Must-Know News - Jan. 14

• 1) Gold price to rise up to $2,000 per ounce by end of 2010 and then up to $5,000 per ounce (Gold Corp CEO)

“US Gold Corp CEO and founder Rob McEwen stated that in period between 2012 and 2014 gold price can soar up to $5,000 per ounce.

““The cause of gold price rise can be weakening of US dollar against the background of rapid growth of United States’ public debt,” Mr. McEwen said.

He Ruiyan, the head of research at Hong Kong firm Xiamen International Trade Futures Co., predicts that gold price can reach $2,000 before the end of 2010.

”The US government, striving to help domestic economy, prints money. The US increases its debt in devastating scale and that will reduce value of dollar further,” Mr. Ruiyan thinks.

In 2009, Deutsche Bank made gold price forecast for 2010 at the level of $1,100 per ounce, but already last autumn it was surpassed.”"

• 2) The Coming Sovereign Debt Crisis (Nouriel Roubini and Arpitha Bykere)

“In 2008 and 2009, the decisions by these governments to do “whatever it takes” to backstop their financial systems and keep their economies afloat soothed investor concerns. But if countries remain biased toward continuing with loose fiscal and monetary policies to support growth, rather than focusing on fiscal consolidation, investors will become increasingly concerned about fiscal sustainability and gradually move out of debt markets they have long considered “safe havens.” ”

• 3) Tehran urges Moscow to use national currencies in energy deals (Tehran Times)

“”"We want our national currencies to be used in our projects,”" the Iranian official said, adding this measure would facilitate the financing of large projects.

The move is also seen as an attempt to find an alternative to the U.S. dollar whose credibility has been weakened by the global economic crisis and reduce dependence on the greenback as the world’s major reserve currency.

Shirazi also said that Iran planned to double gas output in the next five years to one billion cubic meters a day, increase oil production by one million barrels per day to five million bbl/d, and build new oil refineries and petrochemical plants. ”

• 4) James Turk-The US on the cusp of hyperinflation (video)

“James Turk, founder of GoldMoney, speaks about the indications of hyperinflation in the US today.”

• 5) Major economic risks facing the world

“Strong worries over further asset bubbles, underinvestment in infrastructure, falling government finances, and the consequent danger to economies to sink into a major debt crisis are some of the top threats facing the world in 2010, the World Economic Forum said on Thursday.”

“In response to the financial crisis, many countries are at risk of overextending unsustainable levels of debt, which, in turn, will exert strong upwards pressures on real interest rates. In the final instance, unsustainable debt levels could lead to full-fledged sovereign debt crises. These crises also have social and political implications of high unemployment.”

……………5A) Debt levels

“Debt levels have risen from 78 percent (in 2007, before the crisis) to 118 percent of GDP in the G20 … this is something that could really create much more of a crisis than in the past, and we are already in a vulnerable situation.”

• 6) The spectre of sovereign default returns to rich world (Financial Times)

“Since 2007, Organisation for Economic Co-operation and Development government deficits have risen by 7 per cent of gross domestic product to just more than 8 per cent, and debt, excluding contingent liabilities, has risen by about 25 per cent of GDP to just more than 100 per cent. The biggest increases have occurred in Iceland, Ireland, the US, Japan, the UK, and Spain. There is no peacetime precedent for the current speed and scale of public debt accumulation and it is difficult to assess the social tolerance for high debt levels, and for the pain of protracted fiscal restraint. In several European Union member states, the threshold has already been breached. The spectre of sovereign default, therefore, has returned to the rich world.

Default does not have to mean outright debt repudiation. It can mean some type of moratorium on interest payments, and the restructuring of loan terms. Richer nations are assumed to be above such measures, but not in extreme circumstances. The US abrogated the gold clause in government and private contracts in 1934, and in 1971, it abandoned the gold standard altogether. Default can also occur through inflation, currency debasement, the imposition of capital controls, and the imposition of special taxes that break private contracts. Seen in this light, a few countries in eastern and western Europe may already be technically at risk of default.”

• 7) US faces grim future without action to curb debt: study

“The US economy is heading down a path of lower living standards and diminished confidence without action to stem the massive budget deficit, a group of prominent researchers said Wednesday.

The panel said the country faces difficult choices on tax increases and spending cuts to achieve a more sustainable fiscal balance.

“The federal government is currently spending far more than it collects in revenues, and if current policies are continued, will do so for the foreseeable future,” said the report from the National Research Council and National Academy of Public Administration.

“No reasonably foreseeable rate of economic growth would overcome this structural deficit. Thus, any efforts to rein in future deficits must entail either large increases in taxes to support these programs or major restraints on their growth — or some combination of the two.”

The US government closed its 2009 fiscal year with a record 1.416-trillion-dollar budget deficit and the White House forecasts an even bigger gap of 1.502 trillion dollars in fiscal 2010, said the report.

“The federal government’s fiscal ship is headed toward dangerous waters,” said John Palmer, dean emeritus of the Syracuse University Maxwell School and co-chair of the panel.

“Our committee members have varying political backgrounds and views, but we all agree that future economic prosperity is at grave risk if our nation does not change its fiscal course.”"

• Rick Santelli Reaction to Growth of Fannie and Freddie (Video posted on January 11)

“Rick Santelli discusses how ironic it is that the media has ignored the government’s silent suspension of the loss ceilings of government investment in Fannie and Freddie, clearing the way for the companies to receive hundreds of billions of dollars more in government/taxpayer money. ”

• 9) Administration considers forcing investors into Treasury debt

“The Obama administration appears to have come up with a novel way of financing trillion-dollar budget deficits – demanding IRA and 401(k) holders buy trillions of dollars in Treasury bonds.

