Baltic Dry Index. 1400 -12
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
“The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.”
Adam Smith
Yesterday it was all about Greece. The tax and work shy Greek people are revolting at the idea they become debt slaves to German and French banksters, who were foolish enough to believe Goldman’s Greek accounting gimmicks, and lent money to Greece in the belief that when it all went wrong Germany would be around to pay off. The Germans are outraged at being forced to work hard and pay taxes just so feckless Greeks can swan around in sunshine all day drinking Retsina washed down with ouzo.
By now even the doziest Greek MP can see that piling more unrepayable debt on the Greek people, while tied in to the Germanic Euro, is a recipe for a future default, but only after making Greece’s sovereign debt about 100 billion greater. You cannot solve an unrepayable debt problem by piling on even more unrepayable debt. Greece needs to default and devalue to make Greece a cheap tourist destination again, to stimulate the economy and jobs, to get Greek taxes rising again. The exact opposite of what the ECB is trying to impose.
Below, the latest in the slow motion Great Greek Wreck.
"Part of the $10 billion I spent on gambling, part on booze and part on women. The rest I spent foolishly."
Greece, with apologies to George Raft.
Europe warned of financial chaos over Greek debt crisis
Greek prime minister fails to form unity government as police battle rioters in Athens and shares tumble over default fears
Thursday 16 June 2011
Greece's 18-month sovereign debt crisis brought the government to the brink of collapse as public fury over savage austerity measures erupted in pitched battles with riot police on the streets of Athens.
The escalation of the Greek crisis had instant European and global impact, sending world stocks tumbling and exposing European Union paralysis over whether and how to launch a second attempt in a year to save Greece from insolvency.
George Papandreou, the socialist prime minister, announced he would seek a vote of confidence on a new government after offering to resign and broker a new national unity coalition with opposition conservatives.
He admitted failure after intense but fruitless negotiations with the conservative New Democracy party aimed at engineering a consensus behind the massive public spending cuts and wholesale privatisation programme – moves deemed necessary to secure a second bailout from the European Union and International Monetary Fund
----The opposition called for Papandreou's resignation and a renegotiation of the bailout terms with the EU, the European Central Bank, and the IMF as the price for its assent to a national coalition.
Earlier, riot police clashed with tens of thousands of demonstrators protesting in the capital against the radical austerity measures being imposed to try to secure a new bailout expected to amount to around €100bn.
Following the fall of the Irish and Portuguese governments in recent months after driving their countries into bankruptcy, it appeared that the eurozone's worst crisis was claiming another scalp. Despite the heightening sense of urgency, EU governments, the ECB, and the European Commission remained gridlocked over how to respond to the debt emergency, which pushed Greece closer to sovereign default and Europe towards a fresh banking crisis
More
http://www.guardian.co.uk/world/2011/jun/15/europe-warned-greece-financial-crisis
JUNE 16, 2011
French Banks Warned on Their Greek Debt
PARIS—Europe's sovereign-debt crisis washed closer to U.S. shores Wednesday after Moody's Investors Service warned it may downgrade three French banks that rely heavily on U.S. money funds for short-term financing.
Moody's cited the banks' exposure to Greek debt, and added that it may do the same to other euro-zone banks.
The three banks—BNP Paribas SA, Crédit Agricole SA and Société Générale SA—have all said recently that their exposure to Greece remains manageable. Analysts say a Greek default would cause them only small declines in the capital ratios used to measure financial strength. Shares in the three banks all fell 2.5% or more on Wednesday.
Still, the warning from Moody's followed heightened fears over the prospect of a disorderly Greek default, and its impact across financial markets. Investors have begun assessing the so-called contagion risk on global markets should European officials be unable to reach any agreement on how Greece's debt should be restructured.
One place many have been looking is the U.S. money markets, where massive funds buy up short-term debt of sovereign nations, banks and companies.
In recent years, some European banks have been some of the biggest borrowers in these markets. According to Fitch Ratings, as of February, 44.3% of assets at the 10 largest prime money market funds were invested in short-term loans to European banks.
