To Axel Weber.Slight inflation= slight pregnant

[bimetalaupt]

Inflation is here>>> Ask China.. India.. You Father!! Recall the pasty.. Germany we have inflation and it is growing faster then a M1..

FRANKFURT (Dow Jones)--The European Central Bank's unease at rising inflation is showing, despite the claims of its president that December's above-target figure is nothing to worry about yet.

Two of the ECB's heavyweights, Juergen Stark and Lorenzo Bini Smaghi, warned in separate speeches Wednesday evening that there are considerable risks both in keeping interest rates at their current historically low level and in keeping in place the unconventional measures that have kept weaker euro-zone banks afloat as the financial crisis has spread.

The euro has risen by nearly six cents against the dollar since ECB President Jean-Claude Trichet said at the bank's regular press conference last week that the bank would do everything necessary to stop December's blip--largely driven by energy and commodity prices--from becoming a trend. That move reflects something of a change in market expectations about when interest rates will start to rise in the euro zone.

Since then, commentators have questioned whether the bank would actually have the courage to tighten policy while the health of many euro-zone countries and banks is so fragile. The ECB has already had to put its "exit strategy" on hold more than once owing to bouts of volatility in euro-zone financial markets.

Their skepticism was reinforced when Bank of Cyprus Governor Athanasios Orphanides said in an interview with Bloomberg afterwards that markets may have overreacted to the ECB's message.

But Wednesday's comments suggest that there is real concern at the development of commodity and energy prices, so often played down by economists as "temporary" or "volatile." Many analysts had played up the fact that core inflation, which excludes food and energy prices, was only 1.1% in December.

Bini Smaghi told a roundtable audience that "core inflation can provide policy makers with a downwardly biased assessment of overall price pressures and--mistakenly--suggest a pro-cyclical policy course."

Another concern, voiced by both Stark and Deutsche Bundesbank President Axel Weber the previous evening, was that the elements of inflation causing most concern are those that the ECB has least control over.

"What worries me about the short-term development is that gasoline and food prices are largely determined at a global level, and that [global] demand for these is rising sharply," Weber had told an audience at the Bundesbank's headquarters.

Stark and Bini Smaghi both argued that, because of the desire in many emerging economies to tie their exchange rates closely to the dollar, loose monetary policy in the developed world is effectively exporting inflation to the largest emerging economies.

Stark warned that inflation is already "a serious problem" in countries such as China and India, while Bini Smaghi argued that the tendency of those countries to accumulate foreign reserves and recycle the liquidity created by western central banks "intensifies the trends in asset and commodity prices, thus potentially leading to further imbalances and global inflation."

"When setting their policies, monetary policy makers in industrialized countries should take this dimension into account," Bini Smaghi warned.

All the same, there seems little chance of such warnings translating into near-term action by the ECB, because it has already committed itself to keeping its policy of offering unlimited one-week and three-month credit through the end of March. The Euro interbank offer rate--the rate at which banks lend among themselves--for three-month money has risen only five basis points to 1.02% since Trichet's press conference. :-XONLY!!!

Watch M3 and M2.. The EU is where the problem will start!!![/img]

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[Virgil Showlion]

A must-read for the "but housing shows we're in a deflationary environment" crowd, Bruce.

[The Virginian]

must-read for the "but housing shows we're in a deflationary environment" crowd, Bruce

Agreed,

Unless you are buying, selling or trying to borrow against your home the value does not matter much!

Everywhere it does matter there is inflation! Food, Fuel, Clothing, Entertainment......

[scaredshirtless]

Stagflation even...

[bimetalaupt]

Axel is very upset with me... Just read

European Central Bank Governing Council member Axel Weber said he expects inflation rates in Germany and the euro region to be below the bank’s 2 percent limit in the medium term.

“In the medium term, inflation rates below 2 percent should still be expected for the euro area as well as for Germany,” Weber, who heads Germany’s Bundesbank, said in a speech in Frankfurt today. “Inflation risks are still more or less balanced but upside risks could continue to increase. Therefore, the ECB council still considers the current interest rates appropriate. At the same time, future price developments have to and will be monitored very carefully.”

The ECB last week moved inflation fighting back into focus after consumer-price gains in the single-currency region breached the bank’s price-stability threshold for the first time in more than two years. Widening divergences between euro-region economies and a fiscal crisis that’s threatening to engulf the Iberian peninsula make it harder for the ECB to set its “one- size-fits-all” policy.

