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Posts tagged ‘Nouriel Roubini’

EU finance ministers to discuss raising of EFSF ceiling

Reuters has the story that European finance ministers are preparing to discuss an increase in the funding ceiling of the EFSF, and a widening of its mandate, at next week’s eurogroup/ecofin meeting. It quotes two separate unnamed sources. One source said that it was about “getting the whole 440 billion into operation,” while another source cautioned that no decision is likely to be taken next week.

El Pais writes that the European Commission was planning to propose a “pooling” of debt issues that would benefit from EU guarantees. This would effectively constitute a first step towards a European bond. This debt pooling proposal is a hybrid construction to satisfy both advocates of a single bond, and those who are opposed. (It is essentially a single bond, without the name – and without the benefit of a large single bond market).

Olli Rehn, meanwhile, wrote a commentary in the Financial Times, calling for a review of the size of all financial backstops, not just the EFSF, but also the ESM.

Bond spreads and forex  

A relatively quiet day on the markets, after heavy ECB buying. Spreads remain elevated, but recovered marginally. The euro remained at just under $1.30 this morning.

10-year sovereign spreads (against 10 year German bunds)

      Previous Day Close Yesterday’s Close This morning
France     0.470 0.442 0.466
Italy     1.984 1.894 1.901
Spain     2.706 2.583 2.611
Portugal     4.256 4.070 4.078
Greece     9.618 8.960 10.21
Ireland     6.279 6.012 6.625
Belgium     1.375 1.364 1.362

 

Euro bilateral exchange rates:  

  € at last Briefing This morning
Dollar +1.2945 +1.2997
Yen +107.50 +108.01
Pound +0.8316 +0.8311
Swiss Franc +1.2533 +1.2660

 

Source: Thomson Reuters

We forgot to insert the ten-year yield chart in yesterday’s briefing. Here it is.

Barnier proposes ambitious bank stress test

After the disastrous and deceitful bank stress tests last July, the EU is now considering a tougher series of new tests, planned for February or March, Michel Barnier told the French newspapers Le Figaro. He announced that these tests would be supervised by the newly created European Banking Authority (EBA), based in London, but refused to answer the question as to whether a failure for a bank to pass this stress test would be linked to restructuring calls by the European Commission.

Roubini says it is absurd to focus on 2013

This is an interesting interview with Der Spiegel, hat tip FT Alphaville. Nouriel Roubini criticises the German government, not for insisting on investor bail-ins, which he supports, but for making a string of unworkable proposals of how to deal with debt crisis. We quote in full.

“ What the euro countries decide for 2013 is completely inconsequential. Forget 2013! The important thing is what will happen in the next three months in Portugal, Spain, Italy, and France. I can’t fathom how the EU member states can hold a summit entirely preoccupied with what will happen after the present rescue package runs out, without once mentioning what they intend to do now to help Portugal and Spain.”

Issing warns against political union through the back door

This is a news story about a comment – which is not yet published – so it may not contain all the relevant bits, but it is clear from the quotes published in, among others, the Financial Times that Otmar Issing is seriously concerned about the future of the euro. He warns against the adoption of a political union through the backdoor of a monetary union, and what he see a development towards a transfer union, in which governments remain independent, and able to conduct bad policies, while Germany would have to subsidise them on a quasi-automatic basis. It seemed he was reeling against the decision to make the implementation of the stability pact rules only semi-automatic.

Belgian king asked the two main parties to continue negotiating with mediator

King Albert II asked the leaders of the two largest political parties to support the mediator Johan Vande Lanotte in brokering a compromise over the state reform. Lanotte, after offering his resignation last week, agreed to continue his efforts and to hold privileged talks with the two leaders.  The separatist NV-A party signalled that they would be ready to move on some issues if more power on social economic issues is handed over to the regions, Le Soir reports.

