Baltic Dry Index. 2784 -127
LIR Gold Target by 2019: $3,000.
"The leaders who, for many years, have been at the head of the French armies have formed a government. This government, alleging the defeat of our armies, has made contact with the enemy in order to stop the fighting. It is true, we were, we are, overwhelmed by the mechanical, ground and air forces of the enemy. Infinitely more than their number, it is the tanks, the airplanes, the tactics of the Germans which are causing us to retreat. It was the tanks, the airplanes, the tactics of the Germans that surprised our leaders to the point of bringing them to where they are today.
"But has the last word been said? Must hope disappear? Is defeat final? No!
"Believe me, I who am speaking to you with full knowledge of the facts, and who tell you that nothing is lost for France. The same means that overcame us can bring us victory one day. For France is not alone! She is not alone! She is not alone! She has a vast Empire behind her. She can align with the British Empire that holds the sea and continues the fight. She can, like England, use without limit the immense industry of the United States.
"This war is not limited to the unfortunate territory of our country. This war is not over as a result of the Battle of France. This war is a worldwide war. All the mistakes, all the delays, all the suffering, do not alter the fact that there are, in the world, all the means necessary to crush our enemies one day. Vanquished today by mechanical force, in the future we will be able to overcome by a superior mechanical force. The fate of the world depends on it.
General de Gaulle. BBC Broadcast June 18, 1940.
As difficult as Europe’s predicament is today, 70 years ago today, it was infinitely worse. The French and British armies had been comprehensively beaten by Nazis Germany. The French government was negotiating an armistice with Ribbentrop and the German High Command. The Soviet Union began its invasion and occupation of the Baltic States. Poland, Denmark, Holland, Belgium and Norway, had all been defeated and occupied by Germany, France was about to be. For Europe it seemed about as black as black could be, although no one expected the murderous depravity into which Nazis Germany would now sink. Few French people heard General De Gaulle’s June 18th broadcast, four days later millions would hear his second broadcast.
At yesterday’s EU summit in Brussels, Caesar van Rompuy and the assembled heads of the EU states chose not to dwell on the past. No one brought up the war. Not even the Greeks, who are sensitive to German demands that they give up their way of life and adopt the German work ethic, tax ethic, and German beer, in return for hard earned German cash. Below, the reality of the Eurozone heading towards breakup and default. Stay long precious metals. Sooner or later the Eurozone must face up to the reality of modern defeat. A one size fits all euro works for none of Club Med, if it’s to be a hard German run currency for the benefit of Germany. A Club Med soft euro works for Club Med, but turns hard working, tax paying, money saving Germans into dissolute Italians and is unacceptable to German voters. Germans would rather leave the euro and go back to the Deutsche Mark. Squaring the circle is not going to happen. Sooner or later, the euro as we know it will end.
ECB must buy 'hundred of billions' of bonds to tame Europe's debt crisis
Fitch Ratings has warned that it may take massive asset purchases by the European Central Bank to prevent Europe's sovereign debt crisis escalating out of control.
By Ambrose Evans-Pritchard Published: 8:19PM BST 17 Jun 2010
Brian Coulton, the agency's head of sovereign ratings, said German members of the ECB appeared to be blocking the sort of muscular intervention in southern European bond markets needed to restore the shattered confidence of investors.
"There has been an unwillingness to follow through, and markets are going to want to see the ECB's money. It will require hundreds of billions in my opinion," he told a global banking conference.
The ECB agreed to start buying Greek, Portuguese, and Irish bonds in April to help buttress the EU's `shock and awe' package, known as the European Financial Stability Facility. Total purchases so far have been €47bn (£39bn).
It has focused its firepower on Greece, mopping up some €25bn of government bonds. This has prevented a collapse of the Greek debt market but at the high political price of letting banks and funds dump their holdings onto the EU taxpayer.
ECB council member Jose Manuel Gonzalez-Paramo said it was "not entirely correct" to assume that the ECB was the sole buyer of the debt. "We will continue buying bonds until the situation has stabilized," he said.