More
Greece poses $41 billion risk to U.S. banks
June 15, 2011, 7:01 p.m. EDT
SAN FRANCISCO (MarketWatch) — While fears stirred by Greece’s deepening debt crisis raced Wednesday through global financial markets, a quick check of U.S. banks showed they risk losses on tens of billions of dollars should the Mediterranean nation default on its payments.
U.S. banks had total exposure of $41 billion to Greece by the end of 2010, according to the latest figures from the Bank for International Settlements issued June 9. Most of the financial commitments appear to be indirect.
About 83% is tied to “guarantees” that range from protection for sellers of credit derivative contracts to other obligations owed to third parties. Still the data are murky, according economic consultant Kash Mansori.
“We don’t know exactly what the form of exposure is,” said Mansori, who authors the Street Light blog. “We can only make educated guesses.”
He thinks U.S. banks are mostly exposed to Greek’s financial crisis through credit-default swaps, which essentially are insurance contracts. Mansori believes U.S. banks largely sold these deals to European banks, which own bonds issued by Greek banks and the Greek government.
More
http://www.marketwatch.com/story/greece-poses-41-billion-risk-to-us-banks-2011-06-15
JUNE 15, 2011, 4:10 P.M. ET
ECB: Contagion Is Euro Zone's Top Concern
FRANKFURT—Contagion from the euro zone's debt crisis remains the top risk to financial stability in the single currency bloc, the European Central Bank warned Wednesday, reiterating its opposition to a Greek debt restructuring.
----The risk of "adverse contagion" from the bloc's sovereign debt crisis, and its interplay with the financial sector, "arguably remains the most pressing concern", the central bank said. European-level efforts to contain the debt crisis "have not been sufficient," and European crisis management has been "fraught with some detrimental shortcomings," the ECB said.
Funding risks also remain "an Achilles heel" for many banks, particularly those in fiscally stressed countries, according to the report, which noted that about 30% of bank debt will have to be refinanced in 2011 and 2012.
Other key risks cited in the report include potential losses from property price declines, an unexpected surge in long-term interest rates and asset bubbles in emerging markets.
But while the central bank said implementing Greece's fiscal reforms has grown more challenging since December, it warned that a debt restructuring could have "potentially very dangerous implications."
At a press conference, ECB vice president Vitor Constancio repeated the ECB's opposition to any restructuring that leads to a "credit event" but kept the door open to purely voluntary decisions by banks to roll over their holdings of Greek bonds.
More
We close for the day with the ECB’s double Dutchman Wellink. Make the European bailout fund double size at one and a half trillion euros, he says. A trillion here, a trillion there, and pretty soon we’ve gone from a Germanic euro to a new Berlusconi lira. 400 million hapless Euro serfs were just given another reason to protect some of their wealth in physical precious metals. Little wonder many central banks have gone from being sellers of gold to buyers.
"Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state."
William F. Rickenbacker
ECB's Wellink Calls for Doubling of Euro Bail-Out Fund
Thursday, 16 Jun 2011
The European bail-out fund should be doubled to 1,500 billion euros ($2.15 trillion) if politicians want private sector investors to participate in a second bail-out package for Greece, a European Central Bank governing council director said.
Nout Wellink told Dutch newspaper Het Financieele Dagblad that a new Greek aid package would carry so many uncertainties and risks that a doubling in the bail-out fund would be necessary to take into account the contagion risk for both Ireland and Portugal.
"If you take these risks, you need to build a safety net," Wellink, who is also the outgoing Dutch central bank president, was quoted as saying on Thursday.
"It should go to 1,500 billion euros and there should be more flexibility in how the money can be spent." The euro (EUR-) fell to a three-week low of $1.4113 after the report.
More
http://www.cnbc.com/id/43406636
"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people."
F.A. von Hayek.
At the Comex silver depositories Tuesday, final figures were: Registered 27.92 Moz, Eligible 70.89 Moz, Total 98.81 Moz. Almost 2 Million ozs left the Comex depositories yesterday, with only 28 Moz available for delivery. A silver default appears to be looming.
