Baltic Dry Index. 1484 -05.
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
"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 Europe, Club Med and Ireland have gone bust, or in Ireland’s case, its banks have and the Irish government has foolishly committed Ireland’s serfs to repay the bank creditors out of their savings and generations of future earnings. Enter the Doctors from the ECB and IMF. Europe’s Club Med plus Ireland have gone down with a near fatal case of financial E.coli, living far beyond their means, running up unrepayable debt on the German credit card, and bribing the voters by putting far too many of them in make work jobs on the public payroll. So what do the good doctors propose as the solution, more E.coli debt and blood letting the patient. The blood is to be transferred to Europe’s fat cat banksters who’ve come down with a bad case of insane lending and derivatives gambling Mad Cow disease. The patients were all unknowingly infected many years ago, when a frightened Republican President, took the fatal poison of a fiat currency dollar reserve standard. America joined Europe and the USSR and China, in operating an unsound monetary system that has always failed in an orgy of gambling and debt, and collapse and social disorder. In fairness, Europe thought it was tied in to the dollar which was supposedly liked to gold, until one day it suddenly wasn’t. Once on USSR style fiat currency, a similar fate is only a matter of time until the system implodes under a tsunami of mis and malinvestment. Before then, an escalating war between the relatively few haves and the masses f have nots, occurs, as the haves try to stop the have nots from threatening their privilege. Banksterism yes, capitalism it’s not.
For the moment, we all await the “next Lehman” and the collapse of the fiat system. Stay long physical precious metals since that collapse gets closer by the day.
"Deficit spending is simply a scheme for the 'hidden' confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."
Alan Greenspan
Dubious Value
European Banks Dump Junk Bonds on ECB
By Matthias Brendel and Christoph Pauly 06/06/2011
European bankers from countries with ailing economies need fresh infusions of cash from the European Central Bank, but the ECB has turned into the dumping ground for European banks' junk bonds. The practice could harm the central bank's reputation as well as the euro.
One item on the list of eligible securities of the European Central Bank (ECB) is a Portuguese bond from the year 1943. It will be roughly 8,000 years before this money is due for repayment on Dec. 31, 9999.
But this bizarre bond is now extremely valuable for a Portuguese bank, because the document can be submitted to the ECB as collateral in return for a fresh loan in euros. Since the international capital markets are practically closed to banks from Portugal, Greece and the other ailing economies in the euro zone, the financial institutions in these countries desperately need such cash injections from the ECB.
Many of the submitted securities are not really secure -- and it is difficult to say what they are actually worth. As a result, the ECB is slowly degenerating from the guardian of the euro to the bad bank of the euro system, where Europe's banks can dump their junk bonds.
SPIEGEL reported in May that the ECB and, especially, its member national central banks don't scrupulously examine the securities submitted by European banks. This has resulted in junk bonds worth hundreds of billions of euros on their balance sheets.
"These errors were reviewed and corrected," Irish Central Bank Governor Patrick Honohan told the Reuters news agency in response to the report. The reaction of the ECB was also strangely muted. What else can it do? It can't deny the risks. If banks go bankrupt and their collateral isn't sufficient to cover their debts, the central banks will have to cover the losses. And if the central banks' reserves are lacking, then taxpayers will have to pick up the tab.
The dimensions are huge: The ECB has accepted some €480 billion ($700 billion) in so-called asset-backed securities (ABS), and it has an additional €360 billion in "non-marketable financial instruments" on its books.
To make matters worse, the bank has given tens of billions of euros to Portugal, Spain, Greece and Ireland in return for government bonds of dubious value. Although these are only valued at significantly reduced market prices and have been discounted in accordance with their ratings, the central banks often turn a blind eye to this fact.
"It's not our job to constantly bail out insolvent banks in insolvent countries," says a concerned banker at Germany's central bank, the Bundesbank. He says this jeopardizes the reputation of the ECB and, ultimately, the euro.
----Another widely ignored risk at the ECB is the bank's enormous number of non-marketable assets, which the central bank in Frankfurt holds as collateral from other banks. These are promissory notes and other loans that are not traded on any stock exchange.
