Baltic Dry Index. 1369 +20
LIR Gold Target by 2019: $30,000. Revised due to QE.
"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
In our ever more bizarre world on the Great Nixonian Error of fiat currency, the unintended consequences continue to pile up even faster than American profligate politicians can rack up new debt. Now the Middle Kingdom, undergoing a food and fuel inflation bout all of its own, seems about to experience a wobble in its spectacular three decade growth rate. As we know all too well from the Middle East, bad things tend to happen to social stability when food and fuel inflation walk the land, made all the more unstable by repressive regimes. Just what a near bankrupt Club Med doesn’t need on top of its own near insolvency. Paymaster Germany was in the midst of something of an export boom to the Middle Kingdom. As mentioned, the unintended consequences of fiat money are now coming in fast and furious.
Up first, Goldie sees the sky a little lower in the east.
"Let China Sleep, for when the Dragon wakes, she will shake the world."
Napoleon.
May 24, 2011, 12:15 a.m. EDT
Goldman Sachs cuts China, Asia growth forecasts
-- Goldman Lowers China GDP Forecast, Raises CPI View
-- Goldman Cites Weak Data, High Oil For Change
-- Goldman Maintains Overweight View On China
SYDNEY (MarketWatch) -- Goldman Sachs Group Inc. on Tuesday cut its growth forecast for China and predicted inflation will accelerate, citing the impact of higher oil prices and supply-side constraints on the world's second-largest economy.
In addition the bank lowered its outlook for the Asia region, excluding Japan.
The U.S. investment bank cut its China 2011 and 2012 growth forecasts to 9.4% and 9.2% respectively, from previously forecast 10.0% and 9.5%. The bank raised its 2011 CPI forecasts to 4.7% from 4.3% and left 2012 unchanged at 3.0%.
"This is both a sharper and more extended slowdown than we had previously," said Goldman Sachs in a note dated Tuesday, with the bank continuing to keep a view of overweight on China within the Asia region.
Goldman's note comes just a day after the HSBC Chinese Purchasing Managers Index came in at a reading of 51.1, compared with 51.8 a month ago.
http://www.marketwatch.com/story/goldman-sachs-cuts-china-asia-growth-forecasts-2011-05-24
Next, the Telegraph’s Jeff Randall is spoiled for choice, but finally settles for the new developing Chinese appetite for swapping unconvertible fiat currency Yuan, for tangible asset gold bullion and coins. An asset with an intrinsic value totally lacking in a politically manipulated fiat currency. Stay long precious metals. Like all fiat currencies before it, our age of fiat currency dollar reserve standard is headed over a cliff, though for now the even more unlovable fiat euro currency seems likely to take the plunge first.
"We are in a world of irredeemable paper money - a state of affairs unprecedented in history."
John Exter
The Bank of England is failing this country
Its forecasting record is hopeless and inaction has left us with prices racing ahead of pay
By Jeff Randall 10:06PM BST 22 May 2011
With the Queen in Ireland, Benjamin Netanyahu in Washington and Dominique Strauss-Kahn in jail, news editors were spoilt for choice last week. As a result, a telling event in global markets – China's emergence as the world's biggest buyer of gold bars and coins – was barely reported.
---- By contrast, what's happening in the bullion market, and what it tells us about creditors' confidence in fiat currencies, is likely to have a profound and enduring impact on the course of international trade, the balance of economic power, and, in the end, the pounds in our pockets.
In the first quarter of 2011, Chinese investors bought 93.5 tonnes of gold, more than double the level in the same period of 2010. China has eclipsed India as the world's biggest market for gold, not because its citizens have developed a sudden urge for bling, but because they fear inflation.
They are right to do so. In China, prices are rising at more than five per cent a year, with the cost of food roaring ahead at 11.2 per cent. But at least Beijing is on the case: China's central bank has raised the cost of borrowing four times since October and has instructed its banks to slow lending.
In the United Kingdom, it's a different picture: we are stuck in the never never land of wishful thinking as a proxy for monetary policy. In April, inflation (as measured by the Consumer Price Index) bounced up to 4.5 per cent; the retail prices index, which includes mortgage costs, is running at 5.2 per cent.
Over the past five years, inflation has been above-target for 51 of the 60 months, averaging three per cent. What's more, it's heading in the wrong direction, with the Bank itself warning that CPI rises could soon reach five per cent.
On current form, by the time the Bank's governor Mervyn King retires in 2013, UK inflation will have been above-target for the best part of seven years. The Government's official guideline of two per cent for CPI has, de facto, been abandoned by the Bank of England and the Treasury.
Martin Wolf, who served on the Independent Banking Commission, wrote in the Financial Times last week that if the Bank's Monetary Policy Committee were paid a performance bonus, "its members would deserve nothing".
