Tuesday, 14 December 2010

Yuan Rising.

Baltic Dry Index. 2076 -19

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

"This is the beginning of a new era," said Norman Chan, head of Hong Kong's central bank. "This is a step moving to full convertibility of the yuan, and is a major change of the international financial landscape."

Another shortened update today while I try to catch up after travelling. This morning the Journal on the rise of the international yuan. Not quite the rise of a new “EuroYuan” to match the rise in the Eurodollar in the 1950s, but a step in that direction, nevertheless. But what makes anyone think that Beijing’s communists and bureaucrats will be any more competent than America’s aging politicians and central banksters at running a fiat currency that doesn’t cheat all who embrace it? Stay long gold and silver. The appearance of the middle kingdom’s wobbly fiat yuan, alongside the soon to be gone Euro, the disastrous fiat dollar, and the limited use Disney dollar, only makes the fiat currency scam all the more unstable. Do people in the west really want to trade in pictures of mass murderer Mao? The equivalent of Germany issuing a new D-Mark with a picture of Hitler, and Russia a new Rouble with a picture of Stalin.

"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

DECEMBER 14, 2010

Offshore Trading in Yuan Takes Off

China's currency, pent up inside the country's borders for decades, is emerging as a hot property in global foreign-exchange markets, just months after Beijing allowed the yuan to be bought and sold outside the mainland for the first time.

Daily trading in the yuan has grown from zero to $400 million in the past few months, as the currency of the world's second-biggest economy begins to flow around the globe. Global trading in yuan allows businesses to buy and sell the currency to finance trade, investment and borrowing. It's an important step for the yuan to play a role in global financial markets.

The value of the yuan remains tightly controlled by China, so its value won't rise and fall to the same extent as the dollar or euro, in spite of the new trading. Even so, foreign-exchange traders who are embracing the currency see demand for yuan rising sharply. Bankers in New York, London and Tokyo are rushing to set up new trading systems and back offices to trade in yuan.

"This is the beginning of a new era," said Norman Chan, head of Hong Kong's central bank. "This is a step moving to full convertibility of the yuan, and is a major change of the international financial landscape."

The yuan makes up a sliver of the $4 trillion daily trading in currency markets and is dwarfed by trading in the dollar, yen and euro. But traders are surprised at how quickly it is gaining critical mass. Chinese companies are placing yuan into accounts in Hong Kong, where the offshore trading is allowed, and could have as much as 300 billion yuan ($45 billion) there by the end of the year.



Next, a view of Christmas future for Club Med and Ireland, as they drive the great SS Euro-Titanic full speed into a mass of icebergs aka time zone 2011.

"The gold standard sooner or later will return with the force and inevitability of natural law, for it is the money of freedom and honesty."

Hans F. Sennholz

DECEMBER 14, 2010

Banker Sees Peril in Hungary Policies

BUDAPEST—The governor of Hungary's central bank, locked in a struggle with the country's political leaders, said the ruling party's tax and pension policies are risky and warned that eroding investor confidence is one of the biggest potential threats to the national economy.

"The Hungarian economy is still vulnerable to shifts in investor sentiment," said András Simor, who has headed the National Bank of Hungary since 2007. "Risk assessment of Hungary if anything has deteriorated during the recent months."

The central banker's sober assessment Monday comes months after Hungary's new populist government spurred worries across Europe by rebelling against International Monetary Fund and European Union prescriptions for fixing its economy. On the brink of insolvency two years ago, Hungary was the first EU country bailed out by IMF and EU in the wake of the 2008 financial crisis.

Mr. Simor is at odds with the populist governing party, which won a landslide election victory in April. It has imposed high temporary taxes on banks and other big businesses and on Monday passed a law to move a large sum of money from the private pension system into state coffers.

Prime Minister Viktor Orbán has said he is working to jump-start economic growth by slashing personal income-tax rates, lowering taxes on smaller enterprises and boosting some social-welfare payments to families.

In an interview Monday with The Wall Street Journal, Mr. Simor expressed skepticism about government measures that he termed "unconventional," warning that policies designed to shore up the budget in the short term could end up contributing to inflation and crimping credit.

