Tuesday, March 2, 2010

More Precious Metals Pornography...

Rumors are starting to swirl around that Germany is getting ready to lead a bailout of Greece.  Apparently Germany is working behind the scenes to head off speculators from profiting on any bailout.  As per a Reuters article yesterday:  "Germany has moved to identify speculators in Greek debt to try to prevent them from profiting from any bailout of the euro zone country's ailing economy, a source with direct knowledge of the matter told Reuters...While publicly Chancellor Angela Merkel has insisted that Athens solve its own problems and there has been anger over Greek comments about war claims dating back to the Nazi occupation, privately German officials say they have an emergency plan. 'There is a moral responsibility on Germany (to help Greece) given European history and they know it,' said Olle Schmidt, a European liberal parliamentarian. 'Together with others, they will be obliged to help.'"

Today Reuters was carrying this story:  "Ever-cautious Chancellor Angela Merkel has made comments which could be seen as preparing the ground for some sort of aid and in a clear shift, some influential newspapers have started running editorials arguing Germany may have to act."  Here's the link:  German bailout imminent?

IF Greece is bailed out, and it is my view that if Germany does not lead one, then the U.S., via the IMF, will spearhead a bailout because of AIG's known CDS exposure, expect that the markets will party hard to the upside, especially gold, silver and mining stocks.  I believe part of today's ebullience in the precious metals market (HUI +2.57%, gold +1.45%, silver +2.79%) was related to these news reports.  The reason this development would be positive for the precious metals is that any kind of bailout like this means there is a de facto devaluation of the fiat currency involved.  In this case primarily euros, but to the extent the UK and the U.S. are involved, secondarily sterling and greenbacks. 

With this as a backdrop, please enjoy the chart below, provided by DC of New Jersey and created by Carl Swenlin of Decisionpoint.com (green commentary is mine):

(click on chart to enlarge)


  1. It's amazing to think that sixty plus years later, people are playing politics regarding Germany's Nazi era. Wouldn't it be interesting if Germany financially drags itself under from guilt?

  2. Chad, probably being used as way for Merkel to morally rationalize Germany's role in bailing out Greece. The reality of the situation is that, because of German bank exposure to Greek debt, the German financial system would suffer adverse consequences if Germany lets Greece take a dirt nap.

  3. Great day for the metals. Bailout fever spreading like a virus and should be good for metals, poor for paper money.

  4. Hasn’t anyone else noticed the panic and fear that is coming to the fore among the presstitutes today over Greece. Take this piece of MOPE from the Huffington Post.

    Here the article states at the front the Greek deals were legal. Can’t you smell the fear at G Sacs, I can. Let us look for a dispassionate moment at the deals in the broad spectrum of legality. It is admitted that G Sacs colluded with Greek officials to dress up the budget deficit to fool or misrepresent the finances of Greece to inter alia the Greek people and the European Union. This much is admitted by all parties. It is of course long accepted in every legal jurisdiction that financial transactions whose sole and main purpose is to deceive are illegal. In the case of swap transactions these principles were sent to judgement in the local authority swaps that were connived to deceive the UK regulatory authorities. The cases resulted in 1980’s in 10’s of billions of losses for the UK banking system as they were decided to be void ab initio illegal transactions.

    It looks like to me that the presstitutes running the MOPE have been set on the information matrix to promote the idea that the Greek swaps by G Sacs were legal. Whereas any unbiased commentator looking at the thing in the cold light of day would deduce at the very least the legality of the transactions was highly contentious and that the decisions of case law were skewed very definitely to illegality. The amusing thing about the G Sacs propaganda is the legal opinion. I would bet dollars to donuts that the legal opinions were based on and capped by US law, but in void ab initio cases the ruling law is Greek not US. The basis of this is that illegal transactions do not exist in law. All the paper work is void and the court has to decide on the intentions of the parties. You have to argue your case for payment from first principles on the basis of the financial payments. If the purpose of the payments is to deceive you are up shit Greek without a paddle in front of a Greek judge deciding on whether his countrymen should pay or not. Welcome to justice.

    In the local authority swap transactions the banks had to take the hit for all the principle and G Sacs can’t rely on the CDS as default swaps are void on illegal transactions. The banks were only protected from collapse by a Bank Of England pain sharing agreement to stop the litigation and bring order to the market. Can you see the Greeks agreeing to this?

    Hence MOPE is now going around the world in all the presstitutes and all the mainstream propaganda organs to say that the transactions are legal. I smell fear.

    Long may we welcome the day when the headlines read PIIGS eat Goldman Sachs.

  5. Great comment, Anonymous. I like the term "presstitutes." There should be no doubt in anyone's mind that GS acted illegally and unethically with Greece. It's gotten to the point at which the bankers control the rulemaking and the enforcement of the rules. It would be awesome if Greece pulled a "China" and decided to default on the CDS obligations.

  6. by the way, I just saw the full link for the HuffPo article on Sinclair's site - all I can say is that Martin Wolfe is a complete douche.

  7. Germany is a non-country. According to international treaties it is still an ocupied country ("Besetztes Gebiet"). Everything German politicians do is dictated from White House. Grundgesetz ("basic law") was written just after the WWII for THAT piece of country. After the reunification they were in need to establish a real constitution. They didn't. Therefore it is a very special situation, these are international laws ("Völkerrecht") I unfortunately cannot explain. There is plenty of information (internet) on that and I'm quite astonished I find nothing in American web about.

  8. In its latest latest 10-K (via Dealbook) Goldman Sachs (GS) writes:

    “The financial crisis and the current political and public sentiment regarding financial institutions has resulted in a significant amount of adverse press coverage, as well as adverse statements or charges by regulators or elected officials.

    “Press coverage and other public statements that assert some form of wrongdoing, regardless of the factual basis for the assertions being made, often results in some type of investigation by regulators, legislators and law enforcement officials, or in lawsuits."

  9. Wow Anonymous, thanks for the comment. I may turn that into a post.