Baltic Dry Index. 1291 -15
LIR Gold Target by 2019: $30,000. Revised due to QE.
Greece was dead: to begin with. There is no doubt whatever about that. The register of his burial was signed by the clergyman, the clerk, the undertaker, and the chief mourner. Germany signed it. And Germany’s name was good upon 'Change, for anything it chose to put its hand to. Old Greece was as dead as a door-nail.
With apologies to A Christmas Carol, and Charles Dickens.
Yesterday we asked “can anyone save Greece”. The answer from the EU finance ministers meeting in Brussels was no, but a coalition of the largely unwilling did agree to make Portugal the third ward of the EU-ECB-IMF, and put together a 3 year bailout worth about 78 billion euro. In return for this bailout holders of Portuguese sovereign debt are politely requested not to sell off their holdings, but to keep to keep faith that all will be well in the end. In reality, this is a veiled threat to those EU banks, mostly Spanish, holding this debt not to bolt for the exit, any other non EU holders are welcome to exit. Somewhat unrealistically, all will turn out well once Portugal completes an “ambitious” privatization program.
"It's Christmas Day!" said Portugal to itself. "We haven't missed it. The Spirits have done it all in one night. They can do anything they like. Of course they can. Of course they can."
With apologies to A Christmas Carol, and Charles Dickens.
European finance ministers shrug off Dominique Strauss-Kahn scandal to strike Portugal deal
Europe's finance ministers and the International Monetary Fund shrugged off the scandal engulfing IMF head Dominique Strauss-Kahn to clear the way for Portugal to receive a three-year, €78bn (£68bn) rescue package at a key meeting in Brussels on Monday.
By Philip Aldrick, Economics Editor 9:33PM BST 16 May 2011
As the IMF managing director was remanded in custody in New York on charges of attempted rape and declared a flight risk, his colleagues were striking a deal for the eurozone's third rescue package. Europe will provide Portugal a €52bn loan at a rate of around 5.5pc, while the IMF will offer €26bn at 3.25pc. The UK is on the hook for roughly £4.3bn.
"Ministers concur with the [European Commission and the European Central Bank] that providing a loan to Portugal is warranted to safeguard financial stability in the euro area and the EU as a whole," EU ministers said in a joint statement.
Addressing the absence of Mr Strauss-Kahn, who was due to play a leading role in the talks, a Commission spokesman added that the EU is "entirely confident" that there will be "total continuity not only in the operations but in the decision-making process".
Uniquely among the bail-outs agreed so far, private bondholders have been instructed to maintain their exposure to Portuguese debt rather than sell it off. "At the same time, the Portuguese authorities will undertake to encourage private investors to maintain their overall exposures on a voluntary basis," the statement said.
Portugal has also agreed to an "ambitious" privatisation programme to cut its debts. Both the demand for investors to keep some "skin in the game" and the privatisations were conditions set by Finland last Friday for their support of the bail-out. Eurozone bail-outs must be approved by all 17 member states.
More
Though Great Britain isn’t a member of the snake bit European Monetary Union, Her Majesty’s UK Government has committed to toss in another £4.3 billion Pounds to this bailout, even as we force the handicapped off incapacity benefit, cut services to the very poorest in UK society, and cut our military in reckless ways. Not to worry for now, the UK still has its own fiat currency which it prints up at times with gay abandon, so all decisions about who gets what are entirely arbitrary political decisions. As austerity increasingly kicks in, I suspect that we are in for a rowdy time of “where’s mine? Cut the other fellow if you must, but just print up mine!” Stay long physical precious metals.
At the other end of Club Med, the first Greek bailout has gone horribly wrong. The tax and work shy Greeks desperately need another boat load of German cash. Under austerity and increased taxes, and the first Greek bailout, Greece was supposed to return to prosperity, and to servicing its now much higher debt. Unfortunately they entered a death spiral instead. Austerity brought in less taxes not more, the economy contracted since there could be no devaluation of the currency. Turkey is cheaper to holiday in than next door Greece. Now no one has a clue how to prevent an eventual Greek default.
Bah,' said Germany. "Humbug!"
With apologies to A Christmas Carol, and Charles Dickens.
Greece Reality Check 05/16/2011
Euro Crisis Worsens as EU Leaders Play for Time
Europe's leaders are still opposing a Greek debt restructuring, and they are exacerbating the euro crisis as a result. The Greek economy is at risk of collapse and resistance to further loans for the troubled nation is mounting. The continent urgently needs a new bailout plan.
