Baltic Dry Index. 1446 +48
LIR Gold Target by 2019: $30,000. Revised due to QE.
The European Monetary Union doesn’t work and without a federal fiscal redistribution mechanism it will never be able to deliver prosperity. Every time an asymmetric demand shock hits the Eurozone, the weaker nations will fail. Trying to impose fiscal rules and austerity onto the EMU monetary system just makes matters worse.
Marshall Auerback.
Move over America’s Batman Bernanke and Robin Giethner, China’s Superman sovereign wealth fund is coming to the rescue of Portugal, says the chief executive of the European Financial Stability Facility. Well he would say that sort of thing I suppose. It might even be true too, China is still piling up excess dollar reserves at such a rate, they could buy up the whole Portuguese bailot bond offering and it wouldn’t make much of a dent in their overexposure to US dollar risk. When the Fed or the markets force US interest rates higher, China is only too well aware of the hammering they will take on this overexposure. Below, MarketWatch covers the story. Stay long precious metals. If China does go for the Portuguese bonds, in any future default they can probably insist that Portugal takes them back in a swap against Portuguese gold.
May 26, 2011, 1:43 a.m. EDT
China seen buying Portugal bailout bonds: report
SYDNEY (MarketWatch) -- China is interested in buying Portuguese bailout bonds when the European Financial Stability Facility starts auctioning the securities next month, the Financial Times newspaper reported late Wednesday. The report, which cited EFSF officials, said that China and other Asian investors are expected to represent a "strong proportion" of Portuguese bond buyers. Klaus Regling, chief executive of the EFSF, said that interest from Asia signaled that investors have confidence in the euro, according to the report. "They look at us and come to the conclusion it's a good way to diversify," Regling also said, according to the report.
http://www.marketwatch.com/story/china-seen-buying-portugal-bail-out-bonds-report-2011-05-26
While China rides in to rescue Portugal, presumably for old time’s sake after the Macau handover, unloved work and tax shy Greece takes a swing at Brussels and Berlin. Stay long precious metals ahead of the G-8 meeting and long weekend. Will Greece still be an EMU member on Monday?
"Buy gold and sit on it. That is the key to success."
Dr. Franz Pick
EU's Damanaki tells Greece euro membership at risk
ATHENS | Wed May 25, 2011 2:25pm BST
ATHENS May 25 (Reuters) - Greece must take tough measures to deal with its debt crisis or it will have to return to the drachma, the EU's Fisheries Commissioner Maria Damanaki said on Wednesday.
"I am forced to speak openly," Damanaki was quoted as saying in a statement by the semi-official Athens News Agency. "Either we agree with our lenders to a programme of tough sacrifices ... or we return to the drachma."
Damanaki, appointed by the ruling socialists, said Greece's biggest postwar achievement, joining the euro, was at risk and all else was secondary. (Reporting by George Georgiopoulos)
http://uk.reuters.com/article/2011/05/25/greece-euro-idUKATH00610520110525
It's ever more obvious, Greece must leave the euro
I've hardly been alone, but that's no excuse. For more than a year now, I've been regularly predicting the euro crisis's final denouement, yet still it hasn't arrived.
By Jeremy Warner, Assistant Editor 7:42PM BST 25 May 2011
So I've been forced to reach a different conclusion; perhaps it never will. Instead, the eurozone has entered a seeming state of permanent crisis. In desperation, European policymakers have adopted a very British characteristic – the hope that they can somehow just muddle through.
But though no one can know the exact timing of the endgame – that's ultimately for the politicians to decide, so no time soon might be a reasonable bet – it's now fairly clear what that endgame must be.
What's presently being played out among the GIPS (Greece, Ireland, Portugal and Spain) is final proof that you cannot have a monetary union of such size among sovereign nations without compensating fiscal union. That simple underlying truth leaves the euro facing a choice between two equally unappetising outcomes.
Either the richer countries carry on bailing out the poorer ones more or less indefinitely, rather in the manner that Germany subsidises its formerly communist East, or membership of the euro has to be reconstituted on a smaller and more sustainable basis. There's really nothing in between. The longer European policymakers remain in denial about this choice, the worse the situation will become.
So it's with a sense of weary familiarity we approach the latest impasse. The European Central Bank is implacably opposed to debt restructuring, but the eurozone's solvent Northern states have reached the limit of their appetite for further bail-outs. This leaves Greece in an impossible position; it can neither reduce its debt burden through restructuring, nor will anyone lend it more money.
More.
Up next, should Germany be forced out of the dodgy Euro instead, for being too successful for the others to compete? Yes, says Marshall Auerback on a guest posting on the excellent and often quoted website Naked Capitalism. The whole article is well worth the read.
With silent lips. "Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, these bankrupt, tempest-tost countries to me
The EMU. With apologies to Emma Lazarus.
Thursday, May 26, 2011
Marshall Auerback: To Save the Euro, Germany Has to Quit the Eurozone
By Marshall Auerback, a portfolio strategist, hedge fund manager, and Roosevelt Institute fellow
When the euro was launched, leading German politicians used to argue, with evident relish (and much to the chagrin of the British in particular), that monetary union would eventually require political union. The Greek crisis was precisely the sort of event that was expected to force the pace. But, faced with a defining crisis, Ms Merkel’s government is avoiding airy talk of political union – preferring instead to force harsh economic medicine down the throats of the reluctant Greeks, Irish, Portuguese and Spanish electorates. This is becoming both economically and politically unsustainable. If the objective is to save the currency union, perhaps policy makers are looking at this the wrong way around. In the end, paradoxically, to save the European Monetary Union, the least disruptive way forward would be for the Germans, not the periphery countries, to leave.
More.
