Monday 27 September 2010

Hoarding Gold.

Baltic Dry Index. 2444 -17
LIR Gold Target by 2019: $3,000.

Political power grows out of the barrel of a gun.

Mao Tse Tung.

Gold may be a barbarous relic, but in our fiat currency race to the bottom, the central banksters have now started hoarding their gold. What do they know that we don’t? My guess is that they see what we see, a coming crash in the Euro zone, a coming currency war between America and China, and massive social stress just about everywhere. They also know that despite all the trillions of new money tossed in globally to try to get back to the Greenspan bubble era of conspicuous consumption, the modest rebound has ended and without more Quantitative Easing and fast, our world will double dip back into severe recession. QE once started, is impossible to stop, until it all ends badly in fiat currency revulsion. Below, gold starts to remonetise no matter what dissembling central banksters do to stop it. I doubt that we’ve seen anything yet.

Passivity is fatal to us. Our goal is to make the enemy passive.

Mao Tse Tung.

Central Bank Gold Sales Drop 40% in Accord, WGC Says

Sept. 27 (Bloomberg) -- Central banks and the International Monetary Fund sold about 94.5 metric tons of gold in the year that ended yesterday, the lowest amount under an agreement that began in 1999, according to data from the World Gold Council.

Euro zone banks disposed of 6.2 tons, led by Germany, Greece and Malta, while the International Monetary Fund sold 88.3 tons. The figure for the eurozone banks was 96 percent below last year’s 142 tons. The data run through Sept. 14 and the first year of the third five-year agreement ended yesterday.

Gold is heading for a 10th consecutive annual advance, the longest winning streak since at least 1920, spurring central banks globally to add the metal to reserves. Combined central bank holdings rose in every quarter since the second quarter of last year, data from the council show.

The Central Bank Gold Agreement was announced more than a decade ago because of concern that uncoordinated selling was destabilizing the gold market and driving down prices. Gold fell from a then-record $850 an ounce in 1980 to $253.83 in February 2001. It reached a record $1,300.07 on Sept. 24.

Signatories to the latest accord are limited to combined annual sales of 400 tons, down from 500 tons in the previous agreement. Sales under the previous agreement had dwindled to 157 tons by its final year, ending in 2009. Sales by eurozone banks have declined every year since 2006.

http://noir.bloomberg.com/apps/news?pid=20601087&sid=apOM67wLhGgU&pos=6

Gold is the final refuge against universal currency debasement

States accounting for two-thirds of the global economy are either holding down their exchange rates by direct intervention or steering currencies lower in an attempt to shift problems on to somebody else, each with their own plausible justification. Nothing like this has been seen since the 1930s.

By Ambrose Evans-Pritchard Published: 6:01PM BST 26 Sep 2010

“We live in an amazing world. Everybody has big budget deficits and big easy money but somehow the world as a whole cannot fully employ itself,” said former Fed chair Paul Volcker in Chris Whalen’s new book Inflated: How Money and Debt Built the American Dream.

“It is a serious question. We are no longer talking about a single country having a big depression but the entire world.”

The US and Britain are debasing coinage to alleviate the pain of debt-busts, and to revive their export industries: China is debasing to off-load its manufacturing overcapacity on to the rest of the world, though it has a trade surplus with the US of $20bn (£12.6bn) a month.

Premier Wen Jiabao confesses that China’s ability to maintain social order depends on a suppressed currency. A 20pc revaluation would be unbearable. “I can’t imagine how many Chinese factories will go bankrupt, how many Chinese workers will lose their jobs,” he said.

Plead he might, but tempers in Washington are rising. Congress will vote next week on the Currency Reform for Fair Trade Act, intended to make it much harder for the Commerce Department to avoid imposing “remedial tariffs” on Chinese goods deemed to be receiving “benefit” from an unduly weak currency.

Japan has intervened to stop the strong yen tipping the country into a deflation death spiral, though it too has a trade surplus. There is suspicion in Tokyo that Beijing’s record purchase of Japanese debt in June, July, and August was not entirely friendly, intended to secure yuan-yen advantage and perhaps to damage Japan’s industry at a time of escalating strategic tensions in the Pacific region.

Brazil dived into the markets on Friday to weaken the real. The Swiss have been doing it for months, accumulating reserves equal to 40pc of GDP in a forlorn attempt to stem capital flight from Euroland. Like the Chinese and Japanese, they too are battling to stop the rest of the world taking away their structural surplus.

