Britain and France 2 Germany 0.
Baltic Dry Index. 3844 +41
LIR Gold Target by 2019: $3,000.
America was "now only one cyclical mishap from joining Japan in outright deflation. Given our view that this cyclical recovery will end surprisingly early, slipping into the deflationary mire will trigger further, more extreme rounds of central bank monetisation, inevitably driving us towards our ultimate destination – 1970s-style 20pc-30pc inflation will surely return.
Albert Edwards. Strategist at Societe Generale
They came, they met, they talked, and talked, and talked, then they talked away some more. We are of course referring to the EU gathering of the 27 finance ministers, who met up Friday in the midst of the worst crisis to hit the Euro since the whole dodgy project was foist on the Germans for starting the two world wars that wrecked Europe. (Yes I know it was the Austrians who started WW1.) At the modern European equivalent of the tower of Babel, everyone then jetted home for the Whitsun weekend, now sadly no longer a holiday weekend in Godless Britain, removed by diktat from neo-communist Godless Brussels. Luckily, the German Parliament was voting in favour of funding Chancellor Merkel’s U-turn on bailing out Greece, at the same time, so the dither and inaction of the useless EU finance ministers, didn’t get to generate another Black Friday in the European stock markets, but this wasn’t their finest hour.
Quite what the Greeks and the other tax and work shy members of Club Med will do with the near trillion Euros they’ve been promised, is anyone’s guess, they were closed for a party yesterday, but I’d bet money they won’t implement anything near the austerity measures they promised to get German cash. The euro is doomed in its present form. Thankfully, in an unexpectedly blunt move by Britain’s new Prime Minister, obviously still green in the job, Mr. Cameron told Chancellor Merkel in Berlin in the press Q&A session, that the UK will veto any attempt to force a Euro-zone rescue on the UK and other non members of the failing European Monetary Union. Chancellor Merkel looked on bewildered and stunned, probably much as she did when President Sarky slammed the table the previous week and screamed at her that if she didn’t cough up German cash for Greece PDQ, he was off taking France out of the EMU. This would all be quite humorous, if it wasn’t that any day now the whole fiat Euro currency fiasco looks like wiping out most of Germany’s banks.
Below, the Telegraph covers the rising summer crisis. I suspect that we will be revisiting this crisis time and again all summer.
Markets left reeling after week of global drama
No one – not Britain, the US nor Japan – is immune to a Greek-style debt crisis, one of Europe's chief policymakers has warned, as investors reeled from a week of market drama.
By Edmund Conway, Economics Editor Published: 9:40PM BST 21 May 2010
The sovereign debt crisis could claim new victims, including those outside the euro area, according to Lorenzo Bini Smaghi, a member of the European Central Bank's executive board. He was speaking as finance ministers met in Brussels to discuss their response to the crisis.
The new Chancellor, George Osborne, urged them to cut deficits faster and with more urgency, pointing towards the £6bn of in-year spending cuts he is set to unveil on Monday.
The warning came on another tense day for capital markets worldwide.
London's benchmark FTSE 100 dipped briefly beneath the 5,000 mark, recovering later in the day but nevertheless closing down 10.2 points at 5062.93. The FTSE has fallen by 3.8pc this week alone, and is 13pc down on its peak in April.
Although markets across Europe spent most of the day in negative territory, they recovered in late trading after German politicians backed their part in the $1 trillion safety net euro area members are constructing to prevent re-runs of the Greek economic catastrophe. On Wall Street, the Dow Jones closed up 1.3pc at 10,193.39 points.
Strategists said that the disruption was likely to continue for some time, as pessimism spreads throughout the marketplace. Some metrics put the level of risk appetite down at the lowest level since the peaks of the Lehman Brothers collapse in 2008.
While last week most attention had been focused on Europe's specific problems, this week has seen investors shift their focus to other leading economies, including the US, Japan and China, which some believe is overheating.
Albert Edwards, strategist at Societe Generale, said that markets still had yet to realise the significance of falling inflation in the US.
He said America was "now only one cyclical mishap from joining Japan in outright deflation. Given our view that this cyclical recovery will end surprisingly early, slipping into the deflationary mire will trigger further, more extreme rounds of central bank monetisation, inevitably driving us towards our ultimate destination – 1970s-style 20pc-30pc inflation will surely return."
The euro, which has fallen sharply against the dollar in recent weeks, rose against a range of currencies amid hopes the German vote may pacify investors.
May 21, 2010
Cameron tells Merkel he would veto transfer of budget powers to EU
David Cameron gave a blunt warning to Angela Merkel today that he would veto any attempt to reopen the Lisbon treaty to give the EU more power over national budgets.
Standing alongside the German Chancellor, Mr Cameron insisted that he wanted to see a strong single European currency but pledged to block moves to prop it up that involved a transfer of power from Westminster to Brussels.
The Prime Minister held robust and cordial talks with Mrs Merkel in Berlin where they also disagreed over hedge-fund regulation and Mr Cameron refused to reconsider his decision to pull the Conservatives out of the main centre-Right group in Europe.