If the institution that submitted such a security goes bankrupt, the ECB will have to cash it in. If things go wrong, it would end up being stuck with this supposed collateral, for example, a loan for a wind farm or a holiday resort.
Up next, the reality of modern banksterism. In reality, why the next Lehman collapses the Ponzi scheme of the fiat reserve standard. Sadly we are all Greeks now. One way or another, fiat currency has corrupted trade, and turned banking into banksterism. Corruption is now the rule not the exception. How Mammon morphed into God in the Land of the Squids.
"Borrowers will default. Markets will collapse. Gold (the ultimate form of safe money) will skyrocket."
Michael Belkin
Will Greece Let EU Central Bankers Destroy Democracy?
A World at Financial War
By MICHAEL HUDSON 6/6/2011
When Greece exchanged its drachma for the euro in 2000, most voters were all for joining the Eurozone. Their hope was that it would ensure stability, and that this would promote rising wages and living standards. Few saw that the stumbling point was tax policy. Greece was excluded from the eurozone the previous year as a result of failing to meet the 1992 Maastricht criteria for EU membership, limiting budget deficits to 3 percent of GDP, and government debt to 60 percent.
The euro also had other serious fiscal and monetary problems at the outset. There is little thought of wealthier EU economies helping bring less productive ones up to par, e.g. as the United States does with its depressed areas (as in the rescue of the auto industry in 2010) or when the federal government does declares a state of emergency for floods, tornados or other disruptions. As with the United States and indeed nearly all countries, EU “aid” is largely self-serving – a combination of export promotion and bailouts for debtor economies to pay banks in Europe’s main creditor nations: Germany, France and the Netherlands. The EU charter banned the European Central Bank (ECB) from financing government deficits, and prevents (indeed, “saves”) members from having to pay for the “fiscal irresponsibility” of countries running budget deficits. This “hard” tax policy was the price that lower-income countries had to sign onto when they joined the European Union.
Also unlike the United States (or almost any nation), Europe’s parliament was merely ceremonial. It had no power to set and administer EU-wide taxes. Politically, the continent remains a loose federation. Every member is expected to pay its own way. The central bank does not monetize deficits, and there is minimal federal sharing with member states. Public spending deficits – even for capital investment in infrastructure – must be financed by running into debt, at rising interest rates as countries running deficits become more risky.
Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) and Trade, Development and Foreign Debt: A History of Theories of Polarization v. Convergence in the World Economy. He can be reached via his website, mh@michael-hudson.com
"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 28.77 Moz, Eligible 71.76 Moz, Total 100.53 Moz. Deliverable silver is now only about 29% of Comex stocks. My guess is that inventories are signaling a default lies ahead.
+++++
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
No bent pols or Wall Street vampire squids today, not even the feeders and enablers of the Madoff caper, today Der Spiegel on what went wrong in Germany as the E.coli outbreak first got blamed on those dodgy Spanish cucumbers, and then on dodgy German grown beansprouts. As of this morning, no one has much idea on how a new virulent strain of E.coli got into the German human food chain, nor when it will end, nor when another outbreak might occur. About the best advice for avoiding contracting it, don’t bother visiting Hamburg this year. Below, Germanic super efficiency 19th century style. Time to bring in the Swiss?
Precious Time Lost in Hunt for E. Coli
06/06/2011
The E. coli epidemic continues to ravage Germany, with every attempt to pinpoint its origin ending in failure so far. Experts say that for a developed country, Germany was ill-prepared to handle such an outbreak and that officials wasted valuable time.
Teams of scientists and investigators are desperately hunting for the cause of Germany's deadly E. coli outbreak as doctors struggle to treat a growing number of patients. But as the deadliest ever recorded outbreak of E. coli continues to spread in Germany and to other countries, one thing has become clear -- health authorities were not fully prepared. Experts say the country's alert system is rudimentary compared to those in other developed nations.