Members of Mr. Orban's Fidesz party have called on Mr. Simor, appointed to a six-year term by the previous Socialist-led government, to resign. Fidesz lawmakers have introduced a bill to change how the central bank's interest rate-setting committee is chosen—a move seen by many analysts as a threat to the central bank's independence.

Mr. Simor called the bill, which would give Parliament the power to appoint and oust four of the committee's seven members, "an unnecessary development that raises questions about the central bank's commitment to price stability, and this undermines the credibility of monetary policy."

Hungary's economic policies and the split between the central bank and the government here have come under intense scrutiny by markets suspicious of any deviation from the belt-tightening orthodoxy now taking hold across Europe.

Last week, Moody's Investors Service cut its credit rating on Hungary's sovereign debt two notches to just above junk-bond levels.


Next, the ECB is suddenly talking about getting a capital increase from the Eurozone member countries. Why, I ask myself, and why are they suddenly contemplating a 30% drop in Club Med’s bonds that they’ve bought. Someone within the ECB must think that such a drop is coming.

"All previous attempts to base money solely on intangibles such as credit or government edict or fiat have ended in inflationary panic and disaster."

Donald Hoppe

Exclusive - ECB eyes seeking capital hike – sources

Mon Dec 13, 2010 6:50pm GMT

FRANKFURT (Reuters) - The European Central Bank is considering requesting an increase in its capital from euro zone member states, euro zone central bank sources told Reuters, as a cushion against any potential losses from its bond buying.

One source said among the options being discussed was a doubling of the ECB's capital. The other source said it was not yet clear how much the bank would ask for.

One of the sources told Reuters the bank was planning to ask for its capital to be raised. A second source confirmed the plan was being discussed, adding:

"The issue is that the ECB is worried about potential losses from its bond buying."

"At the moment we are buying very modest amounts, but what if that is increased, and what if the bonds you buy are suddenly worth 30 percent less?"

----Since May the ECB has bought 72 billion euros of government bonds as part of a 750 billion euro EU/IMF rescue package hastily brought in at the height of the euro zone's debt crisis.

Most analysts believe it is concentrating its purchases exclusively on euro zone debt trouble spots Ireland, Greece and Portugal.


I close for the day noting a divergence between Dr Copper, which is soaring to new highs suggesting a boom underway in Asia at least, and the Baltic Dry Index which has plummeted from over 4200 in late May to just 2076 yesterday suggesting a bulk trade manufacturing slump. This despite figures from China showing increased coal imports ahead of winter, and their latest trade data showing very little economic slowdown if at all. Have ship-owners suddenly put back ships into service? Are newly constructed ships flooding onto the market, depressing charter prices? Something’s not right, but what?

At the Comex silver depositories Monday, final figures were: Registered 47.75 Moz, Eligible 58.06 Moz, Total 105.81 Moz.


Crooks and Scoundrels Corner.

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

Regular readers know that I am a contributing editor to the rare metal blog, where I have recently been posting on some technology developments in Graphene and nano carbon that, I think, will greatly alter our lives in the decade ahead, and with it alter the demand prospects of very many of the difficult to refine rare metals. Ultra capacitors, aka, supercapacitors, have the potential to alter for the better our arriving e-mobility and renewable energy age.

In my post “Ultracaps And Buses”, readers Harvey and Tek commented “so.....what does all this have to do with rare metals?” I have replied in that posting, but think it important enough to post to the wider audience in this additional post.

In themselves they don't add to rare metals demand since they don’t use any, but super capacitors have the potential to turn upside down the public acceptability of EVs, plus transform the renewable energy, intermittent power sector. Both, likely heavy future users of several rare metals. With EVs, they offer the prospect of reducing the size and weight of battery packs by up to 50%, simply by adding one or two super capacitors to the drive package. That's a big cost savings, will take the range of a BEV up towards 200 miles. HEVs will be the big loser as it will no longer be necessary to drag around all the extra weight, and complexity of dual drive, dual fuel, systems. With electric motors 3 to 4 times as efficient as ICEs, supercaps whether Graphene or Recticle Carbons similar version will transform travel. An electrical engine is always going to be lighter and simpler for a given output. Regenerative braking makes a lot of sense for supercapacitors.



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.

No comments:

Post a Comment