So we have an early 1930s world where surplus states are hoarding money, instead of recycling it. A solution of sorts in the Great Depression was for each deficit country to devalue, breaking out of the trap (then enforced by the Gold Standard). This turned the deflation tables on the surplus powers – France and the US from 1929-1931 – forcing them to reflate as well (the US in 1933) or collapse (France in 1936). Contrary to myth, beggar-thy-neighbour policy was the global cure.

A variant of this may now occur. If China continues to hold down its currency, the country will import excess US liquidity, overheat, and lose wage competitiveness. This is the default cure if all else fails, and I believe it is well under way.

The latest Fed minutes are remarkable. They add a new doctrine, that a fresh monetary blitz – or QE2 – will be used to stop inflation falling much below 1.5pc. Surely the Fed has not become so reckless that it really aims to use emergency measures to create inflation, rather preventing deflation? This must be a cover-story. Ben Bernanke’s real purpose – as he aired in his November 2002 speech on deflation – is to weaken the dollar.

If so, he has succeeded. The Swiss franc smashed through parity last week as investors digested the message. But the swissie is an over-rated refuge. The franc cannot go much further without destabilizing Switzerland itself.

Gold has no such limits. It hit $1300 an ounce last week, still well shy of the $2,200-2,400 range reached in the late Medieval era of the 14th and 15th Centuries.

More.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8026324/Gold-is-the-final-refuge-against-universal-currency-debasement.html

While the US Congress gets ready to vote on the Currency Reform for Fair Trade Act, in reality the let’s get even with China Act, China itself has suddenly opted for the role of regional bully and pantomime villain. China’s recent over reaction against Japan , including threatening their access to rare metals, since denied but who really knows, has done more to wake up the world to the dangers of relying on a still communist lead China, than anything since the cultural revolution of 1966. Below, today’s latest installment in China v the World.

Communism is not love. Communism is a hammer which we use to crush the enemy.

Mao Tse-Tung

China’s Charm Blitz in ‘Shambles’ Over Regional Spats

Sept. 27 (Bloomberg) -- China may be undermining its effort to build strong ties with its neighbors and draw them away from the U.S. orbit as it seeks to impose its will in territorial disputes with Japan and Southeast Asian nations.

Relations between Asia’s two biggest economies deteriorated to the lowest point in five years during the 17-day detention of a Chinese fishing boat captain before Japanese authorities last week decided to release him. China opposed U.S.-South Korea military exercises aimed at deterring North Korea, and dismissed regional efforts to mediate maritime territorial claims.

Those positions reflect a more assertive diplomatic role in Asia over the past decade as China developed into Asia’s biggest economy. China set up a regional forum, flooded Malaysia and Thailand with tourists, boosted economic aid to countries including the Philippines and participated in Association of Southeast Asian Nations security dialogues.

“China has tried to establish an image in the region as a nice guy, but all of this could be in a shambles right now,” said Huang Jing, a visiting professor at the National University of Singapore’s Lee Kuan Yew School of Public Policy. “The real issue here is whether Beijing cares.”

China’s stance may benefit U.S.-Japan relations strained by a dispute over relocating American troops.

http://noir.bloomberg.com/apps/news?pid=20601089&sid=aEIE4wb9P4HM

Japan Demands China Repair Damaged Coast Guard Boats

Sept. 27 (Bloomberg) -- Japan said China should pay for repairs to two Coast Guard vessels damaged in a collision with a fishing boat, rejecting Chinese demands for compensation over an incident that has soured ties and shows no sign of abating.

“We will demand that the ships be returned to their original condition,” Chief Cabinet Secretary Yoshito Sengoku said in Tokyo. “The ball’s in China’s court” to improve relations that have sunk to the lowest in five years, he said.

The diplomatic stand-off reflects competing claims of sovereignty over uninhabited islets in an area of the East China Sea that may contain oil and natural gas. China and Japan have yet to implement an agreement signed in 2008 to jointly develop gas fields near the islands, known as Diaoyu in Chinese and Senkaku in Japanese.

Sengoku reiterated Japan’s rejection of Chinese demands for an apology and reparations for the seizure of the trawler. Japan released the ship’s captain on Sept. 24, triggering criticism it had bowed to Chinese pressure.

“China’s ties with Japan are very important and are part of a strategic relationship that is mutually beneficial,” Sengoku told reporters today. “I believe that China has many things to think about in the wake of the release.”