The French socialists agree on a timeline for designation of the presidential candidate

The Socialist candidate for the French presidential election 2012 will not be known before October 2011, le Monde reports, after a process of “open primaries” that allows anybody to vote, not just the PS members. The filing of the candidatures for these primaries will have to be made before July. All eyes are now on Dominique Strauss-Kahn, who is currently riding high in the polls.  

Bank of Portugal expects economy to shrink 1.3%

The Bank of Portugal cites austerity measures and worsening credit conditions, which will push Portugal into a new recession with -1.3% this year and only slightly positive in 2012, Jornal de Negocios reports. According to their forecasts, only exports will continue to grow (5.9%), while other GDP components will  contract significantly, in particular private consumption (-2.7%), public consumption (-4.6%) and investment (- 6.8%).  The Central Bank’s forecast are in line with the IMF forecast (-1.4%) but much more pessimistic than the Portuguese government’s, which still expects the Portuguese economy to realise a positive growth rate this year.

Germany to raise ceiling of its bank tax

FT Deutschland led with a story according to which the German finance ministry is planning a de facto increase in the bank levy they have previously agreed as a means to finance a restructuring fund for the banking industry. The levy is calculated under a complex formula, but was previously capped at 15% of bank profits. Under the new plans, the cap will be maintained in any given year, but the capped amounts will be brought forward. The banks are furious about this proposed change, saying that it make it more difficult for them to raise new capital.

Putting the euro crisis into perspective

FT Deutschland’s Das Kapital is quoting from an OECD report, wondering why everybody is focusing on the eurozone crisis, while the US data are looking universally worse. The combined deficits of Greece, Italy, Spain, Portugal and Ireland will only be 5.3% of their GDP this year, compared to over 10% of the US. The overall debt-to-GDP ratio is higher than that of the eurozone, as are the debts of the private sector. The article concluded that it would be more rational to worry about the greenback than the euro.

Wolfgang Munchau says it is time to restructure debt

In his FT Deutschland column, Wolfgang Munchau says that the core reason of why this crisis continues is the attempt by the EU to treat a solvency crisis through a series of liquidity policies. He says he does not doubt the determination by the EU to do whatever it takes to save the euro, but these will be all liquidity measures, such as increasing the size of the EFSF, or the recently agreed ESM. But none of this resolves the excess indebtedness of the eurozone periphery. The crisis could significantly curtailed if the debt restructuring, and an ensuing restructuring of the financial sector,  were to start right now.

source : http://www.eurointelligence.com/index.php?id=581&tx_ttnews[tt_news]=3003&tx_ttnews[backPid]=897&cHash=3ae2b97558

Bailouts Are Not Working!

The European authorities had hoped that, as soon as their massive, supposedly “definitive” Irish bailout package was announced, investors would jump for joy. Instead, investors have done precisely the opposite.

The authorities had hoped that the premiums on government bond default insurance would come down dramatically. Instead, the premiums have gone higher, as I’ve just shown you.

The authorities had hoped that Irish bond yields would come down sharply, helping to avert a disastrous, additional interest burden for the government. Instead, bond investors have dumped Irish bonds with both hands, driving their prices down and yields up.

Exactly seven days ago, on the morning after the big bailout announcement, the yield on Ireland’s benchmark 10-year government bond was near 8 percent. Now, it has surged by more than a full percentage point to 9.17 percent. That extra interest cost alone threatens to eat up a big chunk of the bailout money.

The authorities had hoped — and prayed — that their earlier bailout of Greece would have been enough to contain the cancer. Instead, it has metastasized and spread — not only to Ireland, but also to Spain and Portugal.

Right now, the cost of insuring against a default on Spanish and Portuguese bonds is at new, all-time highs, far surpassing the levels reached earlier this year when the Greek debt crisis was first exploding.

Even Greece itself, which the authorities thought was largely cured, is back in the emergency room.

But this time, all life support systems are in serious doubt. And this time, investors are in open rebellion against the spin doctors.

