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Rank: Member Joined: 11/13/2006 Posts: 551 Location: Nairobi
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If neither the public sector nor the private sector are spending in the backdrop of capital outlfows by foreign investors, then how will the Club Med (southern Europe) nations grow? "ROME—The government of Italian Prime Minister Silvio Berlusconi approved budget cuts Tuesday of up to €24 billion ($29.7 billion) over the next two years in an effort to shore up public finances. The cuts come as other European governments try to reduce public spending in response to the growing levels of sovereign debt. Spain last week approved measures valued at €15 billion for this year in an effort to trim a budget deficit equal to 11% of gross domestic product. Britain's new coalition government, which outlined $9.05 billion in budget cuts on Monday, plans to unveil further cuts next month...." Read more: http://online.wsj.com/ar...siness_EuropeNewsBucket
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Rank: Member Joined: 11/13/2006 Posts: 551 Location: Nairobi
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Hat tip to a Top Dog. "Listed communications firm Safaricom Limited has posted a 37 per cent increase it s profits before tax for the period ended March 31, 2010. The firm recorded Sh20.9 billion compared to Sh15.3 billion it posted in the previous year, once again bringing into focus its profits margin. Over the past month, the public discourse has been centered along the firms’ performance, which had been a subject of new industry regulations. According to chief executive officer Mr Michael Joseph, the results were a reflection of the heavy investments that they put in to develop their network..." Read more: http://www.nation.co.ke/.../-/igoe2pz/-/index.html
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Rank: Member Joined: 11/13/2006 Posts: 551 Location: Nairobi
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Greece is the writing on the wall for highly indebted nations. Even after having been spared tax increases, Italians will be out in the streets aping the Greeks. With a report on the Financial Times as to a review of $630 bn of Eurozone bond holdings by the Chinese government, the Americans cannot draw comfort as their turn on the hot seat is sure to come. The Chinese have been paring their holdings of U.S. debt to rank second to Japan. "MILAN, Italy — Italy's largest union, the CGIL, on Wednesday threatened a general strike for June to protest against the government's austerity measures aimed at stabilising public finances. Secretary General Guglielmo Epifani said he would ask the union's management committee to approve the strike, Italian news agencies reported. "I will ask the management committee to call for a general strike with regional demonstrations between now and the end of June," he said. The committee meets in early June...." Read more: http://www.google.com/ho...dQfsNjqlOLo-5j71ghw6hJw
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Rank: Veteran Joined: 9/4/2009 Posts: 700 Location: Nairobi
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Coinupdate.com reports that prices at which the Greek Central Bank is selling one ounce gold equivalents are as high as $1,700 (40% over spot), and prices on the black markets are even higher. The punchline, as Athens slowly returns to a forced gold standard: " A popular spot for street vendors to sell their coins is near the Athens Stock Exchange. There the traders wait for citizens to bring payments received from unloading their paper assets like stocks and bonds." That's good - downtown Manhattan close to the NYSE has some free space for gold vendors to set up shop as well, they just need to push some of the frontrunning/collocation boxes off to the side. And in other rhetorical ruminations, is it safe to say that the last days of the fiat experiment are among us now that people themselves are bypassing the government and enforcing their own gold standard? Read more: http://www.zerohedge.com...s-gold-price-1700-ounce
Apple is now worth more than Mister Softee. About $3 billion more. Read more: http://www.ritholtz.com/...valuable-than-microsoft/“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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Rank: Member Joined: 11/13/2006 Posts: 551 Location: Nairobi
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Southern Europe is effectively in a straightjacket of low to negative growth, higher taxes and high unemployment. Margaret Thatcher once remarked, "The trouble with Socialism is that eventually you run out of other people's money." "The downgrade, from AAA to AA+, was prompted by Fitch's view that Spain's growth will be hampered by a €15bn (£12.7bn) austerity package as it attempts to lower its deficit. Fitch made the announcement after European markets had closed, but the news drove the Dow Jones in the US down 1pc to 10148. "The downgrade reflects Fitch's assessment that the process of adjustment to a lower level of private sector and external indebtedness will materially reduce the rate of growth of the Spanish economy over the medium-term," said Brian Coulton, Fitch's head of EMEA sovereign ratings...." Read more: http://www.telegraph.co....ains-credit-rating.html
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Rank: Member Joined: 11/13/2006 Posts: 551 Location: Nairobi
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Collateral damage from the European Debt Crisis. If you have family or friends working in the public sector in Europe or the United States, inform them that their job security is tenuous. "Remittances from the Kenyan diaspora will maintain a downward trend as the debt crisis spreads among European nations, market analysts have said. “There has been a significant drop in remittances from the European area in the last few months, we don’t know when the trend will reverse,” said Frida Nzilani of Sky Forex Bureau, an with MoneyGram and Western Union. Europe, which accounts for 27 per cent of the total remittances from the diaspora, is reeling under the weight of huge domestic debts...." Read more: http://www.businessdaily...0/-/luthlc/-/index.html
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Rank: Member Joined: 11/13/2006 Posts: 551 Location: Nairobi
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A well written article on a rarely discussed subject of intra-Africa trade. "East and West Africa may be on the same continent, just five hours flight from each other, and with complementary economies that would make it natural enough for a high level of interaction. But, in reality, they are virtually cut off from one another. With a combined population of two-fifths of a billion, and well-matched resources, East and West Africa have some of the lowest trade between them of any regions in the world, according to a UN report, with just one carrier running costly and often half-empty flights between the regions, no road route, and negligible traffic between the two continental hubs....." Read more: http://www.businessdaily...0/-/vjurdi/-/index.html
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Rank: Member Joined: 11/13/2006 Posts: 551 Location: Nairobi
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Dear Friends,
No two eras are created equal. Nevertheless, man’s reaction to socio-economic events is almost always identical. Booms are heralded as new paradigms in society whilst busts imbue fear and depression. I have unpacked the 1931 Currency Crisis with a view of providing historical markers to the unfolding European Debt Crisis.
