EURO CRISIS TRUE ORIGIN and a MONETARY LESSON

31 Jan

1.ECB NEWS

2.DAVOS GLOBAL ECONOMY MEETING

3.EU SUMMIT JAN. 30th

4.EUROZONE A DEEPER LOOK with GLOBAL IMBALANCES

5.US and USD with GOLD and SILVER

6.CONCLUSIONS EUROZONE with RATINGS UPDATE

1.ECB NEWS

First a reflection on differences between FED and ECB Policy Objectives:

FED have as priority goals : Maximum Employment,stable prices and moderate long term interest rates.Long term price stability

precondition for sustainable production and Employment growth.

ECB main objective Price stability.This means low inflation max 2% with a non infalationary growth.Secondary high level of employment.

Eurozone now in slow growth environment with minimum inflationary pressure admitting expansionary monetary measurements.

In dec 21 ECB made a LTRO(Long term refinancing Operation) injecting almost 500bilj. Euro at a 1% rate for Banks valid for a 3 Y period.

A new LTRO or Backdoor QE will be alloted 29th Feb.Maybe  another 500bilj. or more!.Both operations have a 3Y  maturity.

A slow recovery expected in Eurozone during 2012 supported by very low interest rates and sustained Global demand.Downside risks

with high tension within Debt Market.Possibility of a disorderly correction of Global Imbalances!More of that in the deeper look part.

The fight against Bank defaults have been so far a success.ECB Backdoor QE have provided cash flow and reached out to general banking system allowing easier credits to enterprises.Interbank lending still low despite ECB low interest for overnight Bank deposits.

2.DAVOS GLOBAL ECONOMY MEETING.

Madame Chancellor Merkel made the opening speech stressing :Solidarity,Structural reforms and Confidance.

Greece will not fall(at least not yet!)Now in coming JULY the permanent Firewall ESM will be functioning with  500bilj.Euro.

Strucural reforms mean that southern European countries must bring their HOUSE in order and improve Competitivness.

David Cameron made an appearance with same type US and UK mantra more money printing ,Euro Bonds and of course no

Financial transaction tax that will be implemented in France aug. this year and possible other Eurozone countries.

UK have enough problem on their own not to teach others their shortcomings!

Mr Draghi ECB: Banks today better Financed and improved risk management than 2008.Risk perception have increased!

Eurozone Countries :Fiscal consolidation,Structural reforms “EU Governance”.Fiscal compact important.

New Treaty with large Firewall ESM to avoid accidents in high Bond spreads.

Fiscal retranchment in amazing progress. LTRO´s well  received and activation Interbank Market.Price stability medium term.

Inflation around 2% target.ESM FUND will interveine and stabilize Bond market with help of IMF.

3.EU SUMMIT JAN:30th

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ALLES KLAR FRAU KOMMISSAR

A Green light for Merkels pet project 25 states in favour for Fiscal Pact.Ratification at next March Summit.

An Inititative for Growth  directed towards fighting the younger persons unemployment worst in SPAIN.

Against the Fiscal pact UK and Chec.Reb. A GERMANISATION of EU is well going ahead with few exeptions.

German HAUSHALT DISCIPLIN is definitely in place for the Southern States with too much uncontrolled spending

without preset Ceilings and Budgetary discipline running for many years in Norhern European states showing surplus.

The straitjacket of too much Austerity must be balanced to avoid further deterioration in labor market.Superficially these

measurements will make Eurozone more like the US where all states have some kind of  balanced budget rule.

Financial markets will impose some constraints on EURO Members in fear of rising Bond spreads in allready

anemic economies.ESM Fund starting in July will be a life support for most ailing Bond Markets and serve like a BAD BANK

that can eliminate some toxic asset from Bank balances and restore lending again! Fiscal tightening will be during a prolonged

period  to make the CURE TAKE EFFECT! Greece still in negotiation with creditors soon to achieve agreement.Everybody is in denial

thinking Greece can recover!It´s all about timing and legal issues set before final dismissal of Greece from Eurozone and same maybe for Portugal.Domino effect fears prolong final decision.My view is POLEN enter Eurozone will provide a Money supply BOOST that will easily

permit exit GREECE same week.Goal is a total GERMANISED EUROZONE competitive in GLOBAL MARKET.At this stage

Euro Bonds will be no problem and desirable for Common Financing and a surplus recycling within the EUROZONE to avoid

FUTURE imbalances to surface.

4.EUROZONE A DEEPER LOOK and GLOBAL IMBALANCES

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Eurozone have a Central Bank ECB and also each Euro Member a National Central Bank.Intercentralbank operations called Target2 .

Unbalances in Banking system often payed by Central Bank by electronic printing money.

As a consequence has Germany end of 2011 a surplus of 463bilj. Euros in Target system means ECB have a debt of this sum

to Bundesbank Germany.It all boils down to market differences meaning the peripheric Eurozone countries lack in

COMPETIVENESS which is true cause of current crisis acording to Prof.Sinn.A joint approach with coordinated growth and

job creation policy needed. .A  common EUROZONE Economic Minister with means to empower weaker Nations.The TOBIN type Financial

tax is a vital source of money to finance this endevour.

