Thursday 28 April 2011

Buffett v Sokol Plus Munger.

Baltic Dry Index. 1259 +09

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

“I believe Costco does more for civilization than the Rockefeller Foundation.”

Proper Charlie Munger.

Up first today, more of the same old story on China. Yesterday the World Bank raised its GDP forecast for China. I suspect that China is in the final stage of an over investment boom. One riddled with malinvestment and unrepayable debt. One geared up to supply goods to a Europe that’s cutting back in an age of austerity programs, to supply a Japan that has many unique problems of its own, and to supply an America that will shortly be cutting back itself. I also suspect that we are about to see inflation go out of control in China, with all of the bad things that brings to bottom 50% in society. For now though, the good times roll endlessly on. The Baltic Dry Index though, suggests some weakness ahead.

World Bank Raises China 2011 GDP Forecast, Urges More Tightening

Published: Thursday, 28 Apr 2011

The World Bank on Thursday raised its forecast of China's economic growth in 2011 for the second time in as many months and said it was too early for Beijing to halt policy tightening, not least because of inflationary risks. 

In its latest quarterly update of the world's second-largest economy, the bank slashed its projection of China's 2011 current account surplus to 3.6 percent of gross domestic product — comfortably below the 4 percent ceiling mooted by U.S. Treasury Secretary Timothy Geithner for G20 countries. 

Following stronger-than-expected outcomes in the past two quarters, GDP is now likely to expand 9.3 percent in 2011, slower than last year's 10.3 percent clip but still a "healthy" rate, the World Bank said. 

It had forecast 9.0 percent in a regional survey in March and 8.7 percent in its previous China update last November. 


Staying with Asia, Japan’s troubles have devastated retail sales. While reconstruction projects will eventually pump cash back into the economy, it takes a long time for that to trickle down into retail sales. Japan’s reconstruction will likely be paid for largely by issuing new debt. But that brings its own problems to the fiat currency Yen. Japan appears headed for a big burst of stagflation. Stay long precious metals for a distinctly troubled H2 2011.

Japanese Retail Sales Slump Most in 13 Years After Quake, Nuclear Crisis

By Aki Ito - Apr 27, 2011

Japan’s retail sales tumbled the most in 13 years last month as the nation’s record earthquake shut stores and discouraged households from spending money.

Sales slumped 8.5 percent in March from a year earlier, the biggest decline since March 1998, according to a statement by trade ministry in Tokyo today. The median estimate of 14 economists surveyed by Bloomberg News was for a 6.1 percent drop.

---- “There is concern that lower confidence could lead to a downward spiral of lower consumer spending, weaker economic activity, and declining pay and employment,” David Rea, a Japan economist at Capital Economics Ltd. in London, said before the report. “As the second quarter unfolds we expect a further deterioration in activity and consumer spending.”

---- Today’s report provides the first official retail-sales figures to reflect the impact of the quake last month.

Confidence among both merchants and households fell the most on record last month, a sign consumers may continue to cut back in the months ahead.


APRIL 28, 2011, 12:56 A.M. ET

Japanese Chip Firm Races to Repair

Renesas Plant Supplying Auto Industry Likely to Be Offline Until June

HITACHINAKA, Japan—A major auto-parts supplier said it is scrambling to restart an earthquake-crippled factory by mid-June but that the plant will run at just 5% of normal capacity at the outset and it is unclear when full output will resume.

Japan's Renesas Electronics Corp., which produces 40% of the chips used to control operations in cars, is working around the clock to restore a plant that was severely damaged by the March 11 quake.

"This is an extremely important plant for us, and we must put all our efforts into getting it back to work," Senior Vice President Tetsuya Tsurumaru said Wednesday. He said the company is making up for lost output by producing the chips at its other plants and outsourcing some orders to other chip makers. "We are making sure that our clients get the chips they need."

The Naka plant in Ibaraki prefecture, north of Tokyo, makes 25% of all of Renesas's automotive microcontroller chips, the brains that control a variety of functions. Given the company's market share, that could translate to a 10% cut in global supplies of the chips. Renesas sells its chips to auto-parts makers, who in turn supply car companies.

The earthquake and subsequent power-supply problems affected eight Renesas plants in Japan. Operations at five of Renesas's 10 factories used in early-stage chip production—where clean rooms require uninterrupted power—were suspended. Many of those plants shut down because of disrupted power supplies, not because of physical damage.

----Renesas expects the Naka plant partly to resume production by June 15. One line at the plant uses 200-millimeter wafers and another uses 300-millimeter wafers. Wafers are the thin slices of silicon that form the base of semiconductors. Only the 200-millimeter line will resume production on June 15, and its initial output will be about 10% of its full capacity, or about 5% of what the plant as a whole produced before the earthquake.


Today we extend our sympathies to all those affected by America’s terrible burst of tornadoes. The pictures carried in the media are very distressing and suggest it’s time to update new building codes. Below, 3 US nuclear reactors had to be shut down due to the storms. Thankfully, all went to plan and the backup generators worked exactly as intended. Still, after Fukushima lost its backup generators due to the tsunami, all nuclear plants everywhere should be instituting emergency plans for replacement backup generators in the unlikely event of a loss of the first line of backup generators.

Storms knock out TVA nuclear units, power lines

HOUSTON | Wed Apr 27, 2011 7:25pm EDT

HOUSTON (Reuters) - Severe storms and tornadoes moving through the Southeast dealt a severe blow to the Tennessee Valley Authority on Wednesday, causing three nuclear reactors in Alabama to shut and knocking out 11 high-voltage power lines, the utility and regulators said.

All three units at TVA's 3,274-megawatt Browns Ferry nuclear plant in Alabama tripped about 5:30 EDT (2230 GMT) after losing outside power to the plant, a spokesman for the U.S. Nuclear Regulatory Agency said.

A TVA spokeswoman said the plant's output had reduced power earlier due to transmission line damage from a line of severe storms that spawned a number of tornadoes as it moved through Mississippi, Alabama, Kentucky and Tennessee.

The NRC spokesman said early information indicated the units shut normally and the plant's diesel generators started up to supply power for the plant's safety system.

The government owned corporation said crews were working to restore service, but more severe weather was forecast, TVA said in a release.

Most of the damage so far has occurred in the western part of TVA's service territory in Mississippi, Alabama and western Tennessee and Kentucky.


"When paper money systems begin to crack at the seams, the run to gold could be explosive."

Harry Browne

At the Comex silver depositories Wednesday, final figures were: Registered 33.32 Moz, Eligible 68.33 Moz, Total 101.65 Moz. We note with rising concern that deliverable registered silver has fallen to about 33% of total Comex depository inventory. While some of the non deliverable eligible class might be moved back into registered easing the tightness somewhat, it seems to me that end users are eager to acquire physical silver for future needs and hold it in the non deliverable category. That’s usually a sign of a physical shortage of silver building up.


Crooks and Scoundrels Corner.

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

Today, Warren Buffett, Berkshire Hathaway, and fallen heir apparent David Sokol. This weekend’s BH AGM in Omaha looks like being more interesting than the average BH AGM. Seen from the outside, BH’s audit committee report looks a little self serving, white washing the role of the great man himself. The audit committee want to sue Sokol for $3 million in ill gotten gains and damage to the reputation of the company itself. If they do, this looks likely to be a most interesting mud fest. According to disgraced, fallen heir apparent, David Sokol, he did nothing that BH Vice Chairman Charlie Munger didn’t do. This mud fest looks likely to be great fun and very messy. In this billionaire v billionaire mud fest, both sides know where all the skeletons are buried and who buried them.

“There’s danger in just shovelling out money to people who say, ‘My life is a little harder than it used to be, at a certain place you’ve got to say to the people, ‘Suck it in and cope, buddy. Suck it in and cope.’”

Proper Charlie Munger.

Warren Buffett to 'Welcome All Questions' on 'Violations' of Ethical Standards by David Sokol

Published: Wednesday, 27 Apr 2011

Warren Buffett tells CNBC he wants to make his first public comments to shareholders this weekend about tonight's blistering report by Berkshire Hathaway's Audit Committee on David Sokol's Lubrizol trades.

