Wednesday, 29 February 2012

A Most Dangerous Day For Man!

Baltic Dry Index. 738 +08

LIR Gold Target by 2019: $30,000. Revised due to QE programs

Today is one of the most dangerous days for man. No not because later today one of the most dangerous men on the planet, Helicopter Ben Bernanke, starts two days of testimony in Washington about how he transformed the US economy into today’s shape. He inherited an USA economic system wrecked by Nixon and Greenspan. He also bet wrong on bailing out banksters. He can merely destroy middle class wealth. Today is the day that comes around every four years, when women can propose marriage to men. A wrong move and wealth and happiness can disappear. Thankfully that risk affects young men much younger than me, so I will await Dr. Bernanke’s next wealth destroying words later today. Stay long physical precious metals.

We open today with India rather than Greece. Like China, India’s economic growth is slowing. The Asian economic miracle that’s driving the global recovery is starting to wobble. Dr. Bernanke will quickly become irrelevant if Asia goes off the rails. Below India, a warning from the World Bank on China.

In central banking as in diplomacy, style, conservative tailoring, and an easy association with the affluent count greatly, and results far much less.

J.K. Galbraith

Feb. 29, 2012, 1:13 a.m. EST

India's economic growth slows to 6.1%

MUMBAI (MarketWatch)-- India's economy grew at 6.1% in the three months to December, its slowest pace in more than two years, weighed by a slowdown in manufacturing and lower production in mining. The number, which marked a sharp slowdown from growth of 6.9% in the quarter ended September, was also below market expectations. The consensus forecast of economists surveyed by Dow Jones Newswires was for the GDP to rise 6.3% in the latest quarter.


Feb. 28, 2012, 12:01 a.m. EST

World Bank warns: China is a ticking time bomb

Commentary: Will Super Rich in China or U.S. be first to trigger meltdown?

SAN LUIS OBISPO, Calif. (MarketWatch) — “It’s as if 2008 never happened,” warned a BusinessWeek editorial last year. A new crash is certain to complete what the 2008 meltdown started but failed to complete — reform Wall Street.

Everybody knows Wall Street’s still playing the same speculative games that triggered the 2008 crash: Bankers and politicians never learned history’s lessons from the 2008 crash, that our “mutant capitalism” is eating at America’s soul, handicapping future generations — we will repeat them.

----Meanwhile back home, Washington, Wall Street and Main Street are so transfixed on our bizarre 2012 election drama, “American Idol” and other titillating reality shows that most fail to see what’s happening outside our narrow vision — like the World Bank’s game-changing new report predicting China’s headed for a major collapse that will sabotage the global economy.

Yes, a collapse of China. And what’s really fascinating is how China’s predictable doomsday scenario parallels America’s. Yes, we know America’s elite Super Rich gained virtual control over Washington the past three decades. And now, ironically, that same bizarre capitalism is sabotaging the goose that laid the golden egg for China’s Super Rich too.

In that game-changing study just released by World Bank President Robert Zoellick we’re “warned of a spreading crisis,” says Reuters.


Now back to Euroland news. Read on and weep. Brave Ireland needs a referendum, poking Germany in the eye with a sharp stick. Meanwhile Germany’s constitutional court strikes down fast track committees. The ECB suspends taking Greek sovereign debt as collateral. Can a Greek exit from the euro be far away? In Greece, the parliament passes the latest German austerity plan. Will Greece be rewarded with 130 billion euros, never to be seen again?

"The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register."

Hans F. Sennholz

Irish EU treaty vote threatens chaos

Ireland has shocked Europe with plans for a referendum on the EU's fiscal treaty, a move that risks an unprecedented fragmentation of the eurozone and a major clash with Germany.

Premier Enda Kenny said Dublin was acting on legal advice from Ireland's attorney-general that "on balance" the fiscal compact requires a vote under the country's constitution. "It gives the Irish people the opportunity to reaffirm Ireland's commitment to membership of the euro," he told ashen-faced members of the Dail.

All three major parties back the treaty but analysts say there is a high risk of rejection by angry voters in the current fractious mood. The compact gives the EU intrusive powers to police the budgets of debtor states, and has been denounced as feudal bondage by Sinn Fein and Ireland's vociferous eurosceptics. The Irish voted "No" to both the Nice and Lisbon treaties before being made to vote again. Dublin has ruled out a second vote this time.

