A Melman Minute By: Leonard Melman   NOTE: In order to complete Mr. Melman's forthcoming book on the essential fundamentals of the developing international financial crisis and its relationship to gold and silver, new "Melman Minutes" will be posted only three times per week, each Monday, Wednesday and Friday. Since the work has been expanded to include potential solutions to the growing list of seemingly insoluble dilemmas, the working title of the book has been revised to 'REVERSING THE WAY IN!"   MELMAN MINUTE - April 23, 2010 - - - - - In our humble opinion, the entire fiasco surrounding the Greece financial debacle is taking on proportions that are truly epic.  Seldom, if ever, in our decades of reporting on the financial scene have we ever seen or heard of such indecisiveness, such uncertain prattling nor have we observed a similar startling inability to develop a cohesive plan to solve an important objective.  Perhaps the recognition of such incompetence among important world leaders is one of the reasons the gold Exchange-Traded-Fund (ETF) has moved sharply higher this morning, as can be easily noted on the GLD short-term chart. For those who might have been on vacation to some remote island without any access to financial information, Greece has been at the center of a growing crisis for some months, ever since it became apparent that they would not be able to repay either principal or interest on 8.5 billion Euros (about $11.5 billion) which is coming due May 19.  Given that it is payable in Euros, the entire European Financial Community has considered such a failure to be a threat to the stability of the European Community itself, therefore finding a believable solution has become a vital consideration. And so, not surprisingly, we began to hear of a parade of 'rescue plans'' including the creation of a pool of money from other European Community nations which would tide Greece over its time of trouble, but that idea ran into difficulties on two levels.  First, other members of the EU signaled that they were not at all enthralled with paying out money to a profligate country when their own citizens were accepting hardships.  Next, since other countries appeared unwilling - or unable - to provide all the cash Greece would need, the International Monetary Fund (IMF) was brought into the picture as yet another source of desperately-needed capital for Greece. But that situation has run into trouble as well for two reasons.  On the one hand, it appears Greece's governmental financial leaders have been inaccurate (lying) about the true size of their deficits, particularly when the size of those deficits is compared to Greece's Gross Domestic Product (GDP).  At first, the figure bandied about was a deficit of 11.7%, then it was admitted it would be closer to 12.7%, and later it was estimated the actual number could be as high as 14%.  This has opened the door to a renewed set of conflicts.  The only way the IMF would agree to help bail out the country would be if Greece presents a credible plan to reduce their deficit to the EU limit of 3%, which would mean reducing governmental expenditures by 11%, a goal which could be accomplished only by firing one in every nine governmental workers and also reducing government payouts by a similar manner.  When that idea began to be debated within Greece, the public service unions as well as socialist or communist organizations, not unexpectedly at all, railed against such austere measures and threatened to bring down the government and even the country if such events actually took place. To make matters even more confusing, Germany's Chancellor Angela Merkel just announced that Germany, the EU's strongest economy, would do nothing at all until Greece's talks with the IMF were concluded and, according to an AP article of this morning, "...very strict conditions including a viable savings plan..." were drawn up in short order.  However, as we have seen, if Greece were to announce "very strict conditions", both the civil service unions and the Communist Party inside that country were threatening rioting in the streets. And, many others have stated a moral objection to any rescue plan because that would make it appear that Greece was being rewarded for violating the very conditions to which it agreed when they first joined the EU. And so, the actual default deadline is approaching, Greece is piling deficit upon deficit, the EU cannot agree on a rescue plan, the IMF is still determining conditions that it will attempt to impose, Germany is openly questioning the entire believability of any imposed solution - and the world's financial markets are pricing Greek debt at ever-higher interest rates, further compounding that sorry nation's difficulties. Can one think of a mess less likely to be rationally and reasonably resolved? It is this kind of uncertainty from which gold has historically thrived, and we cannot help but believe that strong rallies such as we have seen today may indeed be attributed to this sorry mess. Speaking of messes, despite President Obama's promises to unite America and break down political differences, it is our personal belief that America has never been as politically polarized as it is now.  The gulf between believers in free markets and the growing strength of leftist/socialist politicians seems to have reached a level where bitter hostilities are now the order of the day. Perhaps nothing illustrates these differences as much as the intensifying debate regarding an overhaul of America's financial and banking regulations, with that debate now occupying the attention of the financial media.  Riding on his recent medical insurance legislative success, the President has stepped up the frequency and strength of his 'talking-up' his new recommendations for fiscal regulations.  To say the ramifications of these proposed regulations are unprecedented would be a serious understatement. Among the President's proposals which are included in a bill being placed before the Senate, we find: * - The creation of a new council of regulators charged with monitoring systemic risks to the economy, * - The Office of the Comptroller of the Currency would regulate national banks, * - The bill would authorize the federal government to seize and break up companies, * - The Federal Trade Commission would have new powers to impose rules on industry, * - The bill would regulate the content of advice given from broker to client * - The bill would regulate the composition of corporate Boards of Directors In addition, we would also see several entirely new bureaucracies spring up, such as a proposed "Office of national Insurance" and a new "Office of Credit Rating Agencies." And, lurking in the background is a stated desire that the new bodies of regulation being proposed should be part of a larger coordinated effort to create a world financial regulatory authority. All of this is anathema to those who believe in America's free market and limited government traditions - and we cannot see how the high level of animosity which has developed between conflicting political positions can do anything but grow more intense. - - - - - Metals continue to trade on the plus side and, as of 10:15 AM PDT, gold remains up by about $12 to $1,154 while silver is ahead by 20 cents to near $18.20 per ounce.  Both platinum group metals are slightly lower while base metals are close to unchanged on balance.  Mining share indexes are about one percent to the plus side, crude oil is up by almost one dollar and financial markets are stronger in both the USA and Canada with the Dow Industrials ahead by about 30 points and the TSX Index is almost 50 points higher.  The U.S. Dollar is off slightly while interest rates have risen moderately. - - - - - All quotes US$ unless otherwise noted. Next "Melman Minute" scheduled for Monday, April 26, 2010.               ◄  Previous Minute                                                                                                        Next Minute  ►
		DISCLAIMER The information presented above is based on data which we believe to be from reliable sources, but the accuracy of which cannot be guaranteed.  Any opinions or predictions contained herein are those of the editor and are likewise offered also for information purposes only. Any investment decisions should be made only following consultation with registered investment professionals.