GERMAN Target Saldo:

The PIGS countries have been Financing their Current account with Target loans for 88% of deficit last 3 years.

Current account Eurozone overview:

Another overview PIGS Current accounts:

In contrast to US Eurozone do not settle this Target loans on regular basis.In US every April settlement with transfer assets,Gold etc

between the FED sucursals in US. A new facility in Eurozone to make regular settlements is highly needed to rebalance surplus vs deficits

to achieve a pan Eurozone economic growth.This goes along with a deeper Fiscal integration to support risk sharing among members.

On a GLOBAL basis revival of KEYES ideas about an INTERNATIONAL CLEARING UNION for regulating Financial imbalances.

Using BANCOR  distinct from national currencies a system of money creation and destruction not operating as FIAT Money system today.

Much of todays imbalances caused by usage of USD as Global reserve currency with unrestricted expansion capital movements worldwide.

A European such UNIT a must coming years!Now G20 is the Forum for planning such a  GLOBAL UNIT.Rebalancing also means

that surplus countries must stimulate their Economies for improved International total growth.More consumption in surplus areas and

increased  productivity growth in periphery .Germany must spend more to help recovery in general for Eurozone.Same goes for CHINA!

According to IMF Global current account balances  to rise over 2%.Until now no fiscal adjustments done in the world nr1 US economy.

This is of major concern and can trigger unexpected deleveraging of assets from emerging countries in US equity assets.A reliable plan

needed from US Government. Emerging countries Fiscal consolidation can trigger disorderly unwinding of assets threatening

GLOBAL ECONOMIC HEALTH.  IN EUROZONE we must  trust GERMANISATION spreading out to periphery will turn out well.

5.US and USD with GOLD and SILVER

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The USD is a debt based currency system.Borrow Money into existance.Work in future to pay in Future for consumption today.

Debt growth every year  or system IMPLODES! History shows all FIAT BASED currencies have failed!Looking forward a slow

current account deficit adjustment by FED and foreign Central Banks as needed with a slow depreciation of dollar depending on

US Fiscal policy. Another depreciation of 20% over a 10Y period likely.

A quick look on Gold and Silver

GLD Gold in uptrend over 200 ma(Moving average).Silver also in nice uptrend under 200ma that can provide resistance temporary.According to some Banks Gold target 2012  2300USD / ounce today 1650 .

6.CONCLUSIONS EUROZONE with RATING UPDATE

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GREECE

Greece expecting huge Haircut 100bilj.Euro. Until march 20th funding  running.After that the TROIKA and Eurozone leaders will

decide on further money injections to bankrupt state in a downward reccessionary spiral out of control.Economy of Greece

least competitive in Eurozone heading into sure disaster.How best deal with exit strategy of Greece from Euro headache for

Merkel and other Top leaders in Eurozone.Without a viable plan for recovery pointless throwing good money after bad in vain.

The final solution will be life support until a CLEAR agreement exists  including all parties involved.

ITALY

With Berlosconi as Captain  Italian  economy almost heading into a total disaster with substantial collateral damage and end of the EURO SAGA.

Now Captain Monti struggling to restore Market confidance and revive the Italian economy again.This is key for Eurozone area!

ESM Fund  starting in July and ECB will support Italy in this delicate situation.IMF also preparing some assistance through the ESM permanent

mechanism.A number of Fiscal reforms needed.Fiscal discipline never in high esteem by Italian population.Worse case than Spain making

GERMANISATION discipline difficult to fully implement but must be so.

SPAIN

Castellon empty airport recently built with no air  traffic is a good example off Spanish Budget discipline FAILURE.

Debt crisis in Spain heavily caused by overaged Male facist sympaty decision makers.Today with new right wing Government

the young FEMALE will be key for coming economic recovery and end of a too long gender suppression from former FRANCO dictatorship

and a catholic church family ideals distant from todays Global economy requirements. A final Kiss goodbye to facism and catholic total

obediance.Ongoing Trial of Judge GARZON in Spanish supreme court is a shamefull assault on democratic liberty expression.

All falling on  still remaining facism in Justice system.A country with Bull fights, a clear anti animal rights view still have some improvements to

Houseclean.

RATING UPDATES.

A row of ratings degradation falling like a cluster bomb over Eurozone from different institutes once again without too much effect

as Market have a clear picture of situation not based on Historical data.Ratings credibility is eroding as time goes by.

Nice to see their ugly faces demolished once and for all.In a Global Economy world their saying is narrowminded of no bearing

as a future indicator.Revision of ratings ! I pledge once again need for a total overhaul and Europe their own agency urgently.

Reason why ratings today turns obsolete is clear.The Market have a more GLOBAL view meaning they evaluate different Economy blocks

like US,EU,ASIA,etc.not so much individual Nations within blocks!

LENFRED FINANCIALS  to be continueed……………………….

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