Quanitative Easing Begins Again in Europe, May Be Coming to a United States Near You, The Case for Gold, and Bernanke Gets Trashed?

It's official, it looks like Italy is about to be bailed out:

Former Bank of England policy maker Willem Buiter said the European Central Bank will revive its bond-buying program to safeguard this week’s auction of Italian bonds.
“The ECB will intervene on whatever scale is necessary to allow Italy to conduct its auction on Thursday,” Buiter, now chief economist at Citigroup Inc., told reporters in London today. “If the ECB doesn’t come in, the Italian bond auction is likely to fail.”

Translation: "The market doesn't trust Italy anymore, it's unwilling to take the risk and invest, the European Central Bank must step in to save Italy's ass."  Simple as that, but then again simple truths have never been a central banker's strong point.  How much longer are Germans gonna put up with this?

Now that the ECB printing press seems to be warming up again, Switzerland doesn't want to miss out on the party, via WSJ:

The collateral damage from the U.S. and European debt crises shifted the front lines of the currency wars to Switzerland on Wednesday.

In a surprise effort to fend off a flood of money entering the country from investors seeking a safe haven, the Swiss National Bank cut interest rates to nearly zero and pledged to pump billions of newly minted francs into its markets.

Calling its currency "massively overvalued," the central bank said it "will take further measures against the strength of the Swiss franc if necessary."

What kind of Keynesian moron would advocate for stemming the inflow of capital into a country?  Yes, God forbid the citizens of Switzerland have increased purchasing power that may come at the expense of exporters.  We must protect the exporters and the banks who specialize in borrowing short and lending long!

America can't be left out of the QE fun now can it?  Don't worry, it looks like former director of the Fed's monetary chair committee, Don Kohn, is prepared for QE3, via an interview with WSJ:

In an "exclusive" interview with the Fed's last tree monetary affairs committee, Donald Kohn, Vince Reinhart and Brian Matigan, Hilsenrath observes that according to these masters of the universe the chance of another recession is 20-40%, which we are confident is a given at 100%, but more importantly, he quotes Don Kohn who "said the Fed still has some options to support the economy, but "they're kind of limited." He said he expects the central bank, which holds a policy meeting Aug. 9, to wait and see whether the recovery is really losing steam before taking any action. If that's the case--and inflation is coming down--then he would give "very serious consideration" to a new round of bond purchases, he said."

If the excess reserves keep slipping in the money supply like they recently have, there will be no need to worry about deflation and QE3.

With all the talk of more money printing, the fundamentals for a rise in the price of precious metals look strong.  Goldcore agrees an provides plenty of rational and graphs to prove gold is not at all in a bubble:

For more than 3 years - since gold rose above its nominal high of $850/oz in February 2008 - there has been much talk about gold being a bubble.
Nouriel Roubini, professor of economics at New York University's Stern School of Business, is one of the more prominent financial and economic experts who said gold was a bubble and many other experts internationally echoed his sentiments.
On December 10th, 2009, with gold at $1,100 per ounce, Roubini, said, "all the gold bugs who say gold is going to go to $1,500, $2,000, they're just speaking nonsense". Roubini went on to say ,"I don't believe in gold."
Gold has now risen 50% since then and Roubini has been silent on the gold price.

The precious metals of gold and silver are driven by a wide variety of factors, including money supply, debt levels, currencies, CDS spreads, interest rates, inflation and fabrication demand from downstream sectors such as jewelry, electronics, and solar applications.
Investment demand has been one of the primary drivers more recently as investors have used precious metals as a store of value in the face of dollar and currency depreciation as well as a general hedge against inflation.
Investment demand includes significant and growing demand from store of wealth buyers in Asia, investment and diversification demand from hedge funds, pension funds and central banks and monetary demand from central banks.
This demand is due to concerns about the global economy, growing inflation risks and the real risks posed by currency debasement being seen globally.
Gold remains the preserve of the smart money, many of whom predicted the current financial and economic travails. 
Risk aversion and concerns about wealth preservation due to currency depreciation remain the primary demand drivers.

U.S. M2 Growth Expands in June, Correlates High With Gold

The U.S. M2 money supply accelerated in June to a 6.0% yoy pace, the highest reading in 22 months. The U.S. consumer price index (urban consumers) remained at a 3.6% yoy pace in June, in line with May's results. The correlation between the total U.S. M2 and gold has exceeded 0.90 since November 2004.

