Jim Willie CB
Before Its News
December 26, 2011
Central banks are the current sovereign debt market. It is a vacated market; they are the majority bidders via debt monetization. Monetary inflation has become the new normal. In perverse fashion, the financial markets celebrate the monetized purchases, even calling for higher volume. In the process, bond and stock market integrity has been destroyed.
Foreign creditors are exiting the US Treasury market. Large European banks are exiting the Southern Europe sovereign debt market. Central banks are stepping in to avert panic as the underlying structure of the global monetary system crumbles. When government bond yields rose quickly in Europe, it was not from abandonment by their central bank. The big Euro banks sell boatloads of bonds while the ECB buys only truckloads. Bond market integrity has been deteriorating quickly. The dependence upon the debt monetization process is clear: It is hyper-monetary inflation to fill the void, thus providing the dominant bid.
Willie discusses Italy (it will serve as the agent of contagion, next to France and Spain; no solution is possible); central banks averting bank failures (the ECB prevented up to 20 Lehman events with the extended Dollar Swap Facility provided by the Fed); the great gold price divergence (how the price is being suppressed); desperately seeking bullion (lease rates for gold have been pushed down to net negative levels, allowing European banks to lease it, raise cash and stave off failure); irrelevant political leaders (they are wasting their efforts and time, deceiving the public and supporting bankers in last-ditch attempts to salvage what cannot be saved); Wall Street subterfuge (what hurts the euro will help the dollar); and hyperinflation and the failure of 0% (hyper-monetary inflation is an advantage for bankers, and is being used as such).
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