Baltic Dry Index. 1732 +12
LIR Gold Target by 2019: $3,000.
"The nine most terrifying words in the English language are: 'I'm from the government and I'm here to help.'"
President Ronald Reagan.
Today we contrast American and China. For more on President Reagan’s words and modern America, scroll down to the Crooks and Scoundrels section. We open today with more on the unstoppable rise of China. According to the Paris based International Energy Agency, China has already passed the USA as the world’s largest user of energy. Americans still retain the dubious honour of being the world’s largest consumer per capita. With only 300 million consumers, most of them legal, Americans easily surpass China’s 1.3 billion energy consumers when it comes to showing the world how to consume a scarce vital natural resource, that as BP has just shown us, is getting ever harder to find replacement reserves.
We are not creatures of circumstance; we are creators of circumstance.
Benjamin Disraeli.
JULY 19, 2010, 11:17 A.M. ET
China Passes U.S. as World's Biggest Energy Consumer
China is now the world's biggest energy consumer, knocking the U.S. off a perch it held for more than a century, according to new data from the International Energy Agency.
The Paris-based agency, whose forecasts are generally regarded as bellwether indicators for the energy industry, said China devoured 2,252 million tons of oil equivalent last year, or about 4% more than the U.S., which burned through 2,170 million tons of oil equivalent. The oil-equivalent metric represents all forms of energy consumed, including crude oil, nuclear, coal, natural gas and renewable sources such as hydropower.
The figures reflect, in part, how the global recession hit the U.S. more severely than China and hurt American industrial activity and energy use. Still, China's total energy consumption has clocked annual double-digit growth rates for many years, driven by the country's big industrial base. Highlighting how quickly its energy demand has increased, China's total energy consumption was just half the size of the U.S. 10 years ago.
"The fact that China overtook the U.S. as the world's largest energy consumer symbolizes the start of a new age in the history of energy," IEA chief economist Fatih Birol said in an interview. The U.S. had been the biggest overall energy consumer since the early 1900s, he said. The IEA is an energy adviser to most of the world's biggest economies.
China's voracious energy demand helps explain why the country—which gets most of its electricity from coal, the dirtiest of fossil-fuel resources—passed the U.S. in 2007 as the world's largest emitter of carbon dioxide emissions and other greenhouse gases.
The U.S. is still by far the biggest energy consumer per capita, with the average American burning five times as much energy annually as the average Chinese citizen, said Mr. Birol, who has been in his current role for six years.
The U.S. also is the biggest oil consumer by a wide margin, going through on average roughly 19 million barrels a day—with China at a distant second at about 9.2 million barrels a day. But many oil analysts believe U.S. crude demand has peaked or is unlikely to grow very much in coming years because of improved energy efficiency and more-stringent vehicle fuel-efficiency regulations.
Prior to the recession, China had been expected to become the biggest energy consumer in about five years, but the economic malaise and energy-efficiency programs in the U.S. brought forward the date of that superlative, Mr. Birol said.
The decreased energy "intensity" of the U.S. economy is a key reason investors, such as General Electric Co., have increasingly looked to China as a driver of future growth. Mr. Birol said China requires total energy investments of some $4 trillion over the next 20 years to keep feeding its economy and to avoid power blackouts and fuel shortages.
Staying with China, China’s 3G cell phone users now total over 25 million and are increasing at a rate of about 7 million a quarter, British Telecom and others can only look on in envy. It doesn’t take a genius to see where all this quickly leads by the end of the current decade. Stay long precious metals. The age of the fiat currency dollar reserve standard, is passing. With each new Chinese milestone it’s harder and harder to pretend that the dollar reserve standard still fulfills the same role as in 1945.
Quality means doing it right when no one is looking.
Henry Ford.
China 3G phone-user total up sharply to 25 million
July 19, 2010, 10:20 p.m. EDT
BEIJING (MarketWatch) -- China's Ministry of Industry and Information Technology said Tuesday the country had 25.2 million users of third-generation mobile wireless technology at the end of June, up from 18.08 million at the end of March.