The Bundesbank is reportedly irked that French banks have led the rush to the exits while German banks have stuck by a gentleman's agreement to keep their Greek assets. The ECB's council insists that it has "sterilized" all purchases, offering no net stimulus. In effect, the ECB has done little to offset severe fiscal tightening by some eurozone states, and as the M3 money supply contracts.
"The ECB commitment seems half-hearted," said Andrew Balls, head of PIMCO's team in Europe. "The European sovereign problem has started to contaminate the European banking sector and the global economy."
Experts attending a seminar by the Central Banking Journal said the ECB had been behind the curve for months. "They were always one day and one euro too late," said Paul Mortimer-Lee, market chief at BNP Paribas.
----- A smooth auction of €3.5bn of Spanish bonds offered some respite yesterday after a week of stress on the EMU periphery, but Spain had to pay punitive rates. The average yield on 10-year bonds was 4.86pc, a near record spread of 220 basis points over German Bunds.
Silvio Peruzzo from RBS said the auction does little to help Spanish banks and firms that have been frozen out the debt markets and face a funding crunch.
While the EU leaders junketed the day away in Brussels, back across the Rhine Brunhilde was singing time on Chancellor Merkel’s uneasy coalition. Europe is headed into a period of weak governments trying to impose unprecedented austerity on the masses. I doubt that the weak governments will pull it off.
Workers of the world unite; you have nothing to lose but your chains.
Karl Marx.
06/17/2010 04:12 PM
More Bad News for Merkel
Key German State Plans Center-Left Minority Government
Following weeks of failed coalition negotiations, the Social Democrats and the Greens have decided to establish a minority government in the state of North Rhine-Westphalia. The move means that Chancellor Merkel loses her majority in Germany's upper legislative chamber.
It was well over a month ago that North Rhine-Westphalia, Germany's most populous state, headed to the polls for a crucial state election -- one which voters used to give voice to their dissatisfaction with German Chancellor Angela Merkel's governing coalition. Neither the center-left nor the center-right, however, received a clear mandate.
Now, after weeks of fruitless coalition negotiations, the Social Democrats and the Greens have decided to go it alone and try to form a minority government. It is a move that, should it work, will change the balance of power in the Bundesrat, Germany's upper legislative chamber, eliminating Merkel's majority and making it even more difficult for her already acrimonious coalition to pass legislation.
"North Rhine-Westphalia needs governing stability," sources within the state's Social Democrats (SPD) told SPIEGEL ONLINE. "A coalition between the SPD and the Greens will create that."
Hannelore Kraft, SPD leader in North Rhine-Westphalia, will now stand against Governor Jürgen Rüttgers, of Merkel's Christian Democratic Union (CDU) in a parliamentary vote, set to take place by July 13. The SPD and Greens are one vote short of the absolute majority necessary to push Kraft through in the first three rounds of voting. In the fourth round, however, a simple majority is enough. The center-right CDU and the pro-business Free Democrats (FDP) are well short of having enough votes to block Kraft's election in the fourth round.
http://www.spiegel.de/international/germany/0,1518,701317,00.html#ref=nlint
Next, a warning from the NY Times prominent Keynesian, that this is not the time to impose austerity. We will repeat the 1930s he thinks. My guess is that he’s only partly right. In the 1930s, the Soviet Union was in the grips murderous Stalinist communism, largely self excluded from the rest of the world’s trade, while China was largely excluded by war. This time round, both are very much part of the world’s global trade. Mr Krugman also thinks that all the announced austerity plans will get implemented and act as planned. I have my doubts that many will carried through to match the plans. Even so, monetizing more debt is the best that he can offer. Stay long precious metals. It’s not pretty living through the death of fiat currency.
The oppressed are allowed once every few years to decide which particular representatives of the oppressing class are to represent and repress them.
Karl Marx.
That ’30s Feeling
By PAUL KRUGMAN Published: June 17, 2010
BERLIN. Suddenly, creating jobs is out, inflicting pain is in. Condemning deficits and refusing to help a still-struggling economy has become the new fashion everywhere, including the United States, where 52 senators voted against extending aid to the unemployed despite the highest rate of long-term joblessness since the 1930s.
