The Resourceful Bear Blog

Jeffrey Garten expressed the vision of a global monetary authority in 2001.
Jeffrey E. Garten, while the dean of the Yale School of Management, on July 18, 2001, wrote in his NY Times article Free Trade Has to Be Managed, the genesis construct calling for a Global Monetary Authority, a GMA: "The forces that have increased flows of money, goods, services and information around the globe and helped create growth are now working to make the economic downturn deeper and more widespread.

Few mechanisms now exist to manage globalization. Cooperation among governments is increasing, but it is still uneven. We live in a world economy, but we lack institutions that could stabilize and regulate this economy.

President Bush and the other G-7 leaders have to decide whether they have the foresight to construct new systems that can regulate commerce across borders as well as act to moderate a worldwide recession".

In September 2008 Mr. Garten specifically called for a Global Monetary Authority.
On September 25, 2008, in Financial Times article, he wrote We Need A New Global Monetary Authority

In late October 2008, Australia Central Banker Guy Debelle states that US Federal Reserve Dollar Swap Agreements provide global financial stability and liquidity
Business Spectator presents the October 31, 2008 Reuters article RBA's Debelle Says Signs US Dollar Swaps Are Easing Liquidity Pressure which reports: "Top Australian policy maker on Friday said there were signs the Federal Reserve's massive expansion of US dollar swaps with other central banks seems to be working to ease liquidity pressures in global markets.

In a speech to a risk management conference, Reserve Bank of Australia, RBA, Assistant Governor Guy Debelle also said the domestic money market had proven resilient to the global crisis, thanks in part to an expansion of the central bank's liquidity operations.

Debelle, who heads the RBA's financial markets unit, said the Fed's expansion of US dollar swap agreements with an expanding range of other central banks seemed to be helping.

"Overall, it appears this has had some success with conditions in the US dollar swap markets improving over the last few weeks, and the cost of US dollar funding declining to more normal rates," he said.

The Fed established a dollar swap agreement with the RBA last year, essentially lending it US dollars that it can then lend out in return for collateral denominated in Australian dollars.

Just this week the Fed established $30 billion of swap lines with central banks in Brazil, South Korea, Singapore and Mexico, bringing the number of lines to 14.

Ten of the swap lines now amount to $255 billion, while those with the European Central Bank, the Bank of England, Bank of Japan and the Swiss National Bank are technically unlimited.

This sea of dollars seems to be meeting safe-haven demand for the currency across the world, helping pull down the three-month London interbank rate to 3.19 per cent on Thursday, from a ruinously high 4.82 per cent earlier this month.

Debelle said the RBA's expansion of its own domestic market operations had proved effective in meeting the demand for cash. It has widened the pool of eligible collateral for its repurchase agreements, extended the maturity of its lending and offered term deposits to commercial banks.

"In particular, the fact that the Bank has for a long time, dealt daily with a wide range of counterparties across a wide range of maturities has allowed us to respond quickly and flexibly," he said.

"Nevertheless, the Bank is continually reviewing all aspects of the operating framework to ensure that it is consistent with the evolving nature of the domestic financial market."

Will Dollar Swap Agreements lay the foundation and confidence for a Global Monetary Authority?
As evidenced by a pull down the three-month London interbank rate to 3.19 per cent on Thursday, from a ruinously high 4.82 per cent earlier this month, Dollar Swap Agreements are working to some degree.

The goal of a Global Monetary Authority is liquidity and stability, this is currently being provided by Dollar Swap Agreements, but the massive Dollar Swap Agreements are only part of the reason why the three month London interbank rate fell some. The other reason is that there has been profit taking on the unwinding of yen carry trade, better termed the euro carry trade, which is the EUR/JPY, which had fallen to the lowest level since 2003.