“Germany is benefitting considerably from the strong recovery of the global economy, especially in Asian emerging markets,” Weber said, adding that German exports to China have increased 80 percent from pre-crisis levels. After a temporary slowdown of momentum, “foreign demand is once again providing stronger impulses.”

While exports won’t grow at the same pace as last year, investment activity will “strongly increase” and private consumption should “rise considerably,” Weber said. Unemployment will average less than 7 percent in 2012, down from an average 7.7 percent in 2010.

The German economy, Europe’s largest, expanded 3.6 percent last year, the most since records for a reunified Germany began in 1992, and the Bundesbank forecasts growth of 2 percent this year. By contrast, the Greek, Irish and Spanish economies shrank last year, according to European Commission estimates, and Portugal’s is forecast to contract this year.

[bimetalaupt]

Jan 26, 2011 8:08:52 GMT -5 @scaredshirtless said:

Stagflation even...

SS., ;D
You said you needed a good hunting dog for the Beer Hunt??? ... Keep the saki warm please
Have you checked out the price of All natural Duck Food Prices are going up Faster then Deer Corn!!!

WE had an offer for EAST Euro bond Bundle of 8.75% yield... No takers!!!

Bi Metal and Company!!!

Attachments:

[scaredshirtless]

The Peking Duck was extremely good in Hong Kong. The beer was good too (Tsing Tao?).

I also do some of the grocery shopping. Oh yeah - prices be a risin'.

8.75 and NO takers!!! Wow... Tells ya something doesn't it?

How about Ireland CB allowed to print 51 billion Euros out of thin air. I believe that's a move even we haven't tried.

I kinda like Axel - but he's a little shy on "friend making" skills. I figure he's toast in that regard.

Had deer tenderloins last night - from the wife's long shot deer. They taste extra good!

If ya ever want to stay in Hong Kong - the locals put me up at the Mira Hotel. Nice place! With a 10% upcharge I got breakfast free among other things. That was a relative bargain. Worked out to 200 per night US - not bad in a big city. Nice place - the Bentleys (plural) out front were a giveaway in that regard. Its in the Tsim Sha Tsui district of Kowloon. Tourist area. Knutsford steps is a block away. Lots of pubs and restaurants. The bay front and "walk of the stars" is only a mile away. This was a good find!

I am still very worried about Europe. Feb 25th - new elections in Ireland.

GO IRELAND!!!!!!

So... What happens if Ireland backs out of their "bail out"?

[scaredshirtless]

Hey!!!!

I made TWO stars!!!!

[scaredshirtless]

ps

I don't post as often as some.

I have a life.

I'm just sayin....

[The Virginian]

I don't post as often as some.

I have a life.

I'm just sayin....

Too bad the Mods can't limit certain individuals to maybe 10 posts a day!

[bimetalaupt]

Then there is Axel Webers Good old days.. Summer 2010..with savers saying 11.6% !!! With 0.9%infaltion.. What went wrong in 6 months
Angela Merkel’s government is giving Germany something not achieved during the Kaisers, two World Wars or the development of the modern bond market: An interest rate of less than 3 percent on money borrowed for 30 years.

Germany’s 30-year bond yield dropped below that level for a second day after touching 2.96 percent yesterday. The sluggish global recovery from recession means German consumer prices will rise just 0.9 percent this year, according to International Monetary Fund forecasts, less than half the average since 1980. In the U.S., Pacific Investment Management Co. sees a 25 percent chance of a sustained period of falling prices, and the two-year Treasury note yield has also declined to a record low.

“The risk of deflation is much more real than the risk of inflation,” said Christoph Kind, head of asset allocation at Frankfurt-Trust, which manages about $20 billion. “The move in yields is a clear reflection that we are moving toward a deflationary environment. Nobody would be buying if there was a risk of inflation picking up.”

Memories of the hyperinflation that destroyed Germany’s economy in 1923 have set the blueprint for central banking since World War II. Today, bond values suggest that deflation is a much greater threat to economic stability.

Central banks around the world are weighing whether to introduce more stimulus measures to a global economy that may be sliding back into recession. While the Federal Reserve on Aug. 10 extended its bond purchase program to shore up the U.S. economy, the European Central Bank shows little appetite to risk stoking inflation by loosening policy.

