Headed for a Sudden Stop

[JoeSixpack]

Re: Headed for a Sudden Stop

re: Here it comes

Chris, i would speculate this is probably related to the extreme tightness is european USD liquidity, and much worse in Asia.

You can see this for example in the extreme dislocations in LIBOR. For that reason, central banks (ECB, SNB, BanqueLuxembourg, also BOE ?) now offer their banks access to USD repos in special auctions, which they cover via the swap facility with the FED.

As the banks are forced to refinance their USD positions in the shortest terms, they look to reduce exposure to the risk of a sudden complete dryup in USD.

In the the very extreme a bank may therefore choose to stop its USD business, as the poster in your link has claimed.

But I am not certain on the effects this has in the overall scenario we follow on itulip.

[Tulpen]

Re: Headed for a Sudden Stop

there's a massive liquidity crunch at the Fed, hence the need for taxpayer dollars to move dogshit from fed b.s. to a greater fool.

A concise summary of what is going on!

Also remember it is the end of the quarter, only a few more days left to hide the disasters from the books by using 700 billion dollars.

[kingcopper]

Re: Headed for a Sudden Stop

If the House Republicans find a way to hold out, we could see the FED vanish in their own excrement. I would love to see Bernacke selling inland empire homes in a swanky gold jacket with the Century21 badge!

[reallife]

Re: Headed for a Sudden Stop

If the House Republicans find a way to hold out, we could see the FED vanish in their own excrement. I would love to see Bernacke selling inland empire homes in a swanky gold jacket with the Century21 badge!

Yes, but would YOU buy a used house from Bernacke??:p:p

[zenith191]

Re: Headed for a Sudden Stop

Don't fall into the trap of being so focused on only the financial and trade aspects. One must also consider the geopolitical and military aspects.

The US provides military protection through out the world by projecting its military supremacy into certain regions. It is no co-incidence that these countries the US provides military protection to are also its largest creditors. Like all empires the US Empire extracts a tithe from smaller nations. It has been doing this for several decades by selling debt.


I don't think we have to worry about the creditor counties cutting off their credit until such time as US military might fades and the empire dies.

[marvenger]

Re: Headed for a Sudden Stop

nouriel roubini seems pretty adamant that a better solution than the 700b bailout would have been government and private equity injections; these can take many forms, preference shares, common stock, equity for debt, suspension of dividends. Roubini argues that the current bailout is for bank shareholders and unsecured creditors which foreign CB's and SWF's are not major holders of; so it seems to me that the bailout is more about protection of the sanctity of credit and the uber rich's free ride rather than trying to avoid a sudden stop.

[metalman]

Re: Headed for a Sudden Stop

Don't fall into the trap of being so focused on only the financial and trade aspects. One must also consider the geopolitical and military aspects.

The US provides military protection through out the world by projecting its military supremacy into certain regions. It is no co-incidence that these countries the US:p provides military protection to are also its largest creditors. Like all empires the :pUS Empire extracts a tithe from smaller nations. It has been doing this for several decades by selling debt.
:p:p
:p
I don't think we have to worry about the creditor counties cutting off their credit until such time as :pUS military might fades and the empire dies.
:p:p

that aspect has been discussed here for years so i don't think it hasn't been considered in the sudden stop analysis. us trade partners have been making alternate security arrangements for years... in prep for the day when the usa can no longer afford its military and they can get it cheaper elsewhere.

[metalman]

Re: Headed for a Sudden Stop

bump...

Sept. 2008...

Most economists reading will be taken aback by the suggestion that the US might be the victim of capital flight and a Sudden Stop. The US has long been the recipient and beneficiary of flight capital as other nations experienced financial crisis. But a world ordered by poor nations financing the rich with their "excess savings" is an environment where long standing beliefs can be turned upside down, and fast. It remains to be seen what happens to the euro as the financial crisis spreads to Europe. The dollar, at least temporarily, may benefit.

[ocelotl]

Re: Headed for a Sudden Stop

Athough my personal experience of the 1995 Mexican sudden stop is influenced by the geopolitical events that preceded it, IMHO we can mention that part of the process for it is a worsening of the inner political arena. The capital flight has to be preceded by a series of events that tend to worsen the exterior view on a country in steps. At this moment, the image about US is not that of a colapsing regime, rather, the hope built internationally on the policies set up by Obama are holding many of us foreigners. A set of policies directed to rebuild the infrastructure and the manufacturing base within US borders may be the ideal as seen from outside.

A run to trade protectionism, or a reconstruction of the FIRE Economy may be seen as an attemp to finance the restructuration of US economy on the backs of us foreigners, and that may not bee agreed upon. Such a situation may be one of the triggers to capital flight.

¿Can the human kind, over that situation, revert to asset based currencies? We have been for two whole generations under the rule of fiat currencies. Money will be needed until the basic needs of the whole human population (breathing air, water, food and shelter) can be provided without human intervention, and even then, greed and codice will keep asset property running.

