Baltic Dry Index. 3844 +41 (Friday)
LIR Gold Target by 2019: $3,000.
“BP attempted to ease the strength of US feeling by providing up to $500m (£346m) over a 10-year period to assess the impact of the spillage on the marine and shore environment around the Gulf.”
For more on BP scroll down to the Crooks & Scoundrels section where a bad error of judgment continues to go from bad to worse. We can only hope that their “top kill” efforts tomorrow go as intended, there’s quite a high chance of making things even worse. BP’s offer of up to $500 million spread over 10 years, is risible, and right out of Goldman Sacks’ asinine PR manual for squids.
Today we are pleased to activate our mining stock update page. The first update is an excellent review of Endeavour Silver, by Chris Berry. My thanks to Chris for letting me share his review. Click on the page link at the top of the blog.
We open today with Europe putting on sack cloth and ashes. Well the little people anyway, no banksters are going on a Lenten diet. Austerity is now the only game in town, as Europe’s snake bitten leaders reel from crisis to crisis attempting to prop up Europe’s banks. Up first, the UK’s unelected coalition on the first down payment of pain. Later today, the Queen gets to deliver the coalition’s speech on the austerity plans that they avoided talking about during the election. Trouble lies ahead I think. The Pound is headed towards parity with the dollar as the UK competitively devalues against the world.
"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people."
F.A. von Hayek
May 24, 2010
Worst is still to come as Osborne lists £6.2bn cuts
George Osborne today warned the worst was still to come as he announced £6.2 billion worth of spending cuts with the axe falling immediately across Whitehall departments.
The bulk of the money saved will be used to start paying down Britain’s £156 billon budget deficit and to try to preserve the country’s credit rating.
The most severe spending reductions announced by the Chancellor and by David Laws, the Lib Dem Chief Secretary to the Treasury, will affect the Department of Business Innovation and Skills (BIS), which will see £836 million ripped out of its budget during the current financial year.
The cuts — which are £243 million more than expected — have been identified over the last week by civil servants and Treasury officials.
Mr Osborne made it clear today that difficult conversations between the Treasury and Cabinet ministers have been conducted by Mr Laws. The Lib Dem Chief Secretary also was responsible for spelling out the details of the cuts this morning.
Both ministers warned that there will be “many more difficult decisions” over the coming year on spending cuts.
Mr Laws stressed that Britain’s economic future was in grave danger if the Government failed to cut spending and reduce the deficit, but at the same time he tried to reassure voters by insisting that the Coalition would “cut with care”.
The Government has chosen to scrap future contributions to Child Trust Funds, and has backed down on a jobs pledge made by the previous Labour Government to find work or training for any individual who has been unemployed for more than six months.
http://www.timesonline.co.uk/tol/news/politics/article7135030.ece
Queen Elizabeth to open British parliament
AFP May 25, 2010 12:35PM
QUEEN Elizabeth II officially opens Britain's parliament tonight in a ceremony of pomp and history following the election, and will set out the new coalition government's legislative program.
The queen takes part in the traditional State Opening of Parliament, before outlining what are expected to be the coalition's ambitious plans in an address to lawmakers delivered from a throne in the upper house of the legislature.
A leaked draft of the Queen's Speech - in which she sets out proposed legislation in a speech entirely drawn up for her by the government - showed the coalition planned an 18-month program of at least 21 parliamentary bills.
Within days, key school reforms and the scrapping of proposals to introduce a compulsory national identification cards would be brought in, according to the draft revealed in newspapers at the weekend.
A major proposal was a program of political reform, with measures to provide for fixed-term parliaments and powers to enable voters to get rid of lawmakers found guilty of serious wrongdoing, said the Sunday Telegraph newspaper.
It could also lead to a referendum on voting reform - a key demand of the Liberal Democrat party when they were negotiating to go into coalition with the Conservatives, led by Prime Minister David Cameron, after the May 6 poll.
"Freedom, fairness and responsibility" lie at the heart of the program, as well as a "great repeals bill" to abandon laws introduced by the previous Labour administration but opposed by the coalition parties, said the Telegraph.
The finance ministry will be at the forefront of efforts to push through five bills, according to the draft, which highlights the new government's priority of tackling Britain's record deficit.