Double-Dip

As central bankers debate, bond yields keep sliding. The yield on the two-year U.S. Treasury fell to 0.48 percent on Aug. 17 and the yield on the Japanese 10-year security is close to the lowest since 2003. U.S. consumer prices excluding energy and food held at a 44-year low of 0.9 percent in June.

“I do not think the deflation and double-dip is the baseline scenario, but I think it’s the risk scenario,” Pimco Chief Executive Officer Mohamed A. El-Erian said on Aug. 5.

The German 30-year yield rose 3 basis points to 3.005 percent as of 11:24 a.m. in Frankfurt today. The return on 10- year Japanese debt was at 0.925 percent.

The inflation-fighting tradition pioneered by Germany’s Bundesbank, after the hyperinflation of the 1920s undermined confidence in the Weimar Republic, has left central banks unaccustomed to worrying about declining prices.

“Fighting inflation is the old Bundesbank mentality and part of the DNA of German bankers,” said Fredrik Erixon, director of the European Centre for International Political Economy in Brussels. “This has spread to a lot of other central banks in the past 20 years.”

‘Suddenly Poor’

By the end of 1923, prices were doubling every 49 hours and one dollar was worth more than a trillion marks. The experience paved the way for Adolf Hitler’s rise to power.

“My mother came from a rich family but due to the hyperinflation they were suddenly poor,” said Peter Koester, 87, who worked in the film industry with actor Peter Ustinov, and was a fighter pilot for the Luftwaffe in World War II. “Thank God those times are over,” he said in a telephone interview from Starnberg, Germany.

When the Allies and German politicians started to rebuild the war-ravaged economy in the 1950s, the Bundesbank’s inflation-fighting zeal helped cement an economic boom that established the nation’s currency as a global benchmark.

The hyperinflation of the last century casts a long shadow. Thomas Hoenig, president of the Fed bank in Kansas City, Missouri, keeps a framed bill from Weimar-era Germany on a wall near his office, and has opposed the near-zero rate policy that he says could fuel asset bubbles.

Hunting Havens

Some economists say the drop in benchmark bond yields reflects credit quality concern prompted by this year’s European sovereign debt crisis. As investors seek havens for their funds, the spread between Germany’s 10-year bund and Greece’s equivalent government bond last week rose to 800 basis points for the first time since June. The Bundesbank today boosted its growth forecast for this year to 3 percent, from a 1.9 percent prediction made in June.

“Renewed concerns about the fiscal position of peripheral euro zone countries is helping boost demand for bunds,” said Marco Annunziata, chief economist at UniCredit Group in London. “Deflation fears are unjustified. Inflation is not a threat yet, but deflation is extremely unlikely.”

Stripping out the change in consumer prices shows that the real yield on 10-year bunds is currently 0.64 percent, compared with the mean of 2.03 percent since January 2000.

Hoarding Cash

Policy makers will find it tougher to combat deflation because companies are hoarding cash and individuals are saving, according to El-Erian at Pimco. That reduction in private-sector spending makes government policies to stimulate the economy less effective, he said.

Consumers in the world’s largest economy saved 5.5 percent of their disposable income last year. In Germany, the rate was even higher, climbing to 11.4 percent.

“It’s fair to say the bond market is currently pricing in a significant risk of deflation,” said Derrick Wulf, a portfolio manager at Dwight Asset Management Co. which oversees $64.3 billion in Burlington, Vermont. “Not necessarily a unanimous expectation of deflation, but a significant risk.”

[bimetalaupt]

Axel Weber has given Germany the one thing Germany has not had in 130 years.. Price STABILITY!!! HE IS A NATIONAL HERO TO THE SAVER.. NOW SAVING 11.6%!! AND SENDING THE 30 YEAR BONDS TO UNDER 3%!!! A REAL LIFE PRESTON MARTIN FOR THE GERMAN PEOPLE!!! LIKE THE FEDERAL RESERVE SYSTEM IN THE USA,, IT IS ALL ABOUT INDEPENDENT THINKING AND INDEPENDENT AUTONOMY

THE BUNDESBANK is one of the wonders of the Wirtschaftswunder that was ushered in by Ludwig Erhard's great reforms of 1948. Before the establishment of the Bundesbank in 1957, the Bank Deutscher Lander, a creation of the allied military government, had emphasized the importance of monetary policy in ensuring price stability. Both banks owe their independence and prestige to two catastrophes. The first was the great hyperinflation of 1920-23. This expropriated the wealth of the German middle classes and paved the way for Hitler; the gutter became the government. The second catastrophe was the hyperinflation of 1945-47--a consequence of the massive deficit financing of World War II. The Reichsmark currency was completely destroyed and the currency reform of 1948 ushered in the deutschemark, the Grail of which the authorities of the Bundesbank are the guardians.

