Baltic Dry Index. 1003 -19
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
A European war is bound to come sooner or later, and then it
will... be a struggle between Teuton [German] and Slav [Russian]. It is the
duty of all states who uphold the banner of German spiritual culture to prepare
for this conflict. But the attack must come from the Slavs.
General Helmuth von Moltke, 1912, Chief
of the German General Staff.
For more on the Chinese fire sale, scroll down to
Crooks Corner, where Bloomberg sees a tidal wave of dumped Chinese steel on the
way.
Below, short of Club Mad crashing out of the euro,
it doesn’t get much worse than this. Europe stands at the edge of the abyss,
with no one in Europe much bothered about toppling over. The never ending
crisis rolls on, but the ending gets closer by the day. Deficits didn’t matter
until one day they did. The euro monetary union will stay together until one
day it won’t. While the euro isn’t working for most of Europe any more,
austerity is only working to ensure that the euro flies apart. Europe’s great wars and crises, tend to
arrive in July and August, 2012 seems to be following the same script.
It
only requires a spark to set the whole thing off.
Colonel
Edward M. House, 1914. Advisor of
President Woodrow Wilson, opinion of conditions in Europe after returning from
an inspection tour in the Spring.
Europe is sleepwalking towards imminent disaster, warn top economists
The euro has completely broken down as a workable system and faces collapse with “incalculable economic losses and human suffering” unless there is a drastic change of course, according to a group of leading economists.
Europe is “sleepwalking towards disaster”, according to the 17 experts, who warned that over the past few weeks “the situation in the debtor countries has deteriorated dramatically”.“The sense of a neverending crisis, with one domino falling after another, must be reversed. The last domino, Spain, is days away from a liquidity crisis,” said the economists. They include two members of Germany’s Council of Economic Experts and leading euro specialists at the London of School of Economics, all euro supporters.
“This dramatic situation is the result of a eurozone system which, as currently constructed, is thoroughly broken. The cause is a systemic failure. It is the responsibility of all European nations that were parties to its flawed design, construction and implementation to contribute to a solution. Absent this collective response, the euro will disintegrate,” they added in a co-signed report for the Institute for New Economic Thinking.
The warning came as contagion from Spain pushed Italy’s borrowing costs to danger levels, with two-year yields rocketing 40 basis points to more than 5pc. The Milan bourse tumbled 3pc, led by bank shares. Italian equities have been in freefall since it became clear two weeks ago that the EU’s June summit deal had failed to break the nexus between crippled banks and sovereign states.
The crisis is starting to ricochet back into Germany, where the PMI manufacturing index for July fell to its lowest since mid-2009. Doubts are emerging about the creditworthiness of the German state itself.
----The 17 economists said Europe’s political waters have been muddied by disputes over eurobonds, debt-pooling, subsidies and fiscal union. None of this was necessary to break the logjam, they said.
They
claimed the system could be stabilised immediately by creating a lender of last
resort to back-stop the bond markets, either by mobilising the ECB or by giving
the eurozone bail-out fund (ESM) a banking licence to borrow from the ECB.
The
deeper problem can then be managed through a European Redemption Fund that
takes over a chunk of the “legacy debt” left by the errors of early EMU, much
like Alexander Hamilton’s sinking fund in the US to clear up the mess after
America’s revolutionary war.
Debt crisis: Greece to run out of money by August 20
Greece may run out of money and go bankrupt by Aug 20, a British government analysis of the ongoing eurozone crisis has warned.
The
beleaguered country will have to refinance billions of euros worth of
government bonds in less than a month and requires international assistance —
which may not be forthcoming — to repay the money.
International
inspectors arrived back in Greece on Tuesday to assess the country’s austerity
programme with European officials warning that it was “hugely off track”.
David
Cameron is now receiving daily written updates on the deteriorating situation
and was warned earlier this week that a Greek bankruptcy in the next month is
now a serious possibility.
