Baltic Dry Index. 540 +07 Brent Crude 62.18
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
All
treaties between great states cease to be binding when they come in conflict
with the struggle for existence.
Count
Otto von Bismarck.
For more on the second German war on Greece scroll
down to Crooks Corner. Germany thinks it has won. Greece thinks it’s not over.
We open the week with more sign of the global
economy slowing. QE and Zirp may have fuelled stocks to disconnect from reality
nearly everywhere, in the USA mostly by insane debt fuelled stock buy backs;
but in the real world, from China to America to Europe, we seem to be heading
back to a future of 2008-2009.
On the plus side, things are now so bad in Euroland
that the ECB is launching QE Constrained from today onwards. On the negative
side, another round of sanctions on Russia is about to be imposed, and that was
before Friday’s shooting in Moscow, further impacting continental Europe. As
for the murder in Moscow, qui bono? Who benefits from a destabilised Russia and
Putin the Pantomime Villain writ large?
Dollar Climbs as Yuan Slides After Rate Cut; Oil Retreats
10:56 PM WET March 1, 2015
(Bloomberg) -- The dollar rallied
with gold as the yuan slipped to a two-year low after China cut interest rates
for the second time in three months. Oil retreated following its first monthly
gain since June.
The Bloomberg Dollar Spot Index
increased 0.2 percent at 1:22 p.m. in Hong Kong as China’s currency traded at
its weakest level since October 2012 and the euro slipped 0.2 percent. Gold
climbed 0.7 percent. The Hang Seng Index and Shanghai Composite Index advanced,
while contracts on the Standard & Poor’s 500 Index added 0.1 percent. Oil
in New York and London dropped at least 0.6 percent after OPEC output exceeded
its quota for a ninth month in February.
China’s second rate cut in 14
weeks was the latest in a wave of global easing that underscores diverging
economic outlooks for the U.S. versus the rest of the world. A private measure
of factory activity in Asia’s largest economy showed a faster-than-estimated
expansion Monday as lawmakers prepare to meet in Beijing. The euro area updates
on consumer prices and U.S. private spending data are due.
“It’s clear markets are being
driven by other factors besides earnings, and key is the ongoing loose
central-bank policy around the world,” Mark Lister, head of private wealth
research at Craigs Investment Partners Ltd., which manages about $7.2 billion,
said by phone from Wellington. “China is clearly slowing down, you don’t cut
rates twice in three months if things are going stunningly well.”
The People’s
Bank of China announced a benchmark lending and deposit rate cut of a quarter
percentage point Saturday. A day later, a government factory gauge for February
signaled contraction for a second month, underscoring the scope for looser
policy.
More
Austria imposes debt moratorium on Heta "bad bank"
(Reuters) - Austria's Financial
Market Authority stepped in on Sunday to wind down "bad bank" Heta
Asset Resolution and imposed a moratorium on debt repayments by the vehicle set
up last year from the remnants of defunct lender Hypo Alpe Adria.
The step, allowed by new
legislation that gives banking supervisors more power to intervene, followed an
outside audit of Heta's balance sheet that exposed a capital hole of up to 7.6
billion euros ($8.51 billion) which the government was not prepared to fill,
the FMA said.
The finance ministry confirmed
this in a statement, adding Heta was not insolvent and that debt guarantees by
Hypo's home province of Carinthia and the federal government were unaffected by
the move.
Carinthia guarantees back 10.7
billion euros worth of Heta debt. The federal government backs a 1 billion euro
bond issued in 2012 that the ministry said would be honoured in full.
The moratorium on repayment of
principal and capital lasts until May 31, 2016, giving the FMA time to work out
a detailed plan to ensure equal treatment of all creditors, the FMA said in a
decree published on its website.
More
In botched Kiev coup gone hopelessly wrong news,
America’s puppet president and Vicky Nuland’s “Yats” government are starting to
make Yanukovych look good. Pity the poor Ukrainians, the day America’s War
Party found Kiev on the map of Europe.
Ukrainian Economy Starts to Buckle Behind Cloak of Calm in Kiev
10:00 PM WET March 1, 2015
(Bloomberg) -- Ukrainians are
seeing signs the economy is cracking under the weight of war and the risk of
default.
While restaurants and cafes are
bustling and shelves are full in Kiev, a city of 3 million, a recession
stretching into a second year is igniting angst about the return of the
disarray unleashed by the Soviet Union’s collapse in 1991. Especially outside
the capital, that era of food shortages, hyperinflation and mass unemployment
doesn’t seem so far away.
“My business is about to close
and there are many more like it,” said Valentyna Lozova, a 65-year-old
accountant in Kiev. “Salaries aren’t rising, inflation is galloping and the
hryvnia’s in freefall. I’m afraid of the future.”
It’s becoming harder for
Ukrainians, mindful of the thousands who’ve died in a 11-month insurgency near
the nation’s border with Russia, to put a brave face on their economic woes.