During the early 1870s, the numerous states of Germany had fragmented currencies which were unified by the creation of the Reichsbank in 1876. From its inception the Reichsbank was completely dependent on the government. But as Germany had joined the gold standard, such dependence was not a matter of great concern. One of the central principles of international monetary economics is that if one fixes the exchange rate, then there is little or no scope for an independent monetary policy...a simple lesson that is forgotten more often than learnt. So, although Germany rarely obeyed the implicit rules of the old gold standard (it was a notorious hoarder of gold), the convertibility requirement prevented any inflationary financing until the abrogation of the standard in 1914. Then, at the behest of governments, the Reichsbank, by monetizing the large government deficits, ensured the hyperinflation of 1920-23.

As a result of the advocacy of Montague Norman, the powerful Governor of the Bank of England, and the pressure exerted by the Allies in May 1922, the Reichsbank was made independent of government by the Autonomy Act. The monetary reform of 1923 and the creation of the new stabilizing Rentenmark--"backed by the real estate of the Reich"--paved the way for the establishment of a new currency, the "Reichsmark," which was based on the gold exchange standard. The Reichsbank remained independent of government.

With the accession of Hitler, however, the Reichsbank was soon put in its place. Through one encroachment after another, the independence of the Reichsbank was repudiated. In 1937 it was made subject to the instructions of the Fuhrer, Hitler. In January 1939 six of its eight directors were dismissed when they criticized the excessive borrowing required to finance Hitler's spending plans. Thus Germany was all set for the great inflation that followed World War II.

It is not surprising that the German people developed a dread of inflation. Just as the hyperinflation of 1920-23 was important in projecting Hitler into power and to the devastation of war-time defeat, it also caused the complete collapse of the currency and of the economy after World War II. Never again. The independence of the central bank from government became the basis for the forerunner of the Bundesbank, the Bank Deutscher Lander, which was set up to implement the currency reforms of 1948. And with the establishment of the Bundesbank in 1957, a high degree of independence was written in the Bundesbankgesetz (charter).

All this is described in considerable accurate detail in David Marsh's book. Alas, he could not resist the temptation to dwell on the Nazi-party membership of some of the distinguished staff and councils of the Bundesbank. Such smear jobs might have been omitted. Yet Marsh is a gifted journalist and his command of events is most impressive. But he does not have the same respect for ideas as he does for the nitty-gritty of reportage.

In my view the change in ideas was of great importance in converting a collectivist Nazi state into the liberal market economy of the Federal Republic. The context of these great changes in Germany was the development of ideas behind the Sozialwissenschaft--the social market economy. A small band of German intellectuals, led by two great liberal (in the European and literal sense) economists, Walter Eucken and Wilhelm Ropke, bravely opposed the increased socialization and central planning of the Hitler economy and developed the ideas of Ordo-Liberalism (notably in Walter Eucken's book Grundsatze der Wirtschaftpolitik, Tubingen, 1952). The primary focus was through Ordnungspolitik, the "constituent principles" of a market economy (monetary stabilization, free entry, private property, and above all maintaining competition). But this Ordo-Liberalism was modified by Alfred Muller-Armark (Erhard's state-secretary) and other scholars who felt that, as a subsidiary matter, state intervention was needed in order to ensure a safety-net. They wanted to avoid the alienation of dispossessed and disaffected groups that had provided such a fertilizer for the poseurs and demagogues of fascism and communism. This modified Ordo-liberalism was called the "social market economy." Eucken, above all, emphasized the need for price signals, undistorted by inflation, for the market to work efficiently and thus the requirement of a stable general price level. It seems that Eucken, rather like Milton Friedman in our day, would have preferred to bind the central bank to strict monetary rules. But the preponderant opinion was in favor of the conduct of monetary policy by an independent central bank. JUST LIKE THE ARGUMENTS DR. JAMES BALLARD FROM STINT LUIS FEDERAL RESERVE SYSTEM HAS ABOUT WHY THE SECOND BANK OF THE UNITED STATES FAILED.. IT WAS NOT INDEPENDENT..

