Category: zerohedge

By: Chris Tell at http://capitalistexploits.at/

 

 

I’ve never been trapped in a fire before and trust me, I have had plenty of opportunity. Yes, I was THAT kid, the one who played with fire. The trick was, and still is to steer clear of the flames, to anticipate what and where. Fire is however notorious for doing what it wants and once its out of control even the best firefighters don’t stand a chance.

  Each day that passes we come closer to the arrival of a monetary fire that threatens to dwarf anything in our collective living memories. Watching the Australian bush fires in New South Whales recently made me think of our monetary system. Funny that.

The Australian bush has been burning long before the Brits began exporting their best and brightest to the “lucky country.” Right now the fires are raging. It was inevitable. Like the business cycle nature too abhors excess and steps in to correct it, clear the dead wood and prepare for rebirth.

What is often forgotten is that nature has evolved to rely on bush-fires as a means of reproduction and new “birth.” Fires are an integral part of the ecology of the planet’s surface. Humans can try and prevent these inevitable fires by “controlled burnings”, clearing out much of the dead underbrush, but it’s not foolproof.

The fires now raging in New South Whales are in part due to an extensive build up of dry brush which is likely overdue a good burning. The longer the dry bush remains unburned, and the more that accumulates the greater the risk of an inevitable fire. The result will be much greater than that which would have preceded it should a fire have taken place sooner. This is a basic, easy to understand law of nature.

Financial markets are NO different. The dry brush of excessive credit, monetary stimulus, rampant fraud, and government interference, which has caused the largest sovereign bond bubble the world has ever seen, has not been cleared or burned to allow for regeneration. In contrast we’ve actually been ADDING to it, doing the exact opposite of the “controlled burn.”

The market, like nature, has attempted to correct these excesses many times, only to be met with central bankers fire hoses spraying liquidity at ever increasing volumes and velocity. As the outbreaks of financial fires increase so too do the tools and technologies used by the central bankers. This postponement of the inevitable leads to massive mis-allocation of capital.

That’s a lot of dead wood buildup there

The above graph shows all the dead wood build-up. Quite a bonfire awaits us.

It is possible that the fires will continue to be contained, central bankers promise that this is indeed the case. We DO know however that it is not possible to contain it forever. This time is not different…or is it?

Let’s compare what’s different this time around in Australia and the world’s monetary system?

• The bush fires have invaded the suburbs. So too have the monetary bush fires directly impacted most western “suburbs”.
• The “tools” available to the firefighters are more advanced than at any time in human history. The tools that are at the disposal of central bankers are more “advanced” than at any time in human history.

What’s happening in New South Wales right now provides us with an instruction manual for how to proceed forward in a world of monetary madness. We need to BURN THE UNDERBRUSH. Simply hoping that the fires will fail to erupt simply defies history and mathematics. “Hope and Change” be damned.

The likely outcome is that we’re heading deep into asset confiscation mode. Government meddling will fail, it always has and it always will. The playbook from throughout history tells us that governments will steal anything and everything from the most productive before they default.

This happens either overtly (taxation, fines, penalties, asset seizure) or covertly via destruction of currencies (quantitative easing). Everything not nailed down is up for grabs. Don’t say you weren’t warned! If you need an example look at what’s happening in France. Hollande is insane, but he’s not unique.

As such, aside from structuring myself in order to protect what I have, which I hope I’ve done, ensuring that what I invest in going forward is structured properly is just as important. It makes no sense to invest intelligently only to have some thug steal the proceeds because I failed to set myself up to deal with the inevitability just mentioned.

So, how are Mark and I choosing to allocate our capital:

• Investing in private equity. We like businesses where we can get to know and deal directly with CEO’s and management, and where we are not at the whim of black box trading systems, plunge protection teams and assorted other “firefighters”. This is by far our most overweighted asset class. If you want to know more about how we do this, drop us a line.
• Trading the volatility created by these madmen. Our friend and colleague Brad Thomas, the new editor of our Trade Alert service, “The Capex Options Alert” is our guru in this area. You can get to know Brad a bit and sign up for this complimentary service for a limited time HERE.
• Continuing to buy and store physical precious metals. This just seems a long-term no-brainer.
• Investing in agriculture. A guy’s gotta eat, right!
• Select real estate. Maybe some premium scorched earth in New South Wales, Australia. After all, the risk of a devastating fire is now significantly reduced! But seriously, a nice piece of land where you can escape the madness and “grow your own” if need be.