With much of the country’s industrial base in ruins and a looming debt
restructuring, the effect may be felt for years. The economy is set to plunge
12 percent in 2014-15 and the inflation rate jumped to 28.5 percent in January,
the world’s second-highest behind Venezuela.
As the economy deteriorated, the
hryvnia has sunk 70 percent in the past year, the most in the world, sparking
panic in some towns.
“I see people every day in
supermarkets buying sacks of flour and cereals as prices grow,” said Iryna
Lebiga, a 31-year-old mother of three who’s struggling to find a buyer for her
unprofitable sheep farm in Poltava, a 350-kilometer (220-mile) drive east of
Kiev. “People don’t have money. Someone approached us last year but my husband
thought he offered too little. Now, nobody offers even half of that.”
----While the recession isn’t yet as deep as the last one in 2009, this contraction is longer-lasting and Ukraine entered it after two years of almost zero-growth. The scale of the malaise risks triggering disquiet among some Ukrainians who helped unseat their Russian-backed leader last year with the hope of rebuilding the nation, according to Citibank Inc. in Moscow.
“There’s an increasing danger we
see a significant accumulation of social dissatisfaction,” Citibank economist
Ivan Tchakarov said by e-mail. “Economic life becomes ever harder and some of
the promises of the street revolution may be perceived by the public as being
unfulfilled.”
The hardship spans Ukraine, from
the eastern conflict zone near Russia to the western regions next to the
European Union.
----While the official inflation figure is
28.5 percent, annual price growth may be as quick as 272 percent, with a
monthly rate of 64.5 percent that would be qualified as hyperinflation,
according to estimates based on the hryvnia’s black-market price by Steve
Hanke, a professor of applied economics at Johns Hopkins University and
director of the Troubled Currencies Project at the Cato Institute.
----About 600,000 people have fled the
country, according to the UN, headed for new lives in Russia in the east and in
nations such as Poland, Hungary and Romania in the west. Almost 1 million have
been displaced inside Ukraine, the government estimates.
More
We end for today with it’s that man again. No not
the war time BBC radio comedy program of that name, which boosted UK domestic
morale, and that I’m too young to have ever heard, but the always interesting
read from America’s David Stockman. As ever, Mr. Stockman’s whole article is
well worth the read.
Q4 Obliterates The Case For QE And ZIRP
by David Stockman • February 27,
2015
The most important number in
today’s Q4 GDP update was 2.3%. That’s the year/year change in real final
sales from Q4 2013. As an analytical matter it means that the Great Slog
continues with no sign of acceleration whatsoever.
Indeed, the statistical truth
of the matter is that this year’s result amounted to a
slight deceleration—–since the Y/Y gain in real final sales for Q4 2013
was 2.6%. But
beyond the decimal point variation the larger point is this: Take out the
somewhat jerky quarterly impacts of inventory stocking and destocking, and view
things on a year/year basis to eliminate seasonal maladjustments and data
collection and timing quirks, such as the double digit gain in defense
spending during Q3 and the negative rate for Q4, and what you get is a straight
line slog since the recession ended in 2009.
Thus, the
year/year gain in real final sales for Q4 2012 was 2.1%; and was
1.5% and 2.0% for the years ended in Q4 2011 and 2010,
respectively. Its a 2% world. Period.
The questions thus recurs as
to what in the world the Fed’s massive money printing spree had to do with
this tepid performance. The answer is nothing at all, and
that “tepid” and “slog” are exactly the right words to characterize these
numbers. After all, the plunge in GDP during 2008 and the first half of 2009
was the deepest since WW II. By all prior norms, therefore, the bounce back
should have been exceptionally strong.
For instance, real final sales
dropped by 3% during the Great Recession—–far more than the 1.1% decline during
the deepest prior post-war downturn of 1981-1982. However, during
the next five years of rebound, real final sales grew by 26% or nearly 4.7% per
year. That’s more than triple the 8% cumulative rebound
from a far deeper hole in June 2009.
So the case for the Fed’s
massive money printing campaign has now been flat-out obliterated. As I
documented in the Great Deformation, the short but deep recession of 2008-2009
represented a sharp liquidation of excess inventories and labor that had built
up in the main street economy during the Greenspan-Bernanke housing and
subprime credit bubble. But that one-time liquidation was over by June
2009; the economy was not sinking into a black hole.
----But here’s the thing. The 5X gain in the Fed’s balance sheet since 2009 has not been harmless——even though it has not stimulated the main street economy. What is has done, obviously, is reflate a massive financial bubble. The latter will splatter eventually, sending the main street economy into a new tailspin of short-term labor and inventory liquidation and another financial crisis for no reason whatsoever.
Indeed, the monetary politburo is
stuck in a dangerous time warp. Not recognizing that the credit channel of
monetary transmission is broken and done, they keep money market rates
pinned to the zero bound because they claim to detect no acceleration of
consumer price inflation on the immediate horizon.
Much More
The
secret of politics? Make a good treaty with Russia.