Buffett promises to "welcome all questions" on the Sokol scandal this coming Saturday, when tens of thousands of Berkshire shareholders will be in Omaha for the company's annual meeting.

He'll also answer Becky Quick's questions about the matter when he does his first live interview following the meeting, appearing on CNBC's Squawk Box between 8 AM and 9 AM ET Monday morning.

There's no statement from Buffett in the news release accompanying tonight's release of an 18-page report finding that Sokol violated the company's ethical standards when he bought Lubrizol shares while "serving as a representative of Berkshire Hathaway in connection with a possible business combination with Lubrizol."

Buffett hasn't said anything about the matter since his unusual public letter less than a month ago first revealing Sokol's Lubrizol purchases.  At that time, Buffett wrote he would not have anything to say on the matter in the future.

Tonight's report appears to be a response to widespread criticism about Buffett's handling of Sokol's trades and resignation.


"Thank God For Bank Bailouts"

Proper Charlie Munger.

Due to tomorrow’s Royal Wedding holiday here, the next LIR update will be on Monday, the Worker’s Paradise Bank Holiday, so thoughtfully imposed on Britain by “Sunny” Jim Callaghan, the last Labour Prime Minster to wreck the British economy before Tony Blair and Gordon “Goldfinger” Brown nuked it allowing all Britain’s banks to blow up simultaneously and causing the first UK bank run in 150 years. Have a great weekend everyone. The UK spring countryside is now at its best and well worth a visit. Check with the blog for weekend updates.

"In the long run, the gold price has to go up in relation to paper money. There is no other way. To what price, that depends on the scale of the inflation - and we know that inflation will continue."

Nicholas L. Deak

The monthly Coppock Indicators finished March:

DJIA: +160 UP 06. NASDAQ: +216 Down 01. SP500: +163 UP 6.

The Dow and SP 500 have reversed albeit by tiny margins, while the NASDAQ barely moved down. The Fed’s rigging of the indicators seems to have worked. Note: like all indicators, they were devised for normal markets not markets where the central bank is flooding the economy with new cash. In current conditions where risk is suspended by too big to fail, I doubt any indicators are showing more that where the Fed’s new cash is flowing in our world of casino capitalism.

Wednesday 27 April 2011

The End of the Euro is Nigh!

Baltic Dry Index. 1250 -04

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

“Our policy has been and will always be, as long as I will be in office, that a strong dollar is in the interest of the country.”

U.S. Treasury Secretary Geithner. N.Y. 26/04/2011.

Today, the end of the euro is nigh, and by nigh we mean one to two years at best. The Euro, as we know it, is in for a giant rendering. The Germanic Euro is about to shed its work and tax shy, party loving members of Club Med. It simply isn’t worth it to Club Med voters to stay in the euro, consigning themselves and their children to a lifestyle of sackcloth and ashes. Even the doziest, Club Med politician knows that default is a necessary part of solving Europe’s sovereign debt crisis. Even the doziest Finnish or German politician knows that trying to bailout Spain or Gadaffi’s Italy, will only drag them down with Club Med’s sinking yacht.

Nevertheless, despite the end being nigh for the euro, Uncle Sam’s dollar can’t manage even a half hearted rally against it. The Lira-isation of the dollar continues unchecked. Stay long precious metals ahead of the coming debacle. Western fiat money is in terminal decline.

Economics is haunted by more fallacies than any other study known to man. This is no accident. The inherent difficulties of the subject would be great enough in any case, but they are multiplied a thousandfold by a factor that is insignificant in, say, physics, mathematics or medicine - the special pleading of selfish interests.

Henry Hazlitt.

Geithner Vows to Defend Strong Dollar

April 26, 2011

The United States would never deliberately promote a weak dollar policy, U.S. Treasury Secretary Timothy Geithner vowed Tuesday.

“Our policy has been and will always be … that a strong dollar is in the interest of the country,” Geithner said at a New York conference. “We will never embrace a strategy to weaken the dollar.”

It was the first time this year that Geithner publicly prostituted his personal reputation defending a position that everyone knows is a lie. A U.S. strong-dollar policy has been the mantra of treasury secretaries for decades. However, over that time period the dollar has continually devalued. Members of Congress also frequently call on the Federal Reserve to devalue the dollar to temporarily aid exporters.

Conversely, if a strong dollar really is in the interest of America, the government has done a horrible job.

Breitbart reports that the dollar hit a new all-time low against the Swiss Franc Tuesday. Earlier this month the dollar hit all-time lows against gold. Today it also hit a 35-year low against coffee. In fact, the dollar has been cascading against virtually all commodities over the past decade and has even been plunging against other paper currencies—down 6.5 percent against a basket of currencies so far this year.


APRIL 26, 2011

Timing of Bailout-State Restructuring Could Affect Survival of the Euro Zone

The timing of a debt restructuring by one of the three euro-zone members financially reliant upon the European Union and the International Monetary Fund is likely to have profound implications for the rest of the currency area, and its survival.

The earlier a restructuring occurs, the more it will hurt euro-zone banks. But the later it occurs, the more conscious taxpayers in creditor nations will be of giving help to another country. And that will provide a major test of the currency area's cohesiveness.

As time passes, the debts of the Greek, Irish and soon the Portuguese governments are being transferred to the public from the private sector. Private investors aren't willing to fund these governments, so as bonds mature, they are taking their money and putting it elsewhere. The EU and IMF are replacing those funds, with the result that as the months go by, their share of the three governments' overall debt rises.

What this means is that if any of the bailout three were to restructure now, private-sector investors could be asked for a write-down of around 50%—by no means a comfortable conversation.

But should one of the three instead seek to restructure from 2013, it would face two far nastier alternatives: defaulting on all its debt to private creditors, thereby shutting itself out of the financial markets for years to come, or asking other members of the euro zone for a write-down. And the latter would be politically difficult—perhaps impossible—for whoever is then in charge of Germany, France, Finland or any of the other countries providing funds through the bloc's bailout mechanisms.

By 2013, for example, Greece's government debt could be at an unsustainable 170% of its gross domestic product. But half of that will be held by the EU and the IMF, and the IMF has preferred-creditor status, which means it must always be repaid first.

To return to sustainability, the Greek government would need to write down as much as half of its debt. To that end, Greece could renege on all its debt to the private sector, but governments that do that are excluded from the bond markets for a very long time.

The alternative would be to restructure some of its debt to other European Union nations. But how would that go down with German or French taxpayers?


APRIL 26, 2011, 8:31 A.M. ET

Greece's Budget Deficit Wider Than Expected

BRUSSELS—Greece's budget deficit in 2010 was 10.5% of gross domestic product, significantly larger than forecast by either the Greek government or the European Union authorities, Eurostat, the EU's official statistics agency, said Tuesday.

Lower-than-expected government revenue was the main culprit behind the higher deficit number. Greece has struggled to meet its goals for tax revenue under the rescue program overseen by the EU and the International Monetary Fund since last May. Economic growth has fallen short of forecasts, while the government has faced problems cracking down on tax evasion.

Greek government bonds continued to come under growing pressure Tuesday, when bonds yields soared alongside the rising cost of insuring Greek debt against default with credit default swaps.

The Greek government was targeting a 2010 deficit of 9.4% of GDP, although the European Commission in February said it expected the deficit to be 9.6% of GDP.

The missed target was "mainly the result of the deeper-than-anticipated recession of the Greek economy that affected tax revenue and social security contributions," the Greek government said in a statement after the Eurostat announcement.

The new deficit figure will add further pressure on Greece to raise taxes and cut spending this year to meet its targets.


UK has third biggest budget deficit in Europe

The UK has the third biggest budget deficit in Europe, the EU’s official league table showed, placing it alongside the struggling nations engulfed in the eurozone’s debt crisis

By Emma Rowley 12:01PM BST 26 Apr 2011

Britain’s shortfall in its finances amounted to 10.4pc of gross domestic product (GDP) in 2010, according to data for each of the EU’s 27 member states from the statistics agency Eurostat.

That meant the UK had a bigger deficit, or annual shortfall, than the recently bailed-out Portugal and also Spain, which is viewed as the next euro-using nation to potentially need international aid.