The above is neither a recommendation nor an endorsement of any particular asset class or strategy. Obviously everyone’s situation is different, and we don’t know yours. Some could probably do just fine with a couple hunting rifles, some ammo and a nice piece of land to grow food and run a few livestock. Albeit that’s not going to work for urban dwellers.

The bottom line is that we are just encouraging you to consider how to prepare for a monetary firestorm. Do it your own way, use common sense, but just don’t be the dupe who ignores the obvious.

– Chris

“So just as I want pilots on the planes that I fly, when it comes to monetary policy, I want to think that there is someone with sound judgement at the controls.” – Martin Feldstein

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/nm9tXpH-L0I/story01.htm Capitalist Exploits

Today’s AM fix was USD 1,346.75, EUR 978.81 and GBP 837.06 per ounce.
Yesterday’s AM fix was USD 1,351.00, EUR 978.28and GBP 833.69per ounce.

Gold climbed $1.50 or 0.11% yesterday, closing at $1,353.00/oz. Silver slipped $0.05 or 0.22% closing at $22.47. Platinum rose $9.20 or 0.7% to $1,382.00/oz, while palladium climbed $6.50 or 0.9% to $707/oz.

Gold for immediate delivery gained as much as 0.6% to $1,360.76/oz, prior to a sharp bout of  concentrated selling just before European markets opened at 0800 GMT, that saw gold fall to just above $1,340/oz .

Gold had been near the highest level in five weeks after U.S. economic data showed how weak the U.S. economy remains leading to concerns that the Fed will continue with ultra loose monetary policies.

Gold in US Dollars, 10 Days – (Bloomberg)

Gold is currently 1.3% higher in October. Gold fell into the middle of the month (see chart below) and then as U.S. lawmakers wrangled over the nation’s budget and debt ceiling, triggering a 16-day partial government shutdown, gold began to recover and is now nearly $100 above the low seen mid October at $1,252/oz.

U.S. factory output trailed forecasts in September, while pending sales of previously owned homes fell the most in three years, separate reports showed yesterday.
Asian demand remains robust and holdings in the SPDR Gold Trust, the biggest gold  exchange traded product, held steady at 872.02 metric tons yesterday.

Gold in US Dollars, 1 Month – (Bloomberg)

In the Financial Times, veteran financial journalist and gold watcher, John Dizardnoted the increasing strain in the physical gold market and detailed how that should lead to much higher 
gold prices.

“Something is unsettling the animals in the forest of the gold market. Usually there is a chorus of chirrups and squeaks that are significant, momentarily, for one species or another, such as a few cents of arbitrage between Zurich and London, or a dollar-an-ounce rise in India caused by a dealer’s near insolvency. Then the noise settles down to the murmur of wind through the trees

However, the continuing high level of premiums for physical gold over the kinds you can trade on a screen suggests that the next move in the major gold indices or the various exchange traded funds could be discontinuous and dramatic. It would be much better for the financial world if gold were just bumping along, with only enough volatility and liquidity to keep a few dealers’ lights on. That would mean electronic or paper assets have retained their essential credibility with the public …”

“This could turn into a very violent wake-up call for [screen-traded gold]. People talk about ‘fiat currencies’, but we also have ‘fiat gold.’ Volatility is too cheap right now.”

Taken together, this collection of persistent microeconomic signals in gold could flag macro trouble to come. These noises worried me in August. They worry me more now.

Dizard’s article, ‘Strange gofo cry heralds trouble for gold’ in the Financial Times can be read here.

He has previously warned that ETF gold holdings and central bank gold reserves may be being lent to bullion banks, who then re lend that gold into the market.

Owners of gold exchange traded funds (ETFs) would be surprised and worried to discover that certain banks might be lending out gold that they have bought and believe that they own.

The leading gold ETF, GLD has been criticised by many analysts for its extremely complex structure and prospectus. There have also been warnings about the possible conflict of interest and overall lack of transparency.

If as has been suggested, banks are lending gold into the market that has come from exchange traded funds then this would validate the many concerns raised about the gold ETF market.

Questions would again be asked as to whether many of the ETFs are fully backed by the gold that they claim to own in trust on behalf of clients. 