Many economists, myself included, regard this turn to austerity as a huge mistake. It raises memories of 1937, when F.D.R.’s premature attempt to balance the budget helped plunge a recovering economy back into severe recession. And here in Germany, a few scholars see parallels to the policies of Heinrich Brüning, the chancellor from 1930 to 1932, whose devotion to financial orthodoxy ended up sealing the doom of the Weimar Republic.
But despite these warnings, the deficit hawks are prevailing in most places — and nowhere more than here, where the government has pledged 80 billion euros, almost $100 billion, in tax increases and spending cuts even though the economy continues to operate far below capacity.
What’s the economic logic behind the government’s moves? The answer, as far as I can tell, is that there isn’t any. Press German officials to explain why they need to impose austerity on a depressed economy, and you get rationales that don’t add up. Point this out, and they come up with different rationales, which also don’t add up. Arguing with German deficit hawks feels more than a bit like arguing with U.S. Iraq hawks back in 2002: They know what they want to do, and every time you refute one argument, they just come up with another.
------ In America, many self-described deficit hawks are hypocrites, pure and simple: They’re eager to slash benefits for those in need, but their concerns about red ink vanish when it comes to tax breaks for the wealthy. Thus, Senator Ben Nelson, who sanctimoniously declared that we can’t afford $77 billion in aid to the unemployed, was instrumental in passing the first Bush tax cut, which cost a cool $1.3 trillion.
----- There will, of course, be a price for this posturing. Only part of that price will fall on Germany: German austerity will worsen the crisis in the euro area, making it that much harder for Spain and other troubled economies to recover. Europe’s troubles are also leading to a weak euro, which perversely helps German manufacturing, but also exports the consequences of German austerity to the rest of the world, including the United States.
But German politicians seem determined to prove their strength by imposing suffering — and politicians around the world are following their lead.
How bad will it be? Will it really be 1937 all over again? I don’t know. What I do know is that economic policy around the world has taken a major wrong turn, and that the odds of a prolonged slump are rising by the day.
http://www.nytimes.com/2010/06/18/opinion/18krugman.html
We end for the week with news of another strike in China. The age of slave Chinese labour is ending. A generation of cheap prices and deflation is drawing to a close. Stay long precious metals, as fiat currency fails, a giant hyper-inflation comes next.
Toyota Supplier Hit by Strike as Unrest Spreads Beyond Honda
June 18 (Bloomberg) -- Workers at a Toyota Motor Corp. affiliate in China went on strike, adding to a series of assembly-line walkouts that underscore pressure for higher wages in the world’s fastest-growing major economy.
The Toyoda Gosei Co. plant in the northern city of Tianjin has been partially shut since yesterday and talks with employees are ongoing, said Shingo Handa, a spokesman for the company, based in Japan’s Aichi prefecture. Toyota’s car production in China hasn’t been affected, said Ririko Takeuchi, a Tokyo-based spokesman for the automaker.
The stoppage comes as a Honda Motor Co. unit seeks to prevent workers at a parts factory in the region from resuming a strike after setting a 3 p.m. deadline to reach a pay settlement. Honda raised wages 24 percent to end an earlier dispute as two earlier strikes in southern China crippled its production in the world’s largest auto market, helping fan demands for higher pay at rival manufacturers.
“I would definitely get another job if I am not happy with the pay increase,” said Du Jun, a 20-year-old worker at the white-walled Honda Lock (Guangdong) Co. factory, who moved to the region from his parents’ farm in Guangxi province last year. “There are plenty of factories around here I can get a job from,” he said.
Employees at another Toyota supplier in China, Tianjin Star Light Rubber and Plastic Co., also struck briefly on June 15, Toyoda Gosei’s Handa said.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a6o.5w41D7KY&pos=3
At the Comex silver depositories Thursday, final figures were: Registered 52.08 Moz, Eligible 66.21 Moz, Total 118.29 Moz.
