The Gold and Silver Thread

[KissMy]

I am thinking that the Fed will continue to buy government debt. They will continue to lock up these low rates by continuing operation twist. This will prevent the US debt payments from rising for 10 years. Then 10 years from now when the 10 year bond comes due we will have to refinance. At that point we will no longer be able to afford the interest on the debt just like Greece. Then the Fed will just write down the debt they own. That will cause deflation after any inflation they cause until then.

 

[EdwardBaiamonte]

Then the Fed will just write down the debt they own. That will cause deflation after any inflation they cause until then.

why would that cause deflation???

 

[KissMy]

Then the Fed will just write down the debt they own. That will cause deflation after any inflation they cause until then.

why would that cause deflation???

Default on or non payment of debt causes deflation. Just like when people failed to pay their home loans. Money is created (inflation) when money is borrowed. Money is destroyed (deflation) when debt is wiped out or not repaid.

 

[EdwardBaiamonte]

Then the Fed will just write down the debt they own. That will cause deflation after any inflation they cause until then.

why would that cause deflation???

Default on or non payment of debt causes deflation. Just like when people failed to pay their home loans. Money is created (inflation) when money is borrowed. Money is destroyed (deflation) when debt is wiped out or not repaid.

yes but the scenerio you describe has the Fed massively defaulting on Treasuries. In that case I assume they would merely inflate to avoid any deflation.

 

[KissMy]

why would that cause deflation???

Default on or non payment of debt causes deflation. Just like when people failed to pay their home loans. Money is created (inflation) when money is borrowed. Money is destroyed (deflation) when debt is wiped out or not repaid.

yes but the scenerio you describe has the Fed massively defaulting on Treasuries. In that case I assume they would merely inflate to avoid any deflation.

They are already inflating to cover for the deflation from bad sub-prime loans. Once those loans stop defaulting & the economy recovers, the Fed's inflation will show up. Then they will have to write down Treasury debt at the same rate. It may cause panic for a while. We know taxes collected will not be able to cover the interest on the debt once interest rates rise to prevent runaway inflation. They will have to write down debt. The "Baby Boomer's" will soon be drawing hard on the system & pulling money from the markets.

 

[KissMy]

Paving Over Pension Liabilities

Now Congress faces a June 30th deadline, having only been able to pass a 90-day funding extension at the end of March for the nation's transportation needs. As important as stable transportation spending is to the nation's crumbling infrastructure, this bill is not only about roads and bridges. Private corporations are using it as a vehicle to ask Congress to change how they calculate their annual pension contributions, which could create a huge unfunded liability for the American taxpayer.

Currently, the law requires corporate plans to measure their liabilities, and determine the annual contribution needed to fund them, by using the rate of return on corporate bonds - the discount rate. As historically low bond rates force higher contributions, corporations now want to reduce annual payments to their pension plans by lobbying Congress to change this rate. Not only is this misleading and addictive, but artificially lowering contributions today will add to future pension shortfalls tomorrow-possibly requiring further public bailouts.

The provision in the Senate-passed version of the Transportation bill currently under consideration in the House would allow corporations to use a 25-year average rate as opposed to the current 2-year average, increasing the current discount rate from the 4 percent range to roughly 6 percent. Since liabilities are sensitive to discount rate assumptions, the plan's liability will change roughly 15 percent for every one percentage point change in the discount rate. For example, Boeing reports that a mere quarter of a point increase in the discount rate could cut its pension liability by $1.7 billion. Apply a small discount rate hike across all private plans and it's easy to see why corporations are lobbying Congress for a discount rate boost.

Since 2002, Congress has, on a few occasions, let corporations use a higher discount rate to determine their contributions. Among other companies, American Airlines reduced its annual contribution to employee pension plans by $2.1 billion. Unfortunately, today the airline faces a shortfall in its pension plan, triggered by the growing expense for employee retirement. Its parent company filed for bankruptcy in November.

Corporate pension plans are insured by a federal agency, the Pension Benefit Guaranty Corporation (PBGC). If for some reason corporations are not able to pay out the pension benefits they promised to retirees, the PBGC and taxpayers are on the hook for it.