‘Severely Infringed’

Japan has “severely infringed” on China’s territorial sovereignty and the personal rights of Chinese citizens, Jiang Yu, China’s Foreign Ministry spokeswoman, said in Beijing on Sept. 25, according to the state-run Xinhua news agency. China has the right to seek an apology, she said.

“I have no intention whatsoever of accepting” such a demand, Kyodo News quoted Japanese Prime Minister Naoto Kan as saying yesterday. “The Senkaku islands are Japan’s own territory.”

http://noir.bloomberg.com/apps/news?pid=20601089&sid=aDmGz14NdZlM

We end for the day with the WSJ on the continuing fall of the Euro. Sovereign default comes next, but which country will get to figure it out first.

SEPTEMBER 26, 2010

Currency Union Teetering, 'Mr. Euro' Was Forced to Act

LISBON—On May 6, top officials of the European Central Bank were sitting down to dinner with their spouses in the elegant Emperor's Room of the Palacio da Bacalhoa, a 15th-century estate and winery south of the Portuguese capital, when stocks in New York began a terrifying slide.

The bankers' BlackBerrys lit up with frantic notes. The euro was swooning. The Dow Jones Industrial Average had plummeted 1,000 points in the "Flash Crash."

Jean-Claude Trichet, the ECB's president, feared that a fiscal mess in tiny Greece, which had consumed Europe for months, was now touching off another global financial crisis.

It was perhaps the worst of many stomach-churning moments that spring for Mr. Trichet, an urbane 67-year-old Frenchman known as "Mr. Euro" for devoting much of his 40-year career to building the common currency. It now seemed possible the panic could derail his life's work.

This account of how he and other European leaders cobbled an uneasy pact to keep the euro zone from unraveling—a patch-up that continues to show signs of strain—was based on interviews with dozens of officials across the continent.

More.

http://online.wsj.com/article/SB10001424052748703904304575497871279626904.html

The atom bomb is a paper tiger which the United States reactionaries use to scare people. It looks terrible, but in fact it isn't.

Mao Tse Tung.

At the Comex silver depositories Friday, final figures were: Registered 53.89 Moz, Eligible 57.56 Moz, Total 111.45 Moz.

+++++

Crooks and Scoundrels Corner.

The bent, the seriously bent, and the totally doubled over.

More on “God’s work” from Goldman’s top vampire squid in Europe. Lord of the Universe Peter Sutherland descends from Olympus to tell the downwardly mobile Irish serfs, that they’ve got to suck it up some more and cut their wages. Is casino capitalism great for Squids, or what?

"God, no, we don't club baby seals. We club babies."

Goldmanite, quoted in The Times of London. November 8 2009.

Sutherland attacks Irish wages and calls for tougher Budget cuts

Peter Sutherland, former EU commissioner and chairman of Goldman Sachs International, told the Institute of Directors (IOD) in Dublin yesterday that Irish wages are too high.

His speech was ostensibly aimed at countering what he called the "air of fatalism . . . nurtured by negativity" currently taking place in Ireland. But the speech itself made for gloomy listening.

Addressing international perceptions of Ireland, Mr Sutherland highlighted the positive reception abroad to Ireland's budgetary discipline of recent years. But only before calling for cuts in the upcoming Budget to go further. He said policymakers should look to cut beyond the target of €3bn.

"Ireland's principal fiscal problem is its large primary deficit (rather than a large outstanding debt level)."

Tackling the deficit was, therefore, the key to the current crisis. In addition to calling for further cuts in the upcoming budget, he launched an attack on salaries, saying that costs in the Irish economy remained far too high.

"We have really failed to benchmark our costs -- particularly, but by no means exclusively, wages and salaries -- to other European countries."

Mr Sutherland also took the opportunity of the speech, delivered ahead of the IOD's autumn lunch, to challenge calls by the 'Financial Times' to hand Anglo Irish Bank to its creditors.

He said he agreed in principle that bondholders should not be protected, but said the "collateral damage" of such a decision would be very serious.

He said that the maximum saving of €5.1bn did not justify the risk of embarking on a bank resolution process.

http://www.independent.ie/business/irish/sutherland-attacks-irish-wages-and-calls-for-tougher-budget-cuts-2352576.html

In waking a tiger, use a long stick.

Mao Tse-Tung

The monthly Coppock Indicators finished August:

DJIA: +243 Down. NASDAQ: +366 Down. SP500: +243 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. August is the third down month in a row and “crash season” approaches.

No comments:

Post a Comment