KWN: Today James Turk spoke with King World News about a “Black Swan” event, the coming global monetary reset, and the incredible price action that KWN readers can expect to see in gold and silver over the next 60 days.Here is what Turk had to say in this fascinating and powerful interview: “What we saw in 2012, Eric, is a good example of what I have been calling a ‘managed retreat.’ The central planners were out in force – particularly in the fourth quarter – trying to keep a lid on precious metal prices, and they managed to accomplish that to some extent. Nevertheless, despite their best efforts, last year gold rose 7.0%, and silver climbed 8.2% in US dollar terms.”
James Turk continues:
“In fact, gold and silver were higher against all the world’s major currencies last year, which is an important point. National currencies are being destroyed by misguided government policies. So while the purchasing power of these currencies is being eroded, the best governments can do and the most they can expect is to try keep the gold price from rising faster than the rate at which the purchasing power of currencies is being debased.
GREG MANNARINO: RATINGS AGENCIES WILL DOWNGRADE THE DOLLAR IN 2013, BURSTING US DEBT BUBBLE
In his latest market update, Greg Mannarino states that the market pop in the wake of the 2 month fiscal cliff agreement is merely a relief rally that has no real legs. He points out that the agreement does absolutely nothing to address spending.
Mannarino states that the Fed’s $85 billion in monthly counterfeitting to monetize the US budget deficit will steal purchasing power from Americans. Mannarino states that the US ratings agencies will face massive pressure to downgrade the US in 2013, which will result in the busting of the US debt bubble will burst in 2013, and force massive amounts of cash into commodities and physical precious metals.
Cash is going out of style, buy phyzz!
Suddenly, Lots Of Influential People Are Talking About The Trillion Dollar Coin Idea To Save The Economy
This is really thrilling.
An arcane idea that started on finance blogs in the summer of 2011– that Tim Geithner should mint a trillion dollar platinum coin to avert the debt ceiling — is now seriously taking off.
The premise of the idea is this: Although the Treasury can’t just create money out of thin air to pay its bills, there is a technicality in the law that says the Treasury has special discretion to create platinum coins, and the thinking is that Tim Geithner could make the coin and walk it over to the Federal Reserve and deposit it in the Fed’s account.
But there’s a new debt ceiling looming, and this time, LOTS more people are talking about it.
We noted our surprise back in early December that an actual 3rd party research firm brought up the idea.
Now it’s going even more viral.
In an interview with Capitol New York, Representative Jerry Nadler came out in favor of the solution (Nadler has an above-average understanding of economics in our experience).
Josh Barro at Bloomberg is now endorsing it, and that’s spread a huge conversation about it among DC journalists and policy folks on twitter.
Barro explains why it’s the perfect “solution” to the debt ceiling fiasco:
Hitting the debt ceiling isn’t an option. It’s no way to run the country, and Republicans know that. So, a debt-ceiling increase shouldn’t count as a “concession,” and it’s nutty for Obama to have to give substantive policy ground to get one.
Monetizing deficits through direct presidential control of the currency, in lieu of borrowing, is also no way to run a country. It’s silly, and it’s perfectly legal. Agreeing not to do so is therefore the ideal “concession” for Obama to offer in return for Republicans agreeing to end the threat of a debt-default crisis.
This is basically the right way to think about it. Yes it’s silly to think of funding yourself with a coin, but it’s even sillier to think that defaulting might be a good idea, so you might as well do it.
One economics point must be addressed: Lots of people, when they hear the idea, say one of two things:
- This would cause massive inflation!
- Well if we did this, why not a $100 trillion dollar coin?
JIM SINCLAIR: IMF STATES ENTIRE DERIVATIVES MARKET IS A WMD TIME BOMB
Gold and derivatives expert Jim Sinclair has sent subscribers an alert this morning warning on the severity of the global derivatives market, which Sinclair has dubbed the Global Derivative Graveyard Problem.
The IMF, which currently estimates the global derivatives market to be approximately $600 trillion (rather than the true $1.26 QUADRILLION notional), has come out and stated that the entire derivatives market is a WMD time bomb.
From Jim Sinclair:
Here is the recent IMF conclusion on page #47 & #48 on the potential still remaining in the OTC derivative graveyard. This is not from me, but rather from the establishment itself.
The number the IMF is using is way below the huge number of the global problem, and still they conclude that the derivative market is a world class WMD time bomb.
The following is courtesy of CIGA DC browsing on our behalf. This should be a huge concern to any analyst with their eyes open.
TITF – Too Important to Fail Risk
SIFI – Systemically Important Financial Institution Risk
Topology (from the Greek ?????, “place”, and ?????, “study”) – A major area of mathematics concerned with the most basic properties of space, such as connectedness. (wikipedia)
A major hallmark of SIFIs is their activity in financial derivatives markets. The analysis of this paper has one clear message. The global derivatives markets in the post Lehman period, despite considerable compression of bilateral positions, are unstable and they can bring about catastrophic failure. Quite simply, a threat of failure to any of the SIFIs is an immediate threat to the others. The network topology where the very high percentage of exposures is concentrated among a few highly interconnected banks implies that they will stand and fall together. This topological fragility of the derivatives markets as risk sharing institutions has an implicit moral hazard problem that undermines their social usefulness. The empirically calibrated network for derivatives liabilities manifests a highly clustered core- periphery structure and extreme form of TITF as seen in Figures 5.a- 5.f. The implied socialized losses are very large (to the tune of US$350 billion) and the liabilities arising from extant derivatives network structures cannot be supported by the existing capital base. The good news is that the highly clustered network structure permits targeted management of systemic risk. One of the main contributions of the paper is to use network analysis to design a set of surcharges that will enable the SIFIs in the derivatives markets to internalize the costs imposed on other FIs and also the tax payer by their failure.
In a new video message, Peter Schiff reacts on the longer term outlook of the outcome of the “fiscal cliff debate”. Obviously we don’t want to spend time and effort in analyzing what has been decided, but rather what is to come. We have found some interesting insights in Peter Schiff his point of view although most of them are not new.
Peter Schiff is convinced that America is going to raise the debt ceiling again. That is the most irresponsible and reckless type of action, but the only one he expects. Because of this, the dollar is going to come under pressure. Currently the focus is on the European crisis. However, the coming US crisis is much worse. At least, the Europeans deal one way or another with their problems. The American politicians are less disciplined; they keep on spending what they do not have and keep on increasing the already huge deficits.