The facts: At the height of the last Greek debt crisis — on February 8, 2010, to be exact — the cost of insuring a €10 million 5-year Greek government bond reached a peak of €420,855.

But last week, the cost on the exact same instrument had surged above €1,000,000!

That’s like shelling out an outrageous $50,000 for a term life insurance policy that pays no more than $500,000 in death benefits.

Why so expensive? Because investors now realize that austerity, no matter how necessary, can never be a quick ticket to fiscal balance.

In fact, the more the Greek government has cut spending, the more its economy has sunk. Ditto for Ireland and other countries.

Urgent Lessons for All U.S. Investors

Even if you’ve never invested a penny in Europe — and even if you’ve never set foot outside the United States — this new phase of the debt crisis has far-reaching implications and lessons for you and your family …

Lesson #1 America Is Definitely NOT Immune to the Contagion

For 2011, the Bank for International Settlements estimates that Portugal’s and Spain’s government debts will be 99 percent and 78 percent of GDP, respectively.

But for the same year, U.S. government debts will be 91 percent of GDP.

Thus, by this measure, America’s debt burden is similar to

Portugal’s and bigger than Spain’s — two countries that are ALREADY victims of the sovereign debt crisis.

Yes, the U.S. dollar is the world’s reserve currency.

And, yes, that gives Washington the ability to print money with impunity … press other rich countries to accept its debts … and borrow huge amounts abroad to finance its deficits.

But that’s more of a curse than a blessing!

It means that, more so than any other major nation on the planet, the U.S. government is beholden to investors overseas — often the same investors who have repeatedly attacked Greece and Ireland this year.

Ultimately, that could make the U.S. even more vulnerable than Europe.

Lesson #2 Governments CANNOT End a Debt Crisis by Piling on Still MORE Debt Europe tried by announcing a Greek bailout earlier this year … and it failed miserably.

Europe tried again by expanding the Greek bailout to a $1 trillion fund for all euro-zone countries. But that effort is also failing. In fact, just one more bailout — for Spain — could wipe out the fund.

And now, even before Europe has figured out precisely how the bailout fund is to be used, there was new talk in high circles this weekend of expanding it even further — another desperate attempt to “reassure investors.”

But again, it is not working.

In fact, the more money Europe throws at the crisis, the more investors seem to recoil in horror.

Investors can now see, as plain as day, how past rescues have backfired.

They can see how the debt disasters can’t be papered over with bailouts or printed money.

And they KNOW that money printing can only gut the currency they’re investing in — be it the dollar or the euro!

In either case — bailout or no bailout — bond investors want out.

Lesson #3 Before a Government Debt Crisis Can Be Ended, It Must FIRST Get a Lot WORSE!

In order to slash deficits …

  • Governments must impose austerity — deep cutbacks in spending, tax hikes, or both …
  • The austerity inevitably drives the economy into a tailspin, and …
  • The economic tailspin always causes even LARGER deficits!

It’s only after years of fiscal discipline and collective belt-tightening that this vicious cycle is ended and balance is restored.

That’s why the cutbacks in Greece, Ireland, Portugal, and Spain are, in the near term, making the crisis even worse. And it’s also why a similar vicious cycle is now looming in the U.S., as the new Congress seeks to slash the deficit.

Lesson #4 The Great Debt Crisis Of 2008 Never Ended!

Politicians talk about the U.S. debt crisis of 2008 … the Detroit bankruptcy crisis of 2009 … the European sovereign debt crisis of early 2010 … the Greek debt tragedy … the Irish debt mess … the California budget debacle … the U.S. municipal bond collapse … and more.

Then, they talk about the urgent need to make a show of resolve to bail out the world — to stop the “contagion” from spreading from one sector or region to the next.

But these are not separate, isolated disasters. Nor is the contagion of fear the true source of the problem.

Instead, what we are experiencing is one, single, integral debt crisis that never ended.