Stockcharts.com shows retracement in the yen carry trade ... FXE:FXY Daily ... FXE:FXY weekly

Cyclopip in BabyPips October 30, 2008 article Cross-Eyeing: EUR/JPY - Trade Adjustment shows the profit taking retracement in the chart of the EURJPY ... Retracement of the EURJPY

I think the effect of dollar swap agreements will be short lived. I expect a global financial breakdown is coming regardless of the US Central Bank dollar swap agreements.
My belief is that the 0.5% funded Bank of Japan currency traders will continue to short sell a number of currencies, and especially short sell the EUR/JPY, which will cause continued disinvestment globally. Interest rate differentials between central banks, as well as the indebtedness of emerging markets like the former soviet union nations of Ukraine, Hungary and Romania, traded by GUR, to the Austrians traded by EWO, will assure that stocks and currencies will continue to sell off with abandon. As I read, the Gaius Marius article CDS Funding Disaster, I can understand why the Fed has been aggressively pushing dollar swap lines and why it was so eager to "loan" AIG money. I look at the charts in Trader Tim Knight article Is It Back?, and concur that the markets are likely to fall lower again beginning tomorrow October 31, 2008.

Eventually a tough global monetary authority will arise.

Gold is the investment safe haven for those believe that the US Dollar has peaked in value and who want to be independent from a future Global Monetary Authority
Was a high been established in the US Dollar on October 27, 2008 at 86.75? Only time will tell! ... $USD Weekly ... $USD Daily

Jesse reports that Dubai runs out of gold.

The weekly chart of gold reads $738.50 ... $GOLD

Jesse shows that gold having hit $730 is likely to head higher.

Yes, gold is back to the $730 region of a year ago as is seen in the Kitco Alf Field Point of Recognition article of Oct 29 2007.

Is $730, strong support for gold? Tommorrow October 31, will likely tell.

I like to follow the five day Yahoo Finance chart of the EUR/JPY, USD/JPY, UUP, GLD, and RJI.

It's an ideal time to invest in gold: I recommend that one buy gold and put it far, far away from the current financial system, safe and sound in a guarded vault, like BullionVault and GoldMoney, with an account personally at streetTracks Gold Trust, and in physical possession of gold coins.

Introduction
The US Dollar and Treasuries fell as commodities, oil, and currency impaired stocks rose as the Federal Reserve cut the US Central Bank rate to 1%.

Commodities, oil, and currency impaired stocks rose on the Federal Reserve rate cut to 1%
GUR, 15%
RSX, 13%
EWZ, 12%
SLX, 4%
KOL, 7%
USO, 4%
RJI, 4%
JJG, 6% ... JJG has risen 9% so far this week
GLD, 0.3%

Financial and real estate stocks fell
XLF, -6%
IYR, -4%

The US Dollar is now history as a currency -- it will be tumbling lower in a death spiral with all currencies into The Abyss
World currencies, DBV, rose.

US Dollar, $USD, fell to 84.53 ... $USD

US Treasuries TLT fell to 94.91 ... TLT

The interest rate on the 10 Year US Government Note, $TNX, rose to 38.74 ... $TNX

FOMC reports that the Fed lowered the US Central Bank interest rate to 1%.

Commodities, $CRB, rose to $274 ... $CRB

Jesse reports that Dubai runs out of gold

The chart of gold, that is, $Gold, shows a rise to $754: $750 is strong support for gold ... $GOLD

Jesse shows that gold having hit $730 is likely to head higher.

The five day Yahoo Finance chart of the EUR/JPY, USD/JPY, UUP, GLD, and RJI, shows the yen carry trade retracing and the US Dollar Bullish ETF falling and commodities rising ... EURJPY rising, UUP falling and RJI rising

It's an ideal time to invest in gold: I recommend that one buy gold and put it far, far away from the current financial system, safe and sound in a guarded vault, like BullionVault and GoldMoney, with an account personally at streetTracks Gold Trust, and in physical possession of gold coins.

Wolfgang Münchau writing in Euro Intelligence Financial Times provides six reasons why Sarkozy's coup d'etat is likely to succeed.

Sarkozy's coup d'etat is a fulfillment of the bible prophecy of Revelation Chapter 6:1-2 where the first of four riders of the Apocalypse goes forth globally on a white horse in bloodless economic and political coup conquest.

A rising western world government is a prelude to the Beast System foretold in Revelation 13:1-4. Here is an artist's rendition of the seven institution led, world wide oligarchy, that is, beast system. This monster is spread out world wide: it occupies all the ten world regions as proposed by the Club of Rome in February 1974 as documented in the footnote 1. The North American Continent was established as one of these ten regions as documented in footnote 2.

A Sovereign, that is a one world ruler, is held forth in Revelation 13:5-10; his word, will and way will rule the nations; there will be no national sovereignty.

