Tuesday, 7 December 2010


Baltic Dry Index. 2179 +11

LIR Gold Target by 2019: $30,000. Revised due to QE.

The history of taxation shows that taxes which are inherently excessive are not paid. The high rates inevitably put pressure upon the taxpayer to withdraw his capital from productive business.

Andrew Mellon.

It is D-day, the day Irish politicians get to vote the hapless and mostly innocent Irish population into debt slavery forever, in order to get an EU bailout of French, German and UK banks. A day of infamy on a day of infamy, when 69 years ago today Japan launched its unprovoked attack on Pearl Harbor. By diktat of Brussels and Berlin, the Irish are being told to get on their bikes and emigrate. Sold out into poverty to maintain Europe’s banksters affluent lifestyles. The vote, if it goes the Irish government’s way, must surely be the worst betrayal of a democratic people since the second world war. What part of capitalism does Brussels and Berlin fail to understand. Liquidate the Irish banks bondholders. If that creates problems for the lunatic banksters in France, Germany and Great Britain, let those banks go to their central banks and the ECB for emergency finance. If that means that some are insolvent, liquidate their bondholders and stockholders and reorganize them. Why socialize the debts onto the poor Irish population.

Below, the EU on the edge of the Lehman abyss, says Arabian Money Net. Ireland may be sold out all for naught. Stay long precious metals. The worst is still ahead, says Bloomberg.

"liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people."

Andrew Mellon.

Eurozone on the brink of a Lehman-style meltdown

Posted on 07 December 2010

The crisis now enveloping the eurozone is reminiscent of 2008 and the storm that gathered before the collapse of Lehman and the major financial crisis in the autumn. One lesson from 2008 is that once confidence begins to fall in financial markets it quickly develops a momentum of its own.

The bailout of Greece has been followed by Ireland. That leaves bond vigilantes focusing on Portugal and Spain as their next targets. If the line cannot be drawn at the Iberian peninsula then it will move on to Belgium and France say the bond traders.

It ought to be possible to solve this crisis with a combination of austerity dependent on a tighter control of fiscal policy from the centre that will underpin cross guarantees. But the political will to make this happen is missing in Germany.

Without it defaults by Greece and Ireland are still being priced into bond yields that make the cost of servicing national debt prohibitive, and ultimately self-defeating. The default and bust will come, and markets are pricing it in and by doing so making it certain.

But as the Lehman experience showed no financial entity is an island unto itself these days. Cross border lending in the eurozone is the same. Defaults by Greece and Ireland would set off a catastrophic chain reaction across the global banking system.

---- Why is the eurozone sleep walking into this crisis? Well to be fair the US did not handle the subprime crisis much better. It thought Lehman was not too big to fail but it was, and the same mistake may now be made over the eurozone periphery countries that are only five per cent of euro zone GDP.

In these circumstances the flight to gold and silver by European investors is very understandable as is the strength of the dollar, and both can only grow stronger as this crisis unfolds unless something very unexpected now occurs.



Euro collapse 'possible' amid deepening divisions over bail-out

It is feasible that the euro will not survive the current sovereign debt crisis sweeping Europe, one of the Treasury's leading independent forecasters has said.

By Philip Aldrick, Economics Editor 9:08PM GMT 06 Dec 2010

Under questioning from MPs on the Treasury Select Committee, Stephen Nickell, a member of the Office for Budget Responsibility (OBR) and a former Bank of England rate-setter, said a collapse of the single currency was "a possibility".

Asked more broadly about the sustainability of currency unions, he added: "The general consensus is that sooner or later they fail for one reason or another – but that doesn't mean to say it always happens."

His comments came as deep divisions in the eurozone threatened to drive Spain, Portugal and Ireland into more difficulty.

Attempting to defy Germany, the eurozone's powerhouse and the nation that will provide the bulk of any rescue fund, Belgian Finance Minister Didier Reynders called for the €440bn bail-out fund to be expanded, while Luxembourg Finance Minister Jean-Claude Juncker and Italian counterpart Giulio Tremonti outlined proposals for a joint European government bond.

However, Germany, the Netherlands and Austria on Monday pitched themselves against weaker member states by insisting the rescue package should not be increased. Finance ministers from the 16 member nations were debating the bail-out plans late into the night.