[Slimprofits]

Re: Headed for a Sudden Stop

We're in the midst of stage four?

[plinko]

Re: Headed for a Sudden Stop

I want to believe we're more than 70% through stage 4, about to transition into stage 5, just my opinion looking at the news lately, unless some newfound dollar strength occurs via bad news in the euro or china. I apologize for not backing this up with facts.

[doom&gloom]

Re: Headed for a Sudden Stop

Headed for a Sudden Stop

iTulip has since 1999 warned that in a protracted financial crisis the US, a net debtor, is vulnerable to withdrawal of foreign capital and capital flight, producing inflation and a severe economic contraction known in the economics literature as a Sudden Stop.

*snip*

Could THIS be what is preventing a 'sudden stop' at present? China has been accumulating gold. LOTS of gold. It may not be so 'far out' as to think we are buying off our debt-masters to keep things calm at the present time. perhaps they are giving us back lots of 'dead presidents' in exchange?

and for the record, I am not a GATA 'guy' or adherent. I just see this a different way...

(all bolding and colors are theirs, not mine)

http://news.goldseek.com/GoldSeek/1243605552.php



-- Posted Friday, 29 May 2009 | Digg This Article | Share this article | Source: GoldSeek.com


This past Tuesday evening I found myself reading a snippet from Enrico Orlandini’s, DTAnalysis [DT stands for “Dow Theory”] - where Mr. Orlandini opined,

"I believe the [U.S.] trade gap will surprise people and continue to shrink and may even turn positive for the first time in decades. Unfortunately, this will only facilitate the flow out of the US dollar and bond and that’s not a good thing.”

With Enrico being “technically oriented” and me being more fundamentally oriented, I recall how I intuitively did not believe the U.S. Census Bureau’s published U.S. Trade numbers and how I might go about proving that they were falsified:



My primary field of research is focused on precious metals; namely, gold and silver, and I know that recent reports indicate that various countries are contemplating repatriating their sovereign gold reserves. Further, the U.S. Treasury and Federal Reserve have balked at GATA’s recent Freedom of Information [F.O.I] requests and demands for an independent, verifiable audit of the Sovereign U.S. Gold Reserve – thus a little bit of forensic investigation of U.S. gold exports was in order.

I just needed to figure out how to access the relevant numbers.

The United States Geological Survey [USGS] publishes monthly Mineral Industry Surveys designed to provide a macro-import/export-overview of the U.S. precious metals [gold] industry. The data in these surveys is supplied to the USGS principally by industry trade groups such as the World Gold Council as well as official sources like the U.S. Census Bureau:


source: USGS Feb. 09 Mineral Industry Survey

I took special note of how 2,920 metric tonnes of “Gold Compounds” had been exported from the U.S. in 2008. This number seemed BIGGER than BIG – because the U.S is only alleged to have stockpiles of sovereign gold of 8,100 metric tonnes while annual U.S. mine production of gold is roughly 228 metric tonnes. This figure of 2,920 metric tonnes is equal to 36 % of all alleged sovereign U.S. gold stocks or more than 14 times annual U.S. gold mine production. So, I was left wondering, “just what is/are ‘gold compounds’?

I contacted the USGS and queried a qualified individual [who had working knowledge of this data stream] about the definition of “Gold Compounds”. I was told that, according to the U.S. Census Bureau – who supplies not only the definition but the actual reported numbers, gold compounds were typified by industrial type products containing low percentages/amounts of actual gold content – like gold paint.

I then reasoned with the USGS person, if such were the case, why would U.S. exports have increased in 2008 to nearly 3,000 metric tonnes [when the Global Economy was slowing and the U.S. Dollar was strong] from 2007, when U.S. exports totaled approximately 2,000 metric tonnes [when the U.S. Dollar was weaker and the Global Economy was booming]? I noted that this was counter-intuitive and made no fundamental economic sense:


source: USGS Feb. 08 U.S. Mineral Industry Survey

When confronted with reason, the individual for the USGS agreed that the data, as published, did not make logical sense and explained that the U.S. Census Bureau was questioned as to the veracity of this particular line item in their data.

I asked the USGS employee if the gross weight or the gross value [not shown in the table but known to the USGS] of the “Gold Compounds” was queried.

The individual confirmed that their query to the U.S. Census Bureau dealt with the gross value being assigned to these exported goods.

I responded rhetorically, “being an issue of gross value – then let me guess that the U.S. Census Bureau is assigning an astronomically high value to these goods. Such a high value would be COMPLETELY INCONSISTENT with what the U.S. Census Bureau claims these items are- namely, industrial goods. The values being reported would be more in line with these goods being gold bullion or equivalents”.

The individual from the USGS confirmed my reasoning when he responded, “that would be CORRECT”.

