Pater Tenebrarum's Contributions

As a reminder, below is the schedule of Italy's debt rollovers for the next several years. As can be seen, the downgrade couldn't come at a worse time, as the the great bulk of Italy's government debt is maturing over the next two years.

It is important to understand what actually happens when a central bank bails out insolvent banks by buying up all their toxic sludge or helps the administration to amass more debt by monetizing government bonds.

The outlooks of gold analysts are diverse. After reading the latest WGC report, Mineweb is bullish: "Gold demand tops US$100 billion and mine supply remains under threat." John Nadler, however, is bearish, citing the expected "additional 400–500 tonnes per annum" that will result from the exploration boom of the last few years.

In US trading, the stock market initially followed the lead from Europe and gradually fell to lower and lower levels. Then a late day rally intervened and the market found itself 'rescued' by the close, actually closing in positive territory.

Did you hear that B&G Mortgage (Bernanke and Geithner Mortgage) is offering a new option ARM loan program? The interest rate is zero and repayment is optional. Other terms will be decided later.

If Charles Evans (president of the Chicago Fed) were Fed chairman, we'd probably be halfway on the road to the abolition of the dollar and its replacement with the new 'territorial Mandat'.

Not surprisingly, the effect of shorting restrictions in various European stock markets failed to have the intended effect – or rather, the effect lasted only for a few days. Once the shorts were finished covering, everybody went back into ' sauve qui peut ' mode and the selling immediately resumed with great gusto.

We're not sure if there actually ever was a plot for Nouriel Roubini to lose. In case you haven't noticed yet, he's a fairly typical Keynesian establishment figure. In spite of having been one of the few mainstream economists who correctly predicted that the housing bubble would end in tears, he is otherwise never straying very far from the officially accepted economic orthodoxy.

Over the past week or so, an uneasy quietude has descended over Europe. Ever since the ECB began its interventions in the government bond markets of Italy and Spain, the sense of immediate crisis has diminished somewhat, as euro area bond yields and CDS spreads have declined in its wake.

Gold mining stocks have spent the past year going nowhere in what is essentially a wide trading range that looks like a complex corrective formation. What is so surprising is that this has coincided with a big rally in gold and a shift in silver prices to a much higher trading range. To this it should be noted that many of the mid tier gold miners produce significant amounts of silver as a byproduct, while both the major gold stock indexes (HUI and XAU) contain a few component stocks of primary silver producers.

The recent behavior of the financial markets is yet another rather obvious indication that central planning doesn't work – as the current market volatility is in principle nothing but the symptom of yet another one of those plans gone wrong. It's not that the 'planning' of central bankers is very sophisticated – as we read elsewhere in a spot-on characterization of Ben Bernanke's policies, 'to someone with a hammer, everything looks like a nail'.

When we read the FOMC statement shortly after publication on Tuesday afternoon, the first thought that came to mind was 'damp squib'. We thought the market wouldn't like this mixture of admission (that the 'recovery' is sputtering badly) and somewhat halfhearted inflationary measures (committing to a time table for ZIRP).

With regards to the US stock market it should be noted that last week's break of lateral support also created a break of the uptrend line from the 2009 low and was accompanied by a Dow theory sell signal.

In recent days, several central banks have made news with new intervention measures. Among them was the SNB, which tried to stem the relentless rise of the Swiss franc by cutting rates 'as close to zero as possible.'

More and more evidence is trickling in that shows that economic activity is softening considerably all over the world. Yesterday, US manufacturing ISM data vastly underwhelmed expectations as the headline number dropped to the lowest level in two years, to 50.9 from 55.3 the previous month and against an expected 54.5 (so much for the forecasting prowess of mainstream economists.

Why is the stock market going down lately? This may seem like a rhetorical question – everybody knows about the debt ceiling wrangle after all.

The debt ceiling ritual often invites political brinkmanship. Usually this happens when there is cohabitation, i.e. when the party in control of Congress is different from the one controlling the administration.

In late June we remarked on the astonishing degree of complacency in the stock market. Not so much, as we argued, complacency about the near term outlook for stocks, but about the medium to longer term one.

We should interpose here that the stress test was certainly not an entirely useless exercise, even though it will likely fail to boost confidence. Its usefulness consists mostly of the fact that it forced the banks concerned to reveal their various exposures in great detail, which makes it easier for outsiders to analyze their situation (we are sure we will have occasion to refer back to these data).

We confess that we have a soft spot for the ex-comrade, for one thing because he has spoken up in defense of free market capitalism in the past, but also because he has this very undiplomatic tendency not to mince his words. The practice of shrouding everything into euphemisms and politically correct terms is refreshingly alien to the man.