The chronology below covers the years and events prior to and leading up to the 1931 Currency Crisis. It shall be disseminated in two parts:
1919
The peaking of the commodity bull market that had begun in 1907. The Dow Jones hits an all time high of 120.
1920
The Dow Jones Index bottoms at 64 points.
1922
Britain chooses to increase taxes and reduce money supply to combat recession whilst Germany grapples with war repatriations imposed on it by the Allies after World War I.
President Harding expresses concern over the number of foreign bond issues in the United States.
1923
Germany defaults on its war repatriations. Adolf Hitler is jailed for 5 years after his uprising fails.
The infamous Weimar hyperinflation rages as confidence in the Papiermark collapses.
1924
Germany issues the new Reichmark, backed by gold and real estate to replace the Rentenmark. The latter replaces the Papiermark as an intermediate currency to restore confidence.
European nations ravaged by inflation return to the gold standard. France adopts a gold Franc, Austria – a silver based Schilling, Germany – a gold Retenmark and Russia - a gold based Chervonetz.
U.S. gold reserves are at the highest level in history, nearly 50% of the world’s official reserves.
Britain and France advocate for forgiveness of war debts worth $11 billion by the United States. They succeed in obtaining partial forgiveness
The Exports Plan is formulated to rebuild Europe. Its member economies recover leading to an attraction of investment.
1925
Britain returns to the gold standard.
1926
The U.S. emerges as the money centre of the world, hosting bonds from 65 nations. Europe has majority, Central and South America rank in second. The defaults of 1931 wreck the debt issued from these two regions.
1927
Europe appeals to the United States to lower interest rates in order for capital to flow to its borders, easing its ability to service war debts.
1928
Stock markets in Britain, Germany, Belgium and Switzerland hit their peak.
1929
Herbert Hoover takes over as President of the United States.
The Dow Jones Index closes at an all time high of 380. A bear market then ensues that is remembered throughout history.
Herbert Hoover institutes tax cuts, a public building program and easy credit from the Federal Reserve to shore up the economy. In addition, he obtains commitments from industry not to cut wages.
1930
Companies begin to show declines in earnings.
Unemployment in South America spawns political upheaval.
The Smooth-Hawley Tariff Act is enacted in the U.S., sparking a trade war around the world. A direct result is exacerbating the inability of foreign nations to pay off debt.
Banking failures in the Midwest States pick up pace as a result of declining commodity values and real-estate backed loans.
At the onset of August, the Midwest and Southern States are plagued by a severe drought. The tribulations there are captured in John Steinbeck’s classic “The Grapes of Wrath”.
Whilst the stock markets tumbles, President Cleveland, in a speech to the United States Congress, delivers the words:
"At times like the present, when the evils of unsound finance threaten us, the speculator may anticipate a harvest gathered from the misfortune of others, the capitalist may protect himself by hoarding or may even find profit in the fluctuations of values; but the wage earner - the first to be injured by a depreciated currency - is practically defenseless. He relies for work upon the ventures of confident and contented capital. This failing him, his condition is without alleviation, for he can neither prey on the misfortunes of others nor hoard his labor."
1931 (Currency Crisis)
Distress in the bond market begins with the default of a Detroit municipal bond.
Hoarding of gold and speculation in gold mining shares becomes prevalent.