It is one crisis that has spread from the U.S. to Europe and beyond … morphed from a private-sector banking crisis to a public-sector government debt crisis … grown in scope and power … and begun to drive the large debtor nations on a collision course beyond anyone’s control.

Lesson #5 The New Phase of the Debt Crisis Can Bring Surging Interest Rates

I showed you how the yields on Ireland’s 10-year notes have surged from 8 to 9.17 percent in just a few days. Yields in other European nations have shot up as well.

Meanwhile, I assume you’ve seen how, despite the Fed’s massive bond purchases, U.S. Treasury yields have also moved higher.

And you’ve seen even bigger jumps in U.S. municipal bond yields.

This is just the beginning.

source http://www.marketoracle.co.uk/Article24628.html

Who’s right ,Eurpoe or The USA ??

 

By Brian Parkin and Tony Czuczka


June 7 (Bloomberg) — Chancellor Angela Merkel‘s Cabinet is meeting to tie up a “decisive” round of budget cuts that will shape government policy for years to come, fueling disagreement with U.S. officials who favor measures to step up growth.

Ministers met for 11 hours until early today to identify potential savings of 10 billion euros ($12 billion) a year, after Merkel said Europe’s debt crisis underscores the need for budget tightening to ensure the euro’s stability. A large part of the cuts were agreed overnight, a government official who spoke on customary condition of anonymity said by phone. Talks resumed at 9 a.m. Berlin time.

“It’s not exaggerated to say that this Cabinet meeting will give important direction for Germany in coming years, years that will be decisive,” Merkel told reporters yesterday before ministers met in the Chancellery. She is scheduled to hold talks with French President Nicolas Sarkozy in Berlin later today.

Merkel’s government is reining in its deficit and urging fellow euro-region states to do likewise to thwart a sovereign- debt crisis. The savings risk further alienating voters angry at Germany’s 148 billion-euro share of a European plan to backstop the euro and clash with a June 5 call by Treasury Secretary Timothy F. Geithner for “stronger domestic demand growth” in European countries like Germany that have trade surpluses.

At stake for Merkel is “the credibility of Germany as one of the countries forcing the others to start fiscal tightening,” Juergen Michels, chief euro-area economist at Citigroup Inc. in London, said in a phone interview on June 4. “It’s a very fine line between fiscal tightening and not choking off the economy.”

Bund Yield Record

German 10-year bunds rose, pushing the yield down to a record low today, as concern the debt crisis may spread boosted demand for the perceived safety of the 16-nation currency’s benchmark securities. The yield fell three basis points to 2.55 percent as of 8:52 a.m. in London. It reached 2.548 percent, according to Bloomberg generic data, the lowest since at least 1989, the year the Berlin Wall fell. The euro fell 0.2 percent to $1.1940 at 10:49 a.m. in Frankfurt.

Tax increases, cuts in welfare and jobless benefits and the loss of about 10,000 civil service posts are among the German measures being considered, Deutsche Presse-Agentur reported, citing unnamed government sources. Utilities face 2.3 billion euros in higher taxes if parliament agrees to extend the running time of German nuclear-power plants, the news agency said.

‘No Taboos’

The Defense Ministry said last week there are “no taboos” when it comes to potential savings. Merkel’s Cabinet seeks to cut almost 30 billion euros to 2013, Bild newspaper said June 5, without saying how it got the information.

Germany’s budget deficit is forecast to rise to 5.5 percent of gross domestic product this year. While that’s less than half the 13.6 percent of GDP in Greece last year and smaller than the U.K.’s 11.1 percent for the fiscal year to March 2010, it’s still almost double the European Union’s 3 percent limit.

Germany’s top AAA rating is at risk unless Merkel’s government agrees on deficit cuts and persuades other euro-area nations to do likewise, Kurt Lauk, who heads a business lobby within Merkel’s Christian Democratic Union party, told reporters on June 2. “We’re at a decisive turning point,” he said.