Of course it’s not going to happen, because Europe’s elite Eurocrats are still fully determined to try to make the unloved, highly politicized euro into the replacement of the dollar. Dollar envy still runs deep in the Brussels empire of Herman van Rompuy. If Germany did leave, it would probably pull others out with them into effectively a new German lead D. Mark currency union. The Euro would become a dead zone of France and bankrupt states of Club Med, Ireland, and the odds and sods of East Europe, unfit to get into the new D. Mark zone.
Next, more on what could all too easily turn into the next Lehman, and the first of the European political revolutions. If Belarus blows up in a popular revolution, what will NATO do if its repressed ? Can Russia be invited in Bahrain style, to suppress the local population? Can Poland? Stay long physical precious metals. The age of fiat currency is coming to an end.
"Never have the world's moneys been so long cut off from their metallic roots."
Murray M. Rothbard
VTB Says Belarus Bound for Meltdown, Ruble Plunge, as Locals Hoard Fridges
By Emma O’Brien and Alex Kudrytski - May 25, 2011 4:58 PM GMT+0100
Belarus is headed for an economic “meltdown” and the ruble will need to depreciate another 51 percent, VTB Capital said, as locals lay siege to shops and protest price increases after the central bank devalued the currency
The Belarusian central bank let the managed ruble weaken by 36 percent versus the dollar on May 24 as demand for dollars and euros from importers and households threatened to derail an economy already laboring under a current-account deficit equal to 16 percent of gross domestic product. Russia and other former Soviet partners last week agreed to give Belarus a $3 billion loan and urged President Aleksandr Lukashenko’s government to sell $7.5 billion of assets to replenish the state’s coffers.
“A ‘91-style meltdown is almost inevitable,’’ said Alexei Moiseev, chief economist at VTB Capital, the investment-banking arm of Russia’s second-largest lender, referring to the country’s economic slump after the collapse of the Soviet Union. ‘‘Rapid privatization is the only way that can help avert complete disaster.”
----Finance ministers from former Soviet nations agreed in Minsk on May 19 to give Belarus up to $3.5 billion over three years, with the first $800 million payment expected in the week after a separate meeting on June 4, Russian Finance Minister Alexei Kudrin said in Moscow yesterday.
---- Devaluing the currency will only worsen the situation for Belarus, VTB’s Moiseev said.
“The main problem is that the economy produces goods which consist of little else than a combination of imported spare parts,” he said. “So devaluation only makes things worse.”
Belarus’s economy effectively collapsed in 1991 as the disintegration of the Soviet Union eliminated natural markets for the country’s exports of farm machinery, textiles and agricultural products.
---- At the Minsk Refrigerator Plant Co. shop in the capital today, about 20 people queued in drizzling rain to use their rubles to buy fridges. While the shop didn’t open on the day of the devaluation, most of the models in the store already had ‘Sold Out’ stickers on their doors.
“I came on Saturday and it was a nightmare, the store was stormed by people who wanted to spend their rubles because of rumors about the devaluation,” said Nikolay, a 74-year-old pensioner who declined to provide his last name. His entire savings of 6 million rubles now buy one fridge compared with three before the devaluation, he said.
More.
"As fewer and fewer people have confidence in paper as a store of value, the price of gold will continue to rise."
Jerome F. Smith
At the Comex silver depositories Wednesday, final figures were: Registered 32.13 Moz, Eligible 69.10 Moz, Total 101.23 Moz.
+++++
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Today, while our fiat currency world heads towards anarchy, a little light relief. Have you heard the one about the British judge vs the British coroner? It all ended well in the end after they reconciled, but the pathetic judge still ended up on trial. No this is not April 1.
Facts are meaningless. You could use facts to prove anything that’s even remotely true!
Homer Simpson.
Judge claims wife punched herself
A deputy High Court judge assaulted his wife during a row after he became “irritated” that she was comforting their cleaner while he was left without supper, a court was told yesterday.
:01AM BST 26 May 2011
James Allen QC, 62, told the court that his wife’s bruises were self-inflicted after she punched herself in the face. He claimed that, as the row continued, his wife snatched his glasses and crushed them to stop him leaving, before trying to grab the car keys from the ignition.
Bradford magistrates were told that Melanie Allen was cooking the evening meal when their cleaner, Amanda Clark, arrived and wanted to speak to her. Mr Allen was unaware that Mrs Clark’s mother had just been diagnosed with cancer. He took a file from his study and went upstairs to read until he heard Mrs Clark leave the house in Wakefield 90 minutes later.
“To be honest, I was irritable,” he told the court. “When I entered the kitchen I told the wife I was not very happy with Mrs Clark having visited. I had had nothing to eat all day and could not be bothered now.” He said the argument became more heated and he intended to drive away while his wife, an assistant deputy coroner, “cooled off”.
“I decided the best thing would be to put some distance between us,” said Mr Clark. “I started to move towards the kitchen door. My wife placed her body between myself and the kitchen door and repeated I was not leaving.” His wife then balled her fists and struck herself in the face in front of him.
When he managed to reach the garage doors, he said, his wife grabbed his glasses from his face and screwed them up. As one of the garage doors started to rise, it struck his wife’s leg, causing her to stumble.
Mrs Allen then jumped into the passenger seat, reached over and tried to reach the keys. The judge said he used one hand to fend her off and she tried to bite his hand.
He finally drove off and spent the night at his parents’ home 10 miles away.
More.
http://www.telegraph.co.uk/news/newstopics/lawreports/8537132/Judge-claims-wife-punched-herself.html
"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
The monthly Coppock Indicators finished April:
DJIA: +182 Up. NASDAQ: +236 Up. SP500: +185 Up.
The Dow and SP 500 and NASDAQ have all reversed from down to up. 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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