The formal act was quickly settled, but German Finance Minister had no time to celebrate. The members of the budget committee in the German parliament, the Bundestag, had hardly given their blessing to billions in new aid for ailing Portugal last Wednesday before parliamentarians were drilling the finance minister with questions about the next troublespot -- Greece.
The lawmakers wanted to know more about the secret meeting held the previous Friday, which had been reported by SPIEGEL ONLINE and which top European politicians were still denying as their limousines were pulling up to the Château de Senningen in Luxembourg. Was it true that Greece needs billions more in financial assistance?
More importantly, the parliamentarians wanted Schäuble to elaborate on reports that Greece is insolvent and that the government in Athens has already considered withdrawing from the monetary union.
In his lengthy response to their questions, the minister denied the reports, explained the turf battles during the negotiations in Brussels and asked the parliamentarians to remain patient until an international panel of experts had thoroughly assessed the situation in the country. "For now, we're going to wait until the results of the report are out in July. Then we'll see what happens next."
As they play down the issue, try to appease critics and play for time, Germany's finance minister and his European counterparts are determined to keep on denying reality in the struggle to rescue the common currency.
More than a year ago, they created a €110 billion ($157 billion) bailout fund for Greece. Since then, however, the likelihood of a government bankruptcy has only increased. The country's mountain of debts is growing, the economy is at risk of collapsing and the promised austerity programs are not progressing as planned.
As a result, economists and financial experts have long agreed that forgiving a large share of Greece's debts will be unavoidable. European leaders, however, seem to be resorting to denial and faith healing instead.
"A restructuring of Greek debts is absolutely out of the question," says French Finance Minister Christine Lagarde, while Schäuble notes: "A debt restructuring is not under consideration and is completely speculative."
Instead, the European Commission intends to fight the crisis with new debts, even though government officials in European capitals are still denying this, as usual. There is talk of a €60-billion loan package, additional austerity programs and even tougher austerity.
If the medicine isn't working, increase the dose. That, at least, is the treatment plan being pursued by the saviors of the euro in Brussels. A new austerity and loan program would not only increase Greece's debt and curb the economy even further. It would also stigmatize Greece as Europe's stepchild for decades to come, dependent on the goodwill of the lender nations, governed by the inspectors of the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF), a prospect London's Financial Times describes as a "political nightmare."
More
http://www.spiegel.de/international/europe/0,1518,762769,00.html#ref=nlint
In other worrying news this week and last, China is still cutting back on Uncle Sam’s profligate debt. With trillion and a half dollar deficits stretching out to eternity, and a panic level zero interest rate policy still in effect, who in their right mind would want to be invested in USA sovereign debt? Well Japan and the UK, as it turns out, although the suspicion is that the UK isn’t necessarily buying up the debt for itself. Nothing good comes from profligate debt, and the longer it goes on the bigger the problem to be fixed later.
"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
China cuts holdings of US Treasurys for 5th month
China cuts holdings of US Treasurys for 5th month; Japan steps up purchases, despite crisis
Monday May 16, 2011
WASHINGTON (AP) -- China, the biggest buyer of U.S. securities, trimmed its holdings for a fifth straight month.
The Treasury Department said Monday that China cut its holdings by $9.2 billion to $1.14 trillion.
Japan, the second-largest foreign holder, boosted its holdings by $17.6 billion to $907.9 billion. There had been concerns that the March 11 earthquake and tsunami would lead Japan to scale back its purchases so it could use the money for reconstruction.
Britain, the third-largest buyer, increased its holdings by 10 percent to $325.2 billion in March.
Total foreign holdings increased by $4.9 billion to $4.48 trillion.
Treasury Secretary Timothy Geithner said the government will reach its $14.3 trillion borrowing limit on Monday.
The U.S. government would default on its debt if it did not have the resources to pay bondholders the interest or principal payments as they come due. Treasury securities are considered the safest investment in the world because the U.S. government has never defaulted.
Treasury officials have said they will be able to continue regular debt auctions until August 2. That's intended to reassure domestic and foreign investors about the availabilty of Treasury securities.
Geithner on Monday said he will halt investments in two big government pension plans immediately to allow the government to continue borrowing money for the next few months. The money that the two pension funds will lose would be replaced if Congress votes to raise the borrowing limit.
http://finance.yahoo.com/news/China-cuts-holdings-of-US-apf-2797288222.html?x=0&.v=3
With hitting the US debt ceiling imminent, it’s time for more smoke and mirrors. Time for another round of US voodoo finance.