[bimetalaupt]

Jan 26, 2011 8:08:52 GMT -5 @scaredshirtless said:

Stagflation even...

S>S>,
Stagflation.. that seems to be what Ben B. is declaring..Talk Talk about about double doubledouble talk ta ;D ???lk!!!

Just a thought,
Bruce

Federal Reserve Press Release

Release Date: January 26, 2011
For immediate release

Information received since the Federal Open Market Committee met in December confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions. Growth in household spending picked up late last year, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, while investment in nonresidential structures is still weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. Although commodity prices have risen, longer-term inflation expectations have remained stable, and measures of underlying inflation have been trending downward.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.

To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities as announced in November. In particular, the Committee is maintaining its existing policy of reinvesting principal payments from its securities holdings and intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that :oinflation, over time, is at levels consistent with its mandate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.
2011 Monetary Policy Releases

[scaredshirtless]

Yeah - a unanimous vote???

ps - Bruce - you're kinda likin' these emoticons aren't you???

I couldn't resist - you know that.

[bimetalaupt]

No Fear of Inflation in Germany as 30-Year Yield Drops Below 3%
Angela Merkel’s government is giving Germany something not achieved during the Kaisers, two World Wars or the development of the modern bond market: An interest rate of less than 3 percent on money borrowed for 30 years.

Germany’s 30-year bond yield dropped below that level for a second day after touching 2.96 percent yesterday. The sluggish global recovery from recession means German consumer prices will rise just 0.9 percent this year, according to International Monetary Fund forecasts, less than half the average since 1980. In the U.S., Pacific Investment Management Co. sees a 25 percent chance of a sustained period of falling prices, and the two-year Treasury note yield has also declined to a record low.

“The risk of deflation is much more real than the risk of inflation,” said Christoph Kind, head of asset allocation at Frankfurt-Trust, which manages about $20 billion. “The move in yields is a clear reflection that we are moving toward a deflationary environment. Nobody would be buying if there was a risk of inflation picking up.”

Memories of the hyperinflation that destroyed Germany’s economy in 1923 have set the blueprint for central banking since World War II. Today, bond values suggest that deflation is a much greater threat to economic stability.

Central banks around the world are weighing whether to introduce more stimulus measures to a global economy that may be sliding back into recession. While the Federal Reserve on Aug. 10 extended its bond purchase program to shore up the U.S. economy, the European Central Bank shows little appetite to risk stoking inflation by loosening policy.
Double-Dip

As central bankers debate, bond yields keep sliding. The yield on the two-year U.S. Treasury fell to 0.48 percent on Aug. 17 and the yield on the Japanese 10-year security is close to the lowest since 2003. U.S. consumer prices excluding energy and food held at a 44-year low of 0.9 percent in June.

“I do not think the deflation and double-dip is the baseline scenario, but I think it’s the risk scenario,” Pimco Chief Executive Officer Mohamed A. El-Erian said on Aug. 5.

The German 30-year yield rose 3 basis points to 3.005 percent as of 11:24 a.m. in Frankfurt today. The return on 10- year Japanese debt was at 0.925 percent.

The inflation-fighting tradition pioneered by Germany’s Bundesbank, after the hyperinflation of the 1920s undermined confidence in the Weimar Republic, has left central banks unaccustomed to worrying about declining prices.

“Fighting inflation is the old Bundesbank mentality and part of the DNA of German bankers,” said Fredrik Erixon, director of the European Centre for International Political Economy in Brussels. “This has spread to a lot of other central banks in the past 20 years.”
‘Suddenly Poor’

By the end of 1923, prices were doubling every 49 hours and one dollar was worth more than a trillion marks. The experience paved the way for Adolf Hitler’s rise to power.

“My mother came from a rich family but due to the hyperinflation they were suddenly poor,” said Peter Koester, 87, who worked in the film industry with actor Peter Ustinov, and was a fighter pilot for the Luftwaffe in World War II. “Thank God those times are over,” he said in a telephone interview from Starnberg, Germany.

