Baltic Dry Index. 2030 +52
LIR Gold Target by 2019: $3,000.
“Unprecedented monetary and fiscal stimulus has produced unprecedentedly weak recovery"
Albert Edwards. Societe Generale
The Fed meets this week amid a whole slew of bad numbers showing the US economy heading towards a double dip recession. With interest rates already at zero, and the US running trillion dollar deficits all the way out to 2020, the Keynesians have started to panic. To them there is only one solution. Monetise like a banshee until the economy starts to fire on its own, or the currency breaks. It is only a fiat currency after all, mere accounting entities, in electronic ledgers. We could change the name of the dollar to “bricks” and nothing would change, no wealth would be created or lost, unless the change shook the confidence of the world to stop accepting American “bricks”. Inside America, legal tender laws and the banksters would force Americans to keep on using bricks no matter what. The US government would probably make the ownership of gold illegal as in the 30s, although back then the US was supposedly still on a gold standard and the confiscation and subsequent dollar devaluation against gold netted the US government a fast 70% against the cheated former owners of gold. We are fast moving into the end game of fiat currency as we know it. See the weekend blog update for the FT on the IMF’s plans for issuing the Keynesian “Bancor”. In their dreams, one mismanaged fiat currency is to be replaced by a new one.
"All of the government's monetary, economic and political power, as well as its extensive propaganda machinery, will be enlisted in a constant battle to drive down the price of gold - but in the absence of any fundamental change in the nation's monetary, fiscal, and economic direction, simply regard any major retreat in the price of gold as an unexpected buying opportunity."
Irwin A. Schiff
Fed set to downgrade outlook for US
By James Politi in Washington Published: August 8 2010 19:15
The Federal Reserve is set to downgrade its assessment of US economic prospects when it meets on Tuesday to discuss ways to reboot the flagging recovery.
Faced with weak economic data and rising fears of a double-dip recession, the Federal Open Market Committee is likely to ensure its policy is not constraining growth and to use its statement to signal greater concern about the economy. It is, however, unlikely to agree big new steps to boost growth.
---- The latest poor reading came in Friday’s monthly employment report, which showed the US private sector creating only 71,000 jobs in July – not enough to keep up with population growth, let alone bring down the unemployment rate. That followed news a week earlier that growth in US gross domestic product slowed from an annualised rate of 3.7 per cent in the first quarter to 2.4 per cent in the second quarter.
“Given how low inflation already is, and given the potential for the recovery to falter, we expect Fed officials will highlight downside risks and signal a bias to ease in the FOMC statement,” said Jim O’Sullivan, chief economist at MF Global.
There is little, if any, doubt that the FOMC will maintain interest rates at their current low target range of 0-0.25 per cent.
http://www.ft.com/cms/s/0/dedcb986-a316-11df-8cf4-00144feabdc0.html
Commodity spike queers the pitch for Bernanke's QE2
Don't be fooled: a food and oil price spike is not and cannot be inflationary in those advanced industrial economies where the credit system remains broken, the broad money supply is contracting, and fiscal policy is tightening by design or default.
By Ambrose Evans-Pritchard Published: 5:56PM BST 08 Aug 2010
-----In Japan itself core CPI deflation has reached -1.5pc, the lowest since the great fiasco began 20 years ago. 10-year yields fell briefly below 1pc last week. Premier Naoto Kan has begun to talk of yet another stimulus package. "The time has come to examine whether it is necessary for us take some kind of action," he said.
In a normal recovery, the US labour market would be firing on all cylinders at this stage. Yet the latest household jobs survey showed a net loss of 35,000 jobs in May, 301,000 in June, 159,000 in July. The ratio of the working age population with jobs has fallen to 58.4, back where it was in the depths of recession. Over 1.2m people have dropped out the work force over the last three months, which is the only reason why the unemployment rate has not vaulted back into double digits. A record 41m Americans are on food stamps. This is unlike anything since the Second World War. It screams Japan, our L-shaped destiny.
"Unprecedented monetary and fiscal stimulus has produced unprecedentedly weak recovery", said Albert Edwards from Societe Generale said this latest "Ice Age" missive. That stimulus is now fading fast before the private economy has clasped the baton.
After digesting Friday's jobs report, Goldman Sachs' chief economist, Jan Hatzius, thinks the Fed will abandon its exit strategy and relaunch QE this week, taking the first "baby step" of rolling over mortgage securities. Future asset purchases may be "at least $1 trillion". He is not alone. Every bank seems to be gearing up for QE2, even the inflation bulls at Barclays. The unthinkable is becoming consensus.