China's three telecommunications giants are in a race to recruit users of their 3G services, which allow faster data downloads and attract higher fees. Each of the three companies uses its own 3G standard, with China Mobile Ltd., the country's largest mobile company by subscribers, promoting a locally developed standard.
Earlier Tuesday, China Mobile said it had 10.46 million 3G users at the end of June. On Monday, China Unicom (Hong Kong) Ltd. said it had 7.56 million 3G users.
The data imply that China Telecom Corp, which doesn't publicly disclose the figure, had 7.18 million 3G users at the end of June. But government data can vary slightly from the figures provided by the carriers
http://www.marketwatch.com/story/china-3g-phone-user-total-up-sharply-to-25-million-2010-07-19
In US news, the aftermath of the end of real estate subsidies still weighs heavily on the market. The green shoots died once the state supplied fertilizer was turned off.
Homebuilder Confidence in U.S. Falls to One-Year Low
July 19 (Bloomberg) -- Builders in the U.S. turned more pessimistic in July than forecast, a sign the expiration of a government tax credit will depress home construction.
The National Association of Home Builders/Wells Fargo confidence index dropped to 14 this month, the lowest level since April 2009, from 16 in June, data from the Washington- based group showed today. Readings lower than 50 mean more respondents said conditions were poor.
The retreat in sales following the April 30 expiration of a deadline to sign purchase agreements and qualify for a tax credit worth as much as $8,000 is lasting longer than projected, the report said. With mounting foreclosures adding to housing inventory and unemployment forecast to end the year at 9.5 percent according to economists surveyed by Bloomberg News, a housing recovery will take time to develop.
“The housing sector is going to be in a hangover for a few months and it looks like it will be quite a nasty one,” said David Sloan, a senior economist at 4Cast Ltd. in New York, who correctly forecast the decline. “This will weigh on growth in the third quarter and well into the fourth quarter as well.”
http://noir.bloomberg.com/apps/news?pid=20601087&sid=aJRZjdQZLP0w
We close for today with rickety central Europe, Germany and Ireland. In the David v Goliath fight between Hungary and the EU/IMF austerity tag team, will little David like Sampson, bring the whole building crashing down. Voters are a funny lot, “vote for me, I’m going to make your life hell,” doesn’t get many votes whether spun from the right or the left. “Vote for me, I’m going to give the rich hell, tell the IMF to pack its bags and get the hell out of our country, and tell Brussels to take a long walk of a short pier,” works wonders. Little Hungary is already 4 years in to austerity packages, while in Greece they’ve barely started, and in the UK we’re still only at the planning stage. Hungary is very likely the future all austerity regimes face, the more so in Britain where no party fought the recent general election telling the truth to the UK’s long deceived voters. Stay long precious metals. 2011 is already looking ugly, with a high possibility, in my opinion, of a large part of the G-7 entering a double-dip recession.
Below Hungary, the latest from austerity struck Ireland still trapped in the Germanic Euro. How Ireland must envy tiny Iceland whose problems, though similar, still has the freedom of allowing competitive devaluation to up part of the adjustment. Below Ireland, Germany’s already state supported Hypo Real Estate bank, managed to fail the EU bank stress test. A test many don’t think hard enough for what likely lies ahead in a double-dip world.
A man is about as big as the things that make him angry.
Winston Churchill.
Hungary's IMF revolt augurs ill for Greece
The collapse of Hungary's talks with the International Monetary Fund and the EU is a chilly reminder that sovereign debt crises do not end with a rescue package and a click of the fingers. As austerity drags on for year after year, democracies react.
By Ambrose Evans-Pritchard, International Business Editor
Published: 8:32PM BST 19 Jul 2010
"We told the IMF/EU that further austerity was out of the question," said Hungary's economic minister Gyorgy Matolcsy, offering no hint that the Fidesz government is willing to back down despite yesterday's surge in Hungarian default costs by 51 basis points.
