Baltic Dry Index. 1141 +04
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
Back in the early 1900s, a crusty British general, Andrew Skeen,
wrote a guide to military operations in Waziristan. His first piece of advice:
"When planning a military expedition into Pashtun tribal areas, the first
thing you must plan is your retreat. All expeditions into this area sooner or
later end in retreat under fire". It took us a century to understand the
limits of our own power. It looks as if those same lessons are being
re-learned.
They came, they talked, they congratulated “the
Dutchman” on winning the French Presidency, remarking how much calmer meetings
were now that President Bling-Bling wasn’t attending. They even had time to
watch Chelsea defeat Bayern Munich to win the Champions League. With Euroland
wrecked on the rocks of Greece threatening to bring down the European and
possibly global banking system, they issued a Pullme-Pushyou statement about
the need for growth with austerity packages, with more emphasis on growth,
except of course in Club Med. And with that the G-8 left Camp David, some to
move on to Chicago for today’s NATO meeting to try to figure out how to cut and
run from Afghanistan, poor “three card Monti,” Italy’s unelected Berlin picked
Prime Minister to look at the medieval ruins of parts of northern Italy
following the weekend earthquake. Was God sending Italy a signal to get back to
elected politics and drop the thin edge of a wedge that ends in Mussolini-lite?
Below, today’s dismal state of Europe after
the meeting of G-8 giants.
"The history of paper money is an account of abuse, mismanagement, and financial disaster."
Richard M. Ebeling
Cracks are appearing in Europe's state-backed lenders
European taxpayers face having to bankroll a new wave of bailouts amid growing funding problems at state-backed borrowers across the region, according to senior bankers.
By Harry
Wilson and Philip Aldrick 9:06PM BST 20 May 2012
Financiers
are becoming increasingly concerned that many taxpayer-backed borrowers are
losing their ability to access private funding markets. The development raises
the prospect of already heavily indebted eurozone national governments being
forced to take on hundreds of billions of euros of additional debts.
“Cracks
are appearing in the funding markets for these institutions. If you don’t like
the sovereign risk, why would you take the risk of buying the debt of the
institutions they support,” said one credit banker.
In
France, the authorities are racing to avoid having to rescue Caisse Centrale du
Credit Immobilier (3CIF) after Moody’s downgraded the mortgage lender last
week, warning it could become totally reliant on taxpayer support within
months.
The
lender is one of France’s largest mortgage providers and is owned by a
collection of local authorities and mutuals, giving it implicit government
support.
But the
troubles at 3CIF are seen as evidence of far wider problems that are likely to
face a range of quasi-government borrowers across Europe, as investors become
more nervous about exposing themselves to the risk of a break-up of the euro
area.
France
has been among the biggest users of quasi-state institutions to everything from
mortgage borrowing to building infrastructure such as roads and railways.
Several other major European countries, including Italy, use similar
organisations to fund public projects that would otherwise add to national
debt.
The
deteriorating situation for these institutions echoes the fate of US mortgage
lenders Fannie Mae and Freddie Mac that enjoyed a similar taxpayer guarantee.
The two lenders were nationalised by the US government in 2008 in the wake of
Lehman Brothers collapse as they were hit by billions of dollars of losses on
toxic assets.
In Spain,
the government has hired independent valuers to go through the books of
struggling lender Bankia, which could cost the Spanish taxpayer as much as
€10bn (£8bn) and even lead to the bank’s full nationalisation within weeks.
More
Multinationals sweep euros from accounts on daily basis
When it comes to contingency planning for a eurozone break-up, it is typically a German company that has been ahead of the game.
Industrial
conglomerate Siemens acquired a banking licence in December 2010. That allowed
it to access directly European Central Bank funds, so cutting its exposure to
swings in jumpy currency markets. It also took to parking cash at the ECB, once
depositing €500m after withdrawing them from riskier French lenders.
Now, with
just about everyone reckoning Greece is heading for the exit, the treasury
operations of multinational companies have gone into overdrive. WPP, Reckitt
Benckiser and Diageo, to name just three, have taken to a daily sweep of euros
from their accounts to reduce the risk of any overnight devaluation.
Sir
Martin Sorrell, the WPP chief executive, confirms that the advertising giant is
also converting euros it doesn’t need to safer haven currencies, notably the
dollar, to minimise risk.
Prudent
treasury operations are all part of running a multinational. But, at a time
when a Greek exit could see the reintroduction of a rapidly depreciating
drachma and all the knock-on effects, contingency planning goes much further
than simply limiting exposure to the single currency held on account.
Rising US recession risk poses the real threat to Europe
The US economy has slowed to stall speed. A few lonely forecasters fear that America has already fallen back into recession, replicating the terrible double-dip of 1937.
The
Philly Fed’s manufacturing index dropped suddenly to minus 5.8 in May. The US
Conference Board’s index of leading indicators fell in April. Job creation has
slipped from 250,000 a month to nearer 130,000 in March and April.
The
Economic Cycle Research Institute (ECRI) says post-War personal income growth
in the US has never been this weak for three months in a row without triggering
a recession. It has happened ten out of ten times
It is
this fresh menace - combined with China’s failure to calibrate its heralded
soft-landing - that poses the real danger to southern Europe’s arc of
depression over the next year. Greece is just a poignant detail.
America’s
official data has not picked up any inflection point yet. We may be repeating
the summer of 2008 when Washington mistakenly reported brisk growth and Fed
rhetoric turned hawkish, setting off the Fannie/Freddie, Lehman, AIG disasters.
We now know that the figures were wildly wrong. The economy was already in
slump.
More
"All of the government's monetary, economic and political power, as well as its extensive propaganda machinery, will be enlisted in a constant battle to drive down the price of gold - but in the absence of any fundamental change in the nation's monetary, fiscal, and economic direction, simply regard any major retreat in the price of gold as an unexpected buying opportunity."
At the Comex silver depositories Friday final figures were: Registered 35.77 Moz,
Eligible 105.94 Moz, Total 141.71 Moz.
Crooks and
Scoundrels Corner.
The bent,
the seriously bent, and the totally doubled over.
No crooks today,
but don’t worry, they haven’t gone away. Tthe next Madoff and Lehman are out there just
awaiting their moment in the sun. And
then there’s always the greatest derivatives gambling bankster of all, yet to
unwind their foolish gamble by the “London Whale.” Everyone and their dog is
lining up to get a piece of the free cash about to flow from JP Morgan Chase.
Is too big to fail great for banksters or what?
"Markets are only a tiny facet of society,
but being made by mass psychology, they are a good litmus paper for what is
going on. Markets only work when they believe, and this confidence is
based on the idea that men can manage their affairs rationally. If that
belief fades, then so do the markets. They do not merely dive, they dive
and then they disappear.”
The monthly
Coppock Indicators finished April:
DJIA: +89 Down. NASDAQ: +97 Down. SP500: +63 Down. All
three indicators remain down but downward momentum is stalling.
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continue reading subscribe to the LIR at Currency Countdown.
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