Wednesday, 1 December 2010

The Nuke Option.

Baltic Dry Index. 2099 -46
LIR Gold Target by 2019: $30,000. Revised.

The whole history of civilization is strewn with creeds and institutions which were invaluable at first, and deadly afterwards.

Walter Bagehot.

Today the nuke option, and no we are not talking about Mrs Palin’s dangerous coded call for someone to take out Wikileaks founder. Today’s nuke option is the call by more and more of Europe’s frightened banksters and dodgy leaders to abandon German economic sanity and go whole hog for Italy’s Lira solution. More on that later.

First this bad news from Asia. China excepted, East Asia is starting to slow. Very bad news for a Europe setting out on the yellow brick road of austerity. Below, Reuters with yesterday’s scary news. Our western stock markets are not priced for trouble in Asia. They are not priced for anything but the Fed forever propping up US stocks.

"We are in a world of irredeemable paper money - a state of affairs unprecedented in history."

John Exter

Japan, S.Korea factory output slumps as Asia shifts down

* Japan Oct factory output drop sharpest since Feb 2009

* S.Korea industrial output falls 3rd month in row

* Japan, Korea data follow Q3 slowdown in much of Asia

* Japanese Nov export orders gauge weakest in year

* India stands out, growth stronger than expected (Updates with India July-Sept GDP)

By Stanley White and Kim Yeonhee

TOKYO/SEOUL, Nov 30 (Reuters) - Factories in Japan and South Korea cut output in October, adding to evidence of an Asia-wide slowdown and boding ill for the rest of the world that has relied on the region to keep the global economy humming.

Japanese companies cut production for the fifth month and by the biggest margin since February 2009, while South Korea's industrial output fell for the third month in a row, disappointing markets which had bet on a rebound.

In contrast, India asserted itself as a regional standout, reporting on Tuesday that its economy grew 8.9 percent in the past quarter from a year earlier.

Asia's third-largest economy handily beat market forecasts, but it has a long way to go to become a global source of demand that could fill the void left by debt-ridden Europe and the United States, which are struggling to take off.

The fall in Japan's output was expected -- in fact a drop of 1.8 percent was smaller than the forecast 3.3 percent decline -- after a key stimulus measure, incentives for buyers of fuel-efficient cars, expired in September, and exports continued to cool.


Now back to why Europe’s leaders, banksters and squids have gone into full panic mode. But even if we rebrand the Euro the Lira, would it do more than buy a year for the dying Euro? Will it even buy a year? Stay long physical gold and silver.

"The gold standard, in one form or another, will prevail long after the present rash of national fiats is forgotten or remembered only in currency museums."

Hans F. Sennholz

Ireland's Debt Servitude

By Ambrose Evans-Pritchard Last updated: November 30th, 2010

Stripped to its essentials, the €85bn package imposed on Ireland by the Eurogroup and the European Central Bank is a bail-out for improvident British, German, Dutch, and Belgian bankers and creditors.

The Irish taxpayers carry the full burden, and deplete what remains of their reserve pension fund to cover a quarter of the cost.

This arrangement – I am not going to grace it with the term deal – was announced in Brussels before the elected Taoiseach of Ireland had been able to tell his own people what their fate would be.

The Taoiseach said afterwards that Brussels had squelched any idea of haircuts for senior bondholders: a lack of “political and institutional” support in his polite words: or “they hit the roof”, according to leaks.

One can see why the EU authorities reacted so vehemently. Such a move at this delicate juncture would have set off an even more dramatic chain reaction in the EMU debt markets than the one we are already seeing.

It is harder to justify why the Irish should pay the entire price for upholding the European banking system, and why they should accept ruinous terms.

I might add that if it is really true that a haircut on the senior debt of Anglo Irish, et al, would bring down the entire financial edifice of Europe, then how did any of these European banks pass their stress tests this summer, and how did the EU authorities ever let the matter reach this point? Brussels cannot have it both ways.


Portugal banks face 'intolerable' risk unless austerity measures are implemented

Portugal's central bank has given warning that the country's banking sector faces "intolerable" risk unless its government implements planned austerity measures, as continuing fears for the health of the eurozone dragged the euro to a 10-week low against the dollar.