Another proposal will aim to ensure that "this parliament and the British people have their say on any proposed transfer of powers to the European Union".
-----In the State Opening of Parliament, the queen proceeds from Buckingham Palace to the Houses of Parliament - the lower house of the legislature - escorted by cavalry in a ceremony which attracts large crowds.
Traditions surrounding the ceremony trace their history back 500 years. In its current forms, it dates from the opening of the Houses of Parliament in 1852 after a huge fire.
Below, cash rich Germany gets in on the new sack cloth and ashes European fad. If you didn’t know better you’d think we weren’t operating in an upside down world of fiat currencies. On fiat, all decisions are purely political. Banksters and car makers can get bailouts ad nauseum. Candlestick makers, nurses and the working poor need not apply. It’s a funny old bankster world on fiat. To him that hath will be given more. To him that hath not, even the little he hath will be taxed away and given to banksters. This system will collapse within the decade. Stay long precious metals.
"The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register."
Hans F. Sennholz
Berlin prepares for €10bn yearly cuts
By Quentin Peel in Berlin Published: May 23 2010 17:40 Last updated: May 24 2010 09:27
The German government is to begin a drastic budget austerity programme next year to set an example to the rest of the eurozone, and comply with a “debt guillotine” that has been written into the German constitution.
The cuts are expected to total at least €10bn ($13bn, £9bn) a year until 2016, government officials said.
Tax rises as well as reduced spending are likely to be considered, in spite of a previous promise by the coalition to put tax cuts at the centre of its programme. Lower state subsidies and the abolition of tax exemptions and allowances are a top target.
Wolfgang Schäuble, finance minister, suggested, in an interview published on Sunday, that reforms of unemployment and social benefits could provide some of the savings if they helped to boost employment rates. He promised that there would be no budget “trickery” in the cuts, and that education and training would be protected.
His proposal was instantly condemned by the centre-left opposition Social Democrats as an attack on the poor. Sigmar Gabriel, SPD leader, called instead for tax rises on the bankers and speculators who had caused the crisis.
http://www.ft.com/cms/s/0/9862a1a8-6687-11df-aeb1-00144feab49a.html
Euro Falls for 2nd Day on Concern Europe Debt Crisis Spreading
May 25 (Bloomberg) -- The euro weakened for a second day against the yen and dollar as signs the European debt crisis is spreading revived concern the region’s recovery will slow.
The single currency dropped to within one yen of its weakest in more than eight years after the International Monetary Fund urged Spain to do more to overhaul its ailing banks, adding to speculation Europe’s financial institutions face more losses. The yen strengthened as a decline in Asian stocks boosted demand for Japan’s currency as a refuge. The won slumped as tensions escalated between the two Koreas over the sinking of a warship from the South’s navy in March.
“I’m concerned about what policy makers can do to contain the debt crisis should it spread from Greece to bigger nations like Spain and Italy,” said Tetsuya Inoue, chief researcher for financial markets at Nomura Research Institute, a unit of Japan’s largest brokerage. “Economic growth can’t help but lose momentum. The euro will stay under downward pressure.”
------Spain’s banking industry “remains under pressure,” as consolidation has been “too slow,” the Washington-based IMF said in a report yesterday after a regular review of Spain.
“We fully support” the new austerity measures, it said, referring to Spain’s plans to rein in its budget deficit with the deepest spending cuts in three decades.
Spain’s Banks
Four Spanish savings banks plan to combine to form the nation’s fifth-largest financial group with more than 135 billion euros ($166 billion) in assets, as regulators push ailing lenders to merge with stronger partners.
-----Stresses in Spain’s banking system are intensifying concern that the Greek debt crisis may spread, Mohamed A. El-Erian, whose company runs the world’s biggest mutual fund, said in an interview with PBS.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a6dY3BHv1qZE&pos=4
We end on the subject leaving the last word to the Telegraph. While us hapless Brits wait today to hear what austerity horrors will descend on us from the parties who totally avoided the subject during the recent election, the Telegraph’s top economics writer covers the EU adopting the wrong remedy in a desperate effort to bailout German and French banks. Nothing good will come from this, I suspect. The end result will still likely be the breakup of the Euro and a giant restructuring of EU sovereign debt. The whole article is well worth the read.
"When paper money systems begin to crack at the seams, the run to gold could be explosive."