 
Gold Prices / Fixes /Rates /Volumes – (Bloomberg)

Already more prudent hedge fund, investment and pension fund managers have liquidated their ETF positions in favour of allocated physical bullion.

We would expect that trend to accelerate as prudent investors rightly seek to avoid the high level of counterparty and systemic risk associated with exchange traded gold and other forms of unallocated gold and paper gold.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/LdEbZ7mHGG0/story01.htm GoldCore

Nearly three years ago, before anyone had heard of expert networks, before the SEC had brought any major enforcement action against any hedge fund and long before anyone had to gall to accuse SAC of insider trading, Zero Hedge started a series of posts commencing with “Is The SEC’s Insider Trading Case Implicating FrontPoint A Sting Operation Aimed At S.A.C. Capital?” exposing the fraudulent transactions of Steve Cohne’s hedge fund despite fears of violent legal reprisals. We are delighted to inform our readers that this particular chapter is now over: the WSJ has just reported that SAC will plead guilty to securities fraud, pay a final $1.2 billion penalty (still a tiny sum compared to all the ill-gotten gains by Steve Cohen over the years), and most importantly, end the fund’s management of outside money.

From the WSJ:

SAC Capital Advisors LP will plead guilty to securities fraud as part of a landmark criminal insider-trading settlement with federal prosecutors set to be announced by next week, people familiar with the discussions said.

 

The exact timing of the pact isn’t set, and if final details are ironed out quickly, it could still be unveiled by the end of this week, these people said.

 

SAC, run by Wall Street titan Steven A. Cohen, also will agree to stop managing outside money and pay the government criminal penalties of about $1.2 billion, according to these people—which would be the largest-ever insider-trading penalty.

 

…

 

A spokeswoman for the Manhattan U.S. attorney’s office, Jennifer Queliz, declined to comment, as did SAC spokesman Jonathan Gasthalter, Federal Bureau of Investigation spokesman J. Peter Donald and SEC spokeswoman Judy Burns.

 

After any settlement is approved, Mr. Cohen would remain under criminal investigation, though no charges are expected against him barring unexpected developments in the probe, the people said.

And since in the hedge fund world the bulk of “retained earnings” comes not from capital appreciation, manipulated, centrally-planned markets or not, but from charging outside investors the exorbitant privilege of 2 and 20 or, in SAC’s case 3 and 50, the Steve Cohen era is now effectively over.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/OaNw3uiGE2I/story01.htm Tyler Durden

SSDD. Collapsing confidence, check. Housing Recovery meme toast, check. Volume at 2013 lows, check. BTFATH and send Trannies up for 13th of last 15 days (+10.4%), Dow near all-time highs again (thank you IBM buybacks), and S&P to new all-time highs… but don't tell Treasuries (which stand +/-1bps on the week). VIX wasn't drinking the kool-aid but the NASDARK session enabled futures to drag us back to higher before limping lower into the closer. The USD oscilatted around Nowotny comments and POMO ending the day up a rather notable 0.5% from Friday's close and that pressured commodities in general lower (gold hovering at $1345). The last 2 minutes saw stocks scream higher on their own as the world was terrified it would miss out on something (but no other market moved) and all the major indices managed new highs.

 

US Equity markets have only one master… JPY carry levered muppetry…

 

But bonds weren't buying the stock exuberance (or was the post-PMO rally in both bonds and stocks just more of the same Un-Taper hope?)….

 

And credit is absolutely ignoring stocks' exuberance…

 

But the straight line rise to infinity and beyond continues as the entire market finds Birinyi's ruler…

 

Homebuilders rejoin Discretionary stocks at the top of the heap post Debt-ceiling lows… (up 8.5%!)…

 

Volume continues to slump as stock prices rise…

 

VIX remains 'relatively' bid as we head into tomorrow's FOMC decision…

 

Intriguingly, shorts have actually not done so badly in the last week or so (but today saw a late day squeeze)…

 

When the Nasdaq cash indices cat is away, the futures mice will play…

 

Charts: Bloomberg

 

Bonus Chart: Let The Kool Aid Flow… (h/t @Not_Jim_Cramer)

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/No-1fHwn2mk/story01.htm Tyler Durden

Following the humiliation of having a US ambassador summoned so he would explain the spying conducted by the US government, in liberated Paris of all places (because while the NSA spying on your own citizens is an absolute travesty and trampling of basic human rights and smacks of Stalingrad circa 1960, spying abroad is permitted, accepted and largely forgiven by all the developed nations – after all everyone does it) the US has struck back in the most poetic way imaginable: it said that whatever phone records the NSA acquired were passed on to it by the local spy agencies of none other than France and Spain. The implication is simple: the local people understandably furious at the US and screaming blood, have just been given a far more convenient target at which to fume: their own governments.