Germany and Austria formulate a customs agreement to ramp up trade between the two debt ridden nations. France, economic cornerstone of Europe, vehemently opposes the move calling it a violation of The Versailles Treaty. Britain joins the protestations.
The French turn the screws on Germany and Austria by redeeming short term debt bills.
Credit – Ansait Bank of Austria collapses causing severe distress in the banking sector. The National Bank of Austria runs out of foreign exchange prompting the nation to appeal to France, Britain and the United States.
No monies are forthcoming from France as it wants a repeal of the German – Austrian customs agreement. Britain is more accommodating, advancing Austria with 4.5 million Pounds.
This move vexes the French who begin liquidation of their Sterling holdings.
The Federal Reserve cuts interest rated to repel capital that seeks safe harbor in the United States. Conversely, Central European nations hike interest rates to attract capital. Both actions fail to stem the tide.
German banks come under siege following statements by the German Finance Minister that the Austrian banking crisis would hit its institutions.
President Hoover proposes a debt moratorium for Germany to which 15 governments with the exception of France agree to. Only upon the threat of isolation do the French co-operate.
The Banking Crisis continues unabated in Europe leading to closures in Hungary, Germany, Austria and Eastern Europe.
President Hoover declares a debt freeze on short-term German liabilities.
Uncertainty hovers over Britain as the French begin withdrawing gold out of British banks. Other nations follow France’s actions causing distress for Austria, Germany and Eastern Europe. The Bank of England attempts to stem the flow by increasing interest rates but to no effect. Furthermore, the BOE requests a $650 million loan from U.S. banks. Lastly, the government adopts austerity measures to curtail public expenditure.
A month later, Britain abandons the gold standard, by and large defaulting on its foreign debt. These actions by Britain along with the Debt Crisis in Europe and South America cement the depression.
The German Bourse closes from June 13th to September 3rd while the Amsterdam market cancels all trades that took place on September 21st after a horrendous plunge.
Next in line to face a crisis of confidence is the United States. Rumours of an abandonment of the gold standard results in withdrawal of bullion from the Federal Reserve and banks. A hike in interest rates by the Federal Reserve does not instill confidence in the markets.
Trade volumes declined sharply. Merchants were unable to effectively price their goods due to extreme currency volatility.
1932
A hearing by the Senate Finance Committee obtains information regarding the extent of the debt crisis. All 57 issues that default are from South American governments.
Bank failures continue in earnest prompting gold hoarding.
Chile and Greece abandon the gold standard, unsettling an already fragile forex market.
Jitters over rising deficits in the U.S. cause France and other European countries to withdraw gold from the New York Federal Reserve.
Seven nations meet in Switzerland to agree on reduction of German repatriation payments from $64 billion to $712 million.
The lowest close in the Dow Jones is achieved on 8th July, 1932 at 4112, a 89% decline from 1929.
Thank you for listening.
Sources:
The Greatest Bull Market in History by Martin Armstrong
http://www.wikipedia.com
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Rank: Member Joined: 11/13/2006 Posts: 551 Location: Nairobi
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This phase in the commodity bull market will be characterised by increased participation of institutional money. The likely duration for this is 2008 to 2012. The last phase (2013 - 2015) will herald the entry of the retail investor. "The US’s second-biggest public pension fund is poised to make its first investment in commodities as a hedge against the risk of rising inflation, in the latest sign of growing investor appetite for raw materials. The proposal by the California State Teachers’ Retirement System comes as US federal commodities regulators explore whether to impose limits on institutional investors’ exposure to raw material markets...." Read more: http://www.ft.com/cms/s/...-91c8-00144feab49a.html
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Rank: Member Joined: 11/13/2006 Posts: 551 Location: Nairobi
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The Euro was beaten with an ugly stick after the confessional by Hungary's new government. Former resistance level of 1.205 gave way like butter to a hot knife as markets were once more reminded of the grim days of Lehman. Should the Euro be unable to get back up above 1.205, its next magnet is 1.17. "Pessimistic words on the economy from senior officials of Hungary's newly elected ruling party plunged the euro to a four-year low Friday, and refocused concern on a region that European Union leaders had hoped was recovering from the wounds it suffered in the early days of the financial crisis. Lajos Kosa, vice president of the right-leaning Fidesz party, which won an overwhelming victory in the April elections, said Thursday that Hungary was in a Greek-style sovereign-debt crisis. And Friday, the prime minister's spokesman, Peter Szijjarto, roiled markets by saying the economic situation is severe and that Hungary isn't likely to meet budget-deficit targets prescribed by the International Monetary Fund...." Read more: http://online.wsj.com/ar...html?mod=wsj_india_main
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