The Taoiseach's announcement sent the euro into sharp dive against the dollar, though it rebounded later. Europe's leaders thought they had tweaked the wording of the text just enough to avoid an Irish vote.

Ireland cannot stop the process since a quorum of 12 states brings the treaty into force, but it would be politically untenable to create a new eurozone structure that left one member in limbo.

----The fiscal compact has totemic significance in Berlin and any sign that the package is fraying may harden opposition in the Bundestag to further EMU rescue measures. Mrs Merkel suffered a serious blow on Monday when she had to rely on opposition votes to pass the Greek loan package due to mounting defections in her own ranks. Her coalition base is in revolt over demands from Brussels and the International Monetary Fund for a boost in the EU rescue machinery (ESM) to €750bn (£635bn), the unspoken condition imposed by the rest of the world for unlocking global aid.

Any decision has been postponed until after this week's EU summit. The new requests would push the German share of the funding to well over €300bn, breaching a €211bn ceiling set by the Bundestag in September.

----There was further bad news in Spain, where it emerged that relapse into recession and ballooning deficits in the regions had pushed the budget deficit to 8.5pc for last year, far above the 6pc target.

Top German court limits power of Parliament panel meant to make quick euro decisions

By Associated Press, Published: February 28

BERLIN — Germany’s highest court on Tuesday limited the powers of a special parliamentary panel set up to make quick decisions on using the eurozone rescue fund, ruling that it can decide only on particularly sensitive bond purchases.

The Federal Constitutional Court said the nine-lawmaker committee could decide on purchases of government bonds on the secondary market, where bonds are traded after they are issued. Such purchases could potentially be made by the bailout funds to help keep indebted eurozone countries’ borrowing rates down.

Chief Justice Andreas Vosskuhle said that if word got out “even of plans for such an emergency measure, that would be liable to thwart its success.”

But otherwise, he said in a televised ruling at the court in Karlsruhe, “no constitutional justification is discernible” for shutting other lawmakers out of decisions that touch on Parliament’s responsibility for budgetary matters.

The cross-party panel, whose members were drawn from Parliament’s larger 41-member budget committee, was set up with a vaguely defined mandate to decide on “cases of particular urgency or confidentiality.”

It has never started work because the court issued an injunction blocking it last October, pending Tuesday’s ruling, following a complaint from two opposition lawmakers.

ECB suspends use of Greek bonds as collateral

The European Central Bank said on Tuesday it was temporarily suspending the eligibility of Greek bonds for use as collateral in its funding operations and that national central banks would have to provide banks with liquidity using an emergency measure.

Reuters 10:07AM GMT 28 Feb 2012

The move came after ratings agency Standard & Poor's cut Greece's long-term ratings to 'selective default' after Athens launched a bond swap to lighten its debt burden.

The ECB requires guarantees in the form of eligible collateral from all banks that seek central bank funds in its lending operations.

In anticipation of such downgrades following a second Greek bailout, the eurozone and ECB had struck a deal whereby Greece would receive €35bn worth of support from the EFSF, the bloc's rescue fund, which it would pass to the ECB as a contingency payment so that the central bank could keep accepting Greek bonds and other assets underwritten by Athens in its lending operations.

However, this support measure has not yet been activated. The timing is particularly awkward for the ECB, coming just a day before its eagerly-awaited second, and expected to be final, offering of three-year loans - a major crisis-fighting policy tool.


FEBRUARY 28, 2012, 5:35 P.M. ET

Athens Approves Big Cutbacks

Lawmakers Pass Raft of Budget and Pension Measures Ahead of European Aid Summit

Greece's Parliament on Tuesday approved a law implementing steep budget and pension cuts on the first day of a two-day legislative sprint to push through overhauls its international creditors demand.

After initially approving the measures this month, Greek lawmakers by a 202-80 vote passed legislation putting into effect cutbacks and structural overhauls needed for the country to secure a €130 billion ($174.6 billion) loan at a European summit this week.

The two main parties that make up the coalition government and control 193 seats in Greece's 300-member Parliament both supported the measures.

The legislation targets around €3.2 billion in budget savings, including a €400 million trim in defense spending and a €400 million cutback in the public investment program. Other cuts reduce the operating expenses of ministries by 15% and implement a 12% reduction in monthly pensions that exceed €1,300.