China M2 Money Supply: M2 Growth is Decelerating, Yet Still Rising

Gold Moves Higher with Chinese Inflation

China’s M2 money supply has been rising by 20%, Switzerland’s by 25%, Russia’s by 30%, and the world’s by 8%-9%. Japan’s M2 is expected to move higher after recent events. In order to fight economic and debt issues, paper currency has been printed at historically high levels.

Rising Debt Levels Drive Gold and Silver Higher

Here is a very entertaining CNBC interview with the great Marc Faber who has the same sentiments of gold though thinks there may some optimistic exuberance in the market and may lead to a small correction very soon:

Gotta love his suggestion on firing half the government workforce, including the President.  I would also throw Congress into that bunch.


Speaking of entertaining, check out this absolutely hilarious Onion article:

Drunken Ben Bernanke Tells Everyone At Neighborhood Bar How Screwed U.S. Economy Really Is

SEWARD, NE—Claiming he wasn't afraid to let everyone in attendance know about "the real mess we're in," Federal Reserve chairman Ben Bernanke reportedly got drunk Tuesday and told everyone at Elwood's Corner Tavern about how absolutely fucked the U.S. economy actually is.
Bernanke, who sources confirmed was "totally sloshed," arrived at the drinking establishment at approximately 5:30 p.m., ensconced himself upon a bar stool, and consumed several bottles of Miller High Life and a half-dozen shots of whiskey while loudly proclaiming to any patron who would listen that the economic outlook was "pretty goddamned awful if you want the God's honest truth."
"Look, they don't want anyone except for the Washington, D.C. bigwigs to know how bad shit really is," said Bernanke, slurring his words as he spoke. "Mounting debt exacerbated—and not relieved—by unchecked consumption, spiraling interest rates, and the grim realities of an inevitable worldwide energy crisis are projected to leave our entire economy in the shitter for, like, a generation, man, I'm telling you."

The whole article is great and uncannily resembles what is really happening in the U.S. economy.  It's hard to believe it even came from the Onion.

I will end with a pretty good interview of Judge Napolitano explaining why the atrocious new "Super Congress" is unconstitutional:

Update- Looks like we have an all out currency war on our hands folks.  First was the Swiss National Bank, then threat of ECB money printing, now Japan:

And from Bloomberg:

• Japan Intervened in Yen, Nikkei Says
• Japan Intervened to Sell Yen, Finance Minister Noda Says
• Yen Falls as Much as 1.8% to 78.43 Per Dollar After Intervention
• Japan’s Intervention Was Unilateral, Finance Minister Noda Says
• MOF sold under Y500 billion in intervention: 2 dealers
• Noda Says He Hopes Bank of Japan Will Take Appropriate Actions

Bloomberg sums the whole situation up:

Just eight months ago, Brazilian Finance Minister Guido Mantega declared a “truce” in competitive currency devaluations. Now, Japanese and Swiss moves to weaken the yen and the franc show reviving tension in foreign-exchange markets as the deteriorating U.S. economy weighs on the dollar.
Japan sold yen today, causing the currency to weaken as much as 3.8 percent against the dollar after rising 5 percent last month. “Ongoing one-sided moves” would hurt the recovery from a March earthquake, Finance Minister Yoshihiko Noda said. Yesterday, the Swiss National Bank cut interest rates to rein in the franc after a gain of about 36 percent in the past 12 months.

Turkey’s lira fell 1.1 percent to 1.7129 per dollar at 12:08 p.m. in Istanbul today after the central bank cut a key interest rate.

South Korea’s government is reviewing “all possibilities” on curbing capital inflows, Finance Minister Bahk Jae Wan told reporters in Seoul today, adding that he’s “closely monitoring” the situation. The won fell 0.1 percent to 1,061.70 per dollar at the 3 p.m. close in Seoul after touching a three- year high on July 27.
The Philippines is prepared to impose controls to cap volatility after the peso rose to a three-year high this week, central bank Governor Amando Tetangco said in an e-mail late yesterday. The bank “will not go against the fundamental currency trend but will not hesitate to use tools, including imposing prudential limits on certain transactions of banks,” he said.

As Margaret Thatcher once said, socialism doesn't work because you eventually run out of other people's money.  Well currency devaluation doesn't work when every country you are trying to export to does the exact same to their currency.   Everyone is left holding on to pieces of paper that buy less and less.  Grandma on a fixed income struggles to buy catfood while her grandson, big banker Jimmy, bathes in a bathtub full of dollars/Euro/Francs/Yen/insert major industrial country's currency.  It's called the race to the bottom and the U.S. is trying desperately to be number one yet again.