Spain, which lost its top grade from Fitch Ratings last month, has seen government borrowing costs soar to a euro-era record, even after Prime Minister Jose Luis Rodriguez Zapatero announced the deepest budget cuts in at least three decades.

Roubini on Stimulus

While countries with large debt such as Italy should trim deficits and contain wages, Germany should spend more and raise wages to help fuel demand in the euro area, Nouriel Roubini, the New York University economist who predicted the financial crisis, said in an interview.

“Germany can afford having more stimulus not just this year but next year,” Roubini said June 5 in Trento, Italy.

Finance Minister Wolfgang Schaeuble, in an interview en route to a meeting of Group of 20 counterparts including Geithner in Busan, South Korea, said there’s no disagreement “in principle” over the need to reduce deficits, only over the pace at which action is taken.

While “it’s possible that the U.S. could use accelerating growth over time to help them reduce their deficits, in Europe we can’t count on growth alone to mend our fiscal position,” Schaeuble said June 4. “I don’t share the view that reducing deficits and strengthening growth are mutually exclusive.”

To contact the reporters on this story: Brian Parkin in Berlin at bparkin@bloomberg.net; Tony Czuczka in Berlin at aczuczka@bloomberg.net. source http://www.bloomberg.com/apps/news?pid=20601087&sid=aVGqrlbamDjE

 

 
May 26, 2010Don’t Doubt Bernanke’s Ability to Create Inflation

With the Dow Jones now down 11% nominally from its high last month, NIA has been getting hundreds of emails and phone calls asking if there is any way we could be wrong about the threat of hyperinflation in the U.S. and if indeed deflation is the real problem we need to be worried about. The names Nouriel Roubini, Robert Prechter, and Harry Dent get mentioned to us a lot, with many NIA members asking why these so-called “experts” believe deflation is in our future.

Roubini, Prechter and Dent have been wrong about the overwhelming majority of their economic forecasts over the past decade. When it comes to their latest predictions about deflation, they will actually be right to some extent. We will see deflation in some assets like stocks and Real Estate, but only when priced in terms of real money – gold and silver. In terms of dollars, prices for pretty much all goods and services are guaranteed to rise dramatically over the next few years. Creating inflation is the only thing in the world Federal Reserve Chairman Ben Bernanke knows how to do and is good at.

During the past week, the mainstream media has shifted from saying we are experiencing an “economy recovery” to now saying we are at risk of a “double dip recession”. Nothing fundamentally has changed in our economy. The fact is, the U.S. economy has been in a recession since mid-2000. All government reported positive GDP growth since mid-2000 has been due to nothing but inflation. Our economy should have experienced a depression in 2001 and an even greater one in 2008, but the depression has been temporarily avoided at the expense of an inevitable Hyperinflationary Great Depression down the road.

NIA believes it is impossible for the U.S. to experience price deflation when the Federal Reserve has held interest rates at 0% for the past 17 months. Sure, there will probably be a second wave of mortgage defaults that could cause another round of forced liquidations on Wall Street, but during any future period of forced liquidations, we doubt the U.S. dollar will still be looked at as the “safe haven” it was in 2008/2009. Gold and silver will soon be looked at as the only real safe havens because they are the only assets that provide protection from both a deteriorating economy and massive inflation. Precious metals will decouple from the Dow Jones and we will begin to see gold and silver rise at the same time as the stock market falls.

Bernanke was questioned yesterday following a speech at the Bank of Japan about whether a 4% inflation target would be better than the Fed’s current inflation target of 2%. Bernanke responded that “it would be a very risky transition” if the Fed changed their inflation target, claiming that U.S. inflation expectations are currently “very stable”. (NIA estimates the real rate of U.S. price inflation is already north of 5%.)