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Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Today it’s BP again. After yesterday’s sequel to Daniel in the Lion’s Den, this morning it’s assessment time for yesterday’s draw in the coliseum. Though I only saw limited snippets of coverage, I gave up watching as Congressman after Congressman read out pompous statements of contrived indignation and bias against big oil, BP and Tony Hayward in particular, it never quite lived up to its billing. The lions were never quite able to go for the kill, mainly because when all’s said and done, we still don’t have all the facts of who made the wrong decisions, why, and why several pieces of failsafe machinery failed. Not all wrong judgments are negligent, and even those that were, there was a reasonable expectation that the equipment should work as intended.
Despite all the Congressional huffing and puffing, just stating black is black, doesn’t make it so unless it’s later backed up by the facts. Not that I think it will make much difference to the eventual outcome for BP and its owners. Rule of law, due process, and informed debate be damned, there’s a company here to be looted and an election coming up in November. European lawmakers might want to take notes for use against America’s great vampire squids later, since they almost brought down the global financial system requiring massive taxpayer bailouts. There’s a whole lot of looting around in our new victim culture capitalism.
Democracy is the road to socialism.
Karl Marx.
BP’s U.S. Future Teeters as CEO, Lawmakers Clash on Oil Spill
June 18 (Bloomberg) -- BP Plc Chief Executive Officer Tony Hayward’s failure to set safety standards to prevent the Gulf of Mexico oil spill may cost the company control over U.S. oil fields, refineries and pipelines that account for more than one-third of its sales, lawmakers and analysts said.
Less than 24 hours after Hayward met President Barack Obama’s demand to set aside $20 billion to clean up and compensate victims of the worst oil spill in U.S. history, lawmakers yesterday accused the BP CEO of “stonewalling.” Hayward appeared before a House committee probing the cause of the April 20 offshore rig explosion that killed 11 workers.
Citing a five-year string of accidents and deadly disasters at BP-operated facilities, Representative Bart Stupak suggested the poor safety record could justify banning the London-based company from doing business in the U.S.
“Setting up the fund was a nice pro-active approach by BP, but in reality it’s going to take a decade for them to recover and regain public trust in this country,” said Jonathan Dison of Bender Consulting, a risk management and strategy firm that has advised BP, Chevron Corp. and Royal Dutch Shell Plc.
Congressman Stupak didn’t elaborate on how BP could be banned from operating in the U.S. and whether such authority rests with Congress, the administration, or regulatory agencies.
New Investigation
Scrutiny of BP’s operations in the U.S. intensified after a fire killed 15 workers at its Texas refinery in 2005, and will increase further following the rig disaster, said John Bresland, chairman of the U.S. Chemical Safety and Hazard Investigation Board.
The board added an investigation into the cause of the rig disaster to a list of federal probes into BP, Bresland said in an interview yesterday. The probe was requested by Representative Henry Waxman, a California Democrat.
------ In his testimony yesterday, Hayward not only failed to convince lawmakers he was committed to making BP safer, he may have deepened suspicion of the company by repeatedly pleading ignorance to events that took place under his command, said Matt Eventoff, a partner at New Jersey communications firm, Princeton Public Speaking.
“Mr. Hayward’s comments today, saying ‘I don’t know’ 66 times, evaporated any feeling of responsibility,” Eventoff said. “Any goodwill that the company bought back yesterday eroded today with his testimony.”
Questioned by the panel about BP practices that may have led to the disaster, Hayward said it was too early in the investigation to know the cause.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a7EfldcRot5U&pos=8
Drilling Moratorium Means Hard Times for Gulf Rig Workers
By TOM ZELLER Jr. Published: June 17, 2010
In addition to the fishermen and hoteliers whose livelihoods have been devastated by BP’s hemorrhaging undersea oil well, another group of Gulf Coast residents is beginning to suffer: the tens of thousands of workers like Ronald Brown who run the equipment or serve in support roles on deepwater oil rigs in the Gulf of Mexico.
