04-Nov (Bloomberg) — Ruling party lawmakers urged Greek Prime Minister George Papandreou to step aside and allow the formation of a new government that can approve a European Union aid package needed to avert default.

Odysseas Vodouris, a deputy in the Pasok party, said a confidence vote tonight signaled the end of Papandreou’s administration and colleague Vasso Papandreou said the motion would support the formation of an administration of national consensus. Lawmakers will later start a roll call televised on state-run Vouli TV with results expected at midnight in Athens.

[source]

04-Nov (The Wall Street Journal) — Stocks tried to scramble back at the last minute, in incredibly thin volume, but still ended the day and week lower, capping their worst week since mid-September.

What drove this dismal performance? One word, two syllables, rhymes with “syrup.” As in, “Pour the syrup out of that bottle, fill the bottle with whiskey and drink yourself into a stupor over all the money you’ve lost this week.”

The Dow ended the day down 61 points and the week down 2% at 11983.24. This was the first weekly decline since the week of Sept. 23.

[source]

04-Nov (ABC News) — It will be the latest sobering economic milestone that few were hoping to see: The U.S. national debt – any day now – will soar above the $15 trillion mark.

As of this writing, the total debt is $14.97 trillion, so moving beyond the symbolic $15 trillion is a foregone conclusion. When the unwelcome milestone is reached, it will come at a volatile time both in this country and abroad.

[source]

04-Nov (Financial Times) — US lawmakers and budget analysts are starting to contemplate the possible failure of a special congressional committee to reach a deal to cut America’s budget deficits.

With less than three weeks to go before a November 23 deadline to present a plan to save at least $1,200bn for the US government over 10 years, the 12-member panel – equally split between Republicans and Democrats – remains gridlocked.

[source]

04-Nov (CNBC) — The eyes of the world have been trained on Greece for most of this week, but, as the Hellenic crisis approached breaking point, signs are that Italy will be the next focus.

“The whole stability of Europe depends on whether Italy gets its act together,” Commerzbank Chief Financial Officer Eric Strutz told analysts in a conference call on Friday.

Prime Minister Silvio Berlusconi’s élan was dented Thursday after he was forced to accept International Monetary Fund (IMF) oversight of Italy’s progress in implementing austerity measures at the Group of 20 nations (G20) meeting in Cannes, France.

While the move calmed markets slightly, there are plenty of warnings that the Italian problem has not gone away.

Yields on Italian 10-year, fixed-rate bonds rose toward record levels on Friday.

[source]

04-Nov (Financial Times) — Italy’s borrowing costs rose sharply and shares in the country’s banks tumbled after leaders of the G20 failed to produce concrete plans to tackle the eurozone sovereign debt crisis.

At a summit in Cannes, the International Monetary Fund said it would monitor Italy’s promises of fiscal reform more closely but G20 leaders meeting in Cannes said they would delay a decision on increasing the fund’s financial firepower to help resolve the crisis until February.

Silvio Berlusconi, the Italian prime minister struggling to hold together a divided coalition government, insisted as the Cannes summit closed that his dwindling majority in parliament was “solid”.

He said the IMF had offered funding to Italy but that he had turned down the proposal as unnecessary. Christine Lagarde, IMF head, offered a different version of events, saying there had been no offer of funding.

[source]

Europe’s Bailout “Bazooka” Fires Blanks

In less than a week, the euphoria that ensued following the announcement of a grand-deal to rescue the eurozone has all-but evaporated. The touted “big bazooka” tuned out to be loaded with blanks. Oh, there were few details provided for the plan from the get-go, but it was Greek Prime Minister George Papandreou pledge to take the latest bailout scheme to the voters that really started the unwind.

From that point the craziness really began: It would be a referendum on the bailout. No, it would be a referendum on Greece’s continued membership in the EU. Papandreou would resign. Papandreou would not resign. The referendum would proceed. The referendum will not be necessary of Papandreou can form a unity government…

Papandreou will apparently be subject to a confidence vote tonight. If he survives it will probably come with the loss of some power. If he doesn’t survive, maybe the new government will accept the latest bailout deal proffered, but maybe they wont…

One thing is certain, any sense that Europe has a handle on their issues has been dashed and interest rates in the periphery are reflecting the marked rise in uncertainty. Italy in particular is now under intense scrutiny, and is scrambling to reassure markets before their yields reach a critical tipping point. The G20 says Italy will be required to endure IMF scrutiny of its progress toward a balanced budget. PM Silvio Berlusconi was indignant, pointing out that Italy is in better financial shape than France or the UK.