He was being generous. With the honourable exception of Andrew Sentance, who stepped down recently, having been for much of his time a lone voice against the perils of easy money, the MPC has failed the country.
Its forecasting record is hopeless. Worse still, its inaction has left us with prices racing ahead of pay (especially damaging for those on low incomes with no bargaining chips) and millions of savers sacrificed on the altar of "stimulating growth". How long will it be before the trade unions switch their focus from "protecting public services" to shoring up members' rapidly diminishing real wages? When that happens, the Bank's little game is over.
More
We return to the world of Club Mad. Despite massive repudiation at the polls at the weekend, Spain’s socialist government is determined to enter a death spiral similar to Greece and Ireland’s. The world’s markets think a Spanish default is more likely, as do I. Club Mad will successively go on to Club Bad, and then Club Sad.
"Borrowers will default. Markets will collapse. Gold (the ultimate form of safe money) will skyrocket."
Michael Belkin
Global stock markets fall as Spain default fears grow
Escalating fears about Europe's debt crisis hit markets around the world, as the Spanish government's battering at the hands of its voters stoked investors' doubts as to whether Madrid will be able to carry out their painful spending cuts as planned
By Emma Rowley 9:30PM BST 23 May 2011
The FTSE 100 closed down almost 2pc at 5,835.89 points, while the CAC 40 in Paris fell 2.1pc to 3,906.98 after the defeat of Spain's ruling Socialist party in local elections raised questions as to whether the economy deemed "too big to bail" can implement the necessary austerity measures.
In the US, the Dow Jones Industrial Average closed down 1.05pc at 12381.26. "What is clearly unnerving markets at the moment is just how unquantifiable the eurozone crisis still is," said David Jones, chief market strategist at IG Index.
The euro touched a record low against the Swiss franc and a two-month low against the dollar. Against the pound, the euro 0.4p to 86.99p. In contrast, the price of gold rallied to its highest in almost a fortnight, as investors took flight and looked to hedge their exposure to the risk that one of the eurozone's stragglers will default on its debt.
Spain's voter protest spooked investors already nervous about the prospect of electorates derailing bail-out plans and austerity packages for stricken European nations, as voters in the eurozone's successful economies resent what they view as hand-outs and those in struggling economies protest harsh fiscal reforms.
Concerns had also been rising after Standard & Poor's, one of the world's three biggest credit rating agencies, this weekend revised its outlook on Italian sovereign debt to "negative" from "stable".
The cut by S&P came after rival agency Fitch on Friday downgraded its view of Greece's debt by three notches, taking its view of the bailed-out nation's government debt further into "junk" territory.
S&P said it had altered its stance on concerns that Italy's tense centre-right coalition government could struggle to reduce the nation's public deficit. Italy has seen the slowest rate of growth in the European Union in the past decade at an average yearly expansion of just 0.2pc, official data showed on Monday.
Poor growth makes it harder for an economy to shrink its debt burden as tax receipts will disappoint.
There were also gloomy figures for the wider region as the index tracking the output of manufacturing and services in the eurozone, compiled by researcher Markit, indicated that May saw the slowest rate of growth in seven months.
More.
Spain's 'Lost Generation' Vows to Fight On
05/23/2011
Mass demonstrations and a historic defeat for the ruling Socialists in regional and local elections this Sunday have put unprecedented pressure on Spanish Prime Minister José Luis RodrÃguez Zapatero. He has refused to bring forward national elections, but members of the young protest movement vow they won't give up until they're heard.
Spain's youth have often been accused of laziness, but over the last week tens of thousands of disillusioned young people took the initiative to camp out in squares across the nation to protest crippling unemployment, corruption and tough austerity measures by the government after the economic crisis. Activists also defied a ban on protests set last Friday by the country's Central Electoral Board, which feared they could disrupt regional and local elections.
But angry voters still managed to make themselves heard on Sunday amid the ongoing demonstrations, toppling Zapatero's Socialists (PSOE) in favor of the center-right opposition People's Party (PP) in most of the 8,000 municipal and 13 regional elections, even in the PSOE's traditional strongholds. While Zapatero admitted the results were the penalty for Spain's dismal economy and high unemployment, he declined to bring forward the general election, which must be held before March 2012.
---- One demonstrator, 33-year-old Oscar Morales Padro, has been looking for a steady job since finishing his psychology degree. "In Spain you can forget it," he said. Padro is like millions of other young Spaniards who have taken to the streets in the last week. Well-educated, but with no hope of finding a job -- a member of the so-called " Lost Generation."
Their movement symbolizes the mounting frustration over unemployment in Spain -- 45 percent among those under 25, and 21 percent overall, the highest rate in the European Union. Many allege the situation has worsened due to government austerity measures to reduce the national deficit and prevent a Greece-style EU and International Monetary Fund bailout.