By Emma Rowley 9:00PM GMT 30 Nov 2010

Failure to consolidate the public finances will put the country's banks in danger, the Bank of Portugal said in a report, which followed Prime Minister Jose Socrates last week pushing through an austerity budget.

The Portuguese government says no bail-out is needed, but markets are already pointing the finger at the country as the next to follow Greece and Ireland in requesting a rescue package.

"The risk will become intolerable if we do not see the implementation of measures that consolidate public finances in a credible and sustainable way," the central bank said.

Ratings agencies have downgraded Portugal's sovereign debt, leaving its banks shut out from market funding and reliant on the European Central Bank (ECB) for their borrowing needs.

The banks must address this dependency, the central bank said, as "large-scale and permanent use of financing from the Eurosystem is unsustainable".

Meanwhile, Spanish lenders are now paying the biggest premium ever on their debt compared with other banks in Europe - a record 166 basis points more than the average for other euro lenders, according to Bank of America.

The warnings came as the euro dropped below the $1.30 mark for the first time since the middle of September, while fears over the eurozone's debt crisis pushed bond yields - the rewards investors demand to take on the debt - to new highs. The spreads between Spanish and Italian 10-year bond yields over the German benchmarks widened to the biggest levels since the euro was launched in 1999 - around 3 and 2.1 percentage points respectively.

Mounting calls for 'nuclear response' to save monetary union

As Europe's debt crisis spreads ever wider, the EU authorities are coming under intense pressure to move beyond piecemeal rescues and resort to radical action on a nuclear scale.

By Ambrose Evans-Pritchard 6:00AM GMT 01 Dec 2010

Spain's former leader Felipe Gonzalez warned that unless the European Central Bank steps into the market with mass bond purchases, the EMU system will lurch from one emergency to the next until it blows up.

Alluding to Portugal and Spain, he said a third country will need a rescue as soon as "January or February", and fourth soon after, at which point it will "contaminate the whole of Europe and get out of hand".

"If the ECB bought just a third as much public debt as the US Federal Reserve is doing, we could stop the speculation," he said.

Willem Buiter, chief economist at Citigroup, said Greece, Ireland and Portugal are all insolvent already, and Spain is close behind. The combined rescue needs of these countries is likely to exhaust the EU's €440bn (£368bn) bail-out fund, which in reality has just €250bn in usable money.

"Once Spain needs assistance, the support of the ECB will be critical. As the sole source of unlimited liquidity and as an institution that can take decisions without the need for political or popular approval, it is the only institution that can take actions of sufficient size and with sufficient speed to stave off major financial instability," he said.

Dr Buiter said the rescue packages for Greece and Ireland put off the day of reckoning. At some point creditors will have to take their punishment. While Europe is now the epicentre of the debt crisis, concerns may ultimately spread to Japan and the US. "There is no such thing as an absolutely safe sovereign," he said.

He said the ECB would have to continue propping up the banking systems of crippled eurozone states - whether it liked it or not.

----There was a whiff of systemic contagion as Belgian yields blew through 4pc, drawing unwelcome attention to a country that has not had a government for five months and appears to be sliding towards Flemish-Walloon dissolution.

"The big change is that Belgium has gone from being the weakest of the strong group to the best of the weak group", said Koen Van de Maele from Dexia.

Most alarming is the surge in Italian yields to 4.7pc, raising fears that the world's third biggest debtor, with more than €2 trillion of outstanding bonds, could be drawn into the maelstrom.

A permanent Governor of the European Central Bank would be one of the greatest men in Euroland. He would be a little `monarch` in every City; he would be far greater than the Elected Leaders. He would be the personal embodiment of the ECB; he would be constantly clothed with an almost indefinite prestige. Every nation in business would bow down before him and try to stand well with him, for he might in a panic be able to save almost anyone he liked, and to ruin almost anyone he liked. A day might come when his favour might mean prosperity, and his distrust might mean ruin. A position with so much real power and so much apparent dignity would be intensely coveted.

With Apologies to Walter Bagehot. Lombard Street. 1873.

At the Comex silver depositories Tuesday, final figures were: Registered 48.03 Moz, Eligible 59.97 Moz, Total 108.00 Moz.