That may be true Silvio, but pointing that out isn’t going to make you any friends within the union. German Chancellor Merkel and French President Sarkozy are already ‘cheesed’ beyond belief at Papandreou for queering the recently announced bailout deal. Given the tenuous position Italy finds itself in, I’m pretty sure you don’t want to incur their wrath as well. France is already fighting desperately to hang on to their triple-A rating, they certainly don’t need the leader of Europe’s third largest economy adding to their woes in an effort to save face.

US advice to Europe was essentially ‘go big, or go home.’ That may in fact be sound advice, but they also must be aware that more big borrowing — to paper over the big borrowing of the past — is not really a solution, but merely a kick of the can down the road. Also, Germany is keenly aware that it is they that must ultimately pay that tab; and quite franky, German taxpayers remain broadly disinclined to bailout those they perceived to be profligates, such as Greece and Italy.

If last week’s bailout plan was the “bazooka,” then clearly the next plan will have to be the ‘howitzer.’ If Europe is unable to prevent contagion from Greece to a larger economy like Spain or Italy (or perhaps even France), then even a howitzer will prove to lack sufficient firepower. The escalation from there may ultimately lead to weapons of mass financial destruction; in other words, printing with abandon to finance central bank and government asset purchases.

Such risks provide the incentive to bolster your protection against the further devaluation of fiat currency. Protection that is provided by gold.

04-Nov (Der Spiegel) — Greece has backed away from holding a referendum on the euro bailout package. This week’s tumult, however, shows that Europe is still far away from solving the euro crisis. German editorialists on Friday warn that the worst-case scenario may arrive sooner rather than later.

It took less than a week for confidence in the euro zone to evaporate. Again. Last Wednesday, European Union leaders agreed to sweeping measures aimed at saving the common currency. But the shocking announcement on Monday by Greek Prime Minister Georgios Papandreou that his country intended to hold a referendum on the conditions of the bailout measures, with its rigid and unpopular austerity measures, was all it took to shake markets again and raise doubts about the strength of the bailout.

As if that weren’t bad enough, interest rates are rising on Italian government bonds again — this week increasing to 6.4 percent and ever closer to the psychologically important 7 percent figure at which analysts believe the country will begin to have significant difficulties refinancing its debt.

On Thursday, even as Papandreou abandoned his referendum plans, he reinforced the image of a bumbling euro zone unable to get a grip on its currency crisis.

[source]

04-Nov (Reuters) — German Bund futures rose on Friday after German Chancellor Angela Merkel said few countries In the Group of 20 leading economies had committed to participation in Europe’s bailout fund.

Euro zone leaders agreed on Oct. 26 to scale up the fund, the European Financial Stabilty Facility (EFSF), but gave no firm details of where the extra money would co from.

“Merkel said hardly any countries in the G20 had said they would participate in the EFSF. To me the EFSF is starting to look dead on arrival,” a trader said.

[source]

JK Comment: Pento has long been a gold bull (about the only thing he’s bullish on), and he continues to make a strong, well-reasoned case in this video.

03-Nov (Financial Times) — George Papandreou, Greek prime minister, has scrapped a controversial plan to hold a referendum on the heavily indebted country’s membership of the European Union and eurozone.

The U-turn by the embattled premier was announced during an emergency cabinet meeting on Thursday and followed a high-pressure meeting with Nicolas Sarkozy, French president, and Angela Merkel, German chancellor in which the offer of a €8bn loan from the EU was temporarily withdrawn.

Defending his decision Mr Papandreou said: “We had a dilemma: consensus or a referendum … Failure to back the package would mean the beginning of our departure from the euro. But if we have consensus, then we don’t need a referendum.”

[source]

PG View: Reaction of the Greek people may prove interesting…

03-Nov (Der Spiegel) — The future of the country is at stake. But for the moment, there are more questions than answers in Athens. Many Greeks are skeptical of plans for a referendum on the euro bailout. On Thursday, it appeared their prime minister might be changing his tune as well. Reports have emerged he may form an emergency government to circumvent the controversial vote.

Maria Loukos is sitting completely alone in a commuter train car staring forlornly out the window. Outside, the city passes by; it is a bright, warm early November day. But the 72 year old is unable to enjoy the ride.

She is on her way to see her daughter, a civil servant in Athens, Loukos explains with a halting voice. “We have huge worries, you know?” she says, mentioning the drastic pay cuts forced upon government employees in addition to new and higher taxes. Her family’s financial security has vanished. “We are desperate!”

But what about the referendum that may be approaching? Greek Prime Minister Giorgios Papandreou announced on Monday that voters will soon be able to decide their fate themselves in a vote on the drastic belt-tightening measures imposed on the Greek populace in the effort to save the euro. Doesn’t the referendum give her hope?

