-- Posted Thursday, 19 January 2012 | | Disqus

We’d almost lost track of Europe since the newspapers went mum on the subject in late December, after auction rates for Spanish and Italian debt receded sharply from the 7% threshold. That’s officially the danger zone, at least to the extent that the business pages usually headline the story, albeit on an inside page. And now, in an apparent effort to keep all of us euroskeptics off balance, news sources often refrain from mentioning certain auction details, including the specific rate demanded by lenders.  Here, for example, is an everything’s-coming-up-roses story from a Wall Street Journal report that ran yesterday under the sunshiney headline Europe Debt Auctions Find Demand:

“Spain sold 4.88 billion euros in 12-month and 18-month treasury bills amid strong demand, at interest rates well below those at its previous auction [emphasis ours]. It’s hard to say whether the Journal was being coy.

To give them the benefit of the doubt, it’s possible the paper’s editors made a decision to downplay the mention of specific rates because the rates have been fluctuating so wildly in recent months as to be meaningless. Perhaps. For the record, we believe that anything above 2% subjects sovereign borrowers to a deflationary burden capable of snuffing the life from an economy. So how have the PIIGS managed to survive nonetheless? Answer:  They haven’t. Fiscally and economically speaking, they are all Dead Countries Walking. But it seems clear that they will be able to continue to borrow at rates that imply the near absence of risk. That’s because the local banks that are sucking up all of the paper, most of it short-dated and backed by “full faith and credit” boilerplate, are so flush with cash that they don’t know what to do with it all. A Dutch banker succinctly summed up the auction picture thus: “A captive audience in the form of domestic banks rolling over collateral for liquidity-management purposes was always going to limit the scope for a poor a poor outcome.”

Just so.  Under the circumstances, and with respect to the commodity markets, one of the great mysteries of the day is why the price of an ounce of gold is not bounding energetically above $2000.  It’s a crazy world, for sure, but stupid-crazy if you ask us.

Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indication of future results, so let the buyer beware. There is a substantial risk of loss in futures and option trading, and even experts can, and sometimes do, lose their proverbial shirts.  Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2011, Rick Ackerman. All Rights Reserved.www.rickackerman.com

-- Posted Thursday, 19 January 2012 | Digg This Article | Source: GoldSeek.com

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