Baltic Dry Index. 715 +03
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
"On 1 January 1999 with the introduction of
the Euro ... an important part of national sovereignty, to wit monetary
sovereignty, was passed over to a European institution ... The introduction of
a common currency is not primarily an economic, but rather a sovereign and thus
eminently political act...political union must be our lodestar from now on: it
is the logical follow-on from Economic and Monetary Union."
Joschka Fischer, German Foreign
Minister and Vice Chancellor. Former Communist firebrand and photographed
beater-up of a policeman (ironically called Mr Marx). Speech to the European
Parliament, January 1999.
Today’s title headline greatly overstates reality. Negative interest rates are only sweeping those nations in Europe likely to benefit from a breakup of the monetary union. Germany and a handful of others would revalue under an EMU breakup, more than offsetting the guaranteed loss from the negative interest rate. Smart money is now betting a breakup is inevitable. While the Germanic part of Euroland would revalue, everywhere else in Euroland would devalue, hence Club Med’s need to keep borrowing at punitive interest rates. Another fine Bilderberger mess generated by those who think themselves fit to rule the world.
We open today with snake bit Euroland, staggering
and lurching its way into recession and breakup.
"The finance of the country is ultimately
associated with the liberties of the country. It is a powerful leverage by
which the English liberty has been gradually acquired. If the House of Commons
by any possibility loses the power of control of the grants of public money,
depend upon it, your very liberty will be worth very little in
comparison."
William Ewart Gladstone, British
Prime Minister. Speech in the House of Commons, 1891.
Debt crisis: eurozone headed for recession as economic rot spreads
The eurozone looks destined for its second recession in three years, as business surveys showed the economic rot is even spreading to Germany, the region's largest and strongest economy.
Telegraph
staff and agencies 9:45AM BST 23 Aug 2012
Markit's Flash
eurozone composite PMI, which measures manufacturing and services
activity, edged up to 46.6 in August.
Although
this was marginally better than the 46.5 forecast by economists, it is the
seventh month that the PMI has fallen below the 50 level that divides growth
from contraction.
The data
suggested that the eurozone will contract by between 0.5pc and 0.6pc in the
third quarter as orders for new business decline.
----More worryingly, the rot in smaller euro zone economies is now taking root in the core, with the flash composite PMI for Germany, falling to a three-year low of 47.0 in August.
"Hopes
that German economic strength will aid recovery in the broader currency union
were dealt a blow by its rate of economic contraction accelerating, and further
signs that its export engine has slammed into reverse gear," said Rob
Dobson, senior economist at Markit.
More
NIRP: The Financial System’s Death Knell?
By: Eric Sprott & David Baker
On July 18th, 2012, the German government sold US$5.13 billion worth of
2-year bonds at an average yield of -0.06%. Please note the negative
symbol in front of that yield number. What this means is that the German
government was able to borrow money for less than nothing. When those
specific bonds expire in two years’ time, the German government will pay back
the original $5.13 billion minus 0.06%. Expressed another way, investors
knowingly and willingly bid the German government $5.13 billion in exchange for
bonds that will pay no interest and are guaranteed to lose them money on
expiration.1 Welcome to the new status quo.Germany is not alone. Over the past six months, the countries of Netherlands, Switzerland and France have also issued short-term government debt at negative yields. Like Germany, they’ve been able to do this because European bond investors are so shell shocked that they’d rather park money in a bond that’s guaranteed to only lose a miniscule amount rather than risk losing more in a PIIGS bond that actually pays some interest. In addition, many investors view German, French and Dutch bonds to be cheap options on the break-up of the Eurozone. If the EU currency union collapses, euro-denominated bonds issued by those specific countries may be paid back in re-issued deutschmarks, francs or guilders, which will be far more valuable than the euros that were spent to buy the bonds in the first place… or at least that’s the idea. As a result of this thinking, the bond market auctions for these select countries have seen overwhelming demand, making NIRP (Negative Interest Rate Policy) the new ZIRP (Zero Interest Rate Policy).