Unfortunately, no policymaker in the world is smart enough to accurately control the rate of price inflation through the manipulation of interest rates, and certainly not Bernanke. It’s mind-boggling to us how the mainstream media could believe anything Bernanke says about inflation after how wrong he has been about everything else. Maybe the press has already forgotten that it was Bernanke who in July of 2005 said, “it’s a pretty unlikely possibility” that home prices will decline across the country, “house prices will slow, maybe stabilize but I don’t think it’s going to drive the economy too far from its full employment path”. We are 100% sure that Bernanke will be proven wrong again when it comes to inflation.

The U.S. Dollar Index has rallied from 75 to 87 since December and is approaching its high from March of 2009 of 89. This has given Bernanke the cover to keep interest rates at a record low 0%, but NIA believes Bernanke is misreading these economic signals. When the U.S. Dollar Index reached its high last year of 89, gold was only $900 per ounce. Today, gold is approximately $1,200 per ounce. The fact that gold has held up so strong despite a rapidly rising U.S. Dollar Index, proves that our financial system is getting ready to overdose on excess liquidity. The U.S. Dollar Index has rallied only because it is heavily weighted against the Euro. The Euro is now overdue for a huge bounce, which we believe will send the U.S. dollar crashing while sending gold to new record highs.

It’s not good for us to pay too much attention to short-term volatility in the financial markets. Short-term “noise” often causes investors to second guess what they know is true. In our new documentary ‘Meltup’ (which has now surpassed 441,000 views in 10 days) we said, “If stocks were to see a nominal decline one last time, we will likely see Bernanke shoot up his largest ever dose of quantitative easing, which could turn the current Meltup into hyperinflation.”

We are seeing signs of this coming true already. Washington is now calling for another stimulus. Larry Summers, senior economic adviser to President Obama, has asked Congress to begin drafting a new stimulus bill in an attempt to prevent a “double dip recession”. The proposed size of this new stimulus is so far only $200 billion, much smaller than the last $787 billion stimulus bill. However, we are sure Congress will increase the size of it, especially if stocks continue their nominal decline. The new stimulus bill will likely coincide with trillions of dollars in additional quantitative easing by the Federal Reserve.

Source http://inflation.us/dontdoubtbernanke.html


 

The major difference is that the Americans want to print money and spend

And the Europeans and particular the Germans want to tighten and save and stop waist!

To my mind the most prudent are of course the Europeans but it would suggest that there is a lot more pain heading our way ,with our European partners in contraction mode and the Germans demanding more austerity measures from all the other EU countries I can’t see where the jobs growth will come from

Even when our own incompetent government will be telling that Ireland is now growing again

Without growth in jobs this is just a mirage that soon will fade again.

The Billions that are been poured down the toxic banks toilets will not save or generate jobs

the billions so far have not even stabilized the situation, and with the next phase of the depression now coming down the track at us the government will need to borrow more money to plug even more holes in the toxic Anglo Irish Bank, together with the disaster that is NAMA there is no way we can borrow enough money and remain financial viable as an independent sovereign state !

Somebody please stop this madness

David Mc Williams has a new article ” Kill Anglo to save Ireland” (http://www.davidmcwilliams.ie/2010/06/07/kill-anglo-to-save-ireland) all independent minded people should take the time to read

We cannot afford to just sit back and allow our sovereign nation disappear in an ocean of debt

we owe it to our children and ourselves .


Don’t Doubt Bernanke’s Ability to Create Inflation (US News)

May 26, 2010

With the Dow Jones now down 11% nominally from its high last month, NIA has been getting hundreds of emails and phone calls asking if there is any way we could be wrong about the threat of hyperinflation in the U.S. and if indeed deflation is the real problem we need to be worried about. The names Nouriel Roubini, Robert Prechter, and Harry Dent get mentioned to us a lot, with many NIA members asking why these so-called “experts” believe deflation is in our future.