Mr. Brown, known as Rusty to his friends, is a “shakerhand.” In the rugged vernacular of offshore drilling, that means he monitors the mud flowing back from the drill hole thousands of feet below.
He works aboard the Ocean Monarch, which was idled along with 32 other oil rigs when the Obama administration ordered a six-month moratorium on all deepwater drilling after the April 20 Deepwater Horizon disaster. The rig’s owner is now seeking customers in other parts of the world. If the rig moves, Mr. Brown and his fellow motormen, roughnecks and roustabouts will be left behind, jobless, with few alternatives that would pay anything close to the $3,500 to $4,000 a month typical for such jobs.
On Wednesday, President Obama and BP announced that the company had voluntarily agreed to create a $100 million fund to compensate such rig workers. That’s a modest sum, critics say, given the potential economic losses. Each rig job supports roughly four additional jobs for cooks, supply-ship operators and others servicing the industry. Together, they represent total monthly wages of at least $165 million, according to estimates by a Louisiana oil industry group.
Still, Mr. Brown is grateful for any assistance. “Every little bit is going to help until we figure out where else to go,” he said. “But I’m not looking forward to unemployment, and I don’t know how quickly we’ll be able to get some of it.”
------The full economic impact of the drilling moratorium is still unclear, since many of the layoffs are just beginning and no one knows how long the ban will last.
The Louisiana Mid-Continent Oil and Gas Association has warned that many of the affected rigs will seek to drill in other countries, imperiling roughly 800 to 1,400 jobs per rig, including third-party support personnel.
The securities firm Raymond James & Associates predicts that the moratorium could last well into 2011, directly jeopardizing 50,000 jobs and potentially gutting blue-collar communities that rely heavily on the economic activity that comes with deepwater work. “Just as the demise of auto plants and steel mills in the Upper Midwest devastated entire towns, an extended drilling ban could eventually have a similar effect in the Gulf Coast,” the company said in a report Monday.
http://www.nytimes.com/2010/06/18/business/18rig.html?hp
Another weekend and it’s the 70th anniversary of the fall of France. 70 years ago today, Hitler and Mussolini met in Munich to carve up France. The Soviet Union began its invasion and occupation of the Baltic countries, and an unknown French Colonel named De Gaulle recently made General, broadcast his appeal to the French to try to make their way to Britain to join him to fight on. Marshal Petain’s government had asked for an Armistice from Germany. Hitler was considering a visit to occupied Paris. In bleak London, Churchill, knowing that all of Europe's armaments industries were now in the hands of the Nazis, was alerting the country to the task ahead. Have a great weekend everyone. We really don’t appreciate just how easy we have life. What a shame that Blair and Brown never read anything about Churchill and Britain.
-----The Battle of France is over. I expect that the Battle of Britain is about to begin. Upon this battle depends the survival of Christian civilization. Upon it depends our own British life, and the long continuity of our institutions and our Empire. The whole fury and might of the enemy must very soon be turned on us. Hitler knows that he will have to break us in this island or lose the war. If we can stand up to him, all Europe may be free and the life of the world may move forward into broad, sunlit uplands. But if we fail, then the whole world, including the United States, including all that we have known and cared for, will sink into the abyss of a new Dark Age made more sinister, and perhaps more protracted, by the lights of perverted science. Let us therefore brace ourselves to our duties and so bear ourselves that, if the British Empire and its Commonwealth last for a thousand years, men will still say, 'This was their finest hour.'
Prime Minister Churchill. June 18, 1940. House of Commons.
The monthly Coppock Indicators finished May:
DJIA: +276 UP. NASDAQ: +499 UP. SP500: +304 UP. The great Bull market goes on with the all three continuing higher in positive numbers, but is now under serious pressure.
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Sunspots – A 22 year colder world? (From 2004?)
Spotless Days June 17
Current Stretch:0 days
2010 total: 35 days (20%)
2009 total: 260 days (71%)
Since 2004: 803 days
Typical Solar Min: 485 days
The long minimum seems to have ended, or has it?
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