And Seignior, that is, a one world banker, who also acts as world religious leader, is described in Revelation 13:11-17; he will lead a global monetary authority, which will provide unified regulation of banking globally; he will install a global seigniorage wealth and commerce system (footnote 3); he will have the authority to settle payments on all debts and derivatives; as economic conditions worsen all wealth will be rented out to him.

Soon there is coming a total worldwide financial system breakdown, and eventually, once currencies are totally burned out (footnote 4); then the Seginior will demand that all take the charagma, meaning mark, or stamp, or tattoo upon, or ethching in, or badge of servitude, (footnote 5), prophesied in Revelation 13:17: "And that no man might buy or sell, save he that had the mark, or the authority of the beast, or the currency of his name."

Footnote 1: The Club of Rome made the call for regional governance in February 1974.
The Club of Rome is the premier think tank comprised of approximately 100 global leaders including scientists, philosophers and political advisors which envisioned totalitarian regional governance and a unifying global ethic --a world consciousness to solve interlocking world problems; and it relates this through published material such as 'Mankind at the Turning Point', and 'The First Global Revolution':

"Therefore we have concentrated out efforts in this report on a number of vital worldwide issues whose mastery we consider essential for man's survival and for an eventual transition into sustainable material and spiritual development of humanity."

"If the human species is to survive, man must develop a sense of identification with future generations and be ready to trade benefits to the next generations for the benefits to himself. If each generation aims at maximum good for itself, Homo Sapiens is as good as doomed."

"In order to achieve balance between regions in global development a more coherent regional outlook must be developed in various parts of the world so that the "preferable solutions" will be arrived at out of necessity rather than out of good will... we are talking about a regional sense of common destiny that will find its expression through appropriate societal, economic concepts and objectives... Such a regional outlook will create a "critical mass" necessary for the practical implementation of new and innovative ways of functioning in cultural, economic, and agricultural areas, especially on the rural level."

Footnote 2: North America is one of of the ten regions of global governance called for.
This region of global governance was announced by George Bush, Vincente Fox and Stephen Harper at Baylor University on March 23, 2005; this triumvirate committed the continent to global principles of security and prosperity as provided in the Security and Prosperity Partnership of North America, the SPP. The leaders called for initiatives of a continental economic congress, and supra regulatory body, that being the North Amrican Competitivenss Council, the NACC, to be supported by Working Groups and Stakeholders who work in harmonizing the institutions and regulations of once formerly sovereign and independent nations into a homeland for the continent's peoples. This North American Union, NAU, is what I call CanMexAmerica.

The Canadian think tank, Frazer Institute, makes a case for The Amero as the North American Continent's Currency relating: "In sum, the alternative methods for creating the benefits of a monetary union have a number of defects and basically are inferior substitutes. If a Canadian consensus emerges that flexible exchange rates are to blame for many of the country's economic ills, monetary union is the preferred alternative institutional arrangement".

Footnote 3: Seigniorage means top dog bank note system.
Seigniorage comes from the Scottish and Bank of England financial system which was devised to maintain the value of currency, The History of Seigniorage Wealth by Elaine Meinel Supkis, February 7, 2008 Money Matters Blog.

Footnote 4: Eventually, there will come an end to paper currencies.
Andy Sutton relates in FinancialSense.com article Anatomy of a Disaster – The Next Stop: "The magnitude of the final quantity of money that must be created is astronomical. From the standpoint of the authorities, it would be best if we continued to go into neverending debt. This way money could be multiplied through the banking system in an ‘orderly’ fashion. The next choices are handouts (think ‘stimulus’ packages), and direct monetization of debt (think outright purchase of new Treasury issues). The multiplier method leads to a ‘slow burn’ inflation such as what we’ve experienced to this point. However, there is an actual moment in time when the population cannot continue to accumulate debt at a level that will perpetuate the fiat system. Then we move to the latter two options which have a much greater likelihood of creating hyperinflation and the eventual end of the paper currency. We have now reached the tipping point where debt accumulation on a meaningful scale cannot continue. Therefore, we are left to watch the remains of the current liquidation of assets then reap the whirlwind of rampant, undisciplined monetary creation".

Footnote 5: Charagma is described by David Deschesne Editor, Fort Fairfield Journal.
The article A Mark in the Right Hand or in their Forehead, Fort Fairfield Journal, July 6, 2005 provides an explanation of Revelation Chapter 13:16-17.