When the Allies and German politicians started to rebuild the war-ravaged economy in the 1950s, the Bundesbank’s inflation-fighting zeal helped cement an economic boom that established the nation’s currency as a global benchmark.

The hyperinflation of the last century casts a long shadow. Thomas Hoenig, president of the Fed bank in Kansas City, Missouri, keeps a framed bill from Weimar-era Germany on a wall near his office, and has opposed the near-zero rate policy that he says could fuel asset bubbles.
Hunting Havens

Some economists say the drop in benchmark bond yields reflects credit quality concern prompted by this year’s European sovereign debt crisis. As investors seek havens for their funds, the spread between Germany’s 10-year bund and Greece’s equivalent government bond last week rose to 800 basis points for the first time since June. The Bundesbank today boosted its growth forecast for this year to 3 percent, from a 1.9 percent prediction made in June.

“Renewed concerns about the fiscal position of peripheral euro zone countries is helping boost demand for bunds,” said Marco Annunziata, chief economist at UniCredit Group in London. “Deflation fears are unjustified. Inflation is not a threat yet, but deflation is extremely unlikely.”

Stripping out the change in consumer prices shows that the real yield on 10-year bunds is currently 0.64 percent, compared with the mean of 2.03 percent since January 2000.
Hoarding Cash

Policy makers will find it tougher to combat deflation because companies are hoarding cash and individuals are saving, according to El-Erian at Pimco. That reduction in private-sector spending makes government policies to stimulate the economy less effective, he said.

Consumers in the world’s largest economy saved 5.5 percent of their disposable income last year. In Germany, the rate was even higher, climbing to 11.4 percent.

“It’s fair to say the bond market is currently pricing in a significant risk of deflation,” said Derrick Wulf, a portfolio manager at Dwight Asset Management Co. which oversees $64.3 billion in Burlington, Vermont. “Not necessarily a unanimous expectation of deflation, but a significant risk.”

[bimetalaupt]

Jan 27, 2011 18:48:12 GMT -5 @scaredshirtless said:

Yeah - a unanimous vote???

ps - Bruce - you're kinda likin' these emoticons aren't you???

I couldn't resist - you know that.

SS.. If you think the .. Ask them if they remember the inflation of 1920 to a Senior in Germany.. many well to do families ended up worth a lot less in terms of real value of money..I am writing a long short story about the two Persian Princes.

Bruce
The market may look for guidance from the FOMC rate decision and OTC option expiry later today. The outcome of the FOMC policy meeting takes centre stage today and the committee is widely expected to leave rates unchanged at 0-0.25%. Markets will focus on the tone of its statement. The Fed is also expected to issue updated forecasts for GDP and CPI. Negative comments are possible especially after the record low consumer confidence data yesterday – this may lead to market volatility and risk aversion.

Reuters reports that German Finance Minister Peer Steinbrueck warned against the central bank selling gold reserves, after a government budget spokesman said the Bundesbank could sell gold or foreign exchange reserves in order to help finance government stimulus measures. The spokesman added that the Bundesbank had to be respected if it decided not to sell gold reserves.

"I remind all those who hastily talk about the sale of gold reserves of the negative experiences many finance politicians, including Theo Waigel," Steinbrueck said, referring to the former German finance minister. "Close coordination with the Bundesbank prevents you from falling into a media trap. I can only advise in favour of that," Steinbrueck told German daily Berliner Zeitung.

Steinbrueck, whose Social Democrats (SPD) rule in a grand coalition with Merkel's conservatives, said the Bundesbank had successfully rejected such demands in the past. Former finance minister Theo Waigel ran into a storm of protest in 1997 when he suggested revaluing Bundesbank gold reserves to help the country qualify for Europe's monetary union.

Memories of Hyperinflation
Germany, Europe's largest economy, holds around 11 percent of worldwide gold reserves. The Bundesbank currently holds around 3,400 tons of gold, worth around 70 billion euros ($92.43 billion) at current prices. Under the terms of a five-year deal between 15 European central banks, the Bundesbank has consistently passed on most of the quota it can sell each year to other institutions. The Bundesbank is the world's second-largest holder of gold after the US Federal Reserve, and has sold just 20 tonnes out of total reserves of over 3,000 tonnes in the past five years.

The German Bundesbank recently clearly stated how they view gold as an essential monetary asset.

