Notes From Underground

Over the last few years of writing Notes From Underground, I have taken his eminence, George Soros (aka the palindrome) to task for advocating that the German polity surrender its sovereign authority to a federal EU entity as he pushed for a harmonization of fiscal authority and then an EU-wide EUROBOND. Previously, Mr. Soros has pushed that the Eurocrats not pursue this Eurobond through a nation-by-nation vote but rather just foist it upon the citizens of Euroland. In a paper released yesterday, Mr. Soros is again pushing a Eurobond backed by a union-wide banking structure and a Euroland harmonized tax system, in which all nations surrender some sovereign authority to a centralized power. There will be no BUNDS, OATS, SPANISH or ITALIAN bonds. It will just be a Eurobond backed by the full credit of the EU fiscal authority. This time around though, Soros does advocate the German government should seek the consent of the electorate.

It seems George believes that the enlightened German electors would see that the costs of financing a Eurobond would be less than enduring a collapse of the EURO and the entire EU financial system. Soros further maintains that if Germany can’t get behind a Eurobond then they should leave the EURO and let the Deutsche Mark appreciate and the Germanless euro devalue and the periphery regain its competitiveness. But at least Mr.Soros has come to accept that there can be “no taxation without representation.” It’s tough to be a philosopher king without a country. Oh wait, the world is his country … thank you Karl popper.

***It was announced today that the idiots in Cyprus plan to sell 400 million Euros of GOLD to help finance some of its solvency issues. I refer to the financial wizards as idiots because they don’t need to sell their gold. In my opinion it is time to issue a GOLD-BACKED CYPRIOT BOND rather than sell off the asset. Utilize and leverage it. If Cyprus offered bonds backed by GOLD, they might be able to leverage the gold so as to issue bonds worth five times as much for bonds secured by 20% gold would be an interesting financial instrument and the borrowing costs on Cypriot bonds would drop dramatically. Of course the Gold would have to be held in a reliable depository with a credible custodian. I have argued for three years that the IMF and others ought to be leveraging up their gold hoards and issuing GOLD-backed bonds as collateral.

National banks have proven to be very poor at dealing with GOLD sales. Remember that both the Bank of England and Swiss National Bank unloaded vast amounts of GOLD almost at the bottom of $280 back around the turn of the millennium. In this day of financial engineering this is the best that the boys in the backroom can come up with: Selling the family jewel. Paul Volcker was right. That last good financial idea from the financial geniuses was the ATM machine.

***I am linking to an article from the Irish media in which the book, “Rotten Heart of Europe,” by Bernard Connolly is cited as it predicted many of the problems that the Irish are facing. As longtime readers of NOTES know, Bill S. and myself paid to reprint Bernard’s book as it was out of print and selling for several hundred dollars on various used book websites. We are offering the book on Amazon for a nonprofit price or can order at the  rottenheratofeurope@gmail.com (pay either by check or PayPal). To have a realtime scorecard this book is a must-read and Bernard Connolly has written a new, updated forward. Don’t order the book in an electronic format as it is a book where you need to mark pages and dog-ear important references. For the price of a lemon drop martini or a glass of good scotch,you can acquire money-making wisdom. Marinate some ice cubes and enjoy.

Tags: Bunds, Eurobond, Gold, gold-backed Cypriot bond, IMF, Italian bonds, oats, Spanish bonds

This entry was posted on April 10, 2013 at 8:08 pm and is filed under Debt Market, Europe, Gold. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.