US raids civil service pension fund as it hits $14.3 trillion debt limit
The US has suspended payments into a civil service pension fund to free up almost $150bn (£92bn) as the major debtor nation approaches its legal borrowing limit.
By Richard Blackden 7:09PM BST 16 May 2011
Timothy Geithner, the US Treasury Secretary, announced the move in a letter on Monday to Congressional leaders as he explained that the move extends the government's breathing space to August 2 to avoid an unprecedented default on its borrowings.
The US Treasury expected to reach the $14.3 trillion limit on on Monday. Congress needs to raise the legal debt ceiling beyond its current limit, which will require Republicans and Democrats reaching agreement over an issue that bitterly divides them. President Barack Obama warned over the weekend that failure to raise the ceiling risks unravelling the world's financial system.
Given US government debt, or Treasuries as they are known, are considered the safest asset in financial markets and held by investors and central banks around the world, few want to imagine the consequences of a default.
"No one in the Treasury market really expects a default," said Bill O'Donnell, a strategist at UBS. "But people are doing up their seatbelts as the rhetoric will only increase over the summer and it could go right to the wire."
America's debt has become a sharp dividing line between the two parties and will be in next year's presidential election
``Are there no prisons?'' asked Finland.
``Plenty of prisons,'' said the gentleman, laying down the pen again.
``And the Union workhouses?'' demanded Germany. ``Are they still in operation?''
``They are. Still,'' returned the gentleman, `` I wish I could say they were not.''
``The Treadmill and the Poor Law are in full vigour, then?'' said Germany.
``Both very busy, sir.''
``Oh! I was afraid, from what you said at first, that something had occurred to stop them in their useful course,'' said Holland. ``I'm very glad to hear it.''
With apologies to A Christmas Carol, and Charles Dickens.
At the Comex silver depositories Monday, final figures were: Registered 32.75 Moz, Eligible 68.15 Moz, Total 100.90 Moz.
+++++
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Today, more on what really happened at Fukushima, even as TEPCO swore blind that it didn’t. Surprise, surprise, US and French nuclear engineers were right all along, even as TEPCO said that they were alarmists. The Japanese government needs to take a hard look at TEPCO’s competence to continue operating any machinery, especially complicated nuclear machinery.
"When it becomes serious, you have to lie"
Jean-Claude Juncker. Luxembourg Prime Minister and president of the Euro Group of Finance Ministers. Confessed liar.
TEPCO admits nuclear meltdown occurred at Fukushima reactor 16 hours after quake
May 16, 2011
Tokyo Electric Power Co. (TEPCO) admitted for the first time on May 15 that most of the fuel in one of its nuclear reactors at the Fukushima No. 1 Nuclear Power Plant had melted only about 16 hours after the March 11 earthquake struck a wide swath of northeastern Japan and triggered a devastating tsunami.
According to TEPCO, the operator of the crippled nuclear power plant, the emergency condenser designed to cool the steam inside the pressure vessel of the No. 1 reactor was working properly shortly after the magnitude-9.0 earthquake, but it lost its functions around 3:30 p.m. on March 11 when tsunami waves hit the reactor.
Based on provisional analysis of data on the reactor, the utility concluded that the water level in the pressure vessel began to drop rapidly immediately after the tsunami, and the top of the fuel began to be exposed above the water around 6 p.m. Around 7:30 p.m., the fuel was fully exposed above the water surface and overheated for more than 10 hours. At about 9 p.m., the temperature in the reactor core rose to 2,800 degrees Celsius, the melting point for fuel. At approximately 7:50 p.m., the upper part of the fuel started melting, and at around 6:50 a.m. on March 12, a meltdown occurred.
On the reason why it took over two months after the earthquake to reveal the information, TEPCO said it had only been able to start obtaining detailed data on the temperature and pressure in the reactor for analysis in early May.
Junichiro Matsumoto, a senior TEPCO official, said, "Because there is similar damage to the fuel rods at the No. 2 and 3 reactors, the bottoms of their pressure vessels could also have been damaged." He said the utility would carry out similar analysis on the two reactors.
More
http://mdn.mainichi.jp/mdnnews/news/20110516p2a00m0na028000c.html
"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
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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