"National gold reserves have a confidence and stability-building function for the single currency in a monetary union," the Bundesbank recently reaffirmed. The prudent bankers in the Bundesbank said that financial and political uncertainty make their gold reserves even more important than before. The German experience of the hyperinflation of the Weimar Republic makes German central bankers wary of putting all their faith in fiat paper currencies backed by nothing except by confidence in politicians and central bankers.

This is something that Gordon Brown had forgotten when he sold much of Britain’s gold reserves at the very bottom of the market (indeed the announcement in advance of the intention to sell UK gold reserves contributed to a fall in the gold price to record lows) and which may lead to considerable monetary difficulties for the British pound and sterling in the coming years.

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[bimetalaupt]

Feb 12, 2011 22:08:08 GMT -5 @franktheimpaler said:

Good ole Axel has resigned...Merkel pushed him out as soon as he said he did not want to represent Germany as the new head of the EUC bank...bye bye AXEL...he got the AX!!!

Frank,
The word on the street is he is in line for CEO for Deutsche Bank.

I would not want to be Number two to Merkel with out my Double Barrel Merkel rifle.
Also Deutsche Bank is in hot water with the Federal Government over interest rate swaps they sold to city and state government in Germany. This may or may not be germain to his leaving Bundisbank and not wanting to have his name on the mess when Greece defaults. Well it look like one more "War of the roses".. Louie thought he won it already..He did not make it to New York but Buttons did.. Wish ere the best.. Be nice to have your litter-mate crowned..
Just a thought,
Bruce

FRANKFURT (Dow Jones)--Germany's highest civil court Tuesday said it will rule on March 22 whether or not Deutsche Bank AG (DB, DBK.XE) properly advised a company on an interest-rate swap purchase.

The outcome could have wide implications for similar, pending cases.

Deutsche Bank and other banks sold interest-rate swaps to German municipalities, government-owned utilities and companies, and a number of lawsuits for alleged violation of duties are underway.

The court, Germany's Federal Court of Justice, or Bundesgerichtshof, Tuesday heard a charge brought by Ille Papier Service GmbH. The company accuses Deutsche Bank of not having sufficiently informed it about the risks attached to an interest-rate swap the bank sold to Germany-based Ille Papier in 2005. By buying the "spread ladder swap," Ille was aiming to save on interest payments on loans, but eventually it ended up losing more than EUR500,000, which it seeks to recover from the bank.

According to FAZ.NET, the online edition of Frankfurter Allgemeine Zeitung, the highest court's chief judge, Ulrich Wiechers, during the hearing Tuesday expressed doubts as to whether the bank properly advised the medium-sized company on the risks involved in this highly complex financial derivatives transaction.

Ille is a maker of sanitary products with annual sales of around EUR38.5 million in 2006, the latest figure available on its Web site.

According to FAZ.NET, Chief Judge Wiechers also said he perceived a potential conflict of interest, as the products had an initial "negative market value" that covered the bank's fees. The products were consciously designed in a way that "the bank's profit is the plaintiff's loss," Wiechers said, according to FAZ.NET, noting that German securities trading regulation now also requires disclosure of such information.

A Deutsche Bank spokesman said the bank will be able to say if and to what extent other interest-rate swap deals will be affected only after the court has ruled and the bank has analyzed the court's written legal opinion, if needed.

Seven similar lawsuits involving Deutsche Bank are pending at the Federal Court of Justice, while 17 other lawsuits are pending at lower courts, the bank spokesman said. The total amount at stake is "very limited," the spokesman said.

Deutsche Bank's lawyer, Reiner Hall, rejected the notion that the bank hadn't properly informed Ille Papier about the risks involved. According to FAZ.NET, Hall said Ille's authorized representative had received a calculation and disclosure of all risks, including the risk of an unlimited, high loss. Hall also rebutted the court's opinion that the swaps are highly complex types of investments. "Every high-school graduate is able to understand such a calculation formula," the lawyer was quoted by FAZ.NET.

Hall also warned against far-reaching implications of the court ruling, as a requirement to disclose fees and profits built into a product could cause "a second financial crisis," according to FAZ.NET.

If banks were required to disclose the profit calculated into financial products they sell, this could cost the industry billions of euros, as customers unhappy with their returns could seek to reverse the contracts, Hall said according to FAZ.NET.

Previously, two lower courts had ruled against Ille Papier. The company appealed those court decisions.