More
Today Germany’s austerity Chancellor gets to tell
the Greek Prime Minister just how high he must jump to get more German bailout
cash. He needn’t bother trying to make the jump. Events elsewhere are fast
making trying to save the euro moot. A
slowing global economy risks sinking a whole lot of boats, but none will sink
faster than Club Med’s. Europe’s never ending crisis is about to come to an
unscripted unexpected end. Europe’s ditherers, muddlers and bunglers, have
simply waited too long to take decisive action, now other events are about to
make any rescue attempt to little too late.
Below, the new reality in the world as China slows
and China becomes glutted with unneeded commodities. In the USA, never has VIX
complacency looked to me to be more wrong.
"There is no example in history of a lasting
monetary union that was not linked to one State."
Otmar Issuing, Chief Economist of the German
Bundesbank Council,1991.
Australia's mining boom is over, says resources minister Martin Ferguson
Australia's resources minister, Martin Ferguson, has declared the nation's mining boom "over" after BHP Billiton, the world's biggest miner, delayed plans to build the largest open-pit mine in the world as the global economy slows.
7:20AM BST 23 Aug 2012
"You've got to understand, the resources boom is over. We've done well
- A$270bn (£179bn) in investment - the envy of the world," Mr Ferguson
told ABC radio. "It has got tougher in the last six to 12 months. Look at Europe, the state of the European and global economy. Think about the difficulties in China. The commodity price boom is over and anyone with half a brain knows that."
Analysts have warned of growing headwinds in Australia due to the commodity slowdown, with Deutsche Bank this week saying the mining-powered economy was at risk of slipping into recession in 2013 as the value of its exports drop.
Australia's central bank expects mining and energy-related spending to peak sometime in 2013-14, quicker than expected, due to global uncertainty.
----The Reserve Bank of Australia predicted in its quarterly outlook on monetary policy this month that the boom would end "somewhat earlier than previously thought". It noted that some resource companies had "adopted a more cautious approach to investment opportunities currently under consideration... given the more uncertain global outlook".
BHP said it was reconsidering the economics of its $20bn (£12bn) expansion of the Olympic Dam mine in South Australia, as its first fall in profits in three years.
As a result, the miner will not be ready to approve the development before December 15, the deadline agreed with the South Australia state government. No major new projects will now be approved before June 2013, management said.
More
DOUG KASS: The Last 5 Times The VIX Was This Low, Markets Got Ugly Really Fast
Aug. 21, 2012 Legendary investor Doug Kass of Seabreeze Partners is out with his outlook for the fall on TheStreet.com, and he's getting pretty nervous about the stock market.Why?
Complacency, as measured by the low VIX, is the highest it's been in months, as a lack of negative news flow out of Europe and recent economic data in the U.S. has surprised investors to the upside.
Kass writes that "typically, the decline in the markets, off of a low VIX is quick and relatively severe."
Here is what the decline in the S&P 500 has looked like the last five times the VIX have bottomed out:
more
"With hindsight, 2003 was the year when
serious cracks in the European political compound became apparent... 2004 could
be the year when markets begin to price in some dire consequences... Investors
who make decisions for the long term should allow for the risk of the Euro
falling apart."
Joachim Fels, Economist, Morgan Stanley. 'Euro
Wreckage?' report, February 2004.
At the Comex silver depositories Thursday final figures were: Registered 35.56
Moz, Eligible 104.41 Moz, Total 139.97 Moz.
Crooks and Scoundrels
Corner
The bent,
the seriously bent, and the totally doubled over.
Today,
diplomacy Asian style. While Her Majesty’s weak coalition Government in London
bizarrely sets out to take on all of the governments in South America over an
Australian wanted in Sweden for alleged sex crimes, who may or may not then be
extradited to America, to join Bradley Manning in political imprisonment, and
who is now hiding in the Ecuadoran embassy in London granted political asylum,
on the other side of the world, Japan is setting out to make enemies of its
near neighbours.
