Baltic Dry Index. 2876 +164 on the week
LIR Gold Target by 2019: $3,000.
Sometimes too much to drink is barely enough.
Mark Twain.
It is the last holiday weekend of the summer in America. The traditional stock market crash season there kicks off on their return next Tuesday. But will 2010 be different? We open the weekend edition with Harvard’s Professor Rogoff calling for the Fed to raise its inflation target, to try to get the US economy moving again. A least worst option he thinks.
Once you've put one of his books down, you simply can't pick it up again.
Mark Twain.
Why America Isn’t Working
Professor Kenneth Rogoff.
-----Given the massive deleveraging of public- and private-sector debt that lies ahead, and my continuing cynicism about the US political and legal system’s capacity to facilitate workouts, two or three years of slightly elevated inflation strikes me as the best of many very bad options, and far preferable to deflation. While the Fed is still reluctant to compromise its long-term independence, I suspect that before this is over it will use most, if not all, of the tools outlined by Bernanke.
The bottom line is that Americans will have to be patient for many years as the financial sector regains its health and the economy climbs slowly out of its hole. The government can certainly help, but beware of pied pipers touting quick fixes.
http://www.project-syndicate.org/commentary/rogoff72/English
The Fed can state its inflation target as often as it likes, simply stating their new target is now 3%, 30% or 300%, doesn’t make it happen, they actually have to do something to make inflation happen. At this point, all the Fed can do to make inflation an arriving reality, is to flood America with dollars, even then there’s no guarantee they will get to the right people who will spend them. Worse, even if they did, chances are that Americans would spend them on imports, and vacations and paying off debt, none very likely to stimulate inflation or the economy very much. However, if the Fed overdoes flooding America with free cash, inflation arrives with a bang, as everyone buys up anything of value in an effort to escape from a collapsing currency. Exactly how the Chinese will feel about Dr. Bernocchio suddenly announcing the death of the fiat reserve standard, Professor Rogoff didn’t cover, but I’d bet that they’d have something to say.
Back across the Atlantic in the continent made for tanks, Germany’s Dr. Sinn expects civil war soon, in work and tax shy Greece. Anything’s possible I suppose, but the work and tax shy aren’t the first group that comes to mind when it comes to starting civil wars. If your whole way of life has been to avoid showing up for work or working and hiding your income, not showing up for the civil war or hiding entirely if one starts, seems a much more probable outcome to me. Sooner or later, even the dumbest Greek is going to figure out leaving the euro and restructuring all the debts is the only sane policy for correcting the problem they are coming from.
Wagner's music is better than it sounds.
Mark Twain.
EU austerity policies risk civil war in Greece, warns top German economist Dr Sinn
Greece’s austerity measures cannot prevent default and will lead to a breakdown of the political order if continued for long, a leading German economist has warned.
By Ambrose Evans-Pritchard in Cernobbio, Italy Published: 9:30PM BST 03 Sep 2010
“This tragedy does not have a solution,” said Hans-Werner Sinn, head of the prestigious IFO Institute in Munich.
“The policy of forced 'internal devaluation', deflation, and depression could risk driving Greece to the edge of a civil war. It is impossible to cut wages and prices by 30pc without major riots,” he said, speaking at the elite European House Ambrosetti forum at Lake Como.
“Greece would have been bankrupt without the rescue measures. All the alternatives are terrible but the least terrible is for the country to get out of the eurozone, even if this kills the Greek banks,” he said.
Dr Sinn said Greece is an entirely different case from Spain and Portugal, which still have manageable public debts and can bring their public finances back into line with higher taxes.
“Greece would have defaulted in the period between April 28 and May 7, had the money not been promised by the European Union,” he said, describing the failure of the EU’s bail-out strategy to include a haircut for the banks as an invitation to moral hazard.
“There should be a quasi-insolvency procedure for countries. Creditors have to accept a haircut before any money flows for rescue plans, otherwise we’ll never have debt discipline in the eurozone,” he said.
