Anyone concerned about the Euro and what is happening in Europe right now?

[lucy]

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Reports are that if drastic measures (meaning billions of dollars) are not found within days, the Euro is going adieu.
Any validity to that?

[lucy]

The 7.7 trillion we gave in loans to European banks didn't help I guess.

[Mornac]

It'll be fine in the long run when the countries involved have their own national currencies back (except for the super-socialized places that will revert to having worthless lucre).

[Mornac]

The 7.7 trillion we gave in loans to European banks didn't help I guess.

--Since when has government spending ever helped anything?

[lucy]

That is a lot of money printed up....who is backing these loans?

[Mornac]

That's a question for notoc.

[lucy]

I would be interested in what he thinks. He seems to be pretty savvy about financial issues.

[lucy]

http://news.yahoo.com/pressure-builds-eurozone-ponders-debt-solutions-171745129.html

[dustup]

Ask yourself.......there was enough money and riches in the world to go around.........where did it go

Big Risk: $1.2 Quadrillion Derivatives Market Dwarfs World GDP

One of the biggest risks to the world's financial health is the $1.2 quadrillion derivatives market. It's complex, it's unregulated, and it ought to be of concern to world leaders that its notional value is 20 times the size of the world economy. But traders rule the roost -- and as much as risk managers and regulators might want to limit that risk, they lack the power or knowledge to do so.

more here: http://www.dailyfinance.com/2010/06/09/risk-quadrillion-derivatives-market-gdp/

It is not being reinvested back into the economy......its being horded by the ultras rich........playing monopoly with it!

[notoc]

That is a lot of money printed up....who is backing these loans? That's a question for notoc.

The clue to the answer is in the first half of the question ... a lot of money printed up. The money didn't exist before it was 'loaned'.

So the questions are; What was actually loaned? Who loaned what to whom? and Why? ... also, I have the ability to print and loan an international reserve currency, there is another international reserve currency emerging. Question: Is it in my interest to stifle that currency's emergence by any means possible?

Take a stab at answering them yourself, Mornac. Here's a few pointers; you will need to understand the difference between Insolvency and Illiquidity; Whose tangible assets have been collateralized against default?

Other things to ponder ... If China is my creditor and I want to lend to Italy, can I lend unilaterally? Who has first call on Italy's collateral in case of default? How much gold does Italy have and will it be collateralized?

Fundamental questions ... what would happen if, say Germany, were to collapse the EURO and revert to a Deutschmark backed by gold?

A question nobody wants to answer ... where is Germany's gold?

The big gold reserves of the Federal Republic -- according to recent data from the the mining lobby World Gold Council the second largest in the world after the U.S., which holds with 8,133 tons, more than twice as much -- date from the 1950s. With the economic miracle, West German exports boomed and many nations paid in gold.

In 1968, Germany held 4,000 tons -- the culmination of the German gold holdings. A large portion of these reserves was, however, never transported, which is both logistically and actuarially difficult. The gold simply changed hands at the great trading centers in New York, London, or Paris without ever changing the local storage locations there.

During the Cold War, it seemed too uncertain to deposit the gold at the headquarters of the Bundesbank in the financial metropolis Frankfurt -- just 100 kilometers away from what in the Cold War was called the "Fulda Gap" -- a spot at the inner German border, which would have been ideal for an invasion by Warsaw Pact troops in wartime because of its topography.

Over the years Germany's gold reserves decreased slightly, especially since the gold price dropped between 1980 and 2000, interrupted only by occasional convulsions. With the gold price increasing beginning in 2001 from below $300 per troy ounce to $700 in 2006 and finally above $1,000 in 2008, the perception of gold in the public mind changed, and more and more critical minds were interested in the whereabouts of the gold.

But the Bundesbank was tight-lipped: Its former chief executive, Hans-Helmut Kotz, told the magazine Stern in 2004: "The biggest part of our gold reserves is held at the U.S. Federal Reserve, the Bank of England, and the Banque de France, in that order." Never again has any representative of the Bundesbank expressed himself in such detail.

Via a written request to the Federal Government, Member of Parliament Peter Gauweiler received in November 2010 no further details of the storage locations but learned that the Bundesbank maintains its gold holdings in physical form -- not in the form of dodgy, windy delivery promises of banks that may be cash-strapped in time of crisis -- and that lending would be made in the current low-percentage range.

... Gold Lender Bundesbank

So anyone who does the treasure hunt has to patch up a map first: for example, from rumors -- 2.300 of the 3.400 tons are allegedly in the vaults of the Federal Reserve Bank in Manhattan. That would be more than two-thirds of the total gold reserves. The testimony of former Bundesbanker Kotz would not be contradicted by that. And because the Bundesbank is so tight-lipped, a lot of yarn is spun.

This also implies that the central bank would have lent the gold to collect interest on the loan -- and to give unspecified market forces such as banks the opportunity to suppress the gold price by selling the borrowed gold at the market. That would be a classic short sale, for which specualators are blamed in the stock and bond markets, and there would have been a lot of winners except for gold owners and producers. The central bank would receive interest for lending the gold that would otherwise uselessly lounge around.