Harry Browne
Europe's deflation torture is a gift to the Far Left
If Europe’s ultra-Left has so far reaped little dividend from the great "Crisis of Capitalism", this will surely change as the eurozone’s 1930s policies of wage deflation sap the credibility of the governing centre and the EU itself.
By Ambrose Evans-Pritchard Published: 6:20PM BST 23 May 2010
The tragedy of the interwar years in Germany was that the Social Democrats - then the world’s foremost socialist party - became fatally tainted by acquiescing in Bruning’s deflation torture from 1930 to 1932. They did so, of course, because they dared not confront the orthodoxies of the Gold Standard.
By then the fixed-exchange mechanism had gone horribly wrong - in much the same way that EMU has gone horribly wrong - because the surplus countries were not recycling demand to maintain equilibrium. It had become a job-destruction machine. The result in Germany was the Reichstag election of July 1932 when the Communists and Nazis won over the half the seats.
As historian Simon Schama wrote over the weekend in the Financial Times - "The world teeters on the brink of a new age of rage: we face a tinderbox moment" - there is typically a lag-time between economic shocks and social fury. Luckily there is no Fascist threat this time. It is the (more benign) Marxist Left that stands to gain.
Perma-slump has already chipped at the left flank of the ruling Socialists in Portugal. The Communist Party (PCP) and the Maoists and Trotskyists of the Left Bloc together won 18pc of the vote in September 2009, leaving premier Jose Socrates with the lonely task of enforcing yet more austerity by minority government.
Communist leader Jerónimo de Sousa said last week that the country was being reduced to a "protectorate of Brussels", cowed into submission by financial blackmail. He invoked the civil war in 1383 when the country rallied heroically to expel the foreign opressor - with English help, the "ultimato inglês" as he calls it - from Portuguese soil.
-----What this comes down to is "ownership" of austerity policies. It is hard enough for the elected parliament of an ancient and sovereign nation to impose cuts - as Britain discovered in September 1931 when Royal Navy ratings at Invergordon refused to set sail after the Admirality docked pay by a shilling - but what is the charisma and ordaining legitimacy of an EU council of ministers meeting behind closed doors in Brussels?
Portugual is not unique. I spent Saturday delving into the subcultures of Italy’s Rifondazione Comunista, Spain’s Izquierda Unida, Olivier Besancenot’s Parti Anti-Capitaliste in France, and Germany’s Linke (Left). While it is too early to talk of a pan-European revolt against EMU-deflation, the Left is starting to offer the only coherent critique of what has gone wrong with monetary union and why there can be no durable solution until the EU creates full fiscal union (which creates its own problems of permanent subsidies, as from Ostrogoth Padania to Berber Sicily under the lira) or until this latter day Gold Standard is broken into viable halves.
------This belt-tightening is intellectually absurd, comes too late to rebalance EMU, and has now run amok. Spain is cutting public sector wages by up to 7pc this year. Greece has swallowed a de facto cut of 16pc. Italy is preparing a wage freeze as part of a €25bn austerity plan over two years. France has joined with plans for a three-year freeze and a hair-shirt clause in the constitution. Pre-EMU Romania is cutting wages by 25pc, so that take that you wimps. Romania’s police union has vowed to bring down the government, threatening to "do what we did in 1989, when we overthrew the dictatorship".
The IMF’s Dominique Strauss-Kahn is having second thoughts about a synchronized fiscal squeeze across half Europe. "Growth in Europe is by far too low. Germany and the other countries must urgently do more to accelerate growth. The whole world is watching this and is losing confidence in Europe," he said.
The Left always warned that EMU was a "Bankers’ Ramp", an instrument of creditor control that would lock in reactionary policies. Little did they know how extreme this would prove to be. Greece is having to go through the harshest fiscal cuts ever attempted in a developed economy under its EU-IMF plan, without offsetting exchange and monetary stimulus. The agony is pointless. The IMF admits that Greece’s public debt will rise from 120pc to 150pc of GDP by 2014. The country is already past the point of no return.
-----Such a policy is not in the interests of Greek society. Greece should leave the euro and carry out a controlled default, sharing the pain with foolhardy creditors. The EU is preventing this cure: either to protect bond-holders - ie, French and German banks - giving them time to shuffle off their bad debts onto EU taxpayers; or because Brussels refuses as a matter of ideological principle to countenance any step back, ever, in the sacrosanct Project.
"Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state."
William F. Rickenbacker
At the Comex silver depositories Monday, final figures were: Registered 52.60 Moz, Eligible 64.84 Moz, Total 117.44 Moz.
Day 16 of Hitler’s attack in the west that almost brought down western civilization. We continue our daily update on the “Dunkirk” page.
Dunkirk & the Battle of France – Day by day 70 years on.
http://londonirvinereport.blogspot.com/p/dunkirk-battle-of-france.html
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Crooks & Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Below, more on the rising frustration in America with BP, and the rising clamor to bring in modern regulation of deep water drilling. BP’s profits will be going to non shareholders for many quarters to come, I suspect. The cost/benefit of deep water drilling are changing by the day. Dare BP allow BP America to file bankruptcy, while the parent company step aside? I doubt it. Dare BP America play hardball on the damage claims submitted in the months ahead? My guess is that Bp has no other option but to try to play hardball on the claims submitted, but that is likely to set off a new PR disaster and fuel yet more punishing legislation. And hanging over all of BP, the prospect of criminal charges over the death of 11 missing workers. The shareholders of troubled BP are still in denial of just what a disaster has befallen them. BP is a very troubled company now, no one’s takeover target nor able to takeover anything itself. Even the most backward country is going to minutely micro manage every BP future application to drill. And still to come, the aftermath of who screwed up, once the calamitous spill is capped.
“I want to share something with you: The three little sentences that will get you through life. Number 1: Cover for me. Number 2: Oh, good idea, Boss! Number 3: It was like that when I got here.”
Homer Simpson.
Oil Hits Home, Spreading Arc of Frustration
By CAMPBELL ROBERTSON, CLIFFORD KRAUSS and JOHN M. BRODER Published: May 24, 2010
PORT FOURCHON, La. — For weeks, it was a disaster in abstraction, a threat floating somewhere out there.
Not anymore. In the last week, the oil slick in the Gulf of Mexico has revealed itself to an angry and desperate public, smearing tourist beaches, washing onto the shorelines of sleepy coastal communities and oozing into marshy bays that fishermen have worked for generations. It has even announced its arrival on the Louisiana coast with a fittingly ugly symbol: brown pelicans, the state bird, dyed with crude.
More than a month has passed since the Deepwater Horizon drilling rig blew up, spewing immeasurable quantities of oil into the Gulf of Mexico and frustrating all efforts to contain it. The billowing plume of undersea oil and water has thwarted the industry’s well-control efforts and driven government officials to impotent rage.
It has demonstrated the enduring laxity of federal regulation of offshore operations and has shown the government to be almost wholly at the mercy of BP, the company leasing the rig, to provide the technology, personnel and equipment to stop the bleeding well.
Senators and administration officials visiting the southern Louisiana town of Galliano lashed out again at BP on Monday, saying they were “beyond patience” with the company. The day before, Interior Secretary Ken Salazar, who early in the crisis vowed to “keep the boot on the neck” of BP, threatened to push the company out of the way.
But on Monday, Mr. Salazar backed off, conceding to the reality that BP and the oil companies have access to the best technology to attack the well, a mile below the surface, even though that technology has proved so far to have fallen short of its one purpose. The government’s role, he acknowledged, is largely supervisory and the primary responsibility for the spill, for legal and practical reasons, remains with the company.
-----Oil industry experts said they did not take seriously the sporadic threats by the administration that the federal government might have to wrest management of the effort to plug the well from BP. The experts said that the Interior and Energy Departments do not have engineers with more experience in deepwater drilling than those who work for BP and the array of companies that have been brought into the effort to stem the leak.
“It’s worse than politics,” said Larry Goldstein, a director of the Energy Policy Research Foundation, which is partly financed by the oil industry. “They have had the authority from Day 1. If they could have handled this situation better, they would have already.”
As the verbal warfare between officials and company executives escalated, the slick from the April 20 well blowout continued to spread in billowing rust-colored splotches in the gulf, raising urgent questions about what lay beneath.
On land, shrimpers were stuffing their catch into coolers in hopes of having some in store if the season ends altogether. Hotel owners all along the gulf were trying to persuade tourists to keep their vacation plans.