The largest deficit in proportion to the size of the country’s economy was seen in Ireland, where the extra borrowing needed to shore up the banks left its deficit at 32.4pc of GDP.

Greece, which received a €110bn bail-out last year, was second with a deficit of 10.5pc, followed by the UK. Spain, at 9.2pc, and Portugal, at 9.1pc, were in fourth and fifth place.

In terms of total debt, the UK fared much better, although it was still among the 14 EU member states burdened with a debt higher than 60pc of GDP last year. EU member states are supposed to keep their debt under the 60pc level.

The debt figures, which refer to a government’s total borrowing over time, rather than the latest yearly shortfall, showed Greece was again in the worst position with a debt equivalent to 142.8pc of its GDP, followed by Italy at 119pc and Belgium at 96.8pc.

The UK was in the ninth weakest position with a debt standing at 80pc of GDP, which was worse than Spain’s 60.1pc. The average debt across the 16 members that use the euro hit a record 85.1pc, up from 79.3pc the previous year.


We end for the day with Amazon. Is this what happened in last year’s stock market flash crash? Without reform, when will it happen again?

Amazon seller lists book at $23,698,655.93 -- plus shipping

By John D. Sutter, CNN April 25, 2011 -- Updated 2212 GMT (0612 HKT)

(CNN) -- Lots of normal people would pay $23 for a book.

But $23.7 million (plus $3.99 shipping) for a scientific book about flies!?

This unthinkable sticker price for "The Making of a Fly" on was spotted on April 18 by Michael Eisen, an evolutionary biologist and blogger.

The market-blind book listing was not the result of uncontrollable demand for Peter Lawrence's "classic work in developmental biology," Eisen writes.

Instead, it appears it was sparked by a robot price war.

"What's fascinating about all this is both the seemingly endless possibilities for both chaos and mischief," writes Eisen, who works at the University of California at Berkeley and blogs at a site called "it is NOT junk." "It seems impossible that we stumbled onto the only example of this kind of upward pricing spiral."

Eisen watched the robot price war from April 8 to 18 and calculated that two booksellers were automatically adjusting their prices against each other.

One equation kept setting the price of the first book at 1.27059 times the price of the second book, according to Eisen's analysis, which is posted in detail on his blog.

The other equation automatically set its price at 0.9983 times the price of the other book. So the prices of the two books escalated in tandem into the millions, with the second book always selling for slightly less than the first. (Not that that matters much when you're selling a book about flies for millions of dollars).

The incident highlights a little-known fact about e-commerce sites such as Amazon: Often, people don't create and update prices; computer algorithms do.

Individual booksellers on Amazon and other sites pay third-party companies for algorithm services that automatically update prices. Some of these computer programs purportedly work very well, getting sellers up to 60% more sales because they underbid the competition automatically and repeatedly.

The advantages are clear: If you're managing dozens of sale items on Amazon or eBay, it's difficult if not impossible to keep up with all of them.


"Every individual is a potential gold buyer, although he may not need the gold. It may be added to the store of personal wealth, and passed from generation to generation as an object of family wealth. There is no other economic good as marketable as gold."

Hans F. Sennholz

At the Comex silver depositories Tuesday, final figures were: Registered 35.72 Moz, Eligible 66.03 Moz, Total 101.75 Moz.


Crooks and Scoundrels Corner.

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

Madoff again. Was the great fraudster being sophisticatedly blackmailed?

“The first requisite of a sound monetary system is that it put the least possible power over the quantity or quality of money in the hands of the politicians.”

Henry Hazlitt.

Madoff Said Picower May Have Suspected Fraud, Henriques Writes

By David Voreacos - Apr 26, 2011 5:01 AM GMT+0100

Bernard L. Madoff believed that one of his billionaire investors, Jeffry Picower, may have suspected him of running a Ponzi scheme, according to a book by Diana B. Henriques.

Madoff, serving a 150-year term for the largest Ponzi scheme in history, said in a prison interview that Picower could have figured out the fraud at Bernard L. Madoff Investment Securities LLC, according to the book. Picower invested $620 million and withdrew $7.8 billion before Madoff confessed to his brother and two sons in December 2008. Henriques asked Madoff who knew of the fraud.

“Picower was the only one that might have,” Madoff said. “I mean how could he not?”

In “The Wizard of Lies: Bernard Madoff and the Death of Trust,” Henriques chronicles how Madoff stole from thousands of investors around the world while fooling regulators, banks and hedge funds about his investment returns. She analyzes Madoff’s deceptive powers, the market forces propelling him, and dozens of key investors such as Picower.

Picower, a lawyer and accountant, “had a genius for making money in the stock market, a passion for privacy, and a willingness to take big risks in pursuit of big rewards,” Henriques writes.

Picower also had been victimized by a Ponzi scheme in the 1970s, she said. He began investing with Madoff in the late 1970s, controlling dozens of accounts. By the late 1990s, Picower’s separate trading account at Goldman Sachs Group Inc. was worth $10 billion, she writes.

“Was he now astute enough to realize what Madoff was doing and devious enough to exploit the leverage that knowledge gave him?,” Henriques writes. “Madoff often suspected that the answer was yes.”


“The great merit of gold is precisely that it is scarce; that its quantity is limited by nature; that it is costly to discover, to mine, and to process; and that it cannot be created by political fiat or caprice.”

Henry Hazlitt.

The monthly Coppock Indicators finished March:

DJIA: +160 UP 06. NASDAQ: +216 Down 01. SP500: +163 UP 6.

The Dow and SP 500 have reversed albeit by tiny margins, while the NASDAQ barely moved down. The Fed’s rigging of the indicators seems to have worked. Note: like all indicators, they were devised for normal markets not markets where the central bank is flooding the economy with new cash. In current conditions where risk is suspended by too big to fail, I doubt any indicators are showing more that where the Fed’s new cash is flowing in our world of casino capitalism.

Today we are adding Canadian junior gold mining company Trade Wind Ventures Inc., TSX.V TWD to our list of mostly NAFTA based gold mining companies. TWD has a very interesting prospect and a very sound JV partner in Detour Gold.


Tuesday 26 April 2011

5 Trillion! 2016!

Baltic Dry Index. 1254

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

"There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

Ludwig von Mises

Five trillion and counting, that’s how much funny money the G-7’s top 4 central banks have pumped into the system to keep the illusion of recovery going in our fiat money follies, following the insolvency of the banking system in 2007-2008. And this is before Japan starts printing more for reconstruction following the March earthquake and tsunami. If the G-20 were counted, the figure is probably half as much again. In a global GDP world of 55 trillion or so, nothing good comes from all this new fiat money created out of nothing.

Below, The Telegraph covers the story. With the Lords of the Universe meeting in Washington today and tomorrow to set US policy as the Fed ends QE2, the story is timely to say the least.

A large Bank is exactly the place where a vain and shallow person in authority, if he be a man of gravity and method, as such men often are, may do infinite evil in no long time, and before he is detected. If he is lucky enough to begin at a time of expansion in trade, he is nearly sure not to be found out till the time of contraction has arrived, and then very large figures will be required to reckon the evil he has done.

Walter Bagehot. Lombard Street. 1873.

Central banks pump $5 trillion into world economy

The world's central banks have pumped £3 trillion into the global financial system since the crisis, the equivalent of 8pc of the world economy, according to new analysis by Fathom Consulting.

By Emma Rowley 6:00AM BST 26 Apr 2011

The figures will intensify fears that the extraordinary injection of liquidity is responsible for rising stock markets, rather than any underlying pick-up in corporate health or investor confidence.

Erik Britton, a director at Fathom, compared the development to throwing lighter fuel on a barbecue. The question is, he said, "whether the coals are lit".

The warning is the result of the extraordinary measures to prop up the financial system, which have seen central banks resort to strategies such as buying up bonds to keep the flow of money circulating.

Fathom's economists are worried that last year may have marked the high point of the global recovery. "It remains unclear how much of the equity market rally has been 'genuine', rather than simply a 'mopping up' of that extraordinary injection of liquidity," they warned. "As that stimulus is gradually withdrawn, further gains in equity markets will be harder to achieve."