The small woman with the blue-tinted hair waves the question away. “How will a referendum help me when I don’t understand anything anyway?” she asks. Everything is so complicated, she complains, media reports are contradictory and Greece’s political parties are hopelessly at odds with one another. She simply no longer knows who to believe. “What is best for my daughter, for me, for Greece? What?”

[source]

03-Nov (USAGOLD) — Gold extended to new 6-week highs and is nearing the 61.8% retracement level of the entire correction at 1772.88 as the chaos in Europe has hit new heights. Rumors and counter rumors of Greek PM Papandreou resigning have been rampant. As have, the rumors about what Greece’s proposed referendum might entail.

The latest suggests Papandreou will not be stepping down, but will seek to form a unity government. If that happens, some are saying that the referendum — that has thrown all of Europe into disarray — may not be necessary. If the referendum gets scrapped, it’s anybody’s guess how the Greek people might react, but I would speculate that they won’t be happy. You can’t say your going to put their future in their hands and then take it away.

The ECB cut its refi rate by 25 bp today, citing mounting headwinds for the eurozone economy, not the least of which is the mess that is Greece. Italian and Spanish yields continue to push further into euro-era record high territory. The new ECB president Mario Draghi suggested there was potential for a mild recession. The ZeroHedge blog reminded followers today that S&P has said that a eurozone recession would likely lead to a French downgrade.

Jefferies is under heavy pressure for its exposure to Europe, but claims it is not the next MF Global.

• US ISM services edged lower to 52.9 in Oct, below market expectations of 53.5, vs 53.0 in Sep.
• US factory orders +0.3% in Sep, above market expectations of -0.2%, vs 0.1% in Aug.
• ECB surprises with a 25 bp refi rate cut to 1.25%. Presser commences at 13:30GMT.
• US Q3 productivity (prelim) +3.1%, above market expectations of +2.5%, vs -0.1% in Q2.
• UK CIPS Services PMI weaker than expected at 51.3 in Oct, vs 52.9 in Sep.
• Japan Culture Day – markets were closed.

03-Nov (Bloomberg) — The European Central Bank unexpectedly cut interest rates at President Mario Draghi’s first meeting in charge after the prospect of a Greek exit from the euro region sent bond yields soaring in Italy and Spain.

ECB officials lowered the benchmark interest rate by 25 basis points to 1.25 percent, confounding 51 of 55 economists in a Bloomberg News survey. Four predicted a quarter-point move and two expected a half-point reduction. The euro fell almost a cent to $1.3729 and the yield on Italian 10-year bonds retreated to 6.14 percent after surging to a euro-era high this week.

“The ongoing tensions in financial markets are likely to dampen the pace of economic growth in the euro area in the second half of the year and beyond,” Draghi said at a press conference in Frankfurt today.

European leaders last night raised the prospect of the 17- member area splintering, with France and Germany saying they would treat Greece’s surprise referendum on a second bailout as a vote on its euro membership.

[source]

02-Nov (CNSNews.com) — The federal government’s debt increased by $203,368,715,583.63 in the month of October, according to the U.S. Treasury.

That equals about $650 per person for each of the 312,542,760 people the Census Bureau now estimates live in the United States.

At the end of September, the total national debt stood at $14,790,340,328,557.15, according to the Bureau of the Public Debt. By the end of October, it had risen to $14,993,709,044,140.78.

[source]

03-Nov (BBC) — Greek Prime Minister George Papandreou is expected to offer his resignation within the next half-hour, sources in Athens have told the BBC.

Mr Papandreou will meet Greek President Karolos Papoulias immediately after an emergency cabinet meeting has finished.

He is expected to offer a coalition government, with former Greek central banker Lucas Papademos at the helm.

Mr Papandreou himself would stand down, the BBC understands.

[source]

PG View: Rumor mill is in full churn mode this morning: G-Pap will resign. He won’t resign. He will resign. He won’t resign. Confidence vote on. Confidence vote off. That the referendum will happen is apparently not in dispute.

02-Oct (AP) — The Federal Reserve has lowered its growth forecasts and raised its unemployment projections, suggesting the economy has a longer path to recovery.

The central bank’s latest forecast released Wednesday predicts that the economy will grow just 1.6 percent to 1.7 percent for all of 2011. For 2012, growth will range between 2.5 percent and 2.9 percent. Both forecasts are roughly a full percentage point lower than the Fed’s projections from June.

The unemployment rate has been stuck near 9 percent for more than two years. The Fed doesn’t see that changing this year. It predicts it will fall between 8.5 percent and 8.7 percent next year. In June, the Fed had predicted unemployment would drop next year to as low as 7.8 percent.

