Thursday, 25 November 2010

Singeing Spain’s Beard.

Baltic Dry Index. 2213 +14
LIR Gold Target by 2019: $30,000. Revised.

There is one day that is ours.  There is one day when all we Americans who are not self-made go back to the old home to eat saleratus biscuits and marvel how much nearer to the porch the old pump looks than it used to.  Thanksgiving Day is the one day that is purely American. 

O. Henry

And so to Spain. The rain in Spain falls mainly on the banks. How safe are Spanish banks? Who knows. Irelands banks passed the EU stress tests with flying colours, only to collapse later in a test far less than the stress tests were supposed to be checking. Spain’s banks are probably as risky as Irelands, who knows? Certainly not the ECB, Elena Salgado, or the markets. Like deficits, dodgy accounts don’t matter until one day they do. The whole Bilderberger United States of Europe project is collapsing under the weight of its own internal lies and deceptions. To get the whole misguided, vanity, fiat Euro currency up and running, everyone lied to each other and fiddled the books. Now the worst of the cheats are collapsing, and there isn’t any way to let the cheats and deadbeats out to devalue. As a result, cabin after cabin fills up with water, in the great SS EU-Titanic, while the ECB and others franticly rush around on deck rearranging the deck chairs. Down below decks first the Greeks were told to drop dead and die like good little Europeans for the German Euro, then the Irish were told the same, now it’s the turn of the Iberian peoples, to trash their futures for the good of the failing Bilderberger project, and after them will come the Italians. At some point this madness ends, and the world’s people will wake up to the nightmare of fiat currency, and a bankster financialised crooked world. But not yet. Stay long precious metals. Our central banksters and crooked politicians aren’t yet ready to abandon voodoo economics. This square peg will relentlessly be hammered into that round hole, until one day next year it’s the Germans and French who are asked to die like good little Europeans for the cause of the United States of Fiat Europe.

Elena Salgado, Spain’s finance minister, insisted on Wednesday that Spain would not need rescuing. She told Spanish radio that “we are in the best position to resist against these speculative attacks.”

Fears Mount Over Spain, and Risks to the Euro

By RAPHAEL MINDER Published: November 24, 2010

MADRID — Europe so far has survived the bailout of Greece. The financial rescue of Ireland also is manageable. Even if Portugal becomes the third country to succumb and seek aid, as many people widely predict, it is unlikely to push Europe to the financial brink.

But any bailout of Spain — with an economy twice the size of the other three combined — could severely stress the ability of Europe’s stronger countries to help the financially weaker ones, and spell deep trouble for the euro, Europe’s common currency. Even though Spain, like Ireland, has adopted an austerity plan to help it avoid the need for a bailout, it still could need aid if its banking system proves frailer than the government thinks it is, as was the case in Ireland.

This troubling possibility has unnerved lenders, with Spain’s borrowing costs rising even though Madrid has cut its deficit and the country’s banks maintain they have sufficient strength to absorb their bad real estate loans. “Europe can afford the collapse of Ireland, even perhaps that of Portugal, but not that of Spain, so Spain’s ultimate line of defense is in fact this knowledge that it’s too big to fail and that it represents a systemic risk for the euro,” said Pablo Vázquez, an economist at the Fundación de Estudios de Economía Aplicada, a research institute here.

Reflecting the worries of investors, the yield spread between Spanish 10-year government bonds and those of Germany continued to widen on Wednesday — to as high as 2.59 percentage points, the biggest gap since the introduction of the euro. Spreads typically widen when investors perceive greater risk of not being repaid.

The problem for Spain is one of “self-fulfilling expectations,” said Jordi Galí, director of the Center for Research in International Economics at Barcelona’s Pompeu Fabra university. “If investors expect Spain to have trouble refinancing its debt, now or somewhere down the road, then Spain will have trouble,” he added. “This is only aggravated by the fact that the reluctance of investors to purchase the country’s public debt leads to an increase in the interest rate it has to pay and thus in the budget deficit and the amount of debt it has to issue.”

----Indeed, some say that one of Spain’s relative strengths is that a large amount of its government debt — 203.3 billion euros ($271.1 billion) — is owed to its own banks, rather than foreign lenders. If the government’s financial condition worsens, the thinking goes, Spanish banks would have a greater incentive to help out by easing terms on the loans than would foreign banks, which might take a harder line.

Of course, it is a bit of a double-edged sword; if the Spanish banks need to ease terms to help the government, they could be forced to swallow steep losses, hurting their balance sheets.

The likelihood of entering such a vicious circle could also rise next year, when Spain is due to repay lenders 192 billion euros, or about a fifth of the total debt. As a result of increasing interest it would have to pay for new borrowing, Spain faces a rise of 18 percent in the cost of financing its debt, according to the government’s budgetary plan.

'Ireland was just one big pyramid scheme'

"A sticking plaster over the open wound in the eurozone", was the judgment from Ireland's finance workers as their Government revealed a €15bn (£12.7bn) package of cuts.