To reach the £3 trillion figure, presented in its calculations as $5 trillion, Fathom measured the liquidity injections made by the world's four major central banks, by tracking how their balance sheets changed in the wake of the crisis.

The analysis of data for the US Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England shows their assets were relatively stable through 2006 up to mid-2007. They then started to climb rapidly as the global financial system began to unravel.

The central banks' assets swelled from around $4 trillion at the start of 2006 to just short of $9 trillion by the end of February this year. "The increase in the size of G4 central bank balance sheets since mid-07 has been around $5 trillion to end Feb-11, or 8pc of global GDP," reported Fathom.

The Bank of England was the smallest contributor to the headline figure. So far, it has pumped £200bn into the system through quantitative easing (QE), its programme of buying government bonds to keep the money flowing. The European Central Bank (ECB), which sets monetary policy across the eurozone, emerged as the biggest contributor to the headline figure.

Once on QE programs, I believe it’s impossible to end them, without setting off the depression they were started to prevent. But “QE forever” isn’t viable either, it reduces the fiat currency to Zimbabwe dollar status. Stay long gold and silver. The PC view right now is to be long the dollar and short gold and silver. The logic is that the FED will end QE programs and the dollar will rally and over extended gold and silver will get hit with profit taking. Perhaps, but I think the Fed will continue QE via the back door for a few months, while later in the year being forced back into QE3. Any sell-off in precious metals, merely allows an opportunity for those who’ve missed out on their re-monetization, to get in without chasing the market.

Below, yet another reason to hold gold and silver. The IMF thinks the “Age of America” ends mid decade. With irresponsible gridlock in Washington, and profligate trillion and a half dollar deficits forever, our dollar centric fiat currency world is heading over a cliff.

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

Walter Bagehot.

April 25, 2011, 7:20 p.m. EDT

IMF bombshell: Age of America nears end

Commentary: China’s economy will surpass the U.S. in 2016

BOSTON (MarketWatch) — The International Monetary Fund has just dropped a bombshell, and nobody noticed.

For the first time, the international organization has set a date for the moment when the “Age of America” will end and the U.S. economy will be overtaken by that of China.

And it’s a lot closer than you may think.

According to the latest IMF official forecasts, China’s economy will surpass that of America in real terms in 2016 — just five years from now.

-----It provides a painful context for the budget wrangling taking place in Washington right now. It raises enormous questions about what the international security system is going to look like in just a handful of years. And it casts a deepening cloud over both the U.S. dollar and the giant Treasury market, which have been propped up for decades by their privileged status as the liabilities of the world’s hegemonic power.

----According to the IMF forecast, which was quietly posted on the Fund’s website just two weeks ago, whoever is elected U.S. president next year — Obama? Mitt Romney? Donald Trump? — will be the last to preside over the world’s largest economy.

Most people aren’t prepared for this. They aren’t even aware it’s that close. Listen to experts of various stripes, and they will tell you this moment is decades away. The most bearish will put the figure in the mid-2020s.

----In addition to comparing the two countries based on exchange rates, the IMF analysis also looked to the true, real-terms picture of the economies using “purchasing power parities.” That compares what people earn and spend in real terms in their domestic economies.

Under PPP, the Chinese economy will expand from $11.2 trillion this year to $19 trillion in 2016. Meanwhile the size of the U.S. economy will rise from $15.2 trillion to $18.8 trillion. That would take America’s share of the world output down to 17.7%, the lowest in modern times. China’s would reach 18%, and rising.

Just 10 years ago, the U.S. economy was three times the size of China’s.

In other news yesterday, S&P lowered its outlook on Japanese auto companies.

April 25, 2011, 7:37 a.m. EDT

S&P cuts Japanese auto outlook to negative

Standard & Poor's Ratings Services cut its outlooks on six Japanese auto companies, including Toyota Motor Corp. (7203.TO, TM) and Honda Motor Co. (HMC, 7267.TO), to negative due to production cuts following the March earthquake and tsunami.

The move indicates the increased likelihood of a downgrade for the automakers and suppliers, who have struggled with parts shortages since last month's disaster. A host of companies in the electronics, industrial and other sectors have face supply-chain problems in the wake of the catastrophe.

Standard & Poor's said Monday it expects the production cuts to hurt the auto companies' operating and financial performance in the current fiscal year and erode their market shares and competitive positions over the long term.

Most Japanese auto companies are producing about half what they had initially planned, the rating agency said. S&P sees them returning to full production by around October.

----S&P has an investment-grade rating for each of the companies except Mitsubishi Motors, which it rates B+, four steps into junk territory.

At the Comex silver depositories Monday, final figures were: Registered 35.72 Moz, Eligible 66.04 Moz, Total 101.04 Moz.


Crooks and Scoundrels Corner.

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

No crooks today, just the ignored wisdom of another age. I wonder of anyone at the Fed has ever read Bagehot? Clearly President Nixon hadn’t when he recklessly took the world off gold and on to the folly of the fiat dollar reserve standard. Today a military superpower straddles the world, engaging in never ending discretionary wars, drowning in unrepayable debt saddled onto the backs of retirees and future generations, its economy hollowed out and largely exported to China, importing back goods that were once made in the USA and lead the world. Today, the business of America is “God’s work”, the “too big to fail” financialised derivatives gambling, where the profits made, if any, leave the system via outrageous bonuses to the elite at the top, unrepayble losses are transferred to the state taxpayers helpless to prevent the modern day reverse Robin Hood theft. The American public, it seems, have never been informed about Iceland.

Again, it may be said that we need not be alarmed at the magnitude of our credit system or at its refinement, for that we have learned by experience the way of controlling it, and always manage it with discretion. But we do not always manage it with discretion. There is the astounding instance of Overend, Gurney, and Co. to the contrary. Ten years ago that house stood next to the Bank of England in the City of London; it was better known abroad than any similar firm known, perhaps, better than any purely English firm. The partners had great estates, which had mostly been made in the business. They still derived an immense income from it. Yet in six years they lost all their own wealth, sold the business to the company, and then lost a large part of the company`s capital. And these losses were made in a manner so reckless and so foolish, that one would think a child who had lent money in the City of London would have lent it better. After this example, we must not confide too surely in long-established credit, or in firmly-rooted traditions of business. We must examine the system on which these great masses of money are manipulated, and assure ourselves that it is safe and right.

Walter Bagehot. 1873.

The monthly Coppock Indicators finished March:

DJIA: +160 UP 06. NASDAQ: +216 Down 01. SP500: +163 UP 6.

The Dow and SP 500 have reversed albeit by tiny margins, while the NASDAQ barely moved down. The Fed’s rigging of the indicators seems to have worked. Note: like all indicators, they were devised for normal markets not markets where the central bank is flooding the economy with new cash. In current conditions where risk is suspended by too big to fail, I doubt any indicators are showing more that where the Fed’s new cash is flowing in our world of casino capitalism.

Monday 25 April 2011


Baltic Dry Index. 1254 -08

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

"Deficit spending is simply a scheme for the 'hidden' confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."

Alan Greenspan

Stay long precious metals, food and fuel price inflation is starting to wrack China. Will today’s Shanghai meeting end the world’s biggest port’s truckers strike? Not yet a week long, the strike is already starting to hit China’s exports. With trouble in nearby Japan due to the continuing nuclear power crisis hitting production, our just in time inventory world is in danger of seizing up. Below, The Telegraph covers the story. For more of food and fuel price inflation scan down to Crooks and Scoundrels Corner.

"Increasingly, the wealth of the modern world has come to be represented by financial assets rather than real assets, and this to me is a very unhealthy situation, because financial assets are inherently unstable. Financial assets (currencies, bonds, mortgages, stocks, bank credit, etc.) can be quickly and violently reduced in value, or destroyed completely by either inflation or deflation."

Donald J. Hoppe

China strikers win concessions, as ugly protests underline inflation fears

Striking Chinese truck drivers have won concessions in their battle against rising costs that threatened to disrupt Shanghai, the world's biggest port.