Keywords
currencyofhisname, unifiedregulationofbankingglobally, canmexamerica,

Office Depot Share Price Plummets On Asset Backed Paper Exposure And Fears Of Economic Slowdown
Office Depot has sold off recently as fears grow that the firm will see a downturn, as it gets a hefty percentage of its North American business from small customers, who are facing pressure from inflation, frozen credit markets and the nation's economic slowdown.

And it does not get commercial paper from the Federal Reserve, rather it gets funding via a new $1.25 billion asset-based credit facility, which in general as a group, have been imploding in value. The facility, as reported by Wallace Witkowski of Marketwatch is secured by the company's inventory, accounts receivable, cash and depository accounts, has replaced its current $1 billion revolving credit.

The Resourceful Bear News Service now places Office Depot, ODP, and Office Max, OMX, on Death Watch; it may take a year or two, but these companies are now goners: These two now stand as tombstones to the former age of prosperity.

The ongoing Yahoo Finance chart of ODP and OMX shows that when bank lending died on September 11, 2008, these two legends of American retailing died ... Chart shows the failure of lending and the death of Office Depot and Office Max.

A World Wide Run On Currencies Is Underway
The Milton Friedman floating currency exhange system has collapsed, that is high yielding currencies have collapsed in value, sending central bank and bond market place interest rates soaring.

Tasneem Brogger and Helga Kristin Einarsdottir of Bloomberg report that Iceland's central bank has raised its key interest rate to 18% from 12% after the island reached a loan agreement with the International Monetary Fund. Iceland will receive about $2.1 billion from the Washington-based fund, according to a deal struck on October 24, 2008.

The rise comes less than two weeks after Iceland cut rates from 15.5%.

"I don't think 6 percentage points will make the krona any more attractive," said Henrik Gullberg, a strategist at Deutsche Bank AG in London ... "Basically what we're seeing is a complete liquidation of everything in emerging markets" ... and Iceland, even in the emerging-market universe, is very vulnerable" ... "Six percent isn't worth a lot if the currency drops another 15 percent".

Iceland and Hungary have had the worst loss in currency value amongst world currencies -- both their currencies went through the floor loosing over 30%. The Brazilian Real has cratered. Many countries have been in the throes of currency runs. A currency run is for all purposes the same thing as a bank run, however these runs are on nations and currencies not just individual banks.

Now Iceland's and Hungary's central banks are being forced by the International Monetary Fund, IMF, to raise their rates dramatically. Hungary just went to 11.5%. Brazilian bond interest rates are soaring.

Russia's credit default swap rates are above 1200 which is higher than Iceland's was just before its collapse. The markets no longer believe that the spending structure of the Russian state is viable as oil threatens to plunge below $60 a barrel. The foreign debt of the oligarchs ($530bn) has surpassed the country’s foreign reserves. Some $47bn has to be repaid over the next two months.

As currenices are imploding and interest rates are exploding higher, countries are falling like dominoes, beginning first with those that formerly had the highest yielding currencies, levels of borrowings, and levels of natural resource extraction and production.

The currency run on Iceland, liquidated its economy, which was based upon securitization and international savings. Hungary, Romania, other eastern union countries, and Russia will see their factories liquidated, that is, closed as lending ceases.

Liquidity comes at a cost: Iceland and Hungary are now owned by the International Monetary Fund. The people of Iceland have now for all pracitcal purposes been rented out to the IMF. Vulture Banking is the way of the IMF: it "assists" only the most desperate of countries, and on the most onerous and crippling of terms.

Soon those in Iceland and Hungary will see prices beyond Weimar: when one's economic infrastructure is liquidated, hyperinflation can be the only outcome.

Watcher on SurvivalBoards relates: "Icelands currency is now 'non convertible'. That means it technically has no value whatsoever and can not be used to purchase any needed imports. The Icelandic Central Bank has raised interest rates to 18% (Think about what that means for mortgages and credit cards for a moment) and has negotiated a large loan from the IMF in the hope that the Icelandic currency can become convertible again.

At the moment Iceland has to pay for all imports with it's limited reserves of foreign currency which are fast running out and is in urgent negotiations with Nordic countries and with Russia for emergency loans.

According to Bloomsberg news service, supermarkets in Iceland normally are resupplied each week, no supplies have arrived in the last two weeks and managers are quoted as saying that they don't know when the next deliveries of supplies are expected".