By Emma Rowley 9:57PM GMT 24 Nov 2010

Much of the four-year plan – or the "IMF/EU directive, they signed it off", in the words of one Dublin trader – had been leaked ahead of Wednesday's announcement.

As expected, the income tax base was widened, the minimum wage was cut €1 to €7.65 and Ireland's much-vaunted corporation tax rate stayed at 12.5pc.

Dealers in Dublin were combing through the 140-page plan for nuances that could affect their positions, but saw no major surprises – or cause for cheer.

No one views the redoubled efforts to cut Ireland's deficit, which stands at about 12pc of GDP even without factoring in the costs of propping up the banks, as drawing a line under the eurozone's debt crisis.

-----A fellow trader was equally unconvinced about the plan's ability to stabilise sentiment. "I don't believe this is going to calm the markets," he said. "We can save money, tax people more, but the sums are so enormous, the total amount of bail-out is so large, that market participants are definitely looking to the eurozone as a whole."

Worryingly for European politicians, the talk from the pair, who trade across equities, bonds, commodities and currencies, was not idle chat. Trader One said he was carefully reviewing the wording of his futures contracts to see how they will be affected if the euro collapses.

"I'll be looking for [the package] to have a negative effect on the eurozone markets – maybe not initially – but the measures are too small for the scale of the problem, and it's not just Ireland that's the issue," he said, referring to other debt-laden eurozone nations.

There has been speculation struggling periphery countries such as Portugal and Spain could be allowed to devalue as a survival strategy, but he was deeply sceptical. "I don't see the point of the euro continuing if we have a two-speed euro."

That said, there was agreement over the need for Ireland to make cuts, and the International Monetary Fund's (IMF) involvement was welcomed.

"It's a good thing that external people are looking in. We've a government that isn't qualified to take on this mess," said one female banker, again speaking anonymously.

There was definitely room for savings to be made, people believed, with concern over the current basic dole rate – estimated at €5 an hour – and relatively high minimum wage.

But many worried the general public has yet to grasp that there is no alternative to the severe and lasting cuts and feared civil unrest.

Nor is America in much better position. Stay long precious metals.

China, Russia quit dollar

By Su Qiang and Li Xiaokun (China Daily)Updated: 2010-11-24 08:02

St. Petersburg, Russia - China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday.

Chinese experts said the move reflected closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies.

"About trade settlement, we have decided to use our own currencies," Putin said at a joint news conference with Wen in St. Petersburg.

The two countries were accustomed to using other currencies, especially the dollar, for bilateral trade. Since the financial crisis, however, high-ranking officials on both sides began to explore other possibilities.

The yuan has now started trading against the Russian rouble in the Chinese interbank market, while the renminbi will soon be allowed to trade against the rouble in Russia, Putin said.

"That has forged an important step in bilateral trade and it is a result of the consolidated financial systems of world countries," he said.

Putin made his remarks after a meeting with Wen. They also officiated at a signing ceremony for 12 documents, including energy cooperation.

The documents covered cooperation on aviation, railroad construction, customs, protecting intellectual property, culture and a joint communiqu. Details of the documents have yet to be released.

Some hae meat and canna eat, -
And some wad eat that want it;
But we hae meat, and we can eat,
Sae let the Lord be thankit.

Robert Burns

At the Comex silver depositories Wednesday, final figures were: Registered 48.55 Moz, Eligible 58.68 Moz, Total 107.23 Moz. Silver is once again leaking out of inventory.


Crooks and Scoundrels Corner.

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

No crooks today just more on our arriving global cooling. Is our new Dalton Minimum in sunspots indicative of another 20 years to come? Snow starts today?

Snow May Cover 90% of U.K. by Nov. 29 With Six Inches in London

Nov. 23 (Bloomberg) -- Snow is forecast to cover as much as 90 percent of the U.K. by Nov. 29 with six inches in London as cold weather approaches, according to weather forecasts.

There may be as much as six inches (15 centimeters) of snow in southeast England, northeast England and much of Scotland, British Weather Services, which sells forecasts to businesses including energy companies, said in an e-mail.

“We expect the country to be whitened out,” Jim Dale, a senior meteorologist at British Weather Services in High Wycombe, England, said by telephone. “There’s a good chance we could be waking up to large volumes of snow.” Snowfall is also forecast across the rest of Europe, particularly across the Alps and Scandinavia, he said.

Weather forecasters use models which can predict trends in weather. The models can change. The U.K.’s Met Office issued a heavy snow warning on its website at 11:30 a.m local time. Cold weather can spur demand for natural gas, used to heat more than half of the country’s homes and businesses.

Snow is going to come “progressively as we get to the end of this week and into next,” Dale said. “On current trends, we can’t see an end to this until mid-December.”

Thanksgiving is an emotional holiday. People travel thousands of miles to be with people they only see once a year. And then discover once a year is way too often.

Johnny Carson.

With St Andrew’s Day fast approaching, below a vital link for my fellow Scots.

The Whisky Shop (Inverness)

The monthly Coppock Indicators finished October:

DJIA: +204 Down. NASDAQ: +289 Down. SP500: +196 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. October is the fifth down month in a row.

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