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.


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