----In measures lawmakers will vote on Wednesday, the minimum wage in the private sector will be slashed 22%, while pay cuts for those under the age of 25 will be 32%. Also Wednesday, lawmakers will approve a bill unifying Greece's myriad supplemental-pension funds and deregulating the pharmacy sector.


We end for the day waiting on the new ECB funding and awaiting the pearls of wisdom from Dr.Bernanke. While we wait, an update from last year.

What do you call a funny German? Nothing, there isn't one

By Eleanor Harding Last updated at 9:19 PM on 7th June 2011

As Mark Twain observed, a German joke is no laughing matter.

Sadly for the nation that brought us everything from Beethoven to lederhosen, it seems that everyone agrees.

Germany has been voted the least funny country in the world in an international poll.

----The survey of 30,000 people in 15 countries was conducted for social networking site, whose spokesman Lloyd Price said: ‘Germans are brilliant at so many things, including making cars and beating us at football.

'Unfortunately, telling jokes isn’t always one of them. If only there was a comedy World Cup, we might stand a chance against them.’

Examples of German jokes include: ‘Yesterday, I met my friend Horst at the hospital. He’d swallowed a sponge. He says it doesn’t hurt but he’s always thirsty.’

If that left your ribs untickled, try this: ‘Plants grow very well if you speak kindly to them. Which is why I sometimes go into the garden and insult the weeds.’


"When paper money systems begin to crack at the seams, the run to gold could be explosive."

Harry Browne

At the Comex silver depositories Tuesday final figures were: Registered 36.12 Moz, Eligible 94.50 Moz, Total 130.62 Moz.

Crooks and Scoundrels Corner.

The bent, the seriously bent, and the totally doubled over.

Today, the French scoundrel Sarky finally gets a break. Germany’s Iron Chancellor Merkel, “the Hammer of Club Med,” won’t campaign for President Sarkozy in France after all. I’d have thought it the kiss of death to be seen anywhere near the miserly paymaster of Europe, for any European politician outside Germany. Old Bonney must have been spinning in his grave at the thought of French Presidents getting picked in Berlin.

Seen from the right side of the Channel, which is to say the left, and an increasingly bemused London, the new era of “the American’s of Europe” leading Euroland, seems to be off to a chaotic start. If there’s a Germanic plan to save Euroland will some please publish it fast. Wikileaks, anyone?

Q. What did France used to be called?
A. Germany, and then the USA saved them.

To continue reading subscribe to the LIR at Currency Countdown.

Wednesday, 22 February 2012


Baltic Dry Index. 706 -09

LIR Gold Target by 2019: $30,000. Revised due to QE programs

On Tuesday morning, private and official lenders to Greece made extra concessions that should bring down Greece's debts from the levels cited in the report. But that didn't soften criticism that even a glum IMF assessment lacked credibility. Sony Kapoor, managing director of Re-Define, a financial think tank, said the IMF had engaged in "arithmetical gymnastics" to produce the assumptions to get Greece's debt target down to the targeted 120.5% of gross domestic product by 2020—a level many analysts still consider too high. Greek government debt now stands at more than 164%.

Greece opted for slavery and effectively put the country under Berlin’s rule, and still it isn’t enough. This morning, one day on, outside of Europe’s delusional politicians and criminal banksters, no one believes that Greece can be saved by the latest announced rescue plan. In the markets most believe Greece will have exited the Euro by the end of the year. What is the point of a non-rescue rescue? Below, the Journal, Telegraph, and Bloomberg cover the reality of yesterday’s non rescue. But now the great Germanic victory parade rolls on towards Lisbon and Madrid. Stay long precious metals, the euro as we know it is dying. For the hapless Europeans trapped in the Euro, keep swapping notes bearing country IDs “Y”, “P”, “S”, “G” and “V” for those with Germany’s “X”. Even the French “U” is questionable.

A German joke is no laughing matter.

Mark Twain.

FEBRUARY 22, 2012

Despite Pact, Unease Lingers for Greece

Agreement Staves Off Immediate Concerns, but Many Problems Remain Even Under Best-Case Scenarios

No triumphalism accompanied Greece's bailout and debt-restructuring deal hammered out early Tuesday; the euro zone's two-year debt crisis has seen too many false dawns.

