Monday, July 2, 2012

WEIMAR IT!


Bank runs in Germany during the Weimar Crisis
An interview with Marc Faber yesterday regarding his point of view that Germany may leave the Eurozone before Greece does triggered this post tonight. I had been juggling this very idea for about a week. Most pundits seem to think Greece will be kicked out first but I had been leaning more to the Faber point of view. In fact I believe that Germany will be forced to leave the Eurozone. The end game for the bankers is to hold a gun to Germany's head right now and trying to get them so "deep in" that they will be forced to continue to go into further debt by "doubling down". Our bases remain in Germany for a reason. Germany has been through this before and they know the outcome. After WWI Germany was forced to go through reparations by the Allies. In spite of many protests by some of the reparation's participants the Germans were placed in a suicide position after the war. The following is a wikipedia account of what will happen when a country is placed in an impossible debt situation...which I believe is being repeated.

Beginning in August 1921, Germany began to buy foreign currency with Marks at any price, but that only increased the speed of breakdown in the value of the Mark.[17] The lower the mark sank in international markets, the greater the amount of marks were required to buy the foreign currency demanded by the Reparations Commission.[14]
During the first half of 1922, the Mark stabilized at about 320 Marks per Dollar. This was accompanied by international reparations conferences, including one in June 1922 organized by U.S. investment banker J. P. Morgan, Jr.[18] When these meetings produced no workable solution, the inflation changed to hyperinflation and the Mark fell to 8000 Marks per Dollar by December 1922. The cost of living index was 41 in June 1922 and 685 in December, an increase of more than 16 times.
In January 1923 French and Belgian troops occupied the Ruhr, the industrial region of Germany in the Ruhr valley to ensure that the reparations were paid in goods, such as coal from the Ruhr and other industrial zones of Germany. Because the Mark was practically worthless, it was not possible for Germany to buy foreign exchange or gold using paper Marks. Instead, reparations were paid in goods. Inflation was exacerbated when workers in the Ruhr went on a general strike, and the German government printed more money in order to continue paying them for "passively resisting."[19] As a result of hyperinflation, there were news accounts of individuals in Germany suffering from a compulsion called zero stroke, a condition where the person has a "desire to write endless rows of [zeros] and engage in computations more involved than the most difficult problems in logarithms."


In order to pay the large costs of World War I, Germany suspended the convertibility of its currency into gold when that war broke out. Unlike France, which imposed its first income tax to pay for the war, the German Kaiser and Parliament decided without opposition to fund the war entirely by borrowing,[10] a decision criticised by financial experts like Hjalmar Schacht even before hyperinflation broke out.[11] The result was that the exchange rate of the Mark against the US dollar fell steadily throughout the war to 8.91 Marks per dollar. The Treaty of Versailles, however, accelerated the decline in the value of the Mark, so that by the end of 1919 more than 47 paper Marks were required to buy one US dollar.[12] It is sometimes argued that Germany had to inflate its currency to pay the war reparations required under the Treaty of Versailles, but this is misleading, because the Reparations Commission required payment to be in gold marks or in foreign currency, not in the rapidly depreciating paper mark.[13][14]
The German currency was relatively stable at about 60 Marks per US Dollar during the first half of 1921.[15] Because the Western theatre of World War I was mostly in France and Belgium, Germany had come out of the war with most of its industrial power intact, a healthy economy, and arguably in a better position to once again become a dominant force in the European continent than its neighbours.[2] But the "London ultimatum" in May 1921 demanded reparations in gold or foreign currency to be paid in annual installments of 2,000,000,000 (2 billion) goldmarks plus 26 percent of the value of Germany's exports. from wikipedia.

44 comments:

  1. Excellent post KLI. I don't think Germany wants history to repeat itself.

    If anyone stands to get screwed during this crisis, it's the Germans once again. I have a very good friend in Berlin and he said many there now regret the entire Euro experiment.

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  2. Gold rallying on rumors that ECB will cut rates Thursday

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  3. Wow sneaky... moving the metals UP on light volume for once. I almost bailed on my SLV calls yesterday when they closed down a bit. NOT holding them past Friday for sure and may close them out for a profit today.

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    1. And decided to do just that... nice 75% gain. Going to roll into a later month now. Hoping for a slight pullback first though.

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    2. Wow actually just sold my SLV $36 August Calls for a Nickel that I bought for 20 cents. Which is a loss but it was a small gamble. Surprised I was able to get that much for them at this point as I seriously doubt we break above $37 by August Expiration barring a major silver squeeze. Maybe more are expecting it than we think.