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
No crooks or scoundrels today, though there plenty of them still around in our gambling banks, hedge funds and great vampire squid community, today an old subject that regular readers are well aware of, since we’ve covered it often before. This solar sunspot cycle and the next, are both highly likely to be the weakest twin sunspot cycles since the Dalton Minimum in the early 19th century, and that low sunspot activity has a good correlation to global cooling. Cooler wetter summers, colder longer winters. At least in the northern hemisphere where we have relatively good historical records. Below, the latest update from America. Coincident or not, today’s Ladies Day at the Royal Ascot races, first held under Queen Anne in 1711, is likely to be wet and unseasonably cool. They were coming off another long cold period back then too, the infamous Maunder Minimum.
New Little Ice Age in store?
The Earth could enter a new 'Little Ice Age' in the coming years due to low solar activity, astronomers believe.
By Stephen Adams 6:13PM BST 15 Jun 2011
Sunspot activity, which follows an 11-year cycle, is due to peak in 2013 after which it will start to wane slightly.
But astronomers think the next upswing will be less intensive than normal, or could fail to happen at all.
That could affect weather on Earth because low solar activity has been linked to low global temperatures in the past.
Between 1645 and 1715 almost no sunspots were observed, a solar period which came to be called the Maunder Minimum.
During those decades Europe suffered frequent unusually harsh winters, and the time was later termed the Little Ice Age.
----Three studies, presented at a meeting of the American Astronomical Society's solar physics division, all point towards declining sunspot activity into the next decade.
Frank Hill, of the National Solar Observatory in New Mexico, who worked on one of the studies, said: "The fact that there are three separate lines of evidence all pointing in the same direction is very compelling."
More.
http://www.telegraph.co.uk/science/science-news/8578014/New-Little-Ice-Age-in-store.html
How Missing Sunspots Could Lead to Global Cooling
June 15, 2011 10:13pm EST
Just days after the earth came close to being struck by a solar flare, some scientists are saying the sun will actually be soon entering a relatively inactive phase, leading to a drop in sunspot activity. Counterintuitively, however, this could potentially be just as troublesome for the planet.
Recent data collected from different groups of researchers suggests the sun may soon enter a particularly "quiet" period after the current active phase is finished, due to peak in 2013. Scientists have recorded both a decline in the magnitude of sunspots—cooler areas of the sun's surface that are easily visible from earth—and a delay in the "rush" of chunks of the sun's magnetic field toward the poles, which usually signals the beginning of a solar cycle (in the current one, they were late).
On top of that, jetstreams of solar material almost always mark the start of the solar cycle, and they have yet to occur.
"It's like a leading indicator in the stock market," says Dean Pesnell, a project scientist with NASA's Solar Dynamics Observatory. "We have leading indicators for solar activity as well. These zonal flows are one of those leading indicators that tells us the timing of the solar cycle. That leading indicator has been expected to show up for several years, and it still has not appeared."
Reductions in sunspot activity have correlated with particularly cool periods in earth's history, the most notable being the "Maunder Minimum," a 70-year span that began in 1645 when average temperatures in northern Europe and North America went down by a few degrees. The period is sometimes referred to as the Little Ice Age.
"There's been an association of the lack of solar activity with the cooling at that time," says Pesnell. "When we look back in time, we see a few other of these minimum periods that didn't last quite as long, but they also correspond with cooling times. These are times when they were ice skating on the Thames."
Could the earth be due for another cooling period? The current solar cycle, due to peak in 2013, appears to be fairly weak in terms of solar activity (though that doesn't mean extreme solar flares, like last week's, are out of the picture). Taking into account the lack of normal activity, it's possible the next solar cycle may not happen at all, leading to a chilling effect.
Pesnell, however, isn't convinced.
"There was some discussion about whether the solar cycle will disappear, and I'm not as convinced of those results," he says. "We're not sure how sunspots affect the earth's climate. When we look back in time, we see times when there's little solar activity, and at the same time the earth's temperature is cooler than average. We're not sure how the two are connected."
Pesnell also says there have been periods when the sun was unusually active, which led to lengthy warm periods for the northern hemisphere. One of them, called the Medieval Optimum, allowed the Vikings to colonize Greenland.
More
http://www.pcmag.com/article2/0,2817,2387098,00.asp
"Never spend your money before you have it."
Thomas Jefferson
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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