Greek society has so far held together well, despite a wave of strikes and street violence in the early months of the crisis. However, unemployment is rising fast and political fatigue with such austerity policies typically sets in the second year.
-----“We are in the second Greek crisis right now, today,” said Dr Sinn.
Greece is undergoing what amounts to an IMF austerity package but without the IMF cure of debt restructuring or devaluation that usual for a country with a spiralling public debt and a chronic loss of competitiveness.
The IMF says Greece’s debt will rise to 150pc by 2013-2014 even if Athens complies fully, a strategy viewed as self-defeating by several ex-IMF officials. There is a strong suspicion that the real objective is to bail-out North European banks with heavy exposure to Southern Europe, rather help Greece.
Dr Sinn said the Germany is now was super-competitive after clawing back 18pc in competitiveness during its long slump. “We’re in a new phase of history. The toggle switch has turned and we are going to see a mirror image of the last 15 years. This time it is Germany that will have an internal boom,” he said.
Germans will not recycle their savings in the Club Med region. They will invest at home.
Next, how are we all going to eat? Actually, even with this year’s poor northern hemisphere wheat, barley and rice crops, there is still no real shortage of foodstuffs, but the same won’t be true if either of next year’s northern and southern hemisphere crops take a hit. Below the FT covers the world on edge for next year.
Fears grow over global food supply
By Javier Blas, Courtney Weaver and Simon Mundy, FT.com September 3, 2010 -- Updated 0331 GMT
(FT) -- Russia announced a 12-month extension of its grain export ban on Thursday, raising fears about a return to the food shortages and riots of 2007-08 which spread through developing countries dependent on imports.
The announcement by Vladimir Putin came as the UN's Food and Agriculture Organisation called an emergency meeting to discuss the wheat shortage, and riots in Mozambique left seven dead.
-----Although agricultural officials and traders insist that wheat and other crop supplies are more abundant than in 2007-08, officials fear the deadly Mozambique riots could be replicated.
The 2007-08 food shortages, the most severe in 30 years, set off riots in countries from Bangladesh to Mexico, and helped to trigger the collapse of governments in Haiti and Madagascar.
The Russian announcement extended an export ban first announced last month until late December 2011, sending wheat and other cereals prices to near a two-year high.
----Russia is traditionally the world's fourth-largest wheat exporter, and the export ban has already forced importers in the Middle East and North Africa, the biggest buyers, to seek supplies in Europe and the US.
Food prices surgeMr Putin said Moscow could "only consider lifting the export ban after next year's crop has been harvested and we have clarity on the grain balances". He added that the decision to extend the ban was intended to "end unnecessary anxiety and to ensure a stable and predict-able business environment for market participants".
Enough of the bad news, we end with the good news, free blackberry season is here. With the school summer holidays now ended, only the birds will get to harvest nature’s free bounty of late August and September.
Go picking blackberries in hedgerows in August and September
When you go out to pick blackberries there are some useful tips to remember. Blackberry juice will stain hands and clothing, and the brambles are covered in many sharp thorns. Therefore wear something old and sturdy (trousers not shorts, and a long sleeved shirt), and give small children gloves.
The most flavoursome blackberries are those which have grown on plants in direct sunlight. Often the best blackberries will be found in difficult to reach positions where they have had the chance to fully ripen without being eaten by birds.
If picking berries on verges, only pick berries above knee height which will not have been splashed by rain hitting the ground, or urinated on by dogs and other animals. Pick only the fully black blackberries (not red or purple) as under-ripe berries will not ripen further once picked. Good blackberries will come of the plant with just a light tug.
"It isn't pollution that's harming the environment. It's the impurities in our air and water that are doing it."
Vice-President Dan Quayle.
Have a great weekend everyone. Be sure to check the rare earths and metals page at the top.
GI.
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