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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (113239)	7/23/2010 5:21:40 AM
From: Haim R. Branisteanu	Respond to of 116555

EBay Inc., International Business Machines Corp. and Delta Air Lines Inc. all pinned part of the blame for disappointing 2010 forecasts or second-quarter sales on the same culprit: the weakened euro. The European currency averaged $1.27 in the quarter, the lowest in more than four years, hurting sales at companies from technology businesses to jet-engine manufacturers. So far in this earnings cycle, Standard & Poor’s 500 Index companies are trailing analysts’ profit estimates at almost twice the rate of the first quarter, Bloomberg data show. “It’s one of these things that oftentimes companies take their eyes off of,” said Peter Sorrentino, a senior portfolio manager for Huntington Asset Advisors in Cincinnati, which manages $13.3 billion. “It’s something that they don’t typically focus on until it reaches up and bites them.” The euro’s decline and other currency fluctuations will lower full-year revenue as much as $250 million at EBay, the San Jose, California-based company said yesterday. IBM, the Armonk, New York-based computer-services company, said its second- quarter sales were slashed by $500 million, and Atlanta-based Delta, the world’s largest carrier, posted a $25 million charge. noir.bloomberg.com

To: Haim R. Branisteanu who wrote (113239)	7/23/2010 12:30:26 PM
From: pogohere	1 Recommendation Read Replies (2) \| Respond to of 116555

Gold Swaps Signal the Roadmap Ahead The news rocked the global gold market when an almost obscure line item in the back of a 216 page document released by an equally obscure organization was recently unearthed. Thrust into the unwanted glare of the spotlight, the little publicized Bank of International Settlements (BIS) is discovered to have accepted 349 metric tons of gold in a $14B swap. Why? With whom? For what duration? How long has this been going on? This raises many questions and as usual with all $617T of murky unregulated swaps, we are given zero answers. It is none of our business! Considering the US taxpayer is bearing the burden of $13T in lending, spending and guarantees for the financial crisis, and an additional $600B of swaps from the US Federal Reserve to stem the European Sovereign Debt crisis, some feel that more transparency is merited. It is particularly disconcerting, since the crisis was a direct result of unsound banking practices and possibly even felonious behavior. The arrogance and lack of public accountability of the entire banking industry blatantly demonstrates why gold manipulation, which came to the fore in recent CFTC hearings, has been able to operate so effectively for so long. It operates above the law or more specifically above sovereign law in the un-policed off-shore, off-balance sheet zone of international waters. Since President Richard Nixon took the US off the Gold standard in 1971, transparency regarding anything to do with gold sales, leasing, storage or swaps is as tightly guarded by governments as the unaudited gold holdings of Fort Knox. Before we delve into answering what this swap may be all about and what it possibly means to gold investors, we need to start with the most obvious question and one that few seem to ask. Who is this Bank of International Settlements and who controls it? BANK OF INTERNATIONAL SETTLEMENTS (BIS) The history of the BIS reads with all the intrigue of a spy novel and comes with a very checkered past. According to the BIS web site, as a privately held bank, it decided in recent years to become wholly owned and controlled by the Central Banks of the world - a highly unusual decision for a private enterprise. Lengthy court cases in Le Hague were involved by private members who objected. Something like this is usually called a buy out or takeover, but there are no public records of any of the central banks making such an acquisition - an extremely strange set of events with little media coverage. I am sure it can all be explained very logically until we get to the size of the balance sheet. We are talking close to a half trillion dollar balance sheet, or more specifically 259 billion SDR’s, which is approximately $400B. Where did the capital or deposits come from? The BIS goes out of its way to specifically assert it only accepts deposits from member central banks, though it does also state confusingly in the financial notes that there are deposits from previous financial statements from recognized international banks. Therefore, are we to conclude that the US Federal Reserve has huge deposits at the BIS? Though I couldn’t find the assets on the Fed’s balance sheet, I’m sure they are there in the small print or on the New York Feds balance sheet somewhere. It would be a legal requirement. It is a forensic accounting nightmare to find these items based on public documents of the various private organizations. Apparently it is just none of our business. For such a major element of the world’s operating financial structure to have such poor visibility, it seems preposterous until you actually do the research. It should be laid out so a freshman Economics class could easily follow the ownership acquisition and money flows. It isn’t and it appears to this researcher that it is intentionally opaque. Since the BIS goes out of its way to ensure readers in its annual financial report that no private funds are accepted, maybe all we really need to know is what the BIS officially tells us. The BIS is owned and controlled by their member Central Banks. Therefore if the BIS was to do a gold swap of the magnitude of 349 metric tonnes, then board member Ben Bernanke would have known of it in advance and approved it. He would know exactly who the transaction was with and why. If he didn’t then he is legally negligent in his fiduciary responsibility as a BIS board member, because of the size of the transaction and its material effect. Other board members include: Mervyn King, Governor of the Bank of England, Jean-Claude Trichet, President of the European Central Bank, Axel Weber, President of the Deutsche Bundesbank and William C Dudley, President of the Federal Reserve Bank of New York. You can’t have it both ways. Though we can suspect many things, there is no other conclusion we can reach than the swap is part of an agreed upon plan or concurrence between these board members. So what is the possible understanding or plan? . . . FUNDING For those who followed the European Sovereign Debt Crisis and the negotiations with Greece, you know that the IMF was an unwelcomed intruder into EU financial affairs. Greece on more than one occasion held the IMF as a negotiating ploy and as a funding alternative to the EU’s procrastination and lack of decisiveness. The IMF’s willingness to interfere created a lot of bad feelings within the EMU and Germany specifically. As Ambrose Evans-Prichard reported: “The ECB is barely on speaking terms with the IMF – the "Inflation Maximizing Fund" as it was dubbed in a Bundesbank memo - - The IMF has not caught up to the reality in Europe said ECB über-hawk Jürgen Stark on July 9th” The final EU bailout in fact heavily involved the IMF participation. The very busy IMF is the dominant crisis lender of last resort throughout all Central & Eastern European current financial problems. What we are seeing is the emergence of another funding structure based on the SDR - SDR’s that have a degree of gold backing. The BIS now has a total of 12.4% of its deposits (32B SDR) in the form gold deposits. Note #11 to the BIS financial statements states: “Gold deposits placed with the Bank originate entirely from Central Banks. They are all designated as financial liabilities measured as amortized cost”. ARE WE SETTING THE PINS UP FOR AN ALTERNATIVE RESERVE CURRENCY? Are we moving towards the BIS and IMF being fractional reserve banks that will create money & credit - a reserve currency that will satisfy Russia and China with an element of Gold backing? A bank such as the BIS could easily assume this role (if it hasn’t already) as could the IMF with possible banking charter adjustments. The chances are high that this is the roadmap we will find ourselves taking. Like all banking that started as Gold backed you could expect that in this case the little gold backing that starts the process is quickly diminished so a limitless money machine could begin functioning. The gold backing would likely be an initial requirement by Russia and China. The partial gold backing would lend credibility to the acceptance and a possible reserve currency alternative and eventual establishment as the global reserve currency. . . . CONCLUSION The advantage of this approach is: 1. Leverage: Compounding money creation between banks 2. Partial gold backing: Present BIS levels of 12.4% 3. SDR: Offers a basket of currencies approach versus a single currency dependency. 4. Former Communist bloc regime backing: China and Russia would likely support this approach for a number of reasons, which they have already expressed as short comings to the current global reserve situation. 5. Reserve Currency: The SDR approach offers a migration path from today’s US$ reserve currency to an alternative bank reserve currency to a future global reserve currency.[emphasis added] home.comcast.net