The new forecast takes into account the substantial slowdown in growth that occurred earlier this year.

[source]

02-Nov (CNBC) — Federal Reserve Chairman Ben Bernanke defended the central bank’s record on keeping inflation low, in the face of criticism that the central bank’s weak-dollar policies have driven up consumer prices.

Speaking at a post-Fed meeting news conference, Bernanke rejected claims that the Fed’s various moves to keep interest rates low and monetary policy accommodative will lead to high levels of inflation.

…Bernanke refused to get too far into the politics but said the committee is comfortable with the current level of inflation, which is around 2 percent excluding volatile food and energy prices but 3.9 percent including gasoline, groceries and similar items.

[source]

02-Nov (HousingWire) — Federal Reserve Chairman Ben Bernanke said the central bank may consider purchasing more mortgage-backed securities to help further stabilize the economy and the troubled housing sector if growth is insufficient in coming quarters.

Speaking at a press conference following the most recent monetary policy decision from the Federal Open Market Committee, Bernanke said the Fed has taken the aggressive actions necessary to try and stimulate growth.

[source]

Bloomberg (Nov 2) — The most accurate forecasters say gold will rebound from its biggest monthly plunge since 2008 and reach a record by March because economic growth is stagnating and Europe’s debt crisis is unresolved.

Futures traded in New York may rise 13 percent to $1,950 an ounce by the end of the first quarter, according to the median of estimates compiled by Bloomberg. The predictions are from eight of the top 10 analysts tracked by Bloomberg over the past eight quarters.

“When we look at gold five years from now, we will say gold was wildly cheap,” said Jason Schenker, the president of Prestige Economics LLC in Austin, Texas, and the fifth-best forecaster tracked by Bloomberg. “What happens to gold is going to hinge on what happens to the dollar, and that is going to be influenced by what happens in Europe and monetary policy.”

[Source]

Europe in Chaos

02-Nov (USAGOLD) — Gold has rebounded to approach the recent highs on ongoing uncertainty in Europe. Greek Prime Minister Papandreou is sticking by his call to submit the latest bailout deal to the citizenry, and he now has the backing of his cabinet. It is a political gamble to be sure, but Papandreou is fighting for his political life and rational thought frequently goes out the window in such circumstances. The Greek newspaper Eleftherotypia dubbed Mr. Papandreou as “The Lord of Chaos.”

Certainly he has angered much of the rest of Europe, and is expected to face the ire of German Chancellor Merkel and French President Sarkozy in advance of the G20 summit. The referendum plans delay implementation of measures that may prove critical to other EU countries. Italy leaps to mind immediately, given the continued rise in their borrowing costs, which has been exacerbated by the Greek uncertainty. If Italy plunges into the abyss, as New York Times economist Paul Krugman is anticipating, all bets are off. The EFSF, even geared up to 4x is not big enough to save the Continent’s third largest economy.

It also raises uncertainties in the banking industry, as financial institutions have already started down the path of capitalizing for a 50% haircut on Greek debt. If the impending Greek default turns disorderly, the haircut could be much bigger; as in 100%. And again, if contagion strikes Italy in any significant way, it’s game-over. Krugman may be right when he says that the only way for Europe to avert a financial apocalypse is for the ECB to “change its spots, fast.” That means print euros with abandon. If the German’s continue to oppose such measures, it’s important to remember that the true lender of last resort to the world is our very own Fed. If the ECB and/or the Fed concede once again that liquidity is the only answer…gold will likely be off to the races.

There are some lingering expectations that the Fed may announce QE3 today, with a likely focus on mortgage backed securities, at least initially. However, I believe that the October rally in stocks bought the Fed some more time. QE3 may indeed be forthcoming, but probably not today. They’ll hold steady on rates and perhaps tweak their language to be a little more accommodative.

Heightened tensions in the Middle East are likely contributing to the interest in gold as well amid reports that Israel may be preparing a preemptive strike against Iranian nuclear facilities. Such concerns crop-up periodically and have never really amounted to anything, but I have no doubt that Israel feels threatened by Iran. Given that, I don’t think such reports can be completely dismissed.

02-Nov (SkyNews) — Israeli Prime Minister Benjamin Netanyahu is trying to rally support in his cabinet for an attack on Iran, according to government sources.

The country’s defence minister Ehud Barak and the foreign minister Avigdor Lieberman are said to be among those backing a pre-emptive strike to neutralise Iran’s nuclear ambitions.

[source]

PG View: Heightened geopolitical tensions in the Middle East are undoubtedly contributing to the bid in gold.