Count
Otto von Bismarck.
At the Comex silver
depositories Friday final figures were: Registered 68.81 Moz, Eligible 108.08
Moz, Total 176.89 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
It also allows the Greeks time to continue painting the Germans into the corner of being the uncompromising tyrants who broke up the euro. Germany threatens “no cash” if those tax and work shy Greeks don’t deliver on those vague aspirations, but that would only confirm them as the villains of the euro fiasco. All in all, for a country with almost no cards, Athens scored a technical victory. In game theory, letting your opponent think he’s won, is not a bad strategy at times. In reality the war goes on. Kalavryta and Agia Lavra have yet to be avenged.
Below, the price of Hun austerity “Greek victory,” so far.
"Greece
will not get a single euro until it complies with its obligations.”
Austerity
Paymaster General Wolfgang Schaeuble.
Humiliated Greece eyes Byzantine pivot as crisis deepens
Neither side holds the upper hand in the strategic game of chicken which could still see Greece forced out of the euro
Greece's new currency designs are
ready. The green 50 drachma note features Cornelius Castoriadis, the Marxisant
philosopher and sworn enemy of privatisation.
The Nobel poet Odysseus Elytis -
voice of Eastward-looking Hellenism - honours the 200 note. The bills rise to
10,000 drachma, a wise precaution lest there is a hyperinflationary shock as
Greece breaks out of its debt-deflation trap at high velocity.
The amateur blueprints are a
minor sensation in Greek artistic circles. They are only half in jest.
Greece's Syriza radicals have
signed a fragile ceasefire with the eurozone's creditor powers. Few think this
can last as escalating deadlines reach their kairotic moment in June.
Each side has agreed to a
deception with equal cynicism, knowing that the interim deal evades the true
nature of Greece's crisis and cannot bridge the immense political divide.
They have bought time, but not
much. "I am the finance minister of a bankrupt country," says Yanis
Varoufakis, the rap-artist Keynesian with a mission to correct all of Europe's
economic ills.
First he has to deal with his own
liquidity crisis. Tax arrears have reached €74bn (£54bn), rising by €1.1bn a
month. "This isn't tax evasion. These are normal people who can't pay
because they are in distress," he told the Telegraph.
The Greek Orthodox Church is
struggling to pick up the pieces. "The local councils can't cope, so
people come to us for food," said Father Nicolaos of St Panourios parish
in a working-class district of West Athens.
"We're feeding 270 people
and it is getting worse every day. Today we discovered three young children
going through rubbish bins for food. They are living in a derelict building and
we have no idea who they are," he said, sitting in a cramped office packed
with bags of bread and supplies.
"We rely on donations from
the local bakery. If we run out of beans or lentils, I put out a call, and
everybody brings in what they can. There is this spirit of solidarity because
nobody feels immune," he said.
His poor parish in Drapetsova was
built by refugees from Smyrna and Pontus, victims of the
"Catastrophe" in 1922, when ethnic cleansing extinguished the ancient
Greek communities of Asia Minor. He lovingly showed me the historic icons and
prayer books they hauled with them in wagons, now in the church basement.
The utility companies have been
cutting off the electricity as arrears rise - and sometimes the water too -
leaving 300,000 Greeks in the dark. "They come and ask for candles. They
can't use their fridge. They can't cook. Their children can't do their
homework," he said. It is almost a description of a failed state.
Restoring electricity is the
first order of business in Syriza's "Thessaloniki programme", along
with food stamps, a halt to property foreclosures, and a month's extra pension
for the less affluent.
Father Nicolaos urged Syriza to
stand its ground. "Yes, we Greeks played our own part in our downfall, but
Europe played its part too. We must not sell out at any cost, or sell our
monuments to pay our debts. We must fight," he said
---- Yet Syriza's leaders do not fully believe Mr Schaeuble's threats. Rightly or wrongly, their verdict on the Eurogroup meeting in Brussels is that he tried to force Greece out of monetary union but was blocked by more powerful forces, including Washington.
They believe that Chancellor Angela Merkel ordered her finance minister to desist. This occurred after Germany's Vice-Chancellor and Social Democrat leader Sigmar Gabriel demanded an end to "Diktats", and after Mr Tsipras warned Mrs Merkel in a 50-minute call that Syriza would default if pushed too far.
Greece is counting on quiet support from France and the European Commission. "There is a schism in the Troika," Mr Varoufakis told a local radio station. "We will be talking with the Commission. The EC can coordinate with the ECB if it wants."
This radio interview has caused outrage in Berlin precisely because it reveals what Syriza's leaders are telling their audience at home, and how they interpret events. Once again he repeated that there will indeed be debt relief, and "very swiftly", whatever the pro forma denials by the creditors.
More
“Greece
has won the battle, but not the war."
Greek Prime Minister Alexis Tsipras.
The monthly Coppock Indicators finished February
DJIA: +120 Down. NASDAQ: +213 Down. SP500: +169 Down.
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