The two leaders put on a relaxed show for the cameras, with Mrs Merkel’s mood buoyed by securing a “yes” vote in the German Parliament for the eurozone’s 750 billion euro bailout fund, to which Berlin will contribute up to €147 billion in loan guarantees.
But the convivial atmosphere could not mask their differences, with Germany leading calls at a finance ministers’ meeting in Brussels today for EU treaty changes to help restore confidence in the euro by introducing new sanctions and powers of co-ordination.
http://www.timesonline.co.uk/tol/news/politics/article7133106.ece
Below, Bloomberg covers what was decided at the EUFM-27. We note the reappearance of the dreaded Caesar van Rompuy, aka Herman Hu. If everything runs according the EU plan, the first implementation of rule changes should be in place for the crash of 2018. For a view of where we are headed, scroll down to the hell hole of modern Venezuela, a Workers' Paradise with oil and gas.
EU Backs Stiffer Deficit Sanctions, Rules Out Default Mechanism
May 22 (Bloomberg) -- European Union finance ministers pledged to stiffen sanctions on high-deficit countries and ruled out setting up a mechanism to manage state defaults, saying no euro country will be allowed to renege on its debts.
After committing as much as 860 billion euros ($1.1 trillion) to halt a European sovereign debt crisis, the ministers vowed to plug holes in the euro region’s system of penalties for countries with runaway deficits.
“We will provide new sanctions, more than is now provided,” EU President Herman Van Rompuy said after the four- hour brainstorming session in Brussels yesterday. “Everyone is ready to go ahead with a strong stability and growth pact.”
Concern that the Greece-fueled European fiscal crisis would drag Europe back into recession pushed down European stocks to a six-month low before the Euro Stoxx 50 Index rebounded to gain 0.2 percent. Rates for three-month loans in dollars between banks rose to the highest level in almost 10 months.
Deliberations over the revamp of Europe’s economic management came after German Chancellor Angela Merkel won parliamentary backing for Germany’s contribution of as much as 148 billion euros to the EU’s planned 440 billion-euro debt- stabilization fund, the largest single share. Spain, meanwhile, enacted the first public wage cuts since returning to democracy in 1978 and cut its economic growth forecast for next year.
Both “financial and non-financial sanctions” are under consideration for repeat violators of the euro area’s deficit cap of 3 percent of gross domestic product, Van Rompuy said.
----- Under the German-inspired Stability and Growth Pact, countries with deficits above the ceiling face fines of as much as 0.5 percent of GDP unless they get the budget back into compliance. No country has been fined during the euro’s 11-year lifespan. Germany and France teamed in 2005 to dilute the rules after overstepping the limits for three years in a row.
----- “There are a lot of reservations about this,” Greek Finance Minister George Papaconstantinou said. “We aren’t the only country with reservations.”
The goal is to make legislative proposals by October, with the EU setting no deadline for when the policy changes would take effect. Some proposals may require an overhaul of EU treaties, a process that took eight years for the 27-nation bloc’s current rulebook.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aMUKfcpOm7zg&pos=1
Next a report that got heavy spin the wrong way during the week. The Telegraph, again, tries to set part of the record right. Very few will pay it any attention.
Mobile phones: Is there an epidemic on hold?
The world’s most important study into the dangers of mobile-phone use raises serious worries, writes Geoffrey Lean.
By Geoffrey Lean Published: 8:03PM BST 21 May 2010
---- This week, the scientists who had completed one of the world’s biggest and most important health studies effectively admitted that it had wasted everyone’s time.
They didn’t put it quite like that, of course. But after 10 years of research and deliberation, the expenditure of £16.5 million, and comparing the health of many thousands of mobile phone users and non-users in 13 countries, the world’s biggest study into whether the phones cause brain cancer – published this week – admitted that its main finding was “implausible” and that its conclusions were undermined by “bias” and “error”.
Not that this stopped the mobile phone industry and establishment scientists suggesting that the study has exonerated handsets. But it does no such thing: indeed, as The Daily Telegraph exclusively predicted back in October, it produces evidence that suggests that they pose a very serious threat indeed.
----- In sober truth, it is extraordinary that this evidence emerged. For the way the study, partly financed by the industry, was set up appears to militate against it. It covered only those aged between 30 and 59, omitting children, teenagers and young adults, who are most vulnerable to the radiation: one study shows that people who start using a mobile before the age of 20 increase their chances of getting the disease fivefold. It chose a ludicrously wide definition of “regular mobile phone users”, including those who only made one call a week over six months – a negligible exposure that could not possibly cause harm.
Worst of all, it looked at people who had used their handsets for far too short a time for cancers to have developed. Tumours almost always take at least a decade – usually several – to emerge after the initial damage has been done. But, on average, the people examined for the research had only been using mobiles for just over two years, far too little time for even the most virulent cancer-causing agents to show an effect. As a commentary accompanying the publication of the paper in the International Journal of Epidemiology put it: “None of today’s established carcinogens, including tobacco, could have been firmly identified as increasing risk in the first 10 years or so since first exposure.”
