Jim’s Mailbox

Posted at 7:33 PM (CST) by & filed under General Editorial.

Dear CIGAs,

Walter J. “John” Williams informs us that:

Fed Began Sidestepping No “Bailout” Before First House Vote – M1 and M2 Annualized Surges of 800% and 200% are Panic Distortions (Offset in M3).

Visit John’s site at www.shadowstats.com

Dear CIGAs,

As Jim points out, financial collapses happen on weekends. We look for major European banks, among the world’s largest, to fail, be forced to merge or be taken over by their respective governments this weekend.

Respectfully yours,
Monty Guild

Dear Monty,

The Europeans are not apt to see solace in the US dollar. Such an event turns Europeans towards gold as the only safe asset with no liability associated with it.

The world of collapsing financial institutions will turn the tide towards gold. Keep in mind that 90 percent of all the OTC crap was manufactured in the good ole USA. The only real ball outside of that was UBS.


Financial Crisis: So much for tirades against American greed
Ambrose Evans-Pritchard says it is ironic that European banks have turned out to be deeper in debt than their US counterparts.
By Ambrose Evans-Pritchard
Last Updated: 1:12AM BST 02 Oct 2008

It took a weekend to shatter the complacency of German finance minister Peer Steinbrück. Last Thursday he told us that the financial crisis was an “American problem”, the fruit of Anglo-Saxon greed and inept regulation that would cost the United States its “superpower status”. Pleas from US Treasury Secretary Hank Paulson for a joint US-European rescue plan to halt the downward spiral were rebuffed as unnecessary.

By Monday, Mr Steinbrück was having to orchestrate Germany’s biggest bank bail-out, putting together a €35 billion loan package to save Hypo Real Estate. By then Europe was “staring into the abyss,” he admitted. Belgium faced worse. It had to nationalise Fortis (with Dutch help), a 300-year-old bastion of Flemish finance, followed a day later by a bail-out for Dexia (with French help).

Within hours they were all trumped by Dublin. The Irish government issued a blanket guarantee of the deposits and debts of its six largest lenders in the most radical bank bail-out since the Scandinavian rescues in the early 1990s. Then France upped the ante with a €300 billion pan-European lifeboat for the banks. The drama has exposed Europe’s dark secret for all to see. EU banks took on even more debt leverage than their US counterparts, despite the tirades against ”le capitalisme sauvage” of the Anglo-Saxons.

We now know that it was French finance minister Christine Lagarde who begged Mr Paulson to save the US insurer AIG last week. AIG had written $300 billion in credit protection for European banks, admitting that it was for “regulatory capital relief rather than risk mitigation”. In other words, it was underpinning a disguised extension of credit leverage. Its collapse would have set off a lending crunch across Europe as banking capital sank below water level.

It turns out that European regulators have allowed even greater use of “off-books” chicanery than the Americans. Mr Paulson may have saved Europe.