Friday, 8 April 2011

Banksters, And Other Imbeciles.

Baltic Dry Index. 1401 -29

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

Sometimes I wonder whether the world is being run by smart people who are putting us on or by imbeciles who really mean it.

Mark Twain.

Me, I’m firmly in the camp of imbeciles who really mean it. Portugal, who can’t repay their debts already, and has an interim government that was just defeated in the Parliament, is proposing to borrow another 75 billion euro, to give to the Spanish, German, French and British banks, that foolishly lent to them in the first place. Portugal, like Greece and Ireland before them, promises to make the ordinary citizen very much poorer in return, and not default before Germany’s new EU bailout rules come in in 2013. Ireland and Greece who probably can’t last that long seem to be getting the nod to default next year. Officially, thanks to the new economic miracle of wishful thinking, Spain has now “decoupled” from the domino chain, and just like Greece, Ireland and Portugal before them, doesn’t need a bailout at all. My monies on Spain needing a bailout before year end. Stay long precious metals, we all know how this currency union ends. Below, yesterday’s coverage of the great long running European Monetary Union farce.

If all else fails, immortality can always be assured by spectacular error.

J.K. Galbraith.

Gold hits record high after Trichet rates comments

By: Reuters 7th April 2011

LONDON  - Gold hit a fresh record high near $1 465 an ounce on Thursday after European Central Bank president Jean-Claude Trichet indicated the rate hike announced by the bank earlier may not be the first in a series.

Spot gold hit a record $1 464,80 an ounce and was bid at $1 460,50 at 1420 GMT, against $1 457 late in New York on Wednesday. U.S. gold futures for June delivery were up $3,80 an ounce to $1 462,30, having peaked at $1 467.

The ECB lifted interest rates by 25 basis points on Thursday as expected, but Trichet said in a press conference after the move that the bank had not taken the decision as the first in a string of such moves.

"The market had factored in that Trichet would be a bit more hawkish in his comments," said Peter Fertig, a consultant at Quantitative Commodity Research. "If you look at government bond markets, they all recovered during his press conference."

"Of course they will be vigilant in monitoring inflation developments very closely. But it is more inflation expectations that made the ECB concerned, and less the actual increase (in inflation)."

---- "The tail risk event remains uncertainty in the Middle East leading to a supply side-driven spike in the oil price," said Citigroup in a note.

"Historically the biggest beneficiary under an oil price spike environment has been gold, with large amounts of petro dollars being recycled into the yellow metal."

Holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, slipped more than 7 tons on Wednesday to their lowest since May 2010, their biggest one-day drop in more than two weeks.

Interest in ETFs, which issue securities backed by physical metal, has been muted since the start of the year, with the SPDR recording its biggest ever quarterly outflow in the first three months of 2011.

"Other factors have to be used to explain the rally of gold prices, and there are plenty of them; besides the weak U.S. dollar, the debt crisis in the euro zone peripherals is also clearly playing a role," said Commerzbank in a note.

Portugal rescue marks eurozone formal commitment to 'two-speed economy'

The eurozone formally committed itself to a two-speed economy on Thursday after the central bank raised interest rates on the same day Portugal joined Ireland and Greece in officially requesting a bail-out.

By Philip Aldrick, and Bruno Waterfield 6:00AM BST 08 Apr 2011

The European Central Bank lifted rates for the first time in almost three years, from 1pc to 1.25pc, as negotiations began over the scale of Portugal's rescue package, which is now expected to hit about €75bn (£66bn).

European Commission sources said the package would be negotiated "swiftly" despite Lisbon's caretaker government lacking a political mandate ahead of country's June 5 elections.

"It will be done quickly, very quickly. Portugal really needs the money soon to service debt. There is no question of waiting until after elections," said one source.

Jean-Claude Trichet, the ECB president, admitted on Thursday that he had "encouraged" the Portuguese authorities to seek financial aid before the election. "We have encouraged the Portuguese authorities to ask for support," he said.

The deal is expected to provoke a political storm because Portugal is without an elected government following the collapse of the Socialist administration two weeks ago, after Portugal's parliament rejected an austerity programme agreed with the European Union to bring its public finances under control.

---- By raising rates to tackle incipient inflation, however, the ECB will make life more difficult for Portugal. Marchel Alexandrovich, European economist at Jefferies, said higher interest rates will hurt the eurozone periphery far harder than its core.

Debt interest for households and non-financial corporations "would rise by around 0.3pc of GDP if ECB rates are one percentage point higher", he said. "But Germany and France would see a rise of just around 0.1pc of GDP, while Portugal, Spain and Ireland would see increases equivalent to 0.8pc of GDP."