Deutsche Bank sold the interest-rate swaps to more than 100 companies and municipalities.

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[bimetalaupt]

I thought this was not the outcome he wanted but money talks.

BERLIN—Germany's top central banker resigned, likely dashing Chancellor Angela Merkel's hopes of making a German the next head of the European Central Bank and complicating Europe's search for a way out of its debt crisis.

Bundesbank President Axel Weber will leave office on April 30, the German government said after Mr. Weber met Ms. Merkel on Friday. The resignation comes after Mr. Weber angered the chancellor this week by letting Bundesbank colleagues know he intended to leave central banking and no longer wanted to become ECB president.

Mr. Weber declined to comment to reporters as he left the Chancellery in ..

[bimetalaupt]

Feb 13, 2011 10:19:27 GMT -5 @franktheimpaler said:

I TOLD YA SO !!!


She is one tough bitch Chancellor!

Frank,
You got Louie all excited... You said the Word.. He like puppies..every seen six Japanese chin playing with an older dog!!! you will be

Bruce

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[bimetalaupt]

Frank,
The tiff was over France.. Both France and Germany must cut spending to meet the EU mandate for solvent government.. Can not use bond to finance the operations or retirement systems.. Looks like the retirement age is going to 69. ( math model at the SAAR University).
After a series of tiffs, France and Germany are doing deals again. In exchange for weaker sanctions on states breaching the EU’s public debt and deficit rules, France on Monday acceded to German demands to reopen the European Union’s treaties as a prelude to creating a permanent mechanism to resolve future sovereign debt crises. The deal is both good and bad news.

The good news is that it raises the chances that the EU will countenance the possibility of sovereign default. The advantages of a formal mechanism are obvious: it would spare taxpayers the pain of having to bail out fiscally incontinent governments; and it would encourage markets to discipline governments indulging in overly lax fiscal policies. In a union that has shown no aptitude for this task, the threat of default may be the best way to avoid irresponsible borrowing and lending. Some countries fret that this would raise their borrowing costs. That is exactly the point.

[bimetalaupt]

Frank,
Will do.. From German,
He also represent in matters of substance similar positions as the former German ECB candidate, outgoing Bundesbankpräsident Axel Weber. "I would automatically in a minority," said Steinbrück. Weber, wants his office in the MAJORITY... not to fight the the 15 nations ..France and Germany working as one

[bimetalaupt]

Frank,
I am hearing Weber Burned his bridge to banking also..
Bruce
Deutsche Bank head Ackermann had Axel Weber as the successor in sight. But after the desertion, he is a leader could hardly acceptable.
The three men are in their Element, as they talked last July in the Hotel "The Grove" in Hertfordshire North London meeting. Only welcomes Anshu Jain, the chief writer and businessman of Deutsche Bank and hosts, the many sharpley dressed gentlemen and few women from around the world. Then there CEO Josef Ackermann its assessment of the global situation before Bundesbank president Axel Weber enters the Podium and on the debt crisis in the Eurozone speaks.

At some of the speeches Alex made an " ASS" of himself and embarrassed German bankers.. The events were with the President of the ECB speaking.
It is the annual "Global Markets Conference" of Deutsche Bank, and some 250 billionaire(in euro) guests, hedge fund Manager and asset managers, are enthusiastic about the presentations of the three bankers, and so brilliantly dozen seem to harmonise. Axel had the job all but in his hands ( ECB President).. Did he want it if he did not have power to currect the problems of the weak states???

At that time, in the summer 2010 pretty accurate, whom he would know the acting chief executive Ackermann one day as his successor would: Central banker Weber. At all Statesmanlike, eloquent, with roots in Germany and best political links. Ackermann also know, however: there is no easy task, Weber all the power banker as Jain vorzusetzen. But with the right tactics and the necessary skill would have success. I do not know Jain vorzusetzen.. Sorry.. Rothschilds I understand did not like Weber.. He did not have "Class".. let Sir Nat run it??? He got class!!!

[bimetalaupt]

Feb 14, 2011 9:28:46 GMT -5 @franktheimpaler said:

I think those guys are all the same...no difference who you pick...they keep each others secrets

Frank,
And your watch Said " Nov 12" and it is deer season... I will not tell if you will not.. Top of the tower is 500 feet.. We can see a ....... Never saw a pig with spikes before"

The Dear Hunter

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