The WSJ reports how the spy scandal tables have just turned:

The phone records collected by the Europeans—in war zones and other areas outside their borders—then were shared with the NSA, U.S. officials said, as part of efforts to help protect American and allied troops and civilians.

 

The new disclosure upends the version of events as reported in Europe in recent days, and puts a spotlight on the role of European intelligence services that work closely with the NSA, suggesting a greater level of European involvement in global surveillance.

 

The U.S. has so far been silent about the role of European partners in these collection efforts so as to protect relationships. These efforts are separate, however, from the U.S. spying programs that targeted dozens of foreign leaders, including German Chancellor Angela Merkel, whose phones were tapped for years by the NSA.

 

The NSA declined to comment, as did the Spanish foreign ministry and a spokesman for the French Embassy in Washington. A spokesman for Spain’s intelligence service said: “Spanish law impedes us from talking about our procedures, methods and relationships with other intelligence services.”

Of course, this is a lie too:

After publication of the report in Le Monde last week, the U.S. Director of National Intelligence James Clapper said that it contained “inaccurate and misleading information regarding U.S. foreign intelligence activities.”

 

He said the allegation that the NSA collected more than 70 million “recordings of French citizens’ telephone data” is false, but he provided no further explanation of what the data in the documents showed.

However, that doesn’t matter because in the New Normal globalized world everyone else is lying too, and the only prerogative is to keep the sheep happily grazing and not thinking too hard about what really goes on behind the scenes.

Officials privately have said the disclosures in the European press put the U.S. in a difficult bind.

 

The U.S. wants to correct the record about the extent of NSA spying but doing so in this case would require it to expose its allies’ intelligence operations, the officials say, which could compromise cooperation in the future as well as ongoing intelligence efforts.

And for the “greater good” this can’t possibly happen, as who knows what level of theft and criminality within the governments would be exposed. So the best option is merely to scapegoat, who else, Snowden himself, and to suggest that whatever the documents showed is not accurate and the NSA knows best.

U.S. officials said the Snowden-provided documents had been misinterpreted and actually show phone records that were collected by French and Spanish intelligence agencies, and then shared with the NSA, according to officials briefed on those discussions.

 

U.S. intelligence officials studied the document published by Le Monde earlier this month and have determined that it wasn’t assembled by the NSA.

 

Rather, the document appears to be a slide that was assembled based on NSA data received from French intelligence, a U.S. official said.

Based on an analysis of the document, the U.S. concluded that the phone records the French had collected were actually from outside of France, and then were shared with the U.S. The data don’t show that the French spied on their own people inside France.

 

U.S. intelligence officials haven’t seen the documents cited by El Mundo but the data appear to come from similar information the NSA obtained from Spanish intelligence agencies documenting their collection efforts abroad, officials said.

And because the NSA never lies, everyone must believe them…. must believe them…. must believe them…

In conclusion: “Public disclosure of European complicity in the collection efforts would likely spark domestic outrage in those countries against their own governments, and could threaten cooperation with the U.S.”

Great – more domestic outrage in countries that have 60% youth unemployment is just what the European recovery doctor ordered.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/mx6pTkmAg10/story01.htm Tyler Durden

There is a fear stalking the corridors of European politics. It is not the surging unemployment in France, or record delinquencies in Spain, or all-time low credit creation across the region; it is the growing concern that the powers that be have from the rise of Euroskepticism. As UKIP’s Nigel Farage exclaims to Barroso and his brood, “years ago, you were less worried… but now we are “evil”, “populists”, we are “dangerous” and are going to bring down Western Civilization.” As the outspoken Brit implores in this brief clip, there is nothing extreme in his views. “The real European debate is about identity,” he notes, “what we are saying, large numbers of us from every single EU member state is: we don’t want that flag, we don’t want the anthem that you all stood so ram-rod straight for yesterday, we don’t want EU passports, we don’t want political union.” As Greece faces down its 3rd bailout and deflationary threats loom across the region, we suspect top-down and bottom-up angst will bubble back to the surface soon enough.