The Fidesz movement – an amalgam of libertarians and nationalists with a Left-populist tilt – won a crushing victory in April on a campaign of defiance against both Brussels and the IMF. It has been spoiling for a fight ever since.
Lars Christensen, of Danske Bank, said events in Budapest are a warning of what may happen in the Baltics later this year, and then in Greece and other parts of EMU-periphery forced to undergo wage cuts and harsh fiscal tightening.
"It is incredible how long Hungary has been struggling to get over its imbalances. It first began austerity measures in 2006, but four years later is still not out of the crisis and there is massive discontent. The Greek problem is even bigger by any measure, whether budget deficit, current account or public debt," he said.
"Austerity is extremely hard to sell to electorates. The risk is that this moves from a wider financial and economic crisis to a European political crisis as governments are punished by voters. The approval rating for Lithuanian's prime minister has fallen to 7pc."
Greece is at an early stage of this political sequel. It has won praise from the IMF so far but spending cuts have only just started over recent months, and will grind much deeper over the next three years. Two MPs from the ruling Pasok party have been expelled for refusing to toe the line, and some Greek analysts say the party may ultimately splinter.
"The issue is whether they can carry the Greek people when have to make the next round of cuts in 2011," said Chris Pryce, of Fitch Ratings.
----- The country cannot easily devalue to claw its way out of its debt-trap because 63pc of loans from mortgages, households, and companies are in foreign currencies, much of it in the ever-soaring Swiss franc. "A weaker currency will crush households. Countries like Hungary with a debt-sustainability problem need to grow but there is no growth, and they can't reflate," he said.
Most investors thought Hungary's woes were over long ago with the approval of the €20bn rescue in 2008 – now mostly exhausted. It was assumed that the rest of Central and Eastern Europe were well on the way to recovery, underpinned by the G20 agreement in April 2009 to triple the IMF's fire-fighting fund to $750bn.
Moody’s Cuts Irish Rating on Debt Outlook, Bank Costs
By Louisa Fahy
July 19 (Bloomberg) -- Ireland had its credit rating cut one level at Moody’s Investors Service, which cited a “significant loss of financial strength” and the cost of bank bailouts.
The company lowered Ireland to Aa2 from Aa1 and moved the country to a “stable” from a “negative” outlook, it said today in a statement. Ireland lost its top rating at Moody’s in April 2009. Irish bonds fell after the downgrade.
The euro has fallen 10 percent versus the dollar this year on concern that widening budget deficits in countries including Ireland, Spain and Greece could lead to a default. While Irish Finance Minister Brian Lenihan said last week that the country’s fiscal position is “stabilizing”, the cost of aiding the banking industry is adding to the country’s debt even as the economy emerges from recession.
“It’s a gradual, significant deterioration, but not a sudden, dramatic shift,” Dietmar Hornung, Moody’s lead analyst for Ireland, said in a telephone interview. Overall, “we have a constructive view. We agree Ireland has turned the corner.”
The premium investors charge to hold Irish 10-year debt over the German bund, Europe’s benchmark, widened to 286 basis points today. The yield reached 306 points in May, the widest since the introduction of the euro in 1999.
----- Moody’s said the downgrade reflected Ireland’s “significant loss of financial strength,” weakened growth prospects and “contingent liabilities from the banking system.” In addition to pumping money into banks to build up their capital buffers, Ireland set up a so-called bad bank to cleanse banks of toxic loans.
Hornung said the possibility of Ireland tapping the European aid mechanism set up in May or defaulting on its debts is “not an issue” for Moody’s. “The risks are balanced” and a stronger-than-expected economic recovery could trigger “upward pressure” on the rating, he said. Ireland’s government sees the economy expanding 1 percent this year.
http://noir.bloomberg.com/apps/news?pid=20601087&sid=albiAeajfz_A
Germany’s Hypo Real Estate Said to Fail Europe-Wide Stress Test
July 20 (Bloomberg) -- Hypo Real Estate Holding AG, the commercial-property and public-finance lender taken over by the German government, failed a Europe-wide banking stress test, two people familiar with the results said.