----- And yet, despite all this, one worrying finding did emerge. The heaviest users of mobile phones – on them for a total of 1,640 hours, equivalent to just half an hour a day over 10 years – were 40 per cent more likely to get glioma, the brain cancer that killed Ted Kennedy.
And they were fully twice as likely to develop it on the same side of the head as they held the handset.
The authors of the study dismissed this result, saying that – wait for it – “biases and error prevent a causal interpretation”. But an appendix to the paper provides strong supporting evidence. It got around the cause of bias that most worried the researchers – that fewer people who did not use mobiles volunteered to be studied than those who did – by comparing light with heavier users. And this revealed consistent increases in glioma among those who had phoned most, and those who had used their handsets for 10 years or more.
These results, among the only people who could possibly be expected to develop the disease, are truly worrying.
For only the most powerful carcinogens show any effect after just a decade, suggesting that very many more people will fall victim after 20 or 30 years, or more. And even the heaviest users were relatively modest callers by today’s standards: many people, particularly the young, use them for an hour a day, often much more.
Later today, another BP briefing on the disaster. Finally over 4 weeks from the disaster we should get some realistic idea of the size of the problem. Then the experts in the blogosphere can really get to work.
New estimates on Gulf spill rate due Saturday, BP says
NEW YORK (MarketWatch) -- As the oil major posted a live video of the well pipe gushing oil at the bottom of the Gulf of Mexico, BP said Friday that estimates claiming the flow of oil is running as high as ten times the official daily rate of 5,000 barrels are not accurate.
Pushing back against critics, BP PLC said estimates based on the width of the 19.5-inch pipe aren't correct because the opening was narrowed by about 30% in the accident, plus the flow has been reduced by 10% from a broken drill pipe inside the riser. About half of the flow coming from the pipe is natural gas, not oil, the company said.
"Thus, some third-party estimates of flow, which assume a 19.5-inch diameter, are inaccurate," BP said.
The U.S. government's set up a Flow Rate Technical Team to develop a more precise estimate of the flow, BP said.
Agencies involved in the project include the Coast Guard, the National Oceanic and Atmospheric Administration, the Minerals Management Service, the Energy Department and the U.S. Geological Survey.
The team's mandate is to produce a report by close of business on Saturday, BP said.
We end with more news from the failing state of Venezuela. Where the “workers’ paradise” of socialism leads, not that the G-7’s banksterist corporate socialism isn’t almost as bad. Stay long precious metals.
VenEconomy: Rabbits keep on popping out
This week more rabbits have popped out of Hugo Chávez' communist hat. The first one of the week was official confirmation of something that all Venezuelans have been feeling in their wallets: Inflation is picking up speed, with an April-to-April rate of 31.9%, and 12.0% so far this year.
That was not all, however. The bad news just kept on coming throughout the remainder of the week: It wasn't just the news that another turbine at the Guri Dam had broken down. Experts continue to say that the critical situation of the nation's electric power grid is likely to last on into 2013. What the country risks, they say, is the possibility of a “long-lasting national collapse.” Meanwhile, Corpoelec has announced that they will only be able to bring 1,621 MW, of the 5,900 MW needed, on line. Meanwhile, the people are still putting up with rationing and fines if they fail to cut back on their use of electric power.
The scandal of the week was not that the Aban Pearl Platform sank in waters off the east coast of Venezuela, but all the information that bubbled to the surface afterwards regarding another murky government business deal: Despite the fact that it is over 33 years old, is obsolete and has structural flaws, the platform was being leased with a surcharge of $374,000 per day. According to the government, however, this mishap is simply a little “stumble” on the road to reclaiming sovereignty.
The bad news is not that, without any valid financial reason whatsoever, another name has been added to the list of thousands of expropriated companies: Molinos Nacionales (Monaca). It is not even the fact that, with this latest expropriation, the government now controls 37% of the pre-cooked cornmeal market. What does not bode well at all is that, once again, the government has taken over a business about which it knows nothing, while totally ignoring its obligation to provide well-run public services, especially health services. This during the same week that 15 cases of Chagas disease have been diagnosed in a single Caracas parish, and triatomine bugs ( chipos) -- the vector for this disease -- have been found in at least five neighborhoods in the capital city.
The bad omen is not only that, this past Thursday, the National Assembly approved the first reading of an amendment to the Lands and Agricultural Development Act. What points to dire consequences is that that government is reserving for itself “the activities of primary [agricultural] production, industrialization, distribution and marketing,” allegedly for the purpose of consolidating food sovereignty. The major contradiction here is that, even with 50 million hectares to its name, the government depends almost entirely on imports to meet the country's basic food requirements.
As the finishing touch to another black week, following the second reading, the National Assembly passed the new Foreign-Exchange Crimes Act. What is terrible in this case is not the witch-hunt against brokers and alleged speculators. What really spells disaster is that this means the end of the securities-swap market, the market where industry, businesses and the man on the street could still buy foreign exchange, leaving them at the mercy of a black market and a system of justice that does whatever Miraflores orders.
http://www.petroleumworld.com/ed10051901.htm
Have a great weekend everyone.
GI.
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