 

 

 

And here, from El Pais, is a very enlightening graphic showing the considerable growth in “Extreme Right” parties across the entire European region:

 

Whether, as Farage has warned in the past, we remain on the verge of social unrest is unclear but for sure this is not the poltical union that Barroso pitches it to have become…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/dW5UBgYLZsI/story01.htm Tyler Durden

There is a fear stalking the corridors of European politics. It is not the surging unemployment in France, or record delinquencies in Spain, or all-time low credit creation across the region; it is the growing concern that the powers that be have from the rise of Euroskepticism. As UKIP’s Nigel Farage exclaims to Barroso and his brood, “years ago, you were less worried… but now we are “evil”, “populists”, we are “dangerous” and are going to bring down Western Civilization.” As the outspoken Brit implores in this brief clip, there is nothing extreme in his views. “The real European debate is about identity,” he notes, “what we are saying, large numbers of us from every single EU member state is: we don’t want that flag, we don’t want the anthem that you all stood so ram-rod straight for yesterday, we don’t want EU passports, we don’t want political union.” As Greece faces down its 3rd bailout and deflationary threats loom across the region, we suspect top-down and bottom-up angst will bubble back to the surface soon enough.

 

 

 

And here, from El Pais, is a very enlightening graphic showing the considerable growth in “Extreme Right” parties across the entire European region:

 

Whether, as Farage has warned in the past, we remain on the verge of social unrest is unclear but for sure this is not the poltical union that Barroso pitches it to have become…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/dW5UBgYLZsI/story01.htm Tyler Durden

Submitted by Simon Black of Sovereign Man blog,

You know the old rule of thumb about laws–

The more high-sounding the legislation, the more destructive its consequences.

Case in point, HR 3293– the recently introduced Debt Limit Reform Act. Sounds great, right? After all, reforming the debt seems like a terrific idea.

Except that’s not what the bill really does. They’re not reforming anything. HR 3293′s real purpose is to authorize the government to simply stop counting a massive portion of the US national debt.

You see, one of the biggest chunks of the debt is money owed to ‘intragovernmental agencies’.

For example, Medicare and Social Security hold their massive trust funds in US Treasuries. This is the money that’s owed to retirees.

In fact, nearly $5 trillion of the $17 trillion debt (almost 30%) is owed to intragovernmental agencies like Social Security and Medicare.

So now they basically want to stop counting this debt. Poof. Overnight, they’ll make $5 trillion disappear from the debt.

On paper, this looks great. But in reality, they’re setting the stage to default on Social Security beneficiaries without causing a single ripple in the financial system.

Remember, when governments get this deep in debt, someone is going to get screwed.

They may default on their obligations to their creditors, causing a crisis across the entire financial system. Or perhaps to the central bank, causing a currency crisis.

But most likely, and first, they will default on their obligations to their citizens. Whatever promises they made, including Social Security, will be abandoned.

And if you read between the lines, this new bill says it all.

Not to be outdone by the United States Congress, though, the International Monetary Fund recently proposed a continental-wide ‘one off’ wealth tax in Europe.

Buried in an extensive report about Europe’s troubled economies, the IMF stated:

“The appeal is that such a tax, if it is implemented before avoidance is possible and there is a belief that it will never be repeated, does not distort behavior (and may be seen by some as fair).”

In other words, first they want to implement capital controls to ensure that everyone’s money is trapped. Then they want to make a grab for people’s bank accounts, just like they did in Cyprus.

The warning signs couldn’t be more clear. I’ve been writing about this for years. It’s now happening. This is no longer theory.

Over the last few weeks I’ve been having my staff revise a free report we put together two years ago about globalizing your gold holdings.

In the report I mentioned that capital controls are coming. And that some governments may even ban cash transactions over a certain level.

These things have happened. Cyprus has capital controls, France and Italy have limits on cash transactions. And given this new evidence, it’s clear there’s more on the way.

Every rational, thinking person out there has a decision to make.

You can choose to trust these politicians and central bankers to do the right thing.

Or you can choose to acknowledge the overwhelming evidence and reduce your exposure to these bankrupt western countries that will make every effort to lie, cheat, and steal whatever they can from you… just to keep the party going a little while longer.

