On the Edge with Gerald Celente – 20 August 2010 (1/3)…

Gerald Celente On The Edge With Max Keiser (Finance, War and Revolt) Part 2 of 3

THERE WILL BE NO DOUBLE DIP…..

by Egon von Greyerz – Matterhorn Asset Management

No, there will be no double dip. It will be a lot worse. The world economy will soon go into an accelerated and precipitous decline which will make the 2007 to early 2009 downturn seem like a walk in the park. The world financial system has temporarily been on life support by trillions of printed dollars that governments call money. But the effect of this massive money printing is ephemeral since it is not possible to save a world economy built on worthless paper by creating more of the same. Nevertheless, governments will continue to print since this is the only remedy they know. Therefore, we are soon likely to enter a phase of money printing of a magnitude that the world has never experienced.  But this will not save the Western World which is likely to go in to a decline lasting at least 20 years but most probably a lot longer.

The End of an Era

The hyperinflationary depression that many western countries, including the US and the UK, will experience is likely to mark the end of an era that has lasted over 200 years since the industrial revolution.  A major part of the growth in the last 100 years and especially in the last 40 years has been built on an unsustainable build-up of debt levels. These debt levels will continue to swell for another few years until the coming hyperinflation in the West leads to a destruction of real asset values and a debt implosion.

In the last 100 years the Western world has experienced a historically unprecedented growth in production, in inventions and technical developments leading to a major increase in the standard of living. During the same period government debt, as well as private debt have grown exponentially leading to a major increase in inflation compared to previous centuries.

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Until the early 1970s the growth in credit to GDP had been going up gradually since the creation of the Fed in 1913.. But from 1971 when Nixon abolished gold backing of the dollar, virtually all of the growth in the Western world has come from the massive increase in credit rather than from real growth of the economy. The US consumer price index was stable for 200 years until the early 1900s. From 1971 to 2010 CPI went up by almost 500%. The reason for this is uncontrolled credit creation and money printing. Total US debt went from $9 trillion in 1971 to $59 trillion today and this excludes unfunded liabilities of anywhere from $70 to $110 trillion. US nominal GDP went from $1.1 trillion to $14.5 trillion between 1971 and 2010.  So it has taken an increase in borrowings of $50 trillion to produce an increase in annual GDP of $13 trillion over a 40 year period. Without this massive increase in debt, the US would probably have had negative growth for most of the last 39 years.

Total US debt to GDP is now 380% and is likely to escalate substantially.

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Russian grain export ban comes into force…

Disasters undermine Russians’ faith in the state

FT,

Outside the Preobrazhenskoye cemetery in eastern Moscow, Muscovites hawking books and trinkets are still in shock from the scorching heat and choking smog that filled the Russian capital and made it hell on earth for nearly a week.

“People couldn’t breathe,” said one. “The authorities did nothing,” said Nadezhda, a pensioner selling flowers.

Inside the cemetery gates, gravediggers are taking respite from a surge in funerals that first grew as temperatures reached record levels and then climbed, as toxic smog from forest and peat bog fires shrouded the city. Death rates doubled in recent days, according to a senior Moscow health official, as the elderly and those suffering from bronchial and heart problems were hit.

MORE IMPORTANT:

A ban on Russian grain exports ordered by Prime Minister Vladimir Putin came into force on Sunday, with the government battling to keep down prices of basic foodstuffs amid a record drought.

According to a government decree signed by Putin on August 5, the ban will extend from August 15 up until December 31, although the powerful premier has indicated it may even extend beyond that date if the harvest is bad.

Russia, the world’s number three wheat exporter last year, has already warned that its grain harvest this year will be just 60-65 million tonnes, compared to 97 million tonnes in 2009.

The drought amid the worst ever heatwave in Russia’s history has ruined one quarter of the country’s crops, according to President Dmitry Medvedev.

The export ban is aimed at keeping the Russian domestic market well supplied with grain to prevent sharp rises in prices. Russia’s leaders, acutely nervous of social unrest, will be keen to avoid any discontent over food prices.

The New Push for a Global Currency…New IMF Strategy Document Charts Launch Of “Bancor” Global Currency…

by Izabella Kaminska

FT Alphaville missed this IMF paper when it first came out in April, 2010.

Authored by Reza Moghadam, director of the IMF’s strategy, policy and review department, it discusses how the IMF sees the International Monetary System evolving after the financial crisis.