Speculators could suppress the price with the sale of the borrowed gold and buy the gold back later more cheaply and pocket the difference as profit, more so as one pushes the gold price down. And both banks and central banks have an indirect interest in a low gold price, even if their gold reserves are worth less. The price of gold is ultimately a crisis indicator of system stability and future inflation rates; the higher the gold price, the higher the stress in the system, which neither banks nor central banks want.

But either the Bundesbank is lying or the conspiracy theory of "gold price suppression" via short selling with borrowed gold is wrong, because at the request of the Financial Times Germany, the Bundesbank announced that "at present no gold is lent."

Thorsten Schulte has neither a wooden leg nor an eye patch -- only his nickname fits the image of the treasure hunt. The "Silver Boy" is an expert in precious metals. He says: "Of course it is suspect that the Bundesbank reveals so little." There are several explanations. One is that the Bundesbank appeals to reasons of security and business policy.

... 'Diplomatic consideration for the U.S.'

In various Internet forums it is conjectured that the reserve was a dead pledge to the United States. But at the Bundesbank they do not want to hear of that: "We are guided by safety, cost efficiency, and liquidity," said a spokeswoman. Changes of storage locations were not excluded in general, but a transport to Germany's own vaults would be associated with high costs. Therefore, much of the gold is stored abroad.

Most experts consider it likely that Germany does not want to offend the wooden leg of the U.S.: "I suppose it's also about diplomatic consideration for the U.S.," says Schulte.

In the 1960s former Bundesbank president Karl Blessing allegedly sent a letter to the American High Commissioner in Germany in which he guaranteed that gold would not be converted into dollars. The letter is unpublished to this day; that's why it cannot be excluded that the commitments went even further. And even if not: "To carry the gold away from the U.S. would be a distrust signal first-class," says Schulte.

The situation is not as dramatic anyway. Parts of the German gold are simply in New York, Paris, or London because it can be traded or sold better this way. About 60 central banks store their bullion in Manhattan, thus saving the cost of transport. "In addition, there are reputable sources who say that the Bundesbank would bring small quantities to Germany time after time," says "Silver Boy" Schulte.

Therefore, the gold reserves that lie under the Bundesbank branches in Mainz and Frankfurt had not for long been at more than 4 percent of the total, as gold fans speculated over and over again. The Bundesbank told the FTD that "a large part of its gold reserves" are in Germany. However, more precise statements will not be given for the time being, and therefore conspiracy theorists will continue in dark nights at the fireplace spinning yarns about the German gold.

http://gata.org/node/10656

If only borrowing and lending were as simple as we have all been brainwashed into thinking it to be. Faith in promises to pay? Ha!

Try this: http://www.businessweek.com/magazine/the-nixon-shock-08042011.html

[notoc]

Got gold?

Case for gold in the eurozone bail-out

... but now the use of gold to fund a eurozone bail-out is coming closer to reality. Buried within a draft of the European Commission study on joint ‘eurobonds’, reported by the Financial Times this week, is the suggestion that gold could be used as collateral for these bonds.

In order to “enhance” the guarantees on the eurobonds, the draft says, governments could provide collateral, including “gold reserves which are largely in excess of needs in most EU countries”.

Between them, the central banks of the eurozone hold 10,792 tonnes of gold – 6.5 per cent of all the yellow metal that has ever been mined – worth some $590bn.

Let’s be clear: this does not imply central banks are getting ready to sell gold to bail out the eurozone. Beyond the numerous legal problems (selling reserves to fund government borrowing contravenes the Maastricht treaty), gold disposals just looks too desperate.

But bullion could be used as collateral. In fact, if Europe’s politicians truly believe that the problems of larger eurozone countries such as Italy are based on liquidity rather than solvency, the use of gold as collateral could be a neat way to regain the confidence of the bond markets.


http://www.ft.com/cms/s/0/c7f61068-1472-11e1-8367-00144feabdc0.html#axzz1fB7SBNZS

[notoc]

So the European Commission suggest that countries looking for loans might collateralise their gold to back their bond issues ... Euro denominated bonds backed by gold?

Whatever next ... currency backed by gold?

Or will the next round of defaults on gold-backed bonds just end in the transfer of gold to the very banks that caused the crisis in the first place?

[ivanm]

The 7.7 trillion we gave in loans to European banks didn't help I guess.

It appears that some of our big banks may take a hit and yet I read this morning where the FRS is going back for more punishment.  I wonder how much of his own money Bernanke has on the line. It is easy to play fast and loose with other peoples' money.

[Mornac]

Take a stab at answering them yourself, Mornac.

--I won't. There's too much speculation involved and not enough clear cut truth. I will, however, look forward to the day that countries revert to their own currencies that they themselves are responsible for instead of putting thier sovereign privliges and responsibilities in the hands of others.

[Pepsi]

I'm concerned as an American but not as concerned as I'd be if I was European right now..

From the US perspective as I see it..

-US dollar will rise, and our exports will be more expensive hurting our economy
-EU will sink into recession again, hurting our exports and our economy
-our banks are exposed to EU banks and they will be hurt, decreasing lending perhaps requiring more capital, hurting our economy

Besides the new recessionary (or worse) risks, and the obvious exposure of banks, I'd love to hear what the near-mid term implications are for the US equity market since that's where I'm primarily invested..