With the Treasury needing this year to see another $1 trillion in debt to finance the anticipated federal budget deficit, and the Federal Reserve about to discontinue its 2009 program of buying Treasury bonds for the Fed’s asset portfolio, the Obama administration is scrambling to find ways to sell government debt without having to raise interest rates.

Bloomberg reported Friday that Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Mark Iwry are planning to stage a public comment period before implementing regulations that would require private investors to structure IRA and 401(k) accounts into what could amount to a U.S. Treasury debt-backed government annuity.

CNBC’s Rick Santelli broadcast the rumor the same day from the trading floor during CNBC’s “Power Lunch” show.

Spokesmen from both the U.S. Treasury and Department of Labor confirmed to WND that the federal agencies about to enter a pre-regulation public comment phase on the proposed rule change. ”

• 10) U.S. Dec. retail sales decline 0.3% (Market Watch)

“Sales for all of 2009 fell 6.2% compared with 2008 to $4.14 trillion. It was the largest decline on record, dating back to 1992. It was only the second decline on record; the other was the 0.5% drop in 2008.”

• 11) Fed officials say need firm recovery before hike (2 years?)

“Two top Federal Reserve policy-makers said on Wednesday that the U.S. central bank will need to be certain the economic recovery is firmly in place before tightening its monetary policy stance.

New York Federal Reserve Bank President William Dudley and Chicago Federal Reserve Bank President Charles Evans said continued credit problems and a high rate of unemployment are constraints on the U.S. economic recovery..”

“Dudley said the “extended period” language means different things to different people. But, he said, “what I want to stress is extended means at least six months. It could be a year from now.. two years from now. It’s going to depend on how the economy develops.”

The comments from Evans and Dudley, seen in the middle ground between the U.S. central bank’s anti-inflation hawks and pro-growth doves, suggest the central bank is in no rush to move toward raising interest rates.”

…………..11A) Fed’s Dudley Says Rates May Stay Low for as Long as Two Years (Bloomberg)

• 12) Obama wants record $708B for military next year

“President Barack Obama will ask Congress for an additional $33 billion to fight unpopular wars in Afghanistan and Iraq on top of a record $708 billion for the Defense Department next year, The Associated Press has learned - a request that could be an especially hard sell to some of the administration’s Democratic allies.”

• 13) Shortfalls For U.S. Cities Could Reach $56 Billion

“WASHINGTON (Reuters) - U.S. cities will face a collective budget shortfall of at least $56 billion over the next two years, with the current recession not seen hitting bottom until 2011, according to a report on Wednesday.

The National League of Cities said that because economic recoveries in cities lag national ones by about two years, the pain from the recession that began in 2007 could continue for years to come.

The collective shortfall could reach $83 billion through 2012, the league said. Cities will seek to cure revenue declines and spending pressures with higher service fees, layoffs, unpaid furloughs, and drawing on reserves or canceling infrastructure projects, the report said.

Many cities have already used these options as the recession has worn down their finances.”

• 14) Banks’ Credit Woes Rise as Buildings Empty

“As banks start releasing fourth-quarter earnings this week, the losses and reserves tied to commercial real-estate loans could spike even higher than some analysts think. Regional banks could get hit hardest, given typically greater exposure to commercial property than their bigger peers.

The stress is building. This month, market researcher Reis Inc. announced sharp declines in rents and occupancies in all property classes, giving landlords less cash flow to service debt. Foresight Analytics estimates delinquencies on commercial real-estate loans held by banks will rise to 9.47% in the fourth quarter from 5.49% a year earlier. ”

• 15) FDIC chief puts blame on Fed for crisis (Financial Times)

“The Federal Deposit Insurance Corporation laid much of the blame for the financial crisis at the door of the Federal Reserve at an inquiry that causes fresh problems for the US central bank.

Sheila Bair, chairman of the FDIC, which insures depositors against bank failures, said on Thursday that the Fed waited seven years to use fully its powers to regulate subprime lending. ”

• 16) Consumer Confidence Plummets (Brian C.)

The ABC Consumer Confidence index plummeted last week, falling from -41 to -47, sustaining “one of its steepest one-week drops in the last quarter century, following last week’s troubling jobs report with an all-hands retreat from what had been a tentative positive trend in consumer attitudes.” At -47 the index is essentially at the average 2009 level of -48, and far below the average since 1985 of -12. As far as the US consumer is concerned, this recession is far from over.

• 17) Sovereign Bonds Seen as Riskier Than Corporates (nncita)

The cost of insuring against the risk of debt default by European nations is now higher than for top investment-grade companies for the first time, as mounting government debt prompts fears over the health of many leading economies.

• 18) Greatest Fake Rally in History (Davos)

I truly believe that back in March 2009 at the market lows, the Federal Reserve, the Treasury, and the criminal mega banks met and decided they were going to create a recovery by manipulating the stock market.

• 19) ’09 Foreclosure Binge to Produce Hangover in ‘10

“As expected, foreclosures broke records by wide margins in 2009, with 2.8 million foreclosures being filed, an increase of 21 percent over 2008 and 120 percent over 2007, according to RealtyTrac’s year-end report.

However, so many properties are in the pipeline that huge numbers of delinquent properties won’t come to market until this year or later. The “hangover” of foreclosures also is expected to set a record and will be felt in real estate markets at least through the second quarter. “In the long term a massive supply of delinquent loans continues to loom over the housing market, and many of those delinquencies will end up in the foreclosure process in 2010 and beyond as lenders gradually work their way through the backlog,” said James J. Saccacio, chief executive officer of RealtyTrac.

In fact, the delay in processing foreclosures due to loan modification programs, moratoria and a system overwhelmed by the sheer volume of properties was the only reason the number of 2009 foreclosures was not greater.”

- Saxplayer00o1