The Worst Of The Bond-Market Bust Is Yet To Come - By Mike Larson (17/6/13) PDF Print E-mail
Mike Larson   
Monday, 17 June 2013 10:03

Money & Markets

It's been only 33 days — barely more than a month — but in that time, bonds have crashed in spectacular fashion.

Check out these stats:

•    The yield on the 10-year Treasury note, the benchmark used to price virtually every longer-term bond and fixed-rate mortgage, exploded to 2.27 percent from 1.6 percent. That's a move of almost 70 basis points, or more than 40 percent, from recent lows. To put that in perspective, that's like the Dow Jones Industrial Average surging by more than 6,000 points or gold jumping by $550 an ounce.

•    The iShares High-Yield Corporate Bond and SPDR Barclays High-Yield Bond ETFs together account for more than $24 billion in investor assets in the high-yield, or "junk," bond market. They gave up every penny of gains racked up during the past eight months in just a few weeks.

•    Or how about this: The Vanguard Total Bond Market Index (BND) is a mammoth store of bond-market value, with a whopping $117 billion in net assets. It owns more than 5,800 bonds spread across a wide range of bond sub-markets.

And you know what? It just sank to the lowest level since July 2011.

Just look at this horrid chart and you can see that the Vanguard Total Bond Market Index violated a key level of horizontal support, and an uptrend that dates back to the summer of 2009. If this were a stock, you'd already have sold it.



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Excess Reserves At FED, One Of The Biggest Financial Scam In History – A Whopping US$1.794 Trillion - By Matthias Chang (17/6/13) PDF Print E-mail
By Matthias Chang   
Sunday, 16 June 2013 12:25


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Copernicus, Galileo and Gold - By Hugo Salinas Price (14/6/13) PDF Print E-mail
Hugo Salinas Price   
Thursday, 13 June 2013 22:05

Plata.com

We are deceived when we consent to think about the “price of gold”. At the very outset of our thoughts regarding gold, we are wrong, just as astronomers prior to Copernicus were wrong in thinking about the solar system as geo-centric, with the Sun, Moon and planets describing perfect circles around Earth. Gold is - to follow the astronomical simile - the center of the monetary universe, and the planets - the currencies - circle the Sun, which represents gold.

The correct starting point is the price of a currency expressed in terms of gold, and not the other way around.

When the price of the dollar was fixed at $20.67 per ounce of gold, up to the time of FDR, the price of the dollar was $1/20.67 = .0483782 oz. of gold, or 4.84 hundredths of an ounce of gold.

When FDR “raised the price of gold” he actually lowered the price of the dollar: $1/35 = .028574 oz. of gold, or 2.86 hundredths of an ounce.

Thus, FDR lowered the price of the dollar from 4.84 hundredths, to 2.86 hundredths of an ounce.

This was done in the Depression of the 30’s, when FDR was anxious to get the unemployed back to work. The purpose of devaluing the dollar by lowering its price in gold was to cheapen labor costs (without telling Labor what he was doing!) and put more people to work by getting them to accept working for lower wages, without their understanding what was going on. Cheaper labor meant cheaper American products and more exports.

At 2.86 hundredths of an ounce, the price of the dollar was below market value, and gold became overvalued in terms of dollars.

It is a principle of economics that undervalued money is exported from the country where it circulates, and overvalued money flows into the country where it is overvalued.



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The Dijssel-Bomb - By Eric Sprott and David Franklin (14/6/13) PDF Print E-mail
Eric Sprott and David Franklin   
Thursday, 13 June 2013 22:01

Sprottgroup.com

[FF Editorial: In April, we warned that by English Common Law, customers’ deposits are monies to be used by the banks in any manner at their absolute discretion because the customer is the creditor when he deposits any money with the banker and the said banker is the debtor. The ownersghip of the money is transferred to the banker, hence he is a debtor. The bank need only to refund the money when so demanded by the customer. However, if the bank is insolvent and bankrupted, the only recourse for the customer is that of an unsecured credit and he must join the queue in the bank liquidation and share in the left-over assets after secured creditors have been paid. So depositors monies are not safe! This legal principle has been in existence for over two hundred years. Depositors have been deluded by banking propaganda!] 

This past March, Jeroen Dijsselbloem, the head of the finance ministers of the eurozone, shocked the markets with seemingly off-the-cuff comments suggesting that the Cyprus banking solution will, "serve as a model for dealing with future banking crises."1 Depositors across Europe took a collective gasp of horror – could banks possibly confiscate depositors’ funds in a form of daylight robbery? Indeed they could, and last week the Bank for International Settlements (“BIS”), the Central Bank's Central Bank, published what we have referred to as 'the template'; a blueprint outlining the steps to handle the failure of a major bank and the conditions to be met before ‘bailing-in’ deposits.

In their recently published paper "A Template For Recapitalising Too-Big-To-Fail Banks", authors Paul Melaschenko and Noel Reynolds argue for a “simple” mechanism to recapitalize failed banks without the use of taxpayers' money. They propose a process whereby a bank, if it reached the point of failure, could transfer ownership to a newly created holding company over a weekend and be recapitalized. The bank would then be sold, enabling the market to determine the ultimate losses to previous equity holders and creditors. And, yes, this scenario includes losses for depositors above a guaranteed limit. Presto! A new bank with a clean balance sheet, ready to receive liquidity support from the prevailing central bank, without the need for handouts, bailouts, TARP programs, or any other form of government assistance. Previous debt and equity holders and depositors of this failed bank would be left with an equity position in the new entity. This 'template' would ensure that "shareholders and uninsured private sector creditors (read: depositors and bond holders) of such banks, rather than taxpayers, bear the cost of resolution."2 While at the moment this framework is only outlined in a discussion paper, it confirms our suspicions. While the old template involved “bailing out” banks through the transfer of toxic assets from the corporate sector to the taxpayer, the new template calls for “bailing in”.



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Dollar At Risk? - By Axel Merk (13/6/13) PDF Print E-mail
Axel Merk   
Thursday, 13 June 2013 08:50

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