By Roland Gribben 4:10PM BST 24 Apr 2011

The regional Government has intervened to reduce some of the increase in fees that triggered strike action in an attempt to take the heat out of an issue that has demonstrated China may be encountering growing social unrest as it wrestles with an inflationary surge.

Drivers were protesting against the increase in port service charges linked to dearer fuel. There were ugly scenes when some striking drivers threw stones at lorries driven by non-strikers.

The Shanghai Municipal Transport and Port Authority has also agreed to cancel a fuel surcharge and lower others in the container and road transport business.

Government officials are due to meet truck driver representatives on Monday to try to end the strike. Some drivers said they would continue to strike unless they were offered a better deal and there were reports that text messages threatening violence against non-strikers are still circulating.

No mention was made about the strikes in official announcements about the fee concession but the decision to defuse the situation reflects concern about the spread of industrial action as the increase in inflation starts to run through the economy.

A 12pc annual increase in the cost of food and an inflation rate now running at 5.4pc has led the Beijing administration to raise interest rates and pressure companies into delaying price rises.


APRIL 25, 2011

Shanghai Lowers Truck Fees

Concessions Signal Officials' Anxiety as Drivers Debate Returning to Work

SHANGHAI—Concessions by Shanghai authorities failed to end wildcat work stoppages by truck drivers who have disrupted the city's container ports, the world's busiest, in protests over rising fees.

The industrial action has brought to a head tensions over rising inflation that have been simmering across the country.

----City authorities said they would reduce some of the fees that triggered the stoppages, and acknowledged the validity of driver grievances. Their willingness to offer concessions, even at the risk of triggering copycat actions by other groups, appeared to indicate a high level of concern.

On Sunday, hundreds of trucks were jammed into parking lots as truckers consider their next steps.

Police officers were stationed around the entrances to port facilities in several sections of the city. In another reflection of official nervousness, scant mention of the industrial action was carried in China's government-controlled media or on the Internet until the fee reduction was announced.

Shanghai government spokespersons have declined all comment.

The government-owned port operator, meanwhile, predicts Shanghai will retain its title as the world's busiest container handling port in 2011, Monday's Shanghai Daily reported. Chen Xuyuan, president of Shanghai International Port (Group) Co., said volume will hit around 30 million twenty-foot equivalent units this year after activity rose 12% in the first quarter from 2010 levels, according to the newspaper report, which included a front-page photo of a sea-bound container being lifted off a truck on Sunday.

-----Truckers say they are in constant touch by telephone with other drivers who serve ports in the export-oriented region—raising the possibility that news of a settlement offer by authorities will prompt workers elsewhere to seek relief from inflation. Late last week. Shanghai's government, in what may have been a pre-emptive effort to ensure that doesn't happen, initiated new toll discounts for local taxi drivers.

In recent years, several labor disputes in China have spread far from their initial flashpoints.

After protesting taxi drivers in the southwestern city of Chonqing won concessions from the municipal government in November 2008, news of their success emboldened drivers from Hainan Island in the south; Guangdong, near Hong Kong; and Gansu in the north to seek relief; they won some concessions.


Staying with Asia, Mongolia is moving to try to break free from China’s embrace. Out of the Chinese frying pan and into the Russian fire? In Japan, it’s the same old TEPCO story.

Mongolia Rail Boom Seen Breaking China's Rare Earths Grip: Freight Markets

By Yuriy Humber and Daniel Ten Kate - Apr 21, 2011

Mongolia’s aim of quadrupling its rail network will send coal, copper and rare earths to nations such as Japan and South Korea under a plan to reduce reliance on the Chinese market and boost economic development.

The landlocked nation’s drive to lay 5,700 kilometers (3,542 miles) of track across the country and to Russia’s Far Eastern ports stands to benefit such companies as Australia- listed Aspire Mining Ltd. (AKM) and Canada’s Prophecy Resource Corp. (PCY), said Richard Harris, chief executive officer of Hong Kong-based Quam Asset Management. Quam raised $20 million for a Mongolia- focused fund that is due to start investing in a few months.

“The missing link in the Mongolian gold rush now is transportation infrastructure,” said Roland Nash, who helps manage about $150 million of Russian stocks at Moscow-based hedge fund Verno Investment Management Ltd. “The key for the Mongolians is to attract investments from as many different countries as possible to lessen their dependence on China.”

A mining boom in the world’s most sparsely populated nation promises the greatest influx of wealth for Mongolia since Genghis Khan conquered much of the known world in the 13th century. Mongolia’s benchmark MSE Top 20 Index is the world’s best performer in the past 12 months and its currency, the tugrik, the fifth-biggest gainer against the dollar.

Economic growth may surge to 23 percent in 2013, more than twice the forecast expansion in China, as large mining projects begin production, the International Monetary Fund says.

----Mongolia has grown increasingly dependent on commerce with China’s 1.3 billion people since the 1991 breakup of the Soviet Union: More than 75 percent of exports went to its giant neighbor in 2009, according to European Union figures.

The relationship hasn’t always been easy. During a 2002 Mongolia visit by the exiled Tibetan leader, the Dalai Lama, trains were held up near the China-Mongolia border, a reminder of the country’s vulnerability to pressure from the rulers of the world’s second-biggest economy.

“Using the Russia route, Mongolia will have better access to a global market rather than just dealing with China,” said Chris Weafer, Moscow-based chief strategist at UralSib Financial Corp. “You need that to maximize the commercial value of its goods. Otherwise China dictates prices.”

----Mongolia this year is to start building a 400-kilometer link from the Tavan Tolgoi coal basin and Oyu Tolgoi copper deposit, two of the world’s biggest untapped resources, joining with an existing rail line north to Russia and south to China.

An expanded rail network eventually will stretch directly from Tavan Tolgoi to China and Russia. Extended train routes to the west and the north will link with untapped silver, iron and coal deposits, according to Eurasia Capital, Mongolia’s biggest investment bank.


APRIL 25, 2011, 12:24 A.M. ET

No Radioactive Water Leaking From Plant

TOKYO—Japan's Nuclear and Industrial Safety Agency said Monday there are no data indicating that highly radioactive water is leaking from the quake-damaged Fukushima Daiichi nuclear complex, a sign that efforts to contain the radiation are working.

However, the absence of leakage may indicate that radioactive water is rapidly accumulating inside the plant, raising the urgency to find a way to process and store such water, the byproduct of a spraying operation to keep damaged reactors from overheating.

Plant operator Tokyo Electric Power Co. announced Thursday that a total of 520 tons of highly radioactive water may have been released into the ocean between April 1 and April 6 through a crack in a concrete pit near the ocean.

The crack was discovered April 2 and was plugged April 6.

----The water is believed to be leaking from Reactor No. 2 and flooding the basement of the turbine building and the utility trench holding a seawater pipe. More than 20,000 tons of water is believed to remain in the basement and the trench.

An operation to drain these facilities has been under way since April 19. A total of 1,410 tons of water had been transferred to a storage facility as of 7 a.m. Monday (2200 GMT Sunday).

In other Japanese news, the economic toll from the Japanese earthquake and tsunami continues to mount.

25 April 2011 Last updated at 06:32

Toyota's Japanese output down 63% due to parts shortage

Toyota Motors has said that its Japanese production fell by 63% in March compared with the same month last year, as its production cuts continued.

The company has been facing shortages in supplies of parts as production has been disrupted because of last month's earthquake and tsunami.

While it has restarted production in Japan, its factories have been working at a reduced output.

The firm has said output would return to normal only by the end of 2011.

The world's biggest car manufacturer also announced more cuts in production at its factories in Asia.

The automaker said plants in eight Asian countries, including Thailand and India, will operate at 50% capacity from 25 April to 4 June.

It also said that factories in these countries will operate for just three days a week during the period.

The company had already announced that its factories in China will operate at 30-50% of capacity until 3 June.

Meanwhile, another Japanese automaker, Nissan Motors also announced that output at its Japanese plants had slumped by 52% in March compared with last year.


We end for the bank holiday partying UK, with the satirical website The Onion, covering BP’s one year anniversary of their Gulf of Mexico oil spill.