Financial markets were somewhat cheered that months of negotiations aimed at cutting Greece's heavy debt had reached a resolution, largely putting to rest fears of a chaotic debt default next month. It also removed—at least for the immediate future—the gnawing anxiety that some policy makers in Germany and elsewhere are trying to oust Greece from the euro.

But the overriding reaction was of unease that this tough deal, which has already generated huge opposition among Greeks, is bound to fail. Many observers ask not if the program will fall apart, but when.

----Tuesday's agreement isn't quite the end of Greece's near-term debt concerns. Private investors will be asked to tender their old bonds for new, which will force some to crystallize losses of perhaps three-quarters of their investments.

If enough bondholders don't agree—the agreement assumes 95% participation—holdouts will be forced into the bond swap, a process that in past sovereign restructurings has generated multiple lawsuits. In Athens, a new law was unveiled Tuesday that could be invoked to strong-arm holdouts.


Battle over EU financial firewall threatens to derail Greek bailout

A battle over an increased eurozone bail-out fund and International Monetary Fund support for the European Union's single currency threatens to derail the latest Greek bailout.

At a G20 summit in Mexico in two days the EU will plead for increased IMF contributions by non-euro countries to help shore up a eurozone "financial firewall" seen as vital to protecting Spain and Italy from Greek debt contagion.

The IMF will refuse to make extra cash available to the EU and will threaten to pull the plug on its contribution to Tuesday's €130bn bailout of Greece unless the eurozone creates a €750bn fund, a move opposed by Germany.

In the wake of this week's deal to prevent a Greek default, Olli Rehn, the EU's economic and monetary affairs commissioner, insisted that a plan to merge two eurozone bailout funds was vital over the next 10 days. Mr Rehn is seeking to fuse the existing European Financial Stability Facility (EFSF) fund, worth €250bn, with a new European Stability Mechanism (ESM), to be created this summer and worth €500bn.

Greek Rescue Leaves Europe Default Risk Alive

By Simon Kennedy and James G. Neuger - Feb 21, 2012 12:51 PM GMT

Europe is still struggling to avoid the threat of default as investors warned Greece will soon risk violating the terms of its second bailout in three years.

Seven months of negotiations ended in the pre-dawn hours in Brussels with Greece winning 130 billion euros ($172 billion) in aid it needs to avoid a March bankruptcy. Any respite may prove temporary after it signed up to a program of austerity and economic reform aimed at slashing debt to 120.5 percent of gross domestic product by 2020 from about 160 percent last year.

Even with investors and central bankers chipping in to relieve the debt burden, economists from Citigroup Inc. to Commerzbank AG concluded Greece may again fail to deliver amid a fifth year of recession, looming elections and social unrest. The upshot could be the removal of aid and renewed debate over the merits of fresh assistance before year-end as policy makers shift toward doing more to inoculate the rest of Europe.

----In return for the new cash, Greece signed up to cuts in pensions, the minimum wage, health-care and defense spending, as well as layoffs of state employees and asset sales. It must implement that austerity with unemployment already topping 20 percent, meaning more retrenchment might end up only compounding the debt stress.

“The danger of Greece saving itself into economic depression and having to default and exit the common currency zone remains substantial,” said Christian Schulz, an economist at Berenberg Bank in London. Jennifer McKeown of Capital Economics Ltd. repeated her forecast that Greece will quit the euro by the end of the year.

Again, it may be said that we need not be alarmed at the magnitude of our credit system or at its refinement, for that we have learned by experience the way of controlling it, and always manage it with discretion. But we do not always manage it with discretion. There is the astounding instance of Overend, Gurney, and Co. to the contrary. Ten years ago that house stood next to the Bank of England in the City of London; it was better known abroad than any similar firm—known, perhaps, better than any purely English firm. The partners had great estates, which had mostly been made in the business. They still derived an immense income from it. Yet in six years they lost all their own wealth, sold the business to the company, and then lost a large part of the company's capital. And these losses were made in a manner so reckless and so foolish, that one would think a child who had lent money in the City of London would have lent it better. After this example, we must not confide too surely in long-established credit, or in firmly-rooted traditions of business. We must examine the system on which these great masses of money are manipulated, and assure ourselves that it is safe and right.

Walter Bagehot. Lombard Street. 1873

To continue reading subscribe to the LIR at Currency Countdown.