Discontent is so widespread that even Spaniards living abroad have set up protest camps outside the country's embassies in Berlin, Paris, London and Amsterdam. Most of the events at home and abroad have been organized online by the Real Democracy Now movement, which became a household name virtually overnight after calling for demonstrations in around 50 cities last Sunday.
http://www.spiegel.de/international/europe/0,1518,764281,00.html#ref=nlint
We end for the day with rising trouble in US real estate. Can any sustainable Us recovery really be underway while real estate is still in trouble? If not, what happens to the G-1 economy when Fed’s QE2 ends?
"The gold standard, in one form or another, will prevail long after the present rash of national fiats is forgotten or remembered only in currency museums."
Hans F. Sennholz
As Lenders Hold Homes in Foreclosure, Sales Are Hurt
By ERIC DASH Published: May 22, 2011
EL MIRAGE, Ariz. — The nation’s biggest banks and mortgage lenders have steadily amassed real estate empires, acquiring a glut of foreclosed homes that threatens to deepen the housing slump and create a further drag on the economic recovery.
All told, they own more than 872,000 homes as a result of the groundswell in foreclosures, almost twice as many as when the financial crisis began in 2007, according to RealtyTrac, a real estate data provider. In addition, they are in the process of foreclosing on an additional one million homes and are poised to take possession of several million more in the years ahead.
Five years after the housing market started teetering, economists now worry that the rise in lender-owned homes could create another vicious circle, in which the growing inventory of distressed property further depresses home values and leads to even more distressed sales. With the spring home-selling season under way, real estate prices have been declining across the country in recent months.
---- Although sales have picked up a bit in the last few weeks, banks and other lenders remain overwhelmed by the wave of foreclosures. In Atlanta, lenders are repossessing eight homes for each distressed home they sell, according to March data from RealtyTrac. In Minneapolis, they are bringing in at least six foreclosed homes for each they sell, and in once-hot markets like Chicago and Miami, the ratio still hovers close to two to one.
Before the housing implosion, the inflow and outflow figures were typically one-to-one.
More.
http://www.nytimes.com/2011/05/23/business/economy/23glut.html?_r=1
"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
At the Comex silver depositories Monday, final figures were: Registered 32.14 Moz, Eligible 68.58 Moz, Total 100.72 Moz.
+++++
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Today, how Reaganomics first bankrupted the evil empire of the USSR, and then bankrupted the bankster state of America itself.
"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
May 24, 2011, 12:01 a.m. EDT
Reagan insider: GOP destroyed U.S. economy, Part 2
Commentary: Tax cuts, wars, rates, dollar, new crash coming
By Paul B. Farrell, MarketWatch
SAN LUIS OBISPO, Calif. (MarketWatch) — “My G.O.P. destroyed the U.S. economy.” Yes, that is exactly what David Stockman, President Ronald Reagan’s director of the Office of Management and Budget, wrote in a New York Times op-ed piece. Not “is destroying,” the GOP has “destroyed” the U.S. economy, setting up an “American Apocalypse.” And it’s getting worse.
----Last fall, Stockman’s hard-hitting op-ed was loaded with jabs like: “If there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation’s public debt” screams “for austerity and sacrifice,” instead, the GOP insisted “the nation’s wealthiest taxpayers be spared even a three-percentage-point rate increase.” Obama blinked, pulled his punch. Let’s get both in the ring. See Paul B. Farrell’s ‘Reagan insider: GOP destroyed U.S. economy.’
Stockman’s latest attack proves he’s still a powerful fighter. Recently, Reason magazine’s editor-in-chief Nick Gillespie did a long interview with Stockman. The title builds on the book: “The Triumph of Politics Over Economics.” But instead of just looking back at the failure of a self-destructive Reaganomics, an older and wiser Stockman focuses us on the paradigm shift that’s destroying America from within.
In this new “Triumph of Politics Over Economics” we see America at a crossroads, struggling to redefine itself. Politicians have become the new economists. Politicians and their big money backers and lobbyists now rule the American economy like banana-republic dictators. Stockman calls this corrupt system the new “crony capitalism.” The old capitalist economics that made America the world’s greatest superpower no longer exist.
Today, professional economists are no more than hired guns for politicians with myopic ideologies and huge bankrolls that make it easy to justify lying, cheating and stealing from investors, workers, consumers, savers and taxpayers. Capitalism has morphed into a monopoly ruled by politicians who are serving a wealthy elite. Competition is a joke. Democracy is a farce. “We the People” no longer exists.
More.
"The gold standard makes the money's purchasing power independent of the changing, ambitions and doctrines of political parties and pressure groups. This is not a defect of the gold standard; it is its main excellence."
Ludwig von Mises
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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