BP Ready To Resume Oil Spilling

April 20, 2011 | ISSUE 47•16

LONDON—A year after the tragic explosion and oil spill that caused petroleum giant BP to cease operations in the Gulf of Mexico, the company announced Wednesday that it was once again ready to begin oil spilling. "People said this company might never rebound from last year, but we're here and ready to do what we do best," said BP chief executive Robert Dudley, who confirmed that the company had already successfully conducted small test spills and that full-scale spilling operations could resume as early as July. "We've reorganized and regrouped, and now we're ready to put the faulty blowout preventers on the wellheads and watch them pump raw crude petroleum right into the environment." BP stock jumped $14 a share following the announcement,20089/

"If ever there was an area in which to do the exact opposite of that which government and the media urge you to do, that area is the purchasing of gold."

Robert Ringer

At the Comex silver depositories Thursday, final figures were: Registered 35.72 Moz, Eligible 66.79 Moz, Total 102.51 Moz.


Crooks and Scoundrels Corner.

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

No scoundrels today, just worrying developments in much of western Europe’s grain crops. Much of Europe’s grain areas are headed to the driest, warmest, March and April in a century. While it’s still too early to write off the crop, the next few weeks are critical. No rain means no harvest come August. With large parts of the US grain belt similarly lack of rain challenged, and a drought happening over a large swath of China, the northern hemisphere grain crop is already under severe stress. Food price inflation seems set to continue, with all the unrest that usually brings.

Europe prays for Easter rain in worst drought for a century


The Dutch have banned barbecues, camp fires and outdoor smoking this Easter, while the Swiss are forecasting potentially the worst drought in Europe for more than a century.

Either way, prayers in Europe this Easter holiday weekend are as likely to call for rain as anything else -- with serious fears over the wheat harvest, its impact on already sky-high global food prices and, of course, devastating brush fires.

A year ago, it was Russia that bore the brunt of global warming, and with the price of benchmark wheat futures jumping by more than a fifth since the spring in the global market hub of Chicago, farmers everywhere are busy scanning the skies for soothing signs.

Traditional Easter fairs in the east and the north of the Netherlands have been cancelled because of the risk of fires posed by the extraordinarily dry weather affecting northern Europe, Dutch news agency ANP said.

In the eastern half of the country, one of Europe's biggest traders, outdoor family barbecues, smoking and camp fires are a strict no-no.

In the Swiss canton of Zurich, officials began moving trout this week from the river Toess before their habitat dried up.

This year threatens to bring "one of the most significant droughts since 1864," the year when records began in Switzerland, said Olivier Duding, a climatologist from Swiss weather service Meteosuisse.

The drought in western Switzerland over the last 12 months is as severe as those recorded in 1884 and 1921, Meteosuisse said.

Several cantons have also imposed bans on lighting fire in and close to forests.

Urs Vogt, who manages an association which champions keeping calves with their mothers after birth, warned that once the cows have fed on this spring's first greens, there may be little left for coming months.

A grass shortage could also lead to a fodder shortfall for next winter.

While the Czech Republic, Slovakia and the Baltic states of northeastern Europe are not reporting drought, the British Met Office warns it has been "incredibly dry in many parts in March and April."

Rainfall is at 40 percent of normal levels, and England and Wales had the driest March in more than a century. Beware the ides, as they say.

Soon, if the hot, dry spell continues, water use restrictions will be forced on residents and companies there.

Six out of 10 French reservoirs are holding water levels far below what is normal, meaning similar irrigation controls are likely there.

March was already extremely volatile for grains, largely due to growing economic uncertainties and the turmoil in North Africa and parts of the Near East -- as well as the Japanese earthquake and tsunami, the Food and Agriculture Organization said after logging a first, slight drop in raw food prices for eight months.

Prices hit record highs at the beginning of the year, and while the main focus for specialist traders is in the United States, a deteriorating drought in Europe could yet spark deep concern.

While European Commission agriculture spokesman Roger Waite acknowledges a "slight" rise in the prices of maize and wheat, he maintained that winter crops remain "generally in good condition."

A spokeswoman for European farmers federation Copa-Cogeca said it was too soon to draw conclusions, but Belgian farmer Guy Franck, who heads a dairy collective in French-speaking Wallonia, says gut instinct tells him worse is yet to come.

"I've been in this game for 30 years, I've never seen a month of April like this one," he said.

"Everything with short roots is seriously dehydrated," he warned.

April 20, 2011, 11:09 a.m. EDT

Next weeks key for European and U.S. wheat harvest

LONDON (MarketWatch) -- The coming weeks will be crucial for the development of next season's crop in the world's two largest wheat exporters, analysts said Wednesday, helping to determine the outlook for a grain market that has hit near-record high prices this year.

Wheat futures have surged this week as fears have mounted over the outlook for world supplies in the 2011-12 season. Chicago soft red winter wheat for May delivery has gained more than 9% from last Friday's lows, while May milling wheat traded in Paris hit early April's highs of EUR256 a metric ton Wednesday.

Leading prices higher were forecasts for continued dryness in key producers the U.S. and Europe. A good harvest in the 2011-12 season is vital to stabilize world supplies after poor weather cut into production last year and sent prices to near-record highs.

Analysts warn that the next fortnight will be crucial in determining whether Europe's upcoming crop will be able to replenish stock levels. Dryness in top producers France, Germany and the U.K. is already stressing crops during the initial growing period.

"Further moisture deficits could see Western Europe emerge as a major issue in May," said Australia and New Zealand Bank.

Dealers are particularly nervous as near-record European exports have eaten into stocks this season. Strategie Grains, an influential French forecaster, pegs inventories at the end of the 2010-11 season at 8.6 million tons--2 million tons less than the minimum needed to supply the market until next harvest.

"In Europe, consequences could be seen on the crop in the next 10 days with the really early start of vegetative state," said risk-manager Agritel

In top exporter, the U.S., the situation is similarly uncertain. The outlook for hard red winter wheat, grown in the Plains states such as Kansas and Oklahoma, is poor as it has struggled with dryness since it was sown last autumn. The crop will be harvested late this spring and summer.

The U.S. Department of Agriculture Monday rated 36% of the U.S. winter wheat crop as good-to-excellent, unchanged from last week. Although the estimate was above analysts' pessimistic expectations, it is well below 69% a year ago.

Yet wheat is one of the best-supplied markets in the grain complex. Corn and soybeans, also used as animal feed, both have critically low stock levels this year and analysts warn that even a record world harvest will not be enough to build up a buffer into 2011-12.

"We need only take our heads out of the sand to see clearly that interventionism not only has failed to provide the promised something-for-nothing, but has led to all sorts of undesirable consequences. Indeed, many are just beginning to realize that we are moving towards disaster even though we have been on a wrong heading for decades."

Leonard Read

The monthly Coppock Indicators finished March:

DJIA: +160 UP 06. NASDAQ: +216 Down 01. SP500: +163 UP 6.

The Dow and SP 500 have reversed albeit by tiny margins, while the NASDAQ barely moved down. The Fed’s rigging of the indicators seems to have worked. Note: like all indicators, they were devised for normal markets not markets where the central bank is flooding the economy with new cash. In current conditions where risk is suspended by too big to fail, I doubt any indicators are showing more that where the Fed’s new cash is flowing in our world of casino capitalism.

Saturday 23 April 2011

Weekend Update April 23, 2011

Baltic Dry Index. 1254

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

"Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium."

Murray N. Rothbard

We open this Easter weekend with another potential black swan flying in from Shanghai. High food and fuel inflation has generated the first really effective strike in China since the Tiananmen Square atrocity in 1989. Dr. Bernanke and all the other Lords of the Universe inhabiting the Fed in Washington DC, may pretend all they want that only core inflation counts and that food and fuel price inflation don’t matter, in the real world people go on strike in tyrannies, topple dictators, and riot from Athens to Atlanta when food and fuel inflation start to impact the masses. 2011 is no different 1789 in Paris. A summer of discontent seems to be shaping up for the northern hemisphere. Stay long physical precious metals. Fiat currency is breaking down and no longer fit for purpose.