 

[KissMy]

FT - Finance: Grinding to a halt

America’s $8tn corporate debt market faces a liquidity drought as banks retreat from the trade... Last month, Boston’s leading asset managers called nine of Wall Street’s top banks to an emergency meeting in a skyscraper overlooking the city’s harbour. Over back-to-back discussions they tried to tackle one of the toughest problems confronting financiers and, potentially, the broader economy: America’s $8tn corporate debt market is running out of its lifeblood – liquidity...

If this liquidity crunch intensifies, some companies already battling a global downturn could find they will also face increasing costs in raising funds. This could then dampen growth in a US economy that appears once again to be straining to recover.

“Corporates face the risk of higher borrowing costs if liquidity continues declining,” says Andrew Lo, a professor at Massachusetts Institute of Technology...

The problem centres on large investment and asset management companies, known as the “buy-side”. These are flush with cash and have sought to expand their massive portfolios with corporate debt. However, they are finding it harder to purchase or sell bonds from “dealer” banks that act as the middlemen, the so-called “sell-side”.

If investment funds have to spend more to trade, they could ultimately pass on their increased costs to companies whose debt they buy.

The banks cannot satisfy the buyside’s needs because they are reducing their own holdings of corporate bonds, partly because of a raft of new regulations proposed in the wake of the financial crisis.

These rules are already altering the way banks behave. While tougher capital standards under Basel III and the pending Volcker rule seek to avoid another meltdown in the banking system, they have had the unintended consequence of sucking liquidity out of the corporate debt market. If banks want to hold riskier assets – such as corporate rather than sovereign debt – they have to go to the greater expense of holding more capital to offset those investments...

 

[Toro]

Comex silver down 5% today, the 14th worst day of the past 12 months. Such big down days are usually followed by more near term weakness.

Gold has support at $1520-$1530. It must hold there. However, the technical picture is worrisome, particularly for silver.

 

[Trajan]

FT - Finance: Grinding to a halt

America’s $8tn corporate debt market faces a liquidity drought as banks retreat from the trade... Last month, Boston’s leading asset managers called nine of Wall Street’s top banks to an emergency meeting in a skyscraper overlooking the city’s harbour. Over back-to-back discussions they tried to tackle one of the toughest problems confronting financiers and, potentially, the broader economy: America’s $8tn corporate debt market is running out of its lifeblood – liquidity...

If this liquidity crunch intensifies, some companies already battling a global downturn could find they will also face increasing costs in raising funds. This could then dampen growth in a US economy that appears once again to be straining to recover.

“Corporates face the risk of higher borrowing costs if liquidity continues declining,” says Andrew Lo, a professor at Massachusetts Institute of Technology...

The problem centres on large investment and asset management companies, known as the “buy-side”. These are flush with cash and have sought to expand their massive portfolios with corporate debt. However, they are finding it harder to purchase or sell bonds from “dealer” banks that act as the middlemen, the so-called “sell-side”.

If investment funds have to spend more to trade, they could ultimately pass on their increased costs to companies whose debt they buy.

The banks cannot satisfy the buyside’s needs because they are reducing their own holdings of corporate bonds, partly because of a raft of new regulations proposed in the wake of the financial crisis.

These rules are already altering the way banks behave. While tougher capital standards under Basel III and the pending Volcker rule seek to avoid another meltdown in the banking system, they have had the unintended consequence of sucking liquidity out of the corporate debt market. If banks want to hold riskier assets – such as corporate rather than sovereign debt – they have to go to the greater expense of holding more capital to offset those investments...

dodd- frank , the gift that has only been half written and will 'keep on giving'

 

[Trajan]

yea baby.....daddy needs a new pair of shoes

 

[Zander]

yea baby.....daddy needs a new pair of shoes

SELL!!! SELL!!! SELL!!!


you'll thank me later.....

 

[KissMy]

Public Pensions Face More Pressure Under Accounting Rules

...The Governmental Accounting Standards Board, which establishes requirements for state and local government financial reporting, will alter how liabilities are calculated and how assets are reported without affecting how much is actually owed to retirees. Under the new guidelines, to be adopted today, pensions in Illinois, New Jersey, Indiana and Kentucky may have less than 30 percent of assets needed for promised benefits, according to the Boston College Center for Retirement Research...