------Ireland, which faces a crucial vote on its debt reduction plans on Tuesday, offered some rare good news as the government appeared to have won sufficient parliamentary support to push the plans through and qualify for the €85bn bail-out package.


Euro’s Worst Ahead as Analysts See Crisis Spreading

Dec. 6 (Bloomberg) -- The most accurate foreign-exchange strategists say the euro’s worst annual performance since 2005 will extend into next year as the region’s sovereign-debt crisis saps economic growth.

Standard Chartered Plc, the top overall forecaster in the six quarters ended Sept. 30 based on data compiled by Bloomberg, predicted the euro may weaken to less than $1.20 by mid-2011 from about $1.33 today. Westpac Banking Corp., the second most accurate, is “bearish in the short term,” and No. 3 Wells Fargo & Co. cut its outlook at the end of last week.

The 16-nation currency’s first weekly gain against the dollar since Nov. 5 may prove short-lived amid mounting concern that more nations will need rescues. European Central Bank President Jean-Claude Trichet delayed the end of emergency stimulus measures last week and stepped up government-debt purchases as “acute” market tensions drove yields on Spanish and Italian bonds to the highest levels relative to German bunds since the euro started in 1999.

“We’re going to get a continuation of the problems that Ireland, Portugal, Spain and others are suffering,” said Callum Henderson, Standard Chartered’s global head of foreign-exchange research in Singapore. “The fundamental issue is these are countries that have relatively large debts, large budget deficits, large current-account deficits, they don’t have their own currency and they can’t cut interest rates. The only way they can get out of this is to have significant recessions.”


Moody's downgrades Hungarian government debt

December 6, 2010

BUDAPEST, Hungary — Credit ratings agency Moody's downgraded Hungary's government bonds by two notches on Monday, citing worries about public finance policies and exposure to foreign financial shocks, such as the European debt crisis.

Moody's Investor Service said it cut the rating to Baa3 from Baa1 — just one step above junk category — and kept its outlook as negative, meaning more downgrades are possible in the coming three months.

"The government's (financial) strategy largely relies on temporary measures rather than sustainable fiscal consolidation policies," said Dietmar Hornung, Moody's' senior credit officer and lead analyst for Hungary.

The agency has also cut Hungary's rating for foreign-currency debt and bank deposits.

The move lowered Moody's listing for Hungary to the equivalent rating category of Standard & Poor's — BBB- — while Fitch lists the country at BBB, one step higher.

-----"While market reaction has been moderate for now ... it's conceivable that foreign investors will turn more cautious for a time, until the issues of the 2011 budget and the private pension funds are settled," Equilor said.

Prime Minister Viktor Orban's center-right government has committed to budget deficit limits set by the European Union but has resorted to unusual methods — including special taxes on banks and energy, telecommunications and retail companies — to reduce the deficit below 3 percent of GDP in coming years.

The government is also planning to fill budget holes with some $13.3 billion (€10 billion) accumulated on private pension funds. People opting to stay in the private pension scheme instead of transferring their savings and all future contributions to the state system by the end of January will lose 70 percent of their pensions when they retire, Economics Minister Gyorgy Matolcsy said last month.


At the Comex silver depositories Monday, final figures were: Registered 49.16 Moz, Eligible 57.93 Moz, Total 107.09 Moz.


Crooks and Scoundrels Corner.

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

No Crooks today, they are all gathered in Dublin for a treasonous vote.

The fairness of taxing more lightly income from wages, salaries or from investments is beyond question. In the first case, the income is uncertain and limited in duration; sickness or death destroys it and old age diminishes it; in the other, the source of income continues; the income may be disposed of during a man’s life and it descends to his heirs. Surely we can afford to make a distinction between the people whose only capital is their mettle and physical energy and the people whose income is derived from investments. Such a distinction would mean much to millions of American workers and would be an added inspiration to the man who must provide a competence during his few productive years to care for himself and his family when his earnings capacity is at an end.

Andrew Mellon.

The monthly Coppock Indicators finished November:

DJIA: +178 Down. NASDAQ: +247 Down. SP500: +167 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. November is the sixth down month in a row.

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