ING economist Carsten Brzeski added that higher rates "will increase, not diminish, divergence within the eurozone".

Cool, calm and collected in the face of disaster shows markets' madness

Europe has stumbled into its next crisis but markets on Thursday remained calm, sanguine even, as the eurozone express continued to plough off the tracks. Only the peculiar autism of finance could produce such an odd reaction.

By Damian Reece, Head of Business 6:00AM BST 08 Apr 2011

Endless reports and pieces of analysis on Thursday told us that Portugal's cry for help was entirely expected and the European Central Bank's (ECB) interest rate rise was long awaited. Frankly, they said, there's not a lot new to worry about. The financial world stared on blankly, unmoved by events.

But this muted response, far from being reassuring, is more evidence of the disconnect between the numbers world
and the real world. We've had bail-outs in Greece, Ireland and now Portugal, while the ECB has chosen this moment to begin its war against inflation, Germany's great fear.

---- There is a momentum behind events on the Continent which Thursday's developments didn't cauterise. Far from it. If anything they exacerbated the underlying problems which aren't financial but political – hence the markets' lack of reaction. If the challenge faced by Portugal was a conventional debt crisis then markets would be right to be sanguine. Europe's bail-out fund will ride to the rescue with terms agreed and contagion avoided.

But, as with Greece and Ireland, this is not a conventional debt crisis. At its heart, this is a crisis of European governance and the structure of the European Monetary Union, something markets can't really compute.

---- We're not drawing to an end of the issue, we're just at the beginning.

Portugal is taking on another €75bn of debt, albeit at cheaper rates than those charged by conventional lenders who have fled the scene, to tide itself over in the short term. The bail-out will come with political conditions of a distinctly Germanic flavour attached.

Portugal has a caretaker government with elections looming soon. What chance does this fragile political system have of implementing the sort of draconian austerity measures that will be required under the bailout to get Portugal's public finances under control while discovering some new engine of growth? I'd say the chances are slim at best.

---- There will be a pause for breath but attention will soon turn to Spain. Its exposure to Portuguese banks will be of increasing concern. But so, too, will its own banks, particularly its savings banks, or cajas. For the markets to remain calm about Spain, Madrid needs to come clean on exactly how big its own bail-out of these deeply troubled institutions is going to be - €20bn? €50bn? Who knows? But, until there's clarity, Spain remains the next domino.

An even bigger uncertainty is just how far Germany will go in standing behind this pack of cards. It has its own domestic political problems, as Angela Merkel has just discovered in Baden-Wuerttemberg. And all the time we have the backdrop of a central bank aggressively tackling inflation with rising interest rates.


In Japanese news, yesterday’s LIR question “what else could possibly go wrong”, was answered by the strongest aftershock to last month’s 9.1 earthquake. Thankfully there was no tsunami this time, nor any new known damage at the Fukushima nuclear disaster site, but 3.6 million people and businesses lost power and yet another Japanese nuclear power station suffered a radioactive water spill, though not a release. Are any of Japan’s nuclear power plants safe?

Japan Hit by 7.1 Quake; Workers Evacuated From Fukushima

By Tsuyoshi Inajima and Michio Nakayama - Apr 8, 2011 5:24 AM GMT+0100

Japan was shaken by the biggest aftershock since the day of the March 11 earthquake, leaving two dead and prompting the operator of a stricken nuclear plant to evacuate workers trying to cool radioactive fuel.

The magnitude-7.1 temblor struck at 11:32 p.m. local time yesterday near the epicenter of last month’s quake, the biggest on record in Japan, the U.S. Geological Survey reported on its website. No unusual conditions were observed at the Fukushima Dai-Ichi nuclear station north of Tokyo, according to statements from Tokyo Electric Power Co. and Japan’s Nuclear and Industrial Safety Agency.

“Indications of new leakage or a change in radiation levels will be the only way they’ll tell if there’s further damage,” Murray Jennix, a nuclear engineer who specialized in radioactive containment leaks and teaches at San Diego State University, said in a telephone interview. “You’ve got cracks that could have been made bigger.”

More than 90 people were injured in the latest quake, the Fire and Disaster Management Agency said, as more than 3.6 million households lost power. Tokyo Electric, the operator of the Fukushima plant 220 kilometers (137 miles) from Tokyo, evacuated 15 workers who were pumping nitrogen into the No. 1 reactor to prevent hydrogen explosions of the type that damaged radiation containment buildings last month.