The Implications

Ladies and gentlemen, the foregoing data and discussion with the USGS individual is proof that the United States of America [or criminal elements within its Treasury and/or The Federal Reserve] “HAS” surreptitiously exported physical gold - and continues to do so. It is confirmed. The exports are likely coin melt [or gold compound, if you prefer] from the great gold confiscation back in 1933; or alternatively, this terminology is being used to disguise physical repatriation of foreign gold bullion formerly on deposit with the N.Y. Federal Reserve. Such repatriations are recorded as “exports” in U.S. Trade data. Public acknowledgement of same would scream like a siren call that the global financial community has totally lost faith in American financial stewardship – hence the need to do so on the sly.

This is being done in a vain/desperate/losing battle to satiate “off the charts” global demand for physical gold bullion arising from the profligacy of the American Empire’s two previous Administrations and to prop up the failing U.S. Dollar.

Over the course of 2007 / 2008 – more than 5,000 metric tonnes of “Gold Compounds” have been exported from the United States of America representing more than 62 % of reported sovereign U.S. gold reserves or about 24 times annual U.S. mine production.

5000 metric tonnes = 160 753 733 troy ounces [$128 billion+ at today’s prices]

The fact that industry funded trade groups like the World Gold Council and other professional gold consultancies, who shall remain nameless, have not reported these facts negates their credibility and illuminates them as dupes or willing shills. These fraudulent or ignorant organizations deserve to be shuttered and disbanded.


U.S. Trade Data Is Bogus

The value of these bullion exports significantly “skew” the doctored U.S. Trade numbers [coincidentally, also prepared by the U.S. Census Bureau] in an attempt to convey a picture that the U.S. financial position is improving.

The reality is this, when gold exports are backed-out, the U.S. Trade picture is decidedly worse.

The United States of America claims to possess a little more than 8,100 metric tonnes of sovereign gold stored principally at Fort Knox, Kentucky, West Point, N.Y., the Denver Mint and The New York Fed. The sovereign U.S. gold reserve has not been independently audited since the 1950’s during the Eisenhower Administration. GATA’s freedom of information requests are all about ensuring that the 8,100 metric tonnes of U.S. sovereign gold is still owned by the U.S.

In April, 2008 the Federal Reserve responded to GATA’s request, releasing hundreds of pages of worthless information with significant portions redacted. They also claimed that they were withholding hundreds of additional pages of documents. The status of the withheld documents is currently under appeal.

These stonewalling tactics – withholding details - are eerily similar to those employed by Messer’s Bernanke, Paulson and Geithner refusing to divulge frank details as to “who” the beneficial recipients were of TARP and TALF funds.

No credible audit of the Sovereign U.S. Gold Reserve will EVER be allowed – because the gold is simply not there.

Hope you have some.

Rob Kirby is proprietor of Kirbyanalytics.com and sales agent for Bullion Custodial Services. Subscribers to the Kirbyanalytics newsletter can look forward to a weekend publication analyzing many recent global geo-political events and more. Subscribe to Kirbyanalytics news letter here. Buy physical gold, silver or platinum bullion here.

[TheServant]

Re: Headed for a Sudden Stop

Even though this data is from 2007-2008, it is probably worth noting that the White House (Rahm Emanuel) oversees the US Census Bureau as of February.

[jk]

Re: Headed for a Sudden Stop

in eric's most recent piece he listed "emergency measures" as a topic to be discussed, which fred then said would be addressed in a follow up piece. fred also referred to this thread about a sudden stop.

re-reading eric's piece from 3 years ago, a question occurred to me. if there is to be capital flight from the u.s. and from the dollar, where would capital GO? what market or markets are big enough to receive the waves of money we're discussing?

in early 2009, according to the bis [quoted in wikipedia's article on the bond market] the global bond market was then worth around $82trillion, of which the u.s. bond market was $32trillion. those numbers have risen in the intervening almost-3 years. so let's say the u.s. bond market is currently $35trillion. if bond holders sell in any size, first to whom do they sell? and then where do they put their money? what bathtub is big enough for this elephant?

capital flight from the u.s. dollar isn't even possible in any size unless the dollar is first hugely devalued.

[FRED]

Re: Headed for a Sudden Stop

in eric's most recent piece he listed "emergency measures" as a topic to be discussed, which fred then said would be addressed in a follow up piece. fred also referred to this thread about a sudden stop.

re-reading eric's piece from 3 years ago, a question occurred to me. if there is to be capital flight from the u.s. and from the dollar, where would capital GO? what market or markets are big enough to receive the waves of money we're discussing?

in early 2009, according to the bis [quoted in wikipedia's article on the bond market] the global bond market was then worth around $82trillion, of which the u.s. bond market was $32trillion. those numbers have risen in the intervening almost-3 years. so let's say the u.s. bond market is currently $35trillion. if bond holders sell in any size, first to whom do they sell? and then where do they put their money? what bathtub is big enough for this elephant?

capital flight from the u.s. dollar isn't even possible in any size unless the dollar is first hugely devalued.

The iTulip thesis is that as peso denominated assets (Argentina domestic capital) fled into the dollar in 2001, dollar denominated assets (Argentina domestic capital) will flee into gold.