The magnitude of the shortfalls ranges from $900 billion to more than $4 trillion, depending on the assumptions used to account for benefits that aren’t due for decades. New criteria set by the Norwalk, Connecticut-based panel will “substantially improve” the accounting and financial reporting of public pension systems, according to a statement by the board.

The rules are aimed at limiting accounting techniques that mask liabilities. That will provide a clearer picture of the size and nature of the obligations, Robert Attmore, chairman of the board, said in a phone interview. “We say it’s a more accurate picture of the financial position,” he said. “The new standards will provide better information. The ultimate goal is to make things more transparent.”

Long-term promises of defined pension benefits will be categorized as a liability on financial statements for the first time, to “more comprehensively and comparably measure the annual cost,” according to the board. The changes also alter accounting for future benefits and projections of investment returns.

In other news - Stockton, Calif., is set to declare bankruptcy tonight!

Stockton, California is going to becoming the largest U.S. city ever to file for bankruptcy as the clock ticks down toward the midnight deadline of talks with creditors.

Stockton has already defaulted on about $2 million in debt since February, requiring it to surrender a building once slated to be its future city hall and three parking garages to the trustee for one its bond insurers.

 

[Toro]

Silver is at a critical point here. For the past nine months, it has bounced at the $26 level. We are testing it again today. If it breaks below support, it could get ugly and fall back down to the $18-$19 range. If silver breaks down, gold will follow.

 

[KissMy]

No way!

I'm up to my eyeballs in precious metals.

You go, Ben! Bail 'em all out!

Is that you John Paulson, President of Paulson & Co Hedge Fund?

 

[KissMy]

Everyone is going to start printing again. Coordinated Central Bank action is on the horizon.

China June official PMI hits 7-month low

China's factory downturn worsened in June as a key activity index hit a seven-month low, data expected to raise expectations the central bank may seek more policy easing to revive the world's second-largest economy.

 

[Trajan]

yea baby.....daddy needs a new pair of shoes

SELL!!! SELL!!! SELL!!!


you'll thank me later.....

Fri Jun 29, 2012 3:23am EDT

* Gold jumps more than 1 pct, erasing June losses
* EU leaders agree to recapitalise banks from rescue fund
* Gold could match last year's record above $1,920 -analyst



stand fast in the ranks!!!!!!!!!!!!!!!!

 

[Toro]

I added to my silver short this afternoon. It's a small position that I will look to close if silver runs above $29. There are a lot of specs leaning against silver, or at least were before the Euro summit. However, the news since has been incrementally negative for silver since. ADP came in better than expected, the ECB said their eased collateral requirements had expired, Merkel backed away from last week's agreement a bit, and the BoE QE came in lighter than expected. If silver breaks $26, it could fall off a cliff pretty quickly given that the next level of support is at $17-$19. However, if it can hold at these levels, it could be putting in a base to move structurally higher.

 

[KissMy]

I think the jobs numbers will be lower than expectations dispite the hot ADP jobs report today. This should boost Gold & Silver with more expectations of QE.

 

[KissMy]

If you want to make some fast money in commodities - Buy Soybeans!

I bought several contracts over a month ago @ $13.65 when this dry heat wave began. Soybean crop has now failed or suffered major damage in the USA, Russia, Brazil & Australia this year. Corn has also had bad yields. The Government stocks & positions report is bogus claiming there is 8% more soybeans in storage this year than last year. Farmers have been buying back their futures contracts because they are not going to raise enough soybeans to deliver & fulfill those futures contract obligations.

Stock up your pantry people because food prices are going way up!

 

[editec]

Then the Fed will just write down the debt they own. That will cause deflation after any inflation they cause until then.

why would that cause deflation???

Default on or non payment of debt causes deflation. Just like when people failed to pay their home loans. Money is created (inflation) when money is borrowed. Money is destroyed (deflation) when debt is wiped out or not repaid.

DEFLATION?????

If the US fails to pay its on its bonds as specified by contract, that will cause the largest INFLATION ever.

US specie would become entirely WORTHLESS