---- Tohoku Electric Power Co., the main power supplier to the northern areas of the main island of Honshu that were devastated in last month’s quake, said no radioactive water leaked from its Onagawa nuclear station after being spilt from spent fuel pools and a pumping room during yesterday’s aftershock.

Spokesman Kazuya Sugawara commented on the situation after the company earlier announced about 11 liters (3 gallons) of radioactive water spilt because of shaking from the quake.

Tohoku Electric restarted its No. 2 350-megawatt oil-fired unit at the Akita plant this morning, Sugawara said earlier today. Five units at three of its thermal power plants remain shut after the aftershock, he said.


"Nobody but a beggar chuses to depend chiefly upon the benevolence of his fellow-citizens. Even a beggar does not depend upon it entirely."

Adam Smith. Wealth of Nations.

At the Comex silver depositories Thursday, final figures were: Registered 41.29 Moz, Eligible 63.39 Moz, Total 104.68 Moz.


Crooks and Scoundrels Corner.

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

Only in America, as they say. In partisan politics as usual in Washington, both parties are playing brinkmanship about funding the Federal government. If no agreement is reached, the US government starts shutting down from midnight tonight. Complacently, no one expects this to happen of course. The tooth fairy will show up to stuff some new money under the pillow and at the last minute both parties will agree a fudge and the government will get funded. Bizarrely, if a shutdown does unexpectedly happen, the President and the politicians still get paid, but the military busy fighting two wars and celebrating a “victory” in Libya, don’t get paid. Has Washington got its priorities right or what? From faraway London it looks as if both parties only have eyes on grabbing the next presidency, no matter what the damage or cost. Like all bureaucracies, there’s lots of room to bring in reform and cost savings, but this isn’t a sane way to do it. Stay long precious metals. There’s almost 18 months more of this acrimony to go.

People of privilege will always risk their complete destruction rather than surrender any material part of their advantage.

J.K. Galbraith.

U.S. Government Shutdown Threatens 800,000 People As Obama Seeks Solution

By James Rowley - Apr 7, 2011 5:01 AM GMT+0100

In the event of a government shutdown, the National Institutes of Health won’t admit new patients, some taxpayers will wait longer for refunds and any furloughed civil servants with federally issued BlackBerrys must turn them off.

A failure by Congress to extend the government’s spending authority, which expires tomorrow, would force the closure of national parks, monuments and museums. Federal agencies -- such as the National Labor Relations Board -- that don’t protect lives, property or national security also would be shuttered.

As Democratic and Republican leaders in Congress seek agreement on a spending measure for the rest of the 2011 fiscal year, the Obama administration has warned of economic disruption from even a short shutdown. More than 800,000 “non-essential” federal workers -- out of a civilian workforce of 2.1 million -- would be furloughed until new spending legislation was passed. Agencies have drafted contingency plans for who would work and who wouldn’t.

The prospect of a government shutdown, however limited it may be, has placed pressure on the Obama administration and congressional leaders to settle their dispute over $30 billion or more in cuts from the federal budget through September before a suspension -- as of midnight tomorrow -- of all but essential federal services. Leaders of both parties are bracing for the blame that will be attached to their failure to resolve what the White House has described as minimal differences.

“People are going to have to understand that a shutdown would have real effects on everyday Americans,” President Barack Obama said last night after a meeting with congressional leaders at the White House, where he expressed confidence that a shutdown can be averted.

Elected Officials

Elected officials, including members of Congress and the president, would get paid during a shutdown unless Congress changes the law. Unlike the president and legislators, though, military personnel and federal employees who are deemed “essential” would receive no paychecks.

Although troops and the civilian employees who continue to work would get paid for their service after government financing is restored, there is no guarantee that Congress would make furloughed workers whole.


"Banksters are the only creatures that consume without producing. They do not give milk, they do not lay eggs, they are too weak to pull the plough, they cannot run fast enough to catch rabbits. Yet they are lord of all the animals. They set them to work, they give back to them the bare minimum that will prevent them from starving, and the rest they keep for themselves."

With apologies to George Orwell. Animal Farm

Another weekend, and spring is at its best here in the hills overlooking the Thames Valley. New lambs are gambling everywhere. The deer have reappeared in the woods, which are ablaze with the bright green of the new emerging leaves, the brilliant white blossom of the hawthorn which is now replacing the blackthorn blossom. The woodland floor is a carpet of bluebells or occasionally wild primroses. To those readers who can get out into the English countryside at this time of year, it’s well worth taking the time to visit. Tomorrow, Britain’s infamous Grand National horse race, now sent all around the world though wisely not replicated. Have a great weekend everyone. Enjoy it to the full, wherever you are.

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.

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