Austria, Sweden and Spain have heavy exposure to emerging market debt, and thus their currencies are likely to implode soon, sending their stocks awesomely lower, threatening to blow apart the European Union.
The Yahoo Finance chart of DEM, EMB, and PCY shows that emerging market debt traded variably today.
Emerging market junk bonds, DEM, 16%
Emerging market bonds, EMB, -4%
Emerging markets sovereign Debt, PCY 2%

Ambrose Evans Pretchard as quoted by Naked Capitalism relates that
EWP, Spain is in bad shape due to exposure in latin america.
EWD, Sweden is in very bad shape exposure in the baltics.
EWO, Austria central bank is in very, very bad shape due to exposure to central europe -- Hungary, Ukraine, and Serbia as well as the fact that it's debt exposure is equal to 85% of GDP.

Ambrose reports: "The latest data from the Bank for International Settlements shows that Western European banks hold almost all the exposure to the emerging market bubble, now busting with spectacular effect. They account for three-quarters of the total $4.7 trillion £2.96 trillion) in cross-border bank loans to Eastern Europe, Latin America and emerging Asia extended during the global credit boom – a sum that vastly exceeds the scale of both the US sub-prime and Alt-A debacles. Europe has already had its first foretaste of what this may mean. Iceland’s demise has left them nursing likely losses of $74bn (£47bn). (devastated without hope of recovery would be a better word, Richard) The Germans have lost $22bn".

The US and Japan sat out the emerging market credit boom. The lending spree has been a European play – often using dollar balance sheets, adding another ugly twist as global “deleveraging” causes the dollar to rocket. Nowhere has this been more extreme than in the ex-Soviet bloc. The region has borrowed $1.6 trillion in dollars, euros, and Swiss francs. A few dare-devil homeowners in Hungary and Latvia took out mortgages in Japanese yen. They have just suffered a 40pc rise in their debt since July. Nobody warned them what happens when the Japanese carry trade goes into brutal reverse, as it does when the cycle turns.

The Yahoo Finance chart of EWD, EWP and EWO shows the toll taken on Austria's and Sweden's stock markets due to the exposure to balkan and central european debt.

Austria is a "walking dead country", in a very short period of time it will be an Iceland.

Yves adds commentary: "Recall 40 nations (EU and Asian) met in Beijing over the weekend, endorsing Nicolas Sarkozy's call for a revamping of international banking regulations and more coordinated, tougher supervision. None of this directly addresses the looming currency crisis, but the markets sold off badly Friday, and if there is any stabilization or reversion on Monday, the backing away from the abyss plus the hope that the next phase of meetings, scheduled for November 15 in Washington DC, might ameliorate the situation, may put the currency crisis in abeyance for a couple of weeks".

Gold is the safehaven currency
Gold is rising as the world's currency and means of preserving wealth as is seen in the ratio of gold relative to local currencies and local stock markets.

Gold relative to the Brazilian Real and the Brazilian stock market ... Chart of GLD:BZF ... and ... Chart of GLD:EWZ

Gold relative to the Indian Rupe and the Indian stock market ... Chart of GLD:ICN ... and ... Chart of GLD:INP

The investment application
Given that the attempt to restart lending has failed, and there is a run on currencies world wide, if one has wealth, it is best to put it far, far away from the current financial system, safe and sound in a guarded vault, like BullionVault and GoldMoney, with an account personally at streetTracks Gold Trust, and in physical possession of gold coins.

The spiritual application: the currency crisis suggests that now is a spiritual time for "new seriousness" and "soberness",
Tom Bergin and Sinead Cruise of Reutuers report: "The credit crisis could propel some people in firmly secular societies such as Britain toward religion, said Lord Richard Harries, a member of Britain's upper house of parliament and a former Anglican bishop. "Perhaps after the last decades of conspicuous consumption and hollow celebrity culture we are entering what we might call an era of the new seriousness," he said in a talk on BBC radio."

"I have a renewed sense of soberness". I am aware that the investment facilities of TARP, and the lending facilities of CPFF are not going to work. And that currencies are imploding, and interest rates soaring, and nations toppling. As told by the Lord, in Luke 21:36: I watch and pray always that I might be accounted worthy to escape all these things that will come to pass, and to stand before the Son of Man.