----- The Senate has delayed confirmation of all three appointees for the board, who all happen to be doves and allies of Fed chairman Ben Bernanke. The Fed is in limbo until mid-September. So the regional hawks who so much misjudged matters in 2008 have unusual voting weight, and now they have a commodity spike as well to rationalise their Calvinist preferences.
Whatever Dr Bernanke wants to do this week - and I suspect he is eyeing the $5 trillion button lovingly - he cannot risk dissent from three Fed chiefs: one yes, two maybe, but not three. He faces a populist revolt from the Tea Party movement, with its adherents in Congress and the commentariat. And China simply hates QE, which may or may not be rational but cannot be ignored.
Global markets have already priced in the next QE bail-out, banking the "Bernanke Put" as if it were a done deal. We will find out on Tuesday if life is really that simple.
West's recovery mission encounters hitch as harness slips off Chinese dragon
By Edmund Conway Published: 7:16PM BST 07 Aug 2010
-----GDP statistics published late last month showed this was America's worst recession since the 1930s – bar none. But it would have been far worse had the world economy not been supported by demand from China, India, and other emerging economies. As activity elsewhere cratered, Beijing pumped adrenalin into its economy by spending and encouraging bank lending, and briefly saw its trade balance go into deficit, a sight for sore eyes in Washington.
This now looks to have been an aberration. Those GDP figures also showed that the pace of US growth has suddenly slowed – and the main reason is an abrupt increase in reliance on imports.
The reality is that just as the US and UK are in most need of demand from Chinese consumers for their goods, Beijing is facing an economic crisis of its own, and is resorting to its most reliable weapon: exporting the hell out
of it.
Here in the US it is finally dawning on the public that the developed world's prospects of recovery, of whether it can withstand a domestic double-dip, are almost entirely dependent on the health of the Chinese economy and its counterparts.
For whereas there was at least a healthy chunk of deficit spending the US and UK could throw at things last time around, in the event of a future economic crunch they really would find themselves in the lap of the gods – or rather Beijing.
Time, then, for a quick health check on the Chinese economy. The latest signs are not particularly encouraging.
Ignore for a moment official GDP growth, which always hangs so close to the 10pc mark that it is difficult to discern any trends from it.
More useful are data on how much businesses are producing and spending, which are clearly pointing towards a slowdown. The official Purchasing Managers' Index, released last week, fell to its lowest level on record – if you exclude the crisis, when world demand collapsed. A rival index by HSBC and Markit suggests that output is actually shrinking. Domestic appetite to spend is drying up. To put it bluntly, China is fast becoming a drag on global demand rather than helping support the broader recovery.
"Deficit spending is simply a scheme for the 'hidden' confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."
Alan Greenspan
At the Comex silver depositories Friday, final figures were: Registered 50.63 Moz, Eligible 59.32 Moz, Total 109.95 Moz.
+++++
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Will history repeat? Will Keynesian crooksters try to monetise to the point of revulsion? Stay long physical precious metals, but outside of the jurisdiction of Uncle Sam. Uncle Sam has form, as they say. Below, in 1933 President Rossevelt confiscates all hapless American serfs gold and paid them in paper, at $20.67 an ounce. Next year he devalued the dollar against gold to $35 an ounce. The serfs were legally cheated by 70%. Little wonder that the Chinese are surreptitiously buying up gold.
"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
Executive order: By virtue of the authority vested in me by Section 5(B) of
The Act of Oct. 6,1917, as amended by section 2 of the Act of March 9, 1933, in which Congress declared that a serious emergency exists, I as President, do declare that the national emergency still exists; That the continued private hoarding of gold and silver by subjects of the United States poses a grave threat to the peace, equal justice, and well-being of the United States; and that appropriate measures must be taken immediately to protect the interests of our people.
"Therefore, pursuant to the above authority, I herby proclaim that such gold
and silver holdings are prohibited, and that all such coin, bullion or other possessions of gold and silver be tendered within fourteen days to agents of the Government of the United States for compensation at the official price, in the legal tender of the Government. All safe deposit boxes in banks or financial
institutions have been sealed, pending action in the due course of the law. All sales or purchases or movements of such gold and silver within the borders of the United States and its territories, and all foreign exchange transactions or movements of such metals across the border are herby prohibited.
"Your possession of these proscribed metals and/or your maintenance of a safe-deposit box to store them is known to the Government from bank and insurance
records. Therefore, be advised that your vault box must remain sealed, and may only be opened in the presence of an agent of The Internal Revenue Service.
"By lawful Order given this day, the President of the United States."
"There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."
Ludwig von Mises
The monthly Coppock Indicators finished July:
DJIA: +264 Down. NASDAQ: +427 Down. SP500: +275 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. July seems to have confirmed June’s reversal and end of the bull market.
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