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    3. good move a nickel beats nuttin

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  4. Barclays chief executive Bob Diamond has resigned a week after the bank was fined a record amount for trying to manipulate inter-bank lending rates.

    Rob a 7-11 and you go to jail.
    Manipulate rates and you get a slap on the wrist fine then live happily ever after.

    Whatta game.

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  5. I've been thinking about earnings season, especially miners and I just wonder if that take down was to get in at low prices before earnings, cause I believe many will be pretty decent..fuel costs down, silver still above $25..

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  6. Replies
    1. KGC‎ - Kinross Gold Corporation (USA) (NYSE)‎
      8.77 +0.38‎ (4.53%‎)

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  7. Sept SLV calls that are out of the money have not moved much this morning... think I'm going to jump into them. Now to figure out if we get a pullback soon or not. Metals look strong for the first time in awhile.

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    Replies
    1. I'd use some tight stops if you play this. Good luck.

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    2. Good advice, standing on the side lines for now.

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  8. gdx needs just a bit more to rally really hard to the close.

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    Replies
    1. GDX‎ - Market Vectors Etf Trust (NYSEARCA)‎
      46.21 +1.45‎ (3.24%‎)

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  9. DCTH is still moving North...it was a good buy in the 1.40s

    look at CLSN also...

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    Replies
    1. DCTH‎ - Delcath Systems, Inc. (NASDAQ)‎
      1.74 +0.08‎ (4.77%‎)

      Dang. Everyone here is making good money today.

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  10. should squeeze the close in miners and metals..

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  11. Looks to me like a breakaway gap and darn close to a bull cross on the daily in gdx...

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    Replies
    1. sheeps it would really foch up the traders and catch the unwashed shorts on vacation.

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  12. DSCO warming up for big run over summer?

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  13. FWIW.....potential black swan developing complements of the only force that the Ponzi cannot stop......nature......watch weather over the next two weeks ....without significant rain a disastrous corn harvest with little in reserves could occur......IF it happens you better be prepared....also watch the bean crop after that ....if no rain over the next four weeks its in trouble

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    1. We actually haven't had too bad a summer here in Oklahoma for once which is odd seeing as it's been bad elsewhere. Last week we had horrible temps but now back to normal. And before that we have been getting good rain though it's been a few weeks now and we're in need again. Last summer was FAR worse and the worst I can remember. I hope this pans out soon for all our sake.

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    2. take a glance at the latest 6-10 articles here....
      http://www.desdemonadespair.net/

      I was thinking like you last night Kli....the weather is scary...look at Russia burning...we need the troops home to fight fires not ghosts...

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  14. Wondering about this low volume squeeze. Could continue Thursday since many shorts are on vacation and possibly caught with their pants down. Just trying to think like a sinister SOB :)

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  15. I'm keeping my eye on RWM.
    If we keep grinding higher during this low volume week, it might be time to add a hedge again.

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  16. RIC got taken to the wood shed on a warning...

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    Replies
    1. didn't they downgrade ore estimates and take a write down? I also see someone accumulating a beaten up bio...

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    2. yes......sheeps and honest....and you can tell that to my burning ass....ouch....it was a sizeable holding

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  17. awww crap. I forgot that the markets were closing early today. Here I kept thinking my Scottrade charts were glitching.

    I lost $120 today. But holding over the holiday.

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  18. Have you kicked RIC to the curb?

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    Replies
    1. took off 25% and moved to a basket of other miners....will ride it out with rest

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    2. Ouch! Wasn't watching today so the ole Submarine'lio just dived a little deeper...... chit

      Anyway have a Happy 4th to all!

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  19. Hope everybody has a great 4th! Just did my patriotic consumer duty and picked up some pop and beer. :)

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  20. yup.....happy 4th everybody......take time for the family

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  21. All the Best--have a Happy 4th.

    It is finally starting to rain up here. Been a very dry Summer so far. I think we are down over 3 inches or rain or so.

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  22. Happy 4th all. I'm headed to a real life casino tonight for some non-family fun.

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  23. you all 'ave a 'appy 4th. Marinate some cubes and toast to freedom. Despite the BS we have all lead extraordinary lives...

    Sheeps.

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  24. http://www.youtube.com/watch?feature=player_embedded&v=Pl6ZAVPzzA4#!

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