Roubini, Prechter and Dent have been wrong about the overwhelming majority of their economic forecasts over the past decade. When it comes to their latest predictions about deflation, they will actually be right to some extent. We will see deflation in some assets like stocks and Real Estate, but only when priced in terms of real money – gold and silver. In terms of dollars, prices for pretty much all goods and services are guaranteed to rise dramatically over the next few years. Creating inflation is the only thing in the world Federal Reserve Chairman Ben Bernanke knows how to do and is good at.

During the past week, the mainstream media has shifted from saying we are experiencing an “economy recovery” to now saying we are at risk of a “double dip recession”. Nothing fundamentally has changed in our economy. The fact is, the U.S. economy has been in a recession since mid-2000. All government reported positive GDP growth since mid-2000 has been due to nothing but inflation. Our economy should have experienced a depression in 2001 and an even greater one in 2008, but the depression has been temporarily avoided at the expense of an inevitable Hyperinflationary Great Depression down the road.

NIA believes it is impossible for the U.S. to experience price deflation when the Federal Reserve has held interest rates at 0% for the past 17 months. Sure, there will probably be a second wave of mortgage defaults that could cause another round of forced liquidations on Wall Street, but during any future period of forced liquidations, we doubt the U.S. dollar will still be looked at as the “safe haven” it was in 2008/2009. Gold and silver will soon be looked at as the only real safe havens because they are the only assets that provide protection from both a deteriorating economy and massive inflation. Precious metals will decouple from the Dow Jones and we will begin to see gold and silver rise at the same time as the stock market falls.

Bernanke was questioned yesterday following a speech at the Bank of Japan about whether a 4% inflation target would be better than the Fed’s current inflation target of 2%. Bernanke responded that “it would be a very risky transition” if the Fed changed their inflation target, claiming that U.S. inflation expectations are currently “very stable”. (NIA estimates the real rate of U.S. price inflation is already north of 5%.)

Unfortunately, no policymaker in the world is smart enough to accurately control the rate of price inflation through the manipulation of interest rates, and certainly not Bernanke. It’s mind-boggling to us how the mainstream media could believe anything Bernanke says about inflation after how wrong he has been about everything else. Maybe the press has already forgotten that it was Bernanke who in July of 2005 said, “it’s a pretty unlikely possibility” that home prices will decline across the country, “house prices will slow, maybe stabilize but I don’t think it’s going to drive the economy too far from its full employment path”. We are 100% sure that Bernanke will be proven wrong again when it comes to inflation.

The U.S. Dollar Index has rallied from 75 to 87 since December and is approaching its high from March of 2009 of 89. This has given Bernanke the cover to keep interest rates at a record low 0%, but NIA believes Bernanke is misreading these economic signals. When the U.S. Dollar Index reached its high last year of 89, gold was only $900 per ounce. Today, gold is approximately $1,200 per ounce. The fact that gold has held up so strong despite a rapidly rising U.S. Dollar Index, proves that our financial system is getting ready to overdose on excess liquidity. The U.S. Dollar Index has rallied only because it is heavily weighted against the Euro. The Euro is now overdue for a huge bounce, which we believe will send the U.S. dollar crashing while sending gold to new record highs.

It’s not good for us to pay too much attention to short-term volatility in the financial markets. Short-term “noise” often causes investors to second guess what they know is true. In our new documentary ‘Meltup’ (which has now surpassed 441,000 views in 10 days) we said, “If stocks were to see a nominal decline one last time, we will likely see Bernanke shoot up his largest ever dose of quantitative easing, which could turn the current Meltup into hyperinflation.”

We are seeing signs of this coming true already. Washington is now calling for another stimulus.  quantitative easing, senior economic adviser to President Obama, has asked Congress to begin drafting a new stimulus bill in an attempt to prevent a “double dip recession”. The proposed size of this new stimulus is so far only $200 billion, much smaller than the last $787 billion stimulus bill. However, we are sure Congress will increase the size of it, especially if stocks continue their nominal decline. The new stimulus bill will likely coincide with trillions of dollars in additional quantitative easing by the Federal Reserve.

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