Official
economic figures to be published today are expected to show that Britain
suffered from a third successive quarter of negative economic growth —
suggesting that the country is still in recession. If the figures are negative,
it will be the longest double-dip recession for more than 50 years.
One
senior source said: “Europe is now paralysing almost every economic initiative.
“The
daily analysis of the situation is filled with doom and gloom. Spain is in turmoil
and Greece may run out of money by Aug 20.”
July 24, 2012, 5:56 p.m. ET
Downturn Deepens in Euro-Zone Economy
Manufacturing and Services Output Shrinks in Germany, France; In Greece, Debt Inspectors Seen Pessimistic on Progress
Business
activity in the euro zone contracted for the sixth straight month in July, a
closely watched survey showed, with powerhouse Germany weakening and the
government in Greece now predicting an even deeper economic recession for this
year.
The data
provided new evidence that the downturn in the 17-nation currency bloc isn't
limited to financially weaker nations most directly embroiled in the sovereign-debt
crisis.
Combined
output in both manufacturing and services fell in the region's two biggest
economies, Germany and France, data company Markit Economics said after its
latest composite survey of purchasing managers.
For the
full euro zone, the preliminary reading of the July composite purchasing
managers index was unchanged at 46.4, meaning output in the manufacturing and
services industries shrank at the same steep pace that it did in June.
A reading
below 50 means a month-to-month contraction.
Euro-zone
manufacturing activity nose-dived, with a reading of 44.1 in July, its weakest
result since June 2009. A subset of that measure also showed order books
shrinking during the month. Germany's combined PMI slipped to 47.3, a
three-year low. France's PMI rose slightly but still signaled contraction.
The
report "supports the view that the region as a whole is in the midst of a
pretty deep recession," said Ben May, economist at consultancy Capital
Economics.
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.
Seven ‘extremely rare’ signs that recession risks in America are rising: David Rosenberg
Jul 24, 2012 – 2:29 PM ET | Last
Updated: Jul 24, 2012 4:17 PM ET
The
Philly Fed in the red for months on end, soaring food prices and tepid retail
sales: We are living in strange times, says Gluskin-Sheff chief economist David
Rosenberg.
“Makes
you want to go out and bet on the horses,” said Rosenberg. “We are seeing
things happen that are extremely rare.”
Rare and
risky — Rosenberg has identified seven uncommon occurrences on America’s
economic landscape that suggest the recession risk is rising.
Here are
his seven signs:
1) The
Philly Fed index of factory activity is in the red for the third straight
month. Seven out of eight times when the average reading has been that low
(-11.8) for that long the U.S. economy has tipped into recession.
2) Retail
sales are also down three months in a row (April-June) . Going back in the
history books that long a run of declining sales is a one-in-50 chance and each
time it has happened, except once, the economy was in recession. The only time
it wasn’t was between October to December, 2000, amid the tech bubble wreckage
— and the recession began the next quarter.
3) Jobs:
A non-farm payrolls reading south of 100,000 for July would make four in a row.
In the past 50 years, only once (last summer’s soft patch) did such a decline
in the job market fail to push the economy into recession.
4)
Disinflation: Inflation is trending down and the flat to negative readings in
the past three months has led to a mild deflationary environment where the CPI
has declined at a 0.8% annual rate.
“How
common is that? Not very. It last happened at the depths of the Great Recession
in early 2009 and looking all the way back to 1950, is a one-in-20 event”
“The lights are going out all over Europe and I doubt we will
see them go on again in our lifetime"
Sir
Edward Grey, 3 August 1914, British Foreign Secretary.
At the Comex silver depositories Tuesday final figures were: Registered 40.29
Moz, Eligible 100.94 Moz, Total 141.23 Moz.
Crooks and
Scoundrels Corner
The bent,
the seriously bent, and the totally doubled over.
Today, China. China
doesn’t play by any rules but China’s. Ominously, Bloomberg suggests a coming
tidal wave of dumped Chinese steel.