Hypo Real Estate didn’t pass a stress scenario on its capital that assumes an economic slowdown and sovereign-debt losses, said the people, who declined to be identified before an announcement on July 23. The Munich-based lender is probably the only German bank to fail the test, one person said.
European Union regulators are examining the strength of banks as they seek to reassure investors about the firms’ resilience to potential losses amid the region’s sovereign-debt crisis. The tests are being applied to 91 of Europe’s biggest banks, including 14 German lenders.
“The government won’t let Hypo Real Estate collapse,” said Andreas Plaesier, a banking analyst at M.M. Warburg in Hamburg. An official at Hypo Real Estate declined to comment.
Banks may be required to have a Tier 1 capital ratio, a key measure of financial strength, of at least 6 percent under the EU stress tests, the same threshold U.S. lenders faced last year, said two people briefed on the talks.
Hypo Real Estate’s Tier 1 capital ratio was 7.7 percent at the end of March, according to a presentation on its website dated June 2010. The lender holds 72.1 billion euros ($93.4 billion) of debt in Greece, Italy and Spain, it said in May.
http://noir.bloomberg.com/apps/news?pid=20601095&sid=aCNmOFmySn.I
Today, the unintended consequence of fiat money. On fiat money, money supply increases so fast and gets super concentrated in gambling hands, grubby money grabbing hands focused purely on casino gambling, that speculation fast becomes the only game in town. A great vampire squid can collect $500,000 just for passing go. A farmer or rancher, might make $50,000 in a good year after spending months of backbreaking old fashioned hard work. A lesser peon might make $8.50 an hour flipping burgers or stacking shelves. Being too big to fail, the squids bets get ever larger and more depraved. Below two articles that neatly sum up all that’s wrong with modern banksterism and why it’s doomed to fail in an almighty misallocation of global resources.
http://londonirvinereport.blogspot.com/p/intraday-news.html
At the Comex silver depositories Monday, final figures were: Registered 52.42 Moz, Eligible 58.65 Moz, Total 111.07 Moz.
+++++
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Today, the Washington Post on America’s best growth industry, domestic spying. Below “Top Secret America: A Washington Post Investigation. Who spies on who, and what does it all get? Below, what borrowing trillions from China can accomplish in less than a decade. Somehow, I don’t think that they are going to get paid back. From the sound of it, this couldn’t be scaled back even if anyone wanted to try.
I believe there is something out there watching over us – unfortunately it's the government.
Woody Allen.
A hidden world, growing beyond control
By Dana Priest and William M. Arkin
The top-secret world the government created in response to the terrorist attacks of Sept. 11, 2001, has become so large, so unwieldy and so secretive that no one knows how much money it costs, how many people it employs, how many programs exist within it or exactly how many agencies do the same work.
These are some of the findings of a two-year investigation by The Washington Post that discovered what amounts to an alternative geography of the United States, a Top Secret America hidden from public view and lacking in thorough oversight. After nine years of unprecedented spending and growth, the result is that the system put in place to keep the United States safe is so massive that its effectiveness is impossible to determine.
The investigation's other findings include:
* Some 1,271 government organizations and 1,931 private companies work on programs related to counterterrorism, homeland security and intelligence in about 10,000 locations across the United States.
* An estimated 854,000 people, nearly 1.5 times as many people as live in Washington, D.C., hold top-secret security clearances.
* In Washington and the surrounding area, 33 building complexes for top-secret intelligence work are under construction or have been built since September 2001. Together they occupy the equivalent of almost three Pentagons or 22 U.S. Capitol buildings - about 17 million square feet of space.
* Many security and intelligence agencies do the same work, creating redundancy and waste. For example, 51 federal organizations and military commands, operating in 15 U.S. cities, track the flow of money to and from terrorist networks.
* Analysts who make sense of documents and conversations obtained by foreign and domestic spying share their judgment by publishing 50,000 intelligence reports each year - a volume so large that many are routinely ignored.
