Tuesday, 29 March 2011

Japan’s Fallout.

Baltic Dry Index. 1585 Unch.

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

The continuing nuclear crisis at Fukushima seems no closer to ending than when it began. In the swirl of rumours arising from the lack of transparency and information from TEPCO, operator of the disastrous site, Japan had to deny it was going to nationalise TEPCO. TEPCO itself yesterday initiated rolling blackouts again. Japan’s GDP will dip this quarter and next, before rising again as the reconstruction effort gets underway. If GDP figures had to write off all the destruction and death instead of merely counting the reconstruction, wooly headed Keynesians wouldn’t keep going on about creative destruction.

Below, Der Spiegel covers the subject for a very skeptical Germany.

How Dangerous Is Japan's Creeping Nuclear Disaster?


The destroyed reactors at Fukushima have been releasing radiation for weeks. According to model calculations, the stricken nuclear plant could already have released one-tenth of the amount of radiation unleashed in the Chernobyl disaster. How serious a risk does the disaster pose to humans?

The workers are now under observation at the National Institute of Radiological Sciences. The water at Fukushima was so contaminated that radioactive beta radiation burned their skin. In less than an hour, they were exposed to about 180 millisievert of radiation, or nine times as much as one nuclear power plant employee is exposed to in an entire year. "These kinds of burns will be causing problems for the men for a long time to come," says Peter Jacob, director of the Institute for Radiation Protection at the Helmholtz Center in Munich, Germany. Commenting on the exposure, a coworker of the three men said laconically: "We do pay attention. But now we have to be even more careful as we work."

The incident revealed, once again, how little experts know about the dangers that still lurk on the grounds of the ill-fated plant. No one had expected the radiation level in the water in the basement to be as high as it was. The levels of radiation in water in the basement of reactors No. 1, No. 2 and No. 3 reached record highs, with water at No. 2 measuring 1,000 millisieverts per hour. This was due to a partial core melt. Also, the containment vessel for the third reactor was apparently damaged, representatives of the Japanese nuclear regulatory agency concluded. Could this mean that there is a crack in the barrier between the highly radioactive core and the surrounding environment?

----Meanwhile, however, the engineers have been forced to realize that they have made almost no headway in restoring the cooling system. By Friday night, pumps were still not working in any of the damaged reactors. Up to 45 tons of sea salt have apparently accumulated in the containment vessels, complicating the cooling effort. The salt is crystallizing in warm spots and creating an unwanted layer of insulation. The engineers planned to start flushing fresh water into the reactors on Friday afternoon. But the reactors are only one problem. There's also the issue of the 3,450 spent fuel rods, which are red-hot, presumably severely damaged and exposed to the air in half-empty pools.

"We are experiencing an ongoing, massive release of radioactivity," says Wolfram König, head of Germany's Federal Office for Radiation Protection. "And everyone should know by now that this isn't over by a long shot." Nuclear expert Helmut Hirsch says: "All I hear is that people are wondering whether this will turn into a meltdown. But the thing is, it already is a partial meltdown." The difference, in this case, is that Fukushima is a creeping disaster.

To make matters worse, the wind changed on Friday. Radioactive particles over the Pacific were now drifting westward across Japan. High levels of radiation were detected in vegetables, water and soil near the Fukushima plant.

The Japanese authorities have so far only evacuated a zone within 20 kilometers (12.4 miles) of Fukushima. But the risks posed by radiation are also growing for people outside this zone. "It is high time Japanese authorities extend the 20- kilometer (12.4-mile) evacuation zone around the crippled nuclear-power plant at Fukushima ... Pregnant women and small children should immediately be evacuated from a progressively increasing area," writes nuclear critic Mycle Schneider, lead author of the World Nuclear Industry Status Reports. Embryos, fetuses and infants are at the highest risk, because radiation targets cells that divide quickly.



Fukushima’s fallout seems to have greatly changed Europe. Germany took a big step to the left. In Germany, nuclear power took a Three Mile Island style hit. Nor is nuclear likely to fare better elsewhere in the EU outside France. The greatly weakened Merkel coalition, is fading fast as a key member of the EU. Abstaining on the UN Libyan vote didn’t help either. Outside of Germany’s bailout cash, German influence will wane until after the next German Federal election. Who speaks for Europe now? President Van Rompuy, and Baroness Whatsit?

“Who do I call if I want to call Europe?”


Greens Score Big in Key German State


It is being hailed as the start of a new political era in Germany. The Green Party looks set to appoint its first state governor after Sunday's election in the state of Baden-Württemberg. The result is a huge setback for Chancellor Angela Merkel.

The Fukushima disaster has had, and will have, many consequences around the world. One of the more unlikely, however, appears to be the results of Sunday's election in the southwestern German state of Baden-Württemberg, where skepticism about nuclear power helped propel the Green Party to a historic victory over Angela Merkel's conservative Christian Democratic Union (CDU).

