Mish's Global Economic Trend Analysis

Concerns in Germany About Its Gold at the NY Fed, London, and Paris; German Gold Off Limits, Greek Gold Subject to Confiscation
Mish Video on Capital Account, March 6: Netherlands, Greek Exit, Stock Valuations, War in Iran, Where to Put Your Money, Faber's Formula for Safety
LPS Home Price Index Shows U.S. Home Prices Accelerated Decline; Psychology Change and Demographics Suggests Bubble Mentality Shattered for Decades to Come

Concerns in Germany About Its Gold at the NY Fed, London, and Paris; German Gold Off Limits, Greek Gold Subject to Confiscation

Posted: 07 Mar 2012 01:02 PM PST

GoldCore has a pair of interesting articles on German concerns about its gold reserves. The most recent article regards gold held outside Germany.

Please consider Germany to Review Bundesbank Gold Reserves in Frankfurt, Paris, London and Federal Reserve Bank of New York

German lawmakers are to review Bundesbank controls of and management of Germany's gold reserves. Parliament's Budget Committee will assess how the central bank manages its inventory of Germany's gold bullion bars that are believed to be stored in Frankfurt, Paris, London and the Federal Reserve Bank of New York, according to German newspaper Bild.

The German Federal Audit Office has criticised the Bundesbank's lax auditing and inventory controls regarding Germany's sizeable gold reserves – 3,396.3 tonnes of gold or some 73.7% of Germany's national foreign exchange reserves.

There is increasing nervousness amongst the German public, German politicians and indeed the Bundesbank itself regarding the gigantic risk on the balance sheet of Germany's central bank and this is leading some in Germany to voice concerns about the location and exact amount of Germany's gold reserves.

The eurozone's central bank system is massively imbalanced after the ECB's balance sheet surged to a record 3.02 trillion euros ($3.96 trillion) last week, 31% bigger than the German economy, after a second tranche of three-year loans.

The concern is that were the eurozone to collapse, Bundesbank's losses could be half a trillion euros - more than one-and-a-half times the size of the Germany's annual budget.

In that scenario, Germany's national patrimony of gold bullion reserves would be needed to support the currency – whether that be a new euro or a return to the Deutsche mark.

Jim Rickards has outlined possible plans by the Federal Reserve to commandeer Germany's and all foreign depositors of sovereign gold at the New York Federal Reserve in the event of a dollar and monetary crisis leading to intensified "currency wars" and the 'nuclear option' of a drastic upward revision of the price of gold and a return to a quasi gold standard is contemplated by embattled central banks to prevent debt deflation.

Currency Wars

It is difficult to separate fact from fantasy, and speculation from reality in such stories, but those wishing to learn more about Jim Rickards' ideas, might be interested in his book, "Currency Wars: The Making of the Next Global Crisis"

In January, Eric King had an Interview with Jim Rickard on King World News.

Rickards' Biography

James G. Rickards is a writer, lawyer and economist with over 30 years experience in global capital markets. He is Senior Managing Director at Omnis, Inc., a consulting firm in McLean, VA and is the leading practitioner at the intersection of global capital markets and national security. His advice to clients from 2002 to 2006 included early warning of impending financial collapse, the rise of sovereign wealth funds, the decline of the dollar and the sharp rise in gold prices years in advance of these events. He has held senior executive positions at Citibank, Long-Term Capital Management and Caxton Associates. In 1998, he was the principal negotiator of the rescue of LTCM sponsored by the Federal Reserve Bank of New York.

German Gold Off Limits, Greek Gold Subject to Confiscation

The other article of note on GoldCore regarding German gold reserves was back in November when various proposals for Germany to backstop Greece and the EFSF with its gold surfaced.

Please see Germany to G20: German Gold "Must Remain Off Limits"; Italian Gold Sale Again Proposed in Germany for details.

Those proposals were shot down quickly. However, Germany did make Greek gold subject to confiscation in the latest bailout proposal by the Troika.