-----Several things have become clear over the past month. Neither BP nor the government was prepared for an oil release of this size or at this depth. The federal Minerals Management Service, charged with overseeing offshore oil development, has for too long served as a handmaiden of industry. Laws governing deepwater drilling have fallen far behind the technology and the attendant risks. And no one can estimate the extent of the economic and environmental damage, or how long it will last.
More.
http://www.ft.com/cms/s/0/5adc64f6-676b-11df-a932-00144feab49a.html
Gulf of Mexico oil spill: BP recovering 40pc less oil than previously claimed as it prepares fourth attempt to halt leak
BP was back on the defensive on Monday amid growing political and public frustration in the US at its failure to stem the massive Gulf of Mexico oil spill and the start of preparations for a fourth attempt to cap the damaged well.
By Roland Gribben Published: 8:24PM BST 24 May 2010
The oil giant admitted it was recovering less oil from a tube inserted into the mile-long pipeline that snapped after the Deepwater Horizon drilling rig exploded with the loss of 11 lives a month ago.
BP initially said that most of the estimated 5,000 barrels a day spewing out of the well was being collected and taken a mile to the surface but yesterday the company disclosed that the average daily recovery is running at just over 2,000 barrels.
-----BP conceded that the siphoning system involved "significant uncertainties" because of its novelty and said that it was impossible to "assure its success or put a definite timescale on its deployment".
The use of a special tube to collect the oil is the third technique used by BP to control the flow after the failure to reactivate the blow out preventer and erect domes over the damaged seabed installations.
Now BP is pinning its hopes on operation "top kill" involving the injection of heavy drilling fluids to stop the flow and sealing the well with cement to end the nightmare. Engineers hope to start work on Wednesday while work continues on the slower process of drilling two relief wells.
-----BP chairman Carl-Henric Svanberg, criticised for keeping a low profile as BP came under fire, said that Tony Hayward, chief executive, had the full support of the board in the way he was handling the accident. Mr Svanberg, back from a visit to the Gulf, told business website e24.se: "It is our sub-contractor's drilling equipment that has defaulted but it is our responsibility. We will do everything as humanely possible to plug the leak, clean up after ourselves and take care of all requirements."
BP attempted to ease the strength of US feeling by providing up to $500m (£346m) over a 10-year period to assess the impact of the spillage on the marine and shore environment around the Gulf. So far BP has spent about $760m (£525m) to control the slick, meet 9,000 out of 23,000 compensation claims tabled up to now and cover the cost of the relief wells. More than $170m has been paid to neighbouring states, including an allowance for the loss of income from tourism.
The enemy was repelled. But victory was not won. The war dragged on for a year and there was no decision. Gold grew scarce, and again the Government was in despair.
"I easily relieved them. 'Write,' I said, 'promises on paper to be repaid in gold.' They did as I advised, paying me (at my request) a trifle of half a million for the advice. I handled the affair on a merely nominal profit. I punctually met for another year every note that was paid in. But too many were presented, for the war seemed unending and entered a third year."
"Then did I conceive yet another stupendous thing. 'Bid them,' said I to the Sultan, 'take the notes as money. Cease to repay. Write, not 'I will on delivery of this paper pay a piece of gold,' but, 'this is a piece of gold.'"
"He did as I told him. The next day the Vizier came to me with the story of an insolent fellow to whom fifty such notes had been offered as payment for a camel for the war and who had sent back, not a camel, but another piece of paper on which was written 'This is a camel.'"
Hilaire Belloc.
The monthly Coppock Indicators finished April:
DJIA: +245 UP. NASDAQ: +448 UP. SP500: +276 UP. The great Bull market goes on with the all three continuing higher in positive numbers. But how much Bull is enough?
Help the LIR fight Banksterism, the EU, and for sound money.
If you can, help the LIR stay around and make a difference. Please make a donation at the PayPal link on the website or better still become a sponsor for what looks like an exciting 2010. Capitalism not banksterism. Many thanks to all who have helped.
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Sunspots – A 22 year colder world? (From 2004?)
Spotless Days May 24
Current Stretch:0 days
2010 total: 33 days (23%)
2009 total: 260 days (71%)
Since 2004: 802 days
Typical Solar Min: 485 days
The long minimum seems to have ended, or has it?
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