We’ll cut to the chase and draw readers’ attention to the final bubble in the following chart, found on page 4:

Which means, in the eyes of the IMF at least, the best way to ensure the stability of the international monetary system (post crisis) is actually by launching a global currency.

And that, the IMF says, is largely because sovereigns — as they stand — cannot be trusted to redistribute surplus reserves, or battle their deficits, themselves.

The ongoing buildup of such imbalances, meanwhile, only makes the system increasingly vulnerable to shocks. It’s also a process that’s ultimately unsustainable for all, says the IMF.

Or as they put it:

The global crisis of 2008/09, for all its costs, has not jeopardized international monetary stability, and the IMS is not on the verge of collapse. That said, the current system has serious imperfections that feed and facilitate policies—of reserves accumulation and reserves creation—that are ultimately unsustainable and, until they are reversed, expose the system to risks and shocks that a reformed system could minimize.

All in all, the IMF believes there has simply been too much reserve hoarding going on:

Reserve accumulation has accelerated dramatically in the past decade, particularly since the 2003-4. At the end of 2009, reserves had risen to 13 percent of global GDP, doubling from their 2000 level, and over 50 percent of total imports of goods and services. Emerging market holdings rose to 32 percent of their GDP (26 percent excluding China). Twenty-seven of the top 40 reserve holders, accounting for over 90 percent of total reserve holdings, recorded doubledigit average growth in reserves over 1999-2008.

Holdings have also become increasingly concentrated, with over half the total held by only five countries. These numbers exclude substantial foreign assets of the official sector not recorded as reserves, including in sovereign wealth funds (SWFs), and yet invested in liquid, dollar denominated financial instruments, that have grown even more in recent years.1

Of course, in the first instance, the solution probably lies in closer collaboration between sovereigns, most likely via the more active use of such things as special drawing rights, says the IMF.

But in the end, a global currency makes the most sense, the paper concludes — especially since the SDR is currently just an accounting tool that draws on the freely usable currencies of member states , not an actual currency itself.

The Bank Crisis and the Glass-Steagall Act… [for prosperity's sake..]

Freefalling rates spark fears dry bulk crash has arrived…

Baltic Dry Index hits lowest level for 13 months

THERE are fears the long-anticipated crash in the dry bulk market has arrived, as the Baltic Dry Index freefall continued for the 30th consecutive day to its lowest level in 13 months, as shipowners prepared to take delivery of record numbers of new panamax and capesize bulk carriers in the second half of 2010.

“I think it could get fairly ugly,” said a prominent Europe-based operator of dry bulk tonnage, who declined to be named.

“Percentage wise, [rates] can probably come off another 50%, to a bit above operating cost levels,” he added, with stronger demand for dry bulk commodities only to return with cheaper transportation costs.

Declining shipments of iron ore and coal to China (which employ nearly half the world’s bulk carrier fleet) have seen panamax and capesize earnings collapse in the past six weeks, losing around 65% in value.

Capesize rates alone on the major Brazil-China route today fell to under $30,000 per day, compared with nearly $84,000 per day in late May.

Darkening an already bleak picture is what some analysts are calling a tsunami of newbuilding tonnage against a deteriorating outlook for commodities shipments forecast to rise 8% to 3.2bn tonnes this year.

Some 23 capesize vessels are set for delivery each month until the end of the year, according to fresh forecasts, which allow for 20% to be delayed. That compares with average monthly deliveries of 16 in the first five months of 2010, which saw the fleet grow by more than 23%, to over 1,000 vessels.

The Gulf Oil Spill – Too many coincidences…

By: Dave -Uncommon Sense

April 20: Deepwater Horizon explodes.

84 days later, the leak continues spewing a much debated number of gallons per day into the Gulf of Mexico (estimates range from 800,000 to 3 million gallons/day).

Speculation on the how’s, the who’s and the why’s behind this “accident” is running rampant in the media and on the internet. Yet for all the media coverage available – getting the facts on Tiger Woods’ extramarital activities or whether or not, Brittney Spears is wearing panties seems easier and the evidence is usually more conclusive. Maybe we need TMZ to cover this story instead of the mainstream media.

The official story is riddled with inconsistencies and missing details, but what is clear is that there are too many unexplained coincidences. These inconsistencies easily lend themselves to conspiracy theories that become difficult to simply dismiss.

Leading up to the accident is a list of strange events and coincidences…

In Praise of Financial Inequality…

Matthias Chang: Economic Crisis – The Next Round of Financial Slaughter…