Greece is foolish to accept this parasitic offer of "help". Greek gold reserves may be the only thing that prevents all-out hyperinflation and complete destruction of currency when Greece returns to the drachma.

Please see Pact With the Devil Over Gold for further discussion as to sad state of affairs that may befall Greece.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Mish Video on Capital Account, March 6: Netherlands, Greek Exit, Stock Valuations, War in Iran, Where to Put Your Money, Faber's Formula for Safety

Posted: 07 Mar 2012 11:46 AM PST

Once again it was a pleasure to be on Capital Account with Lauren Lyster yesterday afternoon. We discussed Europe, a Eurozone breakup, and general investment ideas proposed by Marc Faber, and my own thoughts on the same subject.

Link if video does not play: Netherlands looking for Euro Exit as Supercomputer prepares for Financial Judgment Day.

Normally I can see the same thing you see in the video above while the live TV show is recorded. This time, the video feed went down, so I could not see the charts they asked me to comment or, Lauren Lyster, or anything else. This was recorded (from my perspective) on audio cue only.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

LPS Home Price Index Shows U.S. Home Prices Accelerated Decline; Psychology Change and Demographics Suggests Bubble Mentality Shattered for Decades to Come

Posted: 07 Mar 2012 09:47 AM PST

U.S. home prices declines to a new low for the move and are back to a level last seen in September-October 2002 according to a LPS News Release.

The LPS HPI national average home price for transactions during December 2011 reached a price level not seen since September 2002. This is the sixth consecutive month of price decreases.

Price changes were largely consistent across the country during December, increasing in only 8.0 percent of the ZIP codes in the LPS HPI. Price changes were also consistent across price tiers with a uniform decline of 1.0 percent.

"Despite the broad picture of home price declines following the bubble, prices have not been consistently declining for all MSAs in the country. About one-fifth (89) of all the MSAs that LPS covers has seen average home prices increase since December 2008," commented Dosaj. "For 90 percent of these MSAs, prices rose only if the lowest-priced homes in their markets rose. This correlation did not necessarily hold for higher-priced homes in those areas. Unfortunately, the MSAs that have seen price increases since December 2008 are generally relatively small; Boston and Pittsburgh are exceptions."

About the LPS Home Price Index

The LPS HPI is one of the most complete and accurate home price sources available. It summarizes sales concluded during each month using a repeat sales analysis of home prices as of the transaction dates. Each month, the LPS HPI reports five price levels in each of more than 14,500 U.S. ZIP codes. Five price levels are also reported at the national and state levels and for 436 of the statistical areas defined by the White House Office of Management and Budget; including all 29 of the Metropolitan Divisions and their 11 MSA "parents." The five historical paths of price levels can be easily used to find price paths of intermediate prices. The LPS HPI also supplies REO discount rates for each ZIP code, which are used in the HPI calculations to correct for the impact on estimates of open-market prices that REO sale prices would have.

By combining property and loan data in its repeat sales analysis, the LPS HPI covers about 75 percent of single-family residential properties in the U.S. The innovative approach used to maximize geographical resolution enables the LPS HPI to meaningfully cover about 98 percent of these properties at the ZIP-code level.

The LPS HPI provides the financial industry with the most accurately timed home-price information available – detecting market changes sooner than other HPIs – with valuation accuracies competitive with AVMs in out-of-sample tests.

Bubble Mentality Shattered for Decades to Come

The key take-away is home prices still have not bottomed in most areas. Moreover, nothing stops a renewed decline in those 8% of areas that did not decline.

Also bear in mind that first chart shows nominal prices. Inflation adjusted prices have likely taken back the entire rise in prices, except of course for property taxes.

Once there is a bottom, and we are certainly closer to a bottom than a top, expect home prices to generally languish due to immense shadow inventory, anemic wage growth, anemic job growth, boomer downsize demographics, and most importantly psychology.

Housing prices were a once-in-a-multi-generational bubble, now gone bust. The mentality that "your home is your retirement" is dead for decades to come. A similar bust will happen in Canada, Australia, and China.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

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Wednesday, March 7, 2012

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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