APRIL 23, 2011

Truckers Idle Rigs in Shanghai

Signs of Trade Disruptions Emerge on Third Day of Protests Spurred by Inflation

SHANGHAI—As protests by truckers flared into a third day in China's biggest port city and shippers offered the first indications that trade is being slowed, idled trucks illustrated how inflation worries could gum up the world's No. 2 economy.

The truckers' demonstrations and work stoppages, which began Wednesday, are perhaps the starkest sign yet of the widespread public frustration over inflation in China that has persisted despite six months of tightening moves by the government. Truckers have gathered at port facilities to demand higher incomes, citing rising diesel costs and new dock fees.

Early Saturday, China's Xinhua news agency said the Shanghai government has decided to reduce certain port fees paid by truckers. The report, which said Shanghai's ports are functioning "normally," marked the first government comments about the industrial action.

Xinhua emphasized that the government is making efforts to address trucker worries about high operating costs and to minimize disruptions to one of the nation's key trading hubs. Particulars about the fee-reduction proposal weren't spelled out in the brief Xinhua report and a government spokesman couldn't be reached Saturday.

With no details available about how the strikers are organized—for instance, whether they have formal leadership—it remains uncertain how the government's plan will be regarded among drivers.

A driver surnamed Huang on Saturday said the government's plan doesn't appear to address key grievances. He said that what he has heard sounds like a limited move, both in terms of the fees targeted and the kinds of truckers it will help, and that it wouldn't save the trucking industry much money.


In a sign of further fiat currency trouble still to come, the world’s only reserve currency managed to fall against the earthquake and tsunami struck Japanese Yen, and the sovereign debt challenged snake bit Euro, due to the Fed’s perceived weakness in the face of the runaway US Federal Debt crisis. Officially the Fed is about to end its quantitative easing program no later than the end of June. If they do, most expect the US stock market to slump, the economy to reverse shortly thereafter, and the US real estate market to start collapsing again. Once on QE voodoo economics, is it ever really possible to get off?

"The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register."

Hans F. Sennholz

Dollar Drops to Three-Week Low Versus Yen; Euro Jumps

By Ron Harui and Monami Yui - Apr 23, 2011 5:00 AM GMT+0100

The dollar fell to a three-week low against the yen on speculation the Federal Reserve will reiterate next week its intention to keep interest rates near zero, damping the appeal of U.S. assets.

The euro surged to a 16-month high versus the dollar in the holiday-shortened trading week as signs that the region’s economy is gathering momentum fueled speculation the European Central Bank will raise interest rates further. The Australian dollar, the biggest winner this week among major counterparts to the greenback, climbed to a record as stock and commodity price gains drove investors to higher-yielding currencies.

“Market perceptions seem to be intensifying that the Fed’s quantitative easing stance will continue,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “The bias is likely to sell the dollar.”


Where the Fed is headed.

To avoid the potentially untidy embarrassment of being insolvent on paper, the Fed quietly made an accounting change several weeks ago that will allow any losses to be reported as a new line item - a "negative liability" to the Treasury - rather than being deducted from its capital. Now, technically, a negative liability to the Treasury would mean that the Treasury owes the Fed money, which would be, well, a fraudulent claim, and certainly not a budget item approved by Congress, but we've established in recent quarters that nobody cares about misleading balance sheets, Constitutional prerogative, or the rule of law as long as speculators can get a rally going, so I'll leave it at that.

We end ahead of Easter Sunday, with an update from Fukushima, Japan. Who put the Keystone Kops in charge of something as dangerous as 6 nuclear power plants. Japan has a lot of explaining to do to its neighbours in that part of East Asia. How safe are all Japan’s other power plants and operators?

APRIL 23, 2011

Reactor Team Let Pressure Soar

TOKYO—The operator of Japan's stricken nuclear plant let pressure in one reactor climb far beyond the level the facility was designed to withstand, a decision that may have worsened the world's most serious nuclear accident in a quarter century.

Japanese nuclear-power companies are so leery of releasing radiation into the atmosphere that their rules call for waiting much longer and obtaining many more sign-offs than U.S. counterparts before venting the potentially dangerous steam that builds up as reactors overheat, a Wall Street Journal inquiry found.

Japan's venting policy got its first real-world test in the chaotic hours after March 11's earthquake and tsunami knocked out cooling systems at the Fukushima Daiichi nuclear-power complex. By the first hours of March 12, an emergency was brewing inside the plant's No. 1 reactor.

By around 2:30 a.m., the pressure inside the vessel that forms a protective bulb around the reactor's core reached twice the level it was designed to withstand. Amid delays and technical difficulties, it was another 12 hours before workers finished releasing radioactive steam from this containment vessel, via reinforced pipes, to the air beyond the reactor building.

About an hour later, the reactor building itself exploded—a blast that Japanese and U.S. regulators have since said spread highly radioactive debris beyond the plant. The explosion, along with others amid overheating at reactors 2, 3 and 4, contributed to radiation levels that led to mandatory evacuations around the plant and the government's admission that the Fukushima Daiichi disaster ranks alongside Chernobyl at the top of the nuclear-disaster scale.

Experts in the U.S. and Japan believe the venting delay may have helped create conditions that led to the blast. In one possible scenario, pressure built so high that it damaged gaskets and other parts of the venting system, through which highly explosive hydrogen gas leaked from the core into the reactor building. It was Japan's cautious approach to venting, an outgrowth of its profound concern over nuclear contamination, that may well have made the accident worse, they say.


A very happy, enjoyable Easter to all.


Wednesday 20 April 2011

A Mild Restructuring.

Baltic Dry Index. 1271 -13

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

"The international monetary order is more precarious by far today than it was in 1929. Then, gold was international money, incorruptible, unmanageable, and unchangeable. Today, the U.S. dollar serves as the international medium of exchange, managed by Washington politicians and Federal Reserve officials, manipulated from day to day, and serving political goals and ambitions. This difference alone sounds the alarm to all perceptive observers."

Hans F. Sennholz

Today’s update is the last email update until Easter Monday, 25/4/2011. Check with the blog for updates.

We open today watching China. Lack of winter and spring rains has reduced China’s hydro-electric power to the point of power rationing. As bad that this is for life in parts of China, more worrying is what it is doing to grain and food production. With inflation believed by many China watchers to be running at close to 14%, any hit to food production boosting food price inflation threatens social instability later in the year. The past history of giant China, is one of periodic famines leading to massive internal turmoil and years of internal rebellion. Beijing’s top priority is avoiding any return of social instability. Mao’s murderous “Cultural Revolution” went on from 1965-1968, well within living memory for many older Chinese. Forget Mandarin class Jasmine Revolutions, any Egypt style revolution in China is more likely to see a return of the Red Guards. For those with shorter memories, in all the state encouraged violence, the British Embassy in what was then Peking, was burned to the ground.

There are reports that "Some historians have estimated that the combination of natural disasters combined with the political insurrections may have cost on the order of 200 million Chinese lives between 1850–1865.

04/19/2011 8:42 AM HKT

China regions face power shortage even before summer peak

Central China's Hubei province has joined a growing list of regions facing coal shortages, with a warning on Monday that it is very likely to start rationing power this month if coal supplies remain tight and low water stocks continue to curb hydropower generation.

China has warned that power shortages this summer could be the worst for years, with power generation and transmission systems unable to cope with rising demand. The east, north and south of China are likely to be hit the hardest.

Some central and southwestern Chinese provinces, however, have also begun feeling the pinch because their hydropower plants are wilting after a lack of rainfall.

Coal inventories in thermal power plants in regions with little of their own coal are dwindling due to pricing and transportation issues. Chinese thermal coal prices hit a three month high last week as power producers scrambled for summer supplies.

Coal inventories in thermal power plants in Hubei have fallen by 17,000 tonnes a day to 1.66 million tonnes on April 12, producing an even more serious shortage than last winter, a report on the State-owned Assets Supervision and Administration Commission website ( showed. The report was sourced from the State Grid Corp of China, the country's main power grid operator.

Given the high price of coal, most coal-fired power plants are taking a wait-and-see approach to purchases in hope that prices might fall, the report said.