IMF Says China Downside Risks Significant
By Bloomberg News - Jul 25, 2012 4:39 AM GMT
The International Monetary Fund said China’s slowing economy faces
significant downside risks and relies too much on investment, urging leaders to
boost consumption and channel citizens’ savings away from housing. The IMF repeated an assessment that the yuan is “moderately” undervalued, which China disputed, the Washington-based lender said in an annual review. The fund omitted an estimated range for the currency’s undervaluation that was included in an earlier draft, according to two officials at the fund who had seen the previous language and spoke on condition of anonymity.
The call to support consumer spending echoes priorities set by Premier Wen Jiabao’s government, which is seeking to stem a six-quarter slowdown in economic growth. Leaders have cut interest rates and stepped up investment as the ruling Communist Party prepares for a once-a-decade leadership handover starting later this year.
“The authorities have taken the foot off the brakes, but they have not yet stepped on the accelerator in a major way,” Markus Rodlauer, head of the IMF’s China team, said on a conference call with reporters. The IMF statement followed a July 20 directors’ meeting to discuss the annual staff assessment of China’s policies.
While the economy “seems to be undergoing a soft landing,” achieving it is a key challenge, the IMF said.
More
China to Flood Steel Market Hurting ArcelorMittal: Commodities
By Bloomberg News - Jul 25, 2012 5:44 AM GMT
China, the world’s biggest steel producer, is exporting at the highest level
in two years, exacerbating a global glut that may hurt competitors from ArcelorMittal
(MT) to U.S. Steel (X) Corp. Monthly shipments abroad rose to 8.7 percent of domestic output last month, the highest proportion since July 2010. Chinese steel mills, set for a record production in 2012, are ramping up overseas sales to avoid a softer domestic market, where prices for the commodity have dropped to a two-year low.
ArcelorMittal of Luxembourg, which reports earnings today, and peers in developed markets are closing plants amid slower economies and lower prices. In contrast, Chinese Premier Wen Jiabao is overseeing a $23 billion investment in new mills to stimulate automaking and housing to reignite growth that fell in the second quarter to the slowest in three years. The strategy already is sparking unfair-trade charges by Western rivals.
“Increased Chinese exports take sales directly away from American producers,” Alan Price of Wiley Rein LLP, which acts as the trade attorney for Nucor Corp. (NUE), the largest U.S. steelmaker by market value, said in an e-mail response to questions. “It is highly likely that current Chinese exports across a range of products are being dumped.”
----Daily steel production in China rebounded to 2 million metric tons in June, the second highest following a record of 2.02 million tons set in April. Output, already more than twice the combined daily production in Japan, the U.S., India and Russia, may climb 5.4 percent to 720 million tons this year, further outpacing domestic consumption, according to the median of three analysts surveyed by Bloomberg News.
“Chinese
mills have to boost exports as they don’t have self-control on production,”
said Xu Zhongbo, chief executive officer of Beijing Metal Consulting Ltd. and a
professor at the University of Science & Technology in Beijing.
Reducing
output would require idling plants and laying off workers, Xu said. “All those
things would incur losses while competitors will come in and take up market
share.”
Morehttp://www.bloomberg.com/news/2012-07-24/china-to-flood-steel-market-hurting-arcelormittal-commodities.html
"Indeed the temporary breaks in the market which preceded the crash were a serious trial for those who had declined fantasy. Early in 1928, in June, in December, and in February and March of 1929 it seemed that the end had come. On various of these occasions the [New York] Times happily reported the return to reality. And then the market took flight again. Only a durable sense of doom could survive such discouragement. The time was coming when the optimists would reap a rich harvest of discredit. But it has long since been forgotten that for many months those who resisted reassurance were similarly, if less permanently discredited.”
J. K. Galbraith. The Great Crash: 1929.
The monthly
Coppock Indicators finished June:
DJIA: +63 Down. NASDAQ: +71 Down. SP500: +41 Down. All
three indicators remain down but downward momentum seems stalled.
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