise to replace the fiat money system, as leaders meet in summits to waive national sovereignty and pool sovereignty regionally to form a political union, specifically a Federal European Super State. Eurozone fiscal sovereignty will be established by Germany ruling over peripheral client countries.in a type of revived roman empire as the Beast Regime of Totalitarin Rule, rises from the profiligtate Mediterrean nation of Greece, to replace the Banker Regime of Neoliberal Rule, Revelation 13:1-4.

Mark Strauss writes in the April 2012 Smithsonian article Got Corn? Recent research supports the conclusions of a controversial environmental study released 40 years ago: The world is on track for disaster. So says Australian physicist Graham Turner, who revisited perhaps the most groundbreaking academic work of the 1970s,The Limits to Growth. Written by MIT researchers, (brought together by the Italian tycoon Aurelio Peccei), for an international think tank, the Club of Rome, the study used computers to model several possible future scenarios. The business-as-usual scenario estimated that if human beings continued to consume more than nature was capable of providing, global economic collapse and precipitous population decline could occur by 2030. However, the study also noted that unlimited economic growth was possible, if governments forged policies and invested in technologies to regulate the expansion of humanity’s ecological footprint. Prominent economists disagreed with the report’s methodology and conclusions. Yale’s Henry Wallich opposed active intervention, declaring that limiting economic growth too soon would be “consigning billions to permanent poverty.” Turner compared real-world data from 1970 to 2000 with the business-as-usual scenario. He found the predictions nearly matched the facts. “There is a very clear warning bell being rung here,” he says. “We are not on a sustainable trajectory.

Regionalization will replace both crony capitalism and European Socialism as the dynamos of global growth and corporate profitability wind down; and the dynamos of regional stability, security, and sustainability wind up regional governance God ordained in eternity past, that ten regional blocs form to govern mankind’s economic and political activity, Daniel 2:30-33,  While Neoliberalism featured wildcat finance, a Doug Noland term, Neoauthoritarianism will feature wildcat governance, where leaders bite, rip and tear, one another, and only the top tog leader will rise to rule Europe and eventually the world, Daniel 9:25.

There is neither personal sovereignty nor human action, as envisioned by natural law thinkers; there is only God’s Sovereignty, Ephesians 1:1-23,  Fate, Revelation 1:1, that is Destiny, 2 Corinthians 5:18, and the administrative law of Christ, which is operating for the fullness of times, Ephesians 1:10. This is what Witness Lee calls The economy of God. With the announcement of the first Greek Bailout in May 2010, Christ has been releasing the Four Horsemen of The Apocalypse, Revelation 6, to terminate all existing economic and political life, so that the His Kingdom will be established on planet earth, Revelation 2:26-27. There are seven dispensations or ages: 1)  The Fall From Grace, 2) The Addition Of The Law and Ordinances, 3) Grace And Truth, 4) Regional Governance, 5) Condemnation By The Two Witnesses, 6) The Kingdom of God On Earth, and 7) The New Jerusalem.

5 … I am spending more and more time in prayer and spiritual reflection; and will very soon stop bloggin on the issues of sovereignty and seigniorage; as I purpose to add virtue to the like precious faith of Jesus Christ. 2 Peter 1:1.

I write goodness is 1) goodwill accompanied by 2) honor, and 3) respect (and affection for the saints by living the one-another lifestyle). Goodness 4) practices peace, for without peace, no man will see God, and 5) turns away from all who walk disorderly. Goodness prays for a 6) good conscience, and 7) always does the right thing, and 8) never uses another for personal gain, and 9) never places evil for good. Goodness, 10) upholds the rights of others and 11) never is a busybody in in another’s affairs, and is 12) never rude.  Goodness is the quality that 13) helps another to mature and enjoy his mental and spiritual resources to obtain spiritual wisdom and understanding. For 14) Godly friendship to exist, goodness must be present in both parties. Goodness is the bedrock of 15) self moderation, and as CS Lewis communicates in Men Without Chests, that if we fail to 16) pass along specific standards of right and wrong of what is worthless, useless or harmful, then we must bear the consequences of failure of character. Peace is the partner of goodness. Peace is acceptance. Both of these virtues are facilitated by holiness (being set apart for God’s use) and purity (freedom from contamination of evil). Goodness and peace are spiritual fruit which comes from the reproduction of virtue, that is God’s character in one’s life.

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