Crooks and Scoundrels Corner.

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

While the world’s dodgy scientists and even dodgier politicians meet in Sun King luxury in sun drenched Cancun Mexico to discuss global warming, today we present the view facing the serfs of Europe. Carbon taxes anyone? Perhaps Europe’s shivering huddled masses yearning to be warm can burn some of Goldman’s carbon futures. But first this from the global warming nutters.

Snowfalls are now just a thing of the past

By Charles Onians Monday, 20 March 2000

Britain's winter ends tomorrow with further indications of a striking environmental change: snow is starting to disappear from our lives.

Sledges, snowmen, snowballs and the excitement of waking to find that the stuff has settled outside are all a rapidly diminishing part of Britain's culture, as warmer winters - which scientists are attributing to global climate change - produce not only fewer white Christmases, but fewer white Januaries and Februaries.

The first two months of 2000 were virtually free of significant snowfall in much of lowland Britain, and December brought only moderate snowfall in the South-east. It is the continuation of a trend that has been increasingly visible in the past 15 years: in the south of England, for instance, from 1970 to 1995 snow and sleet fell for an average of 3.7 days, while from 1988 to 1995 the average was 0.7 days. London's last substantial snowfall was in February 1991

Global warming, the heating of the atmosphere by increased amounts of industrial gases, is now accepted as a reality by the international community. Average temperatures in Britain were nearly 0.6°C higher in the Nineties than in 1960-90, and it is estimated that they will increase by 0.2C every decade over the coming century. Eight of the 10 hottest years on record occurred in the Nineties.

However, the warming is so far manifesting itself more in winters which are less cold than in much hotter summers. According to Dr David Viner, a senior research scientist at the climatic research unit (CRU) of the University of East Anglia,within a few years winter snowfall will become "a very rare and exciting event".

"Children just aren't going to know what snow is," he said.

Now we now return to reality. Why would anyone pay any attention to anything put out by the now discredited Climate Research Unit of the dodgy science University of East Anglia.

Colder than Reykjavik: UK set for more snow as temperatures drop to -1C

Freeze spreads to London and the south, with arctic winds predicted to sweep in from northern Russia

Tuesday 30 November 2010 18.48 GMT

Fresh snowstorms are expected to continue for at least two more days across much of the United Kingdom, after 24 hours which saw falls in almost every part of the country.

Strengthening northeasterly winds have taken the national average temperature to –1C (30.2F), lower than Reykjavik in Iceland and parts of Greenland. These are expected to trigger a further week of cold weather payments to four million households.

For the first time in the current chill, the worst in November for 17 years, snow today reached London and England's most southerly counties. Roads, trains and airports including Heathrow and Gatwick were all seriously disrupted.

Trains were cancelled on Scotrail, the East Coast main line and four other operators, while delays and cancellations spread to Eurostar, on which there was upheaval during the cold snap last winter. Although the brunt of the weather continued to hit the eastern half of the country, temperatures plummeted on the west coast, too.


Sweden braces for record freeze

Published: 30 Nov 10 10:43 CET

Stockholm is forecast to experience its coldest seasonal temperatures for over 100 years this week as winter weather takes hold of the country, according to the Swedish Meteorological Institute (SMHI).

Temperatures across the country are expected to drop to record lows for the first week of December, with the exception of the far north, with averages coming in 7-10 degrees Celsius below normal.
Stockholm registered -11 degrees Celsius at the weekend, the coldest November temperature since 1965 and the mercury is set to plunge further on Wednesday and Thursday, dropping as low as -15.
"It is far below average temperatures, which usually oscillate around zero at this time of the year," said Alexandra Ohlsson, a meteorologist with SMHI.
Dalarna and Jämtland in northern Sweden will also be hit with the harsh weather. The Storsjön lake in the heart of Jämtland's main city Östersund has already frozen over in most parts.
SMHI forecasted that in southern and central areas the cold will ease off somewhat come Friday. Northern Norrland will however drop to minus 14-17 degrees Celsius in the middle of the day.