To me,
neither the UK nor Japan are acting wisely in their own best interest, short
term or long term. Though of the two, Japan is likely to suffer most. Great
Britain doesn’t have previous convictions for persecuting its near neighbours,
Sweden nor South America. Japan on the other hand still has a lot to answer
for. Below, today’s update on rising Asian tensions.
When
a government is dependent upon bankers for money, they and not the leaders of
the government control the situation, since the hand that gives is above the
hand that takes, Money has no motherland; financiers are without patriotism and without decency; their
sole object is gain.
Napoleon
Bonaparte
Japan-S. Korea Spat Threatens to Scotch Bond Purchase Plan
By Mayumi Otsuma and Takashi
Hirokawa - Aug 24, 2012 6:25 AM GMT
Japan said an escalating dispute with South Korea over a set of rocky islets
claimed by both sides may threaten its agreement to purchase South Korean
bonds. “We have yet to actually decide on when to start the Korean bond purchases,” Finance Minister Jun Azumi told reporters today in Tokyo. “I’d like to watch the situation for a while.”
His comments came a day after the two countries played a game of diplomatic ping pong over a letter written by Japanese Prime Minister Yoshihiko Noda to South Korean President Lee Myung Bak. A South Korean official yesterday attempted to return the letter protesting Lee’s Aug. 10 visit to the islets, only to be denied entry to the foreign ministry in Tokyo. The letter was then mailed to the ministry and accepted today.
The dispute over the rocks, known as Dokdo in Korean and Takeshima in Japanese, has damaged attempts to strengthen ties between Asia’s second and fourth-biggest economies. The bond purchase deal, which included China, was reached in May to strengthen cooperation amid growing global economic uncertainty.
Noda’s letter was returned because it referred to the islets by the Japanese name, South Korean foreign ministry spokesman Cho Tai Young told reporters yesterday in Seoul. Japanese Foreign Minister Koichiro Gemba, who called the action “diplomatically inconceivable” yesterday, said today the letter had arrived and that the government won’t send it back.
----Japan is embroiled in a separate dispute with China over islands in the East China Sea claimed by both. A group from Hong Kong was arrested and deported last week for landing on the Japanese-controlled islands, and Japanese activists landed there last weekend, sparking protests in Hong Kong and China.
Azumi reiterated today that Japan is also reconsidering an agreement to expand a foreign exchange swap deal with South Korea. Noda and Lee agreed in October to expand an existing swap agreement to $70 billion from $13 billion to offer the countries protection from funding shocks as Europe’s debt crisis deepened.
“The swap agreement was made at South Korea’s strong request,” Azumi said. “The expansion is due to expire in October, and under normal circumstances would be extended automatically. I have no choice but to reconsider the deal from scratch.”
More
Another weekend, and a long weekend here in
the UK as we take off for the last of the summer holidays. Everywhere
outside of the UK for once, looks gloomy, stormy, or outright
dangerous. Here the UK economy merely looks dismal, stagnant, and unlikely to
change for the better before next year. Of course an EMU break up will likely
delay that by about another year. Time to head out into the countryside,
expected rain notwithstanding, to enjoy all the flowers, berries,
butterflies, moths, and wild flowers.
Time too to put a certain Australian on a
plane to Quito, which is what he says he desires, telling all and sundry to
take their disputes there. The CIA is more than capable of pulling an Eichmann
there, if so inclined. Great Britain simply doesn’t have a dog in this fight. Have
a great weekend everyone.
"The Euro can only lead to closer and closer
integration of countries' economic policies ... This demands that member states
give up more sovereignty".
Romano Prodi, EU Commission President. Daily Telegraph,
7 April 1999.
The monthly
Coppock Indicators finished July:
DJIA: +65 Up. NASDAQ: +75 Up. SP500: +48 Up. All
three indicators have reversed from down to up, though only marginally. Last
week’s ECB relief rally probably made the difference.
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