It’s time for people to wake up to this reality. You only have yourself to rely on. Not the system. Not the government. And certainly not the bankers.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/0WJr-vFUED8/story01.htm Tyler Durden

We recently noted that, despite all the hot money flows and self-congratulatory extrapolation, European macro data is collapsing (as opposed to supporting ideas of recovery). In fact, it is falling at the fastest pace in over a year as the prospect of the euro area falling into deflation may be increasing; as Bloomberg’s Niraj Shah notes the single currency rises, growth loses momentum, money-supply expansion slows and bank lending stagnates. As Shah fears, that may push the region into a debt spiral as the real value of debt increases, marking a new phase in the crisis.

Inflation May Turn to Deflation

The pace of inflation has almost halved since the start of the year to a three-and-a-half year low of 1.1 percent in September. Core prices are near a record low of 0.8 percent at 1 percent. Greece is already experiencing deflation as prices fell at an annual rate of 1 percent in September. Spain’s 0.5 percent CPI rate may already be negative once the increase in the 3 percentage point rise in VAT is excluded.

Weak Credit Extension

The three-month average M3 money-supply growth stands well below the ECB’s reference rate of 4.5 percent. It slowed to 2.1 percent in September from 2.3 percent in the prior month. Credit extension is likely to remain weak as banks deleverage their balance sheets in preparation for next year’s Asset Quality Review and stress tests.

Deflation Risks Increase as Euro Strengthens

The strength of the euro will place downward pressure on prices. The Bank of International Settlements measure of the real effective exchange rate, which is deflated by the consumer price index, rose to 98.8 last month, the highest this year. The euro has risen 4.4 percent against the dollar this year.

Real Cost of Debt Servicing to Swell

Countries’ real debt will increase as they fall into deflation. The euro-area debt ratio already stood at 93.4 percent of GDP in the second quarter of 2003 versus 89.9 percent in the same quarter in 2012. Greece had a debt ratio of 169.1 percent in the second quarter. That is only surpassed by Japan and Zimbabwe. Belgium, Ireland, Italy, Portugal have debt ratios exceeding 100 percent.

Source: Niraj Shah (@economistniraj)

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/AtfnjVKp2LU/story01.htm Tyler Durden

We recently noted that, despite all the hot money flows and self-congratulatory extrapolation, European macro data is collapsing (as opposed to supporting ideas of recovery). In fact, it is falling at the fastest pace in over a year as the prospect of the euro area falling into deflation may be increasing; as Bloomberg’s Niraj Shah notes the single currency rises, growth loses momentum, money-supply expansion slows and bank lending stagnates. As Shah fears, that may push the region into a debt spiral as the real value of debt increases, marking a new phase in the crisis.

Inflation May Turn to Deflation

The pace of inflation has almost halved since the start of the year to a three-and-a-half year low of 1.1 percent in September. Core prices are near a record low of 0.8 percent at 1 percent. Greece is already experiencing deflation as prices fell at an annual rate of 1 percent in September. Spain’s 0.5 percent CPI rate may already be negative once the increase in the 3 percentage point rise in VAT is excluded.

Weak Credit Extension

The three-month average M3 money-supply growth stands well below the ECB’s reference rate of 4.5 percent. It slowed to 2.1 percent in September from 2.3 percent in the prior month. Credit extension is likely to remain weak as banks deleverage their balance sheets in preparation for next year’s Asset Quality Review and stress tests.

Deflation Risks Increase as Euro Strengthens

The strength of the euro will place downward pressure on prices. The Bank of International Settlements measure of the real effective exchange rate, which is deflated by the consumer price index, rose to 98.8 last month, the highest this year. The euro has risen 4.4 percent against the dollar this year.

Real Cost of Debt Servicing to Swell

Countries’ real debt will increase as they fall into deflation. The euro-area debt ratio already stood at 93.4 percent of GDP in the second quarter of 2003 versus 89.9 percent in the same quarter in 2012. Greece had a debt ratio of 169.1 percent in the second quarter. That is only surpassed by Japan and Zimbabwe. Belgium, Ireland, Italy, Portugal have debt ratios exceeding 100 percent.

Source: Niraj Shah (@economistniraj)

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/AtfnjVKp2LU/story01.htm Tyler Durden