These are not academic issues; lack of focus, not lack of resources, was at the heart of the Fort Hood shooting that left 13 dead, as well as the Christmas Day bomb attempt thwarted not by the thousands of analysts employed to find lone terrorists but by an alert airline passenger who saw smoke coming from his seatmate.
They are also issues that greatly concern some of the people in charge of the nation's security.
"There has been so much growth since 9/11 that getting your arms around that - not just for the DNI [Director of National Intelligence], but for any individual, for the director of the CIA, for the secretary of defense - is a challenge," Defense Secretary Robert M. Gates said in an interview with The Post last week.
In the Department of Defense, where more than two-thirds of the intelligence programs reside, only a handful of senior officials - called Super Users - have the ability to even know about all the department's activities. But as two of the Super Users indicated in interviews, there is simply no way they can keep up with the nation's most sensitive work.
"I'm not going to live long enough to be briefed on everything" was how one Super User put it. The other recounted that for his initial briefing, he was escorted into a tiny, dark room, seated at a small table and told he couldn't take notes. Program after program began flashing on a screen, he said, until he yelled ''Stop!" in frustration.
"I wasn't remembering any of it," he said.
Underscoring the seriousness of these issues are the conclusions of retired Army Lt. Gen. John R. Vines, who was asked last year to review the method for tracking the Defense Department's most sensitive programs. Vines, who once commanded 145,000 troops in Iraq and is familiar with complex problems, was stunned by what he discovered.
"I'm not aware of any agency with the authority, responsibility or a process in place to coordinate all these interagency and commercial activities," he said in an interview. "The complexity of this system defies description."
The result, he added, is that it's impossible to tell whether the country is safer because of all this spending and all these activities. "Because it lacks a synchronizing process, it inevitably results in message dissonance, reduced effectiveness and waste," Vines said. "We consequently can't effectively assess whether it is making us more safe."
----- Liberty Crossing tries hard to hide from view. But in the winter, leafless trees can't conceal a mountain of cement and windows the size of five Wal-Mart stores stacked on top of one another rising behind a grassy berm. One step too close without the right badge, and men in black jump out of nowhere, guns at the ready.
Past the armed guards and the hydraulic steel barriers, at least 1,700 federal employees and 1,200 private contractors work at Liberty Crossing, the nickname for the two headquarters of the Office of the Director of National Intelligence and its National Counterterrorism Center. The two share a police force, a canine unit and thousands of parking spaces.
Liberty Crossing is at the center of the collection of U.S. government agencies and corporate contractors that mushroomed after the 2001 attacks. But it is not nearly the biggest, the most costly or even the most secretive part of the 9/11 enterprise.
In an Arlington County office building, the lobby directory doesn't include the Air Force's mysteriously named XOIWS unit, but there's a big "Welcome!" sign in the hallway greeting visitors who know to step off the elevator on the third floor. In Elkridge, Md., a clandestine program hides in a tall concrete structure fitted with false windows to look like a normal office building. In Arnold, Mo., the location is across the street from a Target and a Home Depot. In St. Petersburg, Fla., it's in a modest brick bungalow in a run-down business park.
More.
Just because you’re paranoid, doesn’t mean they aren’t after you.
Joseph Heller.
The monthly Coppock Indicators finished June:
DJIA: +269 Down. NASDAQ: +460 Down. SP500: +290 Down.
The bull market (or bear market rally) that commenced on Nasdaq on 30/4/09 at 1717 has ended. (30/5/09 SP 500 at 919, 30/5/09 DJIA 8500.) While the indicators can flip flop at market turns, this action is rare on the slow monthly indicators.
Sunspots – A 22 year colder world? (From 2004?)
Spotless Days July 19
Current Stretch:0 days
2010 total: 35 days (17%)
2009 total: 260 days (71%)
Since 2004: 803 days
Typical Solar Min: 485 days
The long minimum seems to have ended, or has it? I’m beginning to think our new Dalton Minimum of arriving global cooling, might turn out in fact to be a much longer more severe Maunder Minimum.
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