The pursuit of the dangerous pathogen's origin began on May 19 after findings from the University Medical Center Hamburg-Eppendorf (UKE) set off an E. coli alert at the country's disease control center, the Robert Koch Institute (RKI). The next morning four RKI officials traveled from Berlin to Hamburg to question patients who were still conscious about what they had eaten, and where. What followed seemed like an incredible success. Many patients said they had eaten raw tomatoes, cucumbers and lettuce, and when Spanish cucumbers sold in Hamburg's central wholesale market tested positive for E. coli, health officials there proclaimed on May 26 that they had found at least one source of the outbreak. But the relief lasted just five days. Further tests revealed the bacteria was not the same serotype as the one isolated in patients.
Back where they started from, researchers then discovered that they were dealing with a very rare strain of the bacteria Enterohemmorhagic Escherichia coli (EHEC), never before seen by scientists in an outbreak before. The mutant strain of two separate E. coli bacteria was particularly aggressive, the World Health Organization said.
On Monday, hospitals all over northern Germany struggled to treat thousands of patients suffering from the effects of the bacteria. More than one-third of the people infected with E. coli have also come down with a life-threatening complication known as hemolytic-uremic syndrome (HUS) which attacks the blood, kidneys and brain, and has left doctors racing to save lives. Ambulances have reportedly raced between cities to get desperately needed dialysis treatments for victims' failing kidneys as demand for machines became unmanageable. Meanwhile, clinics have cancelled routine operations in order to focus on emergency rooms filled with people infected by the bacteria, which causes watery or bloody diarrhea.
----Evidence does, however, indicate the outbreak is somehow linked to Hamburg's large wholesale produce market -- the same place where the contaminated Spanish cucumbers were found -- though officials remain uncertain whether the contamination occurred on the farm or during shipping, storage or packaging. "In recent days we've had long conference calls with other agencies and have determined that clues repeatedly point to Hamburg's wholesale market," an unnamed Bremen health ministry official told SPIEGEL. "It seems to play some kind of role or another."
Vendors at the huge market hall, which is as large as 30 football fields, have suffered immensely from a general fear of raw produce arising from the RKI's daily renewal of its recommendation for consumers to avoid tomatoes, cucumbers and lettuce. Meanwhile, the initial warning about Spanish cucumbers has sparked diplomatic tensions with Spain, which is now demanding compensation for lost sales.
----But therein lies the fatal mistake of the German health authorities. Eighteen valuable days were lost between when the first patient came down with diarrhea around May 1, and when the RKI was finally alerted.
While part of this may be because those infected waited until their cases became severe to see a doctor, the delay also indicates how unprepared German doctors were to properly report and handle the outbreak. Many fail to consider the possibility of an E. coli infection at all, sending patients with diarrhea home with a prescription and failing to take stool samples. But the larger problem is that local German health authorities are given abundant time to relay news of E. coli infections in their area. Infections, evidence of E. coli sources and even resulting deaths must be reported to state authorities just once a week, at the latest on the third working day of the week following initial identification. State authorities then have another entire week before they must inform the RKI.
----While news of a potentially deadly outbreak can take up to two weeks to reach top German health authorities, other developed nations such as the United States and Japan, have instituted early warning mechanisms. A swift reaction is crucial in such situations, said Robert Tauxe, deputy director of the Division of Foodborne, Bacterial and Mycotic Diseases for the Centers for Disease Control and Prevention in the US. In 1993, officials there responded to an unprecedented E. coli outbreak by creating a registry system for every suspicious group of gastro-intestinal infections. Since 2001, every state and some large cities have had laboratories that analyze stool samples from potential outbreaks and catalogue different strains of the bacteria. The CDC checks it daily, Tauxe said, saying a similar system should already be in place not just for Germany, but all of Europe.
"Whenever an overall breakdown of a monetary or financial system occurs, return to gold always restores order, revives confidence and brings back prosperity."
Donald Hoppe
The monthly Coppock Indicators finished May:
DJIA: +196 Up. NASDAQ: +249 Up. SP500: +200 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. But the Fed’s QE program is supposed to end this month!!!
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