Travel Chaos and Beauty 11/30/2010

Snow and Freezing Weather Hits Germany

Winter arrived early in Germany and much of Europe this week, causing thousands of accidents and travel chaos but also creating snowy landscapes of exquisite beauty. Temperatures are expected to remain well below freezing for the rest of the week and more snow is expected.

Winter hit Germany with a vengeance on Tuesday as heavy snowfall and freezing temperatures caused some 2,000 traffic accidents on icy roads and led to more than 250 flight cancellations at Frankfurt airport alone. At least three people died in accidents on icy roads.

Many roads and motorways became impassable due to ice and snowdrifts, and there were long traffic jams across the country. On the A-96 motorway near Munich, an accident cause a 10-kilometer tailback.

Some 200 passengers had to be evacuated from a high-speed ICE train near the Bavarian town of Kronach on Monday night after snow caused a tree to topple onto an overhead line. The train was stuck and temperatures inside fell sharply because of a power outage. The passengers were taken to a nearby school gymnasium and provided with hot drinks and food before they continued the journey in buses.

In the town of Sigmaringen in the southwestern state of Baden-Württemberg, the temperature plunged as low as 18 degrees Celsius below zero (-0.4 degrees Fahrenheit) on Monday night. More snowfall is expected in the coming days and it is forecast to get even colder.

In the eastern city of Leipzig, an initially harmless snowball fight among several dozen youths escalated into a full-blown riot involving 500 people in which stones, bottles and firecrackers were hurled.,1518,732088,00.html

Cold snap sends Europe into deep freeze

2010-12-01 00:12:57

BEIJING, Nov. 30 (Xinhua) -- An ongoing cold wave with heavy snow and record low temperatures has delayed air flights and snarled road travel across much of Europe.

The Danish National Observatory reported Monday that Northern Jutland reached minus 3.8 degrees Celsius on Nov. 27, Denmark's lowest reading in November in the past 120 years.

Meanwhile, a rare snowstorm with strong winds hit Copenhagen, the capital of Denmark, on Sunday. The storm blanketed Copenhagen with more than 10 cm of snow and temporarily closed the city's airport the next morning for the first time in 25 years.

Heavy snowfall caused the cancellation of 125 flights at the Munich airport in southern Germany on Monday, a spokesman said.

Capacities were halved at the airport so its two runways could be cleared of snow.

Road travel in the region was also hampered by accidents and long traffic jams, police said.

The snowfall caused more than 100 accidents, leading to many minor injuries. Roads were blocked by more than 50 lorries that crashed or got stuck in the snow.

Many provinces in western and central France have seen power outages in recent days because of the bad weather.

Meanwhile, in the Lorraine area in eastern France, some highways were closed because of snow and low temperatures.

At the same time, wintry weather also paralyzed public transportation in some cities in central France.

French health authorities also reported that a total of 54 people so far have been taken to hospitals for treatment after breathing carbon monoxide due to malfunctioning heating equipment.

Weather forecasters said the cold wave could stay in most parts of France for the next week. On Dec. 1 and Dec. 3, some areas could possibly see drop of temperatures to a record low.

----- In Poland and Czech, most areas suffered heavy snows last weekend. On Nov. 26 and 27, Austria and Switzerland also saw their first snow of the winter.

Are Sunspots Different During This Solar Minimum?

-----But something is unusual about the current sunspot cycle. The current solar minimum has been unusually long, and with more than 670 days without sunspots through June 2009, the number of spotless days has not been equaled since 1933. [813 days through June 2010. GI]

----During the period from 1645 to 1715, the Sun entered a period of low activity now known as the Maunder Minimum, when through several 11- year periods the Sun displayed few if any sunspots. Models of the Sun's irradiance suggest that the solar energy input to the Earth decreased during that time and that this change in solar activity could explain the low temperatures recorded in Europe during the Little Ice Age.

----The same data were later published [Penn and Livingston, 2006], and the observations showed that the magnetic field strength in sunspots were decreasing with time, independent of the sunspot cycle. A simple linear extrapolation of those data suggested that sunspots might completely vanish by 2015.These observations caused researchers to wonder whether the characteristics of sunspots are different now than in other solar cycles.

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way

A Tale of Two Cities. Charles Dickens

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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