The Greens doubled their share of the vote to 24.2 percent, according to preliminary results released by the state electoral commission. They are now likely to govern the state in a coalition with the center-left Social Democratic Party (SPD), which secured 23.1 percent of the vote, down 2 percent from the last election in 2006. In what would be a first for Germany, the Greens, as the senior partner in the coalition, will likely appoint the state governor.

----The conservatives had already been suffering in the polls, but the Fukushima disaster effectively turned the state election into a referendum on nuclear power, dealing a blow to the CDU and boosting the fortunes of the anti-nuclear Greens. The debate damaged incumbent CDU Governor Stefan Mappus, who had in the past been a vocal supporter of nuclear power. Merkel's political U-turn on atomic energy in the wake of the catastrophe in Japan also appears to have backfired. Voters apparently saw her sudden decision to temporarily take a number of older reactors off the grid as blatant electioneering.



At the Comex silver depositories Monday, final figures were: Registered 41.80 Moz, Eligible 61.82 Moz, Total 103.63 Moz.

Crooks and Scoundrels Corner.

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

Little by little the fog that hid Greenspan’s casino capitalism is lifting. Today, Cassino in Italy claims JP Morgan’s confidentiality clause prevents it releasing information on how a swap arrangement with Bear Stearns essentially made the city go bust. JP Morgan took over BS in the St Patrick’s Day massacre of BS’s shareholders back in 2008. I wonder what JPM needs to be kept hidden?

Cassino Refusal to Disclose Swap With JPMorgan Results in Suit

By Elisa Martinuzzi and Lorenzo Totaro - Mar 28, 2011 11:24 PM GMT+0100

Cassino, the central Italian city that cost taxpayers 2 million euros ($2.8 million) because of an interest-rate swap with JPMorgan Chase & Co. (JPM), was taken to court earlier this month over its unwillingness to disclose how it lost the money.

The lawsuit, brought by Bloomberg News, asks an administrative court to enforce a ruling by a regional ombudsman that Italian law requires the city to release documents on a swap agreement between Cassino and a unit of Bear Stearns Cos., which JPMorgan bought in 2008. The New York-based bank and Cassino agreed in 2009 to terminate the contract, without disclosing financial terms.

The city of 33,000 people, a site of fighting in World War II, withheld the documents because of the potential damages it would incur if it breached a confidentiality clause with JPMorgan, the second-biggest U.S. lender by assets, the city said in a letter to Bloomberg last month. The news service has a “direct, concrete” interest and should be granted access to the swap file, the regional ombudsman of Lazio said in its final ruling on the case in December, citing a 1990 Italian freedom of information law.

----JPMorgan is separately on trial in Italy in the first European criminal case involving swaps. The bank, together with Deutsche Bank AG (DBK), Depfa Bank Plc and UBS AG, faces charges in Milan for fraud for tricking the municipal government into buying the contracts. Meanwhile, JPMorgan is among banks that are suing Italian municipalities in London to enforce the swaps. The cases are pending.

Deutsche Bank, Germany’s biggest bank, lost a case over interest-rate swaps last week, the first ruling by the country’s highest court on derivative sales. The court said the Frankfurt- based lender didn’t adequately disclose risks and ordered it to pay 541,074 euros in damages to its customer, Ille Papier Service GmbH.

‘Extremely Risky’ Bet

Faced with shrinking income and growing expenses, Italian cities bought swaps that would typically offer lower interest expenses in the near-term, while exposing the buyers to the risk of increased interest costs in later years. Italian cities faced losses of at least 1.2 billion euros from the transactions as of June, data compiled by the central bank show.

Cassino entered a seven-year swap with Bear Stearns in 2003 to adjust payments on about 22 million euros of debt. The swap switched the city’s 4.7 percent fixed interest rate payment for a variable rate, according to a June 2009 report by Italy’s financial police.

The city paid a floating rate based on the U.S.-dollar London interbank offered rate, an “extremely risky” bet given that Libor was at a record low, the police said in testimony to the Italian Senate in 2009.

Three-month U.S. dollar Libor was at a 1 percent in June 2003 and by January 2006 had surpassed 4.7 percent, according to data compiled by the British Bankers’ Association. The measure climbed as high as 5.7 percent in September 2007 as credit markets began to seize up, before declining to a record low of 0.25 percent by December 2009 after policy makers cut rates.

----Bloomberg News sued the European Central Bank in December to make it release documents showing how Greece used derivatives to hide its fiscal deficit and helped trigger the region’s sovereign debt crisis. The case is pending.


The monthly Coppock Indicators finished February:

DJIA: +156 Down 05. NASDAQ: +217 Down 11. SP500: +157 Down 4.


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