Coal consumption also increased in Henan, the province that supplies most coal to Hubei, which in turn cut the amount available for Hubei.

Water levels in major hydropower plants in Hubei, except for the huge Three Gorges dam, were lower than historical averages after expected March rains did not come, the report added


Today is the one year anniversary of BP’s great Gulf of Mexico oil disaster. One year on, no one really knows how much ecological damage it caused, but the numbers are in on the damage it did to US oil production in the Gulf. Below the Journal takes up the story.

"If you don't trust gold, do you trust the logic of taking a beautiful pine tree, worth about $4,000 - $5,000, cutting it up, turning it into pulp and then paper, putting some ink on it and then calling it one billion dollars?"

Kenneth J. Gerbino

APRIL 20, 2011

Spill's Toll on Oil Output Grows Clearer

Drilling Pause That Followed Explosion of Deep-Water Rig Leased by BP Saps Offshore Production

HOUSTON—One year after the BP PLC oil spill, Gulf of Mexico energy output is beginning to show the impact of the Obama administration's 10-month freeze on deep-water drilling.

Offshore oil production, most of which comes from the Gulf, is expected to average 1.55 million barrels a day this year, down 13% from 2010, according to the U.S. Energy Information Administration.

Following the April 20, 2010, blast on the Deepwater Horizon drilling rig operated by BP and the subsequent oil spill, the Obama administration stopped awarding permits for deep-water drilling until late February.

The drilling suspension, along with a new, slower permitting process, will result in the loss this year of about 375,000 barrels of oil a day, according to energy consultancy Wood Mackenzie. That is roughly equivalent to one-third of the production in Libya that remains shut down because of political turmoil there.

The setback for the Gulf's oil and natural-gas fortunes underscores the importance of what are known as development wells in maintaining production. Such wells are drilled in already discovered deep-water reservoirs to extract more oil and natural gas or stem output declines.

"None of those wells have been brought on-line; that's why we're seeing the big drop-off," said Matt Snyder, an analyst with Wood Mackenzie.

----Nowhere is the production drop-off more evident than in the fields operated by UK-based BP, which before last April's disaster had scored an astounding series of discoveries in the Gulf. Those successes, combined with the start-up of several projects, made BP the region's largest energy producer, surpassing Gulf pioneer and long-time leader Royal Dutch Shell PLC.

-----BP's Gulf production now stands at about 300,000 barrels equivalent of oil and natural gas a day, down from more than 400,000 before the spill, according to a company spokesman.

Other producers have also seen output declines, though less severe.

Back in Europe tiny Greece is conditioning the market for a coming default, politely called in the article below “ a mild debt restructuring”. How mild is mild probably lies in which side of the restructuring you’re on.

The fascination of shooting as a sport depends almost wholly on whether you are at the right or wrong end of the gun.

P.G. Wodehouse.

Greece forced to pay sky-high rates to borrow

Greece was forced to pay sky-high rates to borrow money for the next three months, amid reports Athens accepts that it has no alternative but to renege on the terms of its impossible debt burden.

By Emma Rowley 6:00AM BST 20 Apr 2011

The bailed-out nation sold €1.625bn (£1.43bn) of 13-week government bonds on Tuesday, but investors demanded a yield, or return, of 4.1pc to hold the debt - a quarter of a percentage point more than in a similar sale in February.

That means Greece pays a higher rate to borrow for three months than Germany pays for three decades, at 3.8pc.

The costs of servicing Greece's debt keep rising as markets ignore politicians' protestations that the country will not have to restructure the burden - effectively default, by changing its repayment terms.

A local report on Tuesday quoted a European Commission official as saying Greece "has realised that there is no other way and has accepted a mild debt restructuring".

Denials from the Commission, which argued that discussions were "not even" taking place between Brussels and the Greek government, could not convince investors.

Greek government 10-year debt is trading with a yield around 14pc, surpassing the peaks seen during the country's €110bn bail-out last year. The nation's weak economy, hobbled by a severe austerity programme, means it is seen as an impossibility that Greece will manage strong enough growth to support a debt equivalent to 144pc of output.

"Of all the contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money."

Daniel Webster

At the Comex silver depositories Tuesday, final figures were: Registered 41.04 Moz, Eligible 62.08 Moz, Total 103.12 Moz.


Crooks and Scoundrels Corner.

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

Today, the scoundrels and unlovable rogues running Europe. In typical EU “lets make a backroom deal” Brussels’ style, German politicians negotiated a get out of jail deal for German automakers from the environmental pollution rules that were to be enforced on all the lesser Europeans. Only thing was, no one consulted German motorists. In the usual muddle that passes for policy in Brussels, with the highest prices for wheat in living memory, Germany would divert wheat to make ethanol and then blend into petrol at a 10% rate. Quite a shame that no one in either Brussels or Berlin bothered to find out if German cars can run on it. Below Der Spiegel covers the story in Germany. Shame that no one in Brussels thought up the wheeze to stop German traffic in 1940. As we wrote only yesterday, would you buy a used car from Berlusconi, Sarkozy, Merkel, Cameron? Today we can add Von Rompuy, Baroness Whatsit, Zapatero, Papandreou?

“Join in the new game that's sweeping the country. It's called "Bureaucracy" Everybody stands in a circle. The first person to do anything loses.”


E10 Debacle Puts the Brakes on Biofuels

By Dietmar Hawranek and Alexander Neubacher

An attempt to introduce the biofuel mixture E10 in Germany has been a disaster, after motorists refused to buy the supposed green gasoline. Car makers, oil companies and politicians have all tried to blame each other for the mess. Even environmentalists oppose the new fuel.

----The Easter travel season is coming up and Germany's filling stations need gasoline. Production is in full swing at the PCK refinery in Schwedt.

Not much is going on at the bioethanol refinery, however, where two tanks are filled to capacity with up to 100 million liters (26 million gallons) of the plant-based fuel, enough to make a billion liters of biofuel mixture. But demand is much lower than expected, which is why the entire production process now has to be shifted away from E10 -- a mixture of 10 percent ethanol and 90 percent gasoline -- and back to the old super unleaded fuel.

German motorists are to blame for the commercial failure of the supposed green gasoline. The first attempt by politicians to foist a product that is both expensive and environmentally questionable on consumers has failed.

----Of course, drivers are the ones paying for the setback. Oil companies, like Aral, Shell, Esso and Jet, have already raised their prices to recoup their additional costs. According to industry information, the cost of converting refineries and filling stations to E10 was in the triple-digit millions, while reversing the development is unlikely to be much cheaper.

And then there are the penalties the oil industry must pay the government now that it will not reach the legally mandated quota for plant-based fuels. An industry association anticipates penalties of up to €456 million ($552 million) for this year alone, which corresponds to about two euro cents per liter. Companies will presumably add this cost to the price of gasoline.

----The auto company executives have only themselves to blame for the debacle. Making sure that E10 would be a success ought to have been in their best interest, and yet there was little sign of any willingness to promote the fuel. Instead, they contributed to the general sense of uncertainty about E10.

Many car owners still aren't quite sure whether their vehicle can cope with E10. The manufacturers' lists are incomplete. This confusion even prompted the German Interior Ministry to instruct its employees not to fill up their official vehicles with biofuel until further notice. The same applied to all government agencies and organizations associated with the Interior Ministry, such as the Federal Police and the German Federal Agency for Technical Relief (THW), where officials were concerned that emergency vehicles could end up stalling because of engine damage.


“You will never understand bureaucracies until you understand that for bureaucrats procedure is everything and outcomes are nothing.”

Thomas Sowell.

Have a great Easter break everyone.

The monthly Coppock Indicators finished March:

DJIA: +160 UP 06. NASDAQ: +216 Down 01. SP500: +163 UP 6.

The Dow and SP 500 have reversed albeit by tiny margins, while the NASDAQ barely moved down. The Fed’s rigging of the indicators seems to have worked. Note: like all indicators, they were devised for normal markets not markets where the central bank is flooding the economy with new cash. In current conditions where risk is suspended by too big to fail, I doubt any indicators are showing more that where the Fed’s new cash is flowing in our world of casino capitalism.