Baltic Dry Index. 774 +19 Possible
double bottom.
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
"The great merit of gold is precisely that it is scarce; that its quantity is limited by nature; that it is costly to discover, to mine, and to process; and that it cannot be created by political fiat or caprice."
Henry Hazlitt
Agflation – a new problem arrives. “Rabobank, a specialist in agricultural commodities,” sees higher food prices ahead, especially in meat products. Higher prices for animal feed, will lead to higher prices for beef, pork, chicken and eggs, and a smaller global meat herd as well. The great British breakfast may soon be a disappearing memory for many. While we can all downshift to eating more bread, rice and pasta, suggests Rabobank, that tends to make voters highly cranky in the western democracies. Since animal feedstuff corn, is also a major ingredient of much of the world’s beers, higher priced beer probably also lies ahead. Now that really will make Europe’s northern voters cranky. An interesting 2013 seems to lie ahead.
World on track for record food prices 'within a year' due to US drought
Brace yourself for some painful "agflation". That is the shorthand for agricultural commodity inflation, otherwise known as rising food prices.
They are being driven upwards by the climb in grain and oilseed prices as US crops weather the country's worst drought since 1936, while the farming belts of Russia and South America suffer through similar water shortages.What we are seeing represents the third major rally in global grain and oilseed prices in just half a decade.
Worse is to come, new research warns. World food prices look set to hit an all-time high in the first quarter of next year – and then keep rising, according to the analysis from Rabobank, a specialist in agricultural commodities.
By June 2013, the basket of food prices tracked by the United Nations could climb 15pc from current levels, according to the bank's analysts.
"The coming year will see the world economy re-enter a period of agflation as grain and oilseed stocks decline to critically low levels, pushing the FAO [Food and Agricultural Organisation] Food Price Index above record nominal highs set in February 2011," they say.
----Rabobank thinks the consumer impact could be less painful this time around compared to 2008, when there were severe shortages of wheat and rice.
That is because today's shortages are being seen more in crops used as animal feed, such as corn and soybeans.
In contrast, back in 2008 falling wheat stocks and various bans on rice exports capped the amount of grains available for direct consumption by people.
Today, prices for staple grains such as rice and wheat are currently 30pc below their 2008 peaks.
So while the pressure on feedstock supplies pushes up meat prices, consumers feeling the squeeze should be able to switch from animal protein towards staple grains.
Food prices are also rising in a very different global economic environment, with Chinese demand slowing and the debt problems of the West weighing on world growth. That lessens wider price pressures in the system.
"Sooner or later both the Greek population and international creditors will tire of fighting a losing battle, leading to a break-up of the currency union as Greece pulls out, probably followed by other countries"
Douglas McWilliams, chief executive of the Centre of Economics and Business Research.
European Leaders Struggle to Overcome Fresh Crisis Stalemate
By Patrick Donahue - Sep 23, 2012 11:01 PM GMT
European leaders are struggling to overcome a crisis-fighting stalemate as
they face discord over a banking union, Greece’s ongoing debate on how to meet
bailout commitments and foot-dragging by Spain and Italy on financial aid
requests. Chancellor Angela Merkel and President Francois Hollande underlined Franco-German disagreement over the weekend as they clashed on a timetable to introduce joint oversight of the region’s banking sector, with Merkel rebuffing Hollande’s appeal to activate it “the earlier, the better.”
----Markets that surged this month on the back of a European Central Bank rescue plan and clarity over bailout funding may not offer European leaders the time they need as an easing in market pressure raises the risk of policy complacency. Deadlock over the banking union could delay until next year a key building block in resolving the crisis, compounding turmoil that’s so far engulfed five of the euro area’s 17 nations.
“Complacency seems to have affected European policy- makers,” Joachim Fels, chief economist at Morgan Stanley in London, wrote yesterday. “One case in point is the disagreement between governments about the nuts and bolts of a banking union, which remains crucial to break the negative feedback loop between banks and weak sovereigns.”
----Their meeting in the 18th-century Ludwigsburg castle was also the latest in which Merkel and Hollande struggled to find common ground since the French president won office in May on a platform of opposition to Merkel’s austerity agenda.
Merkel, asked about her relationship with Hollande, said they are “friendly.” Hollande shrugged off a question about the closeness between the German chancellor and his predecessor, Nicolas Sarkozy, that led to them being dubbed “Merkozy.” He refused to bless an equivalent “Merkhollande.”
“We don’t need to put our surnames together to put a name on European policies,” Hollande said.
More
http://www.bloomberg.com/news/2012-09-23/euro-leaders-seek-end-to-stalemate-as-discord-mounts-on-crisis.html
ECB in 'panic', say former chief economist Juergen Stark
The European Central Bank is in "panic" over the eurozone crisis and acting outside its mandate with its new bond-buying plans, the bank's former chief economist said in comments published Saturday.
5:20PM BST 22 Sep 2012
"The break came in 2010. Until then everything went well," Juergen
Stark, the German who resigned from the ECB in late 2011 after criticising its
earlier round of buying up of sovereign debt, told Austrian daily Die
Presse in an interview. "Then the ECB began to take on a new role, to fall into panic. It gave in to outside pressure ... pressure from outside Europe."
Mr Stark said the ECB's new plan to buy up unlimited amounts of eurozone states' bonds, announced on September 6, on the secondary market to bring down their borrowing rates was misguided.
"Together
with other central banks, the ECB is flooding the market, posing the question
not only about how the ECB will get its money back, but also how the excess
liquidity created can be absorbed globally," Mr Stark said.
"It
can't be solved by pressing a button. If the global economy stabilises, the
potential for inflation has grown enormously."
----Mr Stark quit in late 2011, following in the footsteps of former Bundesbank head Axel Weber, who stepped down earlier in the year from Germany's central bank because of unease about the ECB's policies.
Mr
Weber's successor Jens Weidmann was the only member of the ECB's policy-setting
governing council to vote against the bank's new programme earlier this month.
Morehttp://www.telegraph.co.uk/finance/financialcrisis/9560102/ECB-in-panic-say-former-chief-economist-Juergen-Stark.html
Václav Klaus warns that the destruction of Europe's democracy may be in its final phase
'Two-faced' politicians have opened the door to an EU superstate by giving up on democracy, Václav Klaus, the veteran Czech statesman, tells Bruno Waterfield.
The new
push for a European Union federation, complete with its own head of state and
army, is the "final phase" of the destruction of democracy and the
nation state, the president of the Czech Republic has warned.
In an
interview with The Sunday Telegraph, Václav Klaus warns that "two-faced"
politicians, including the Conservatives, have opened the door to an EU
superstate by giving up on democracy, in a flight from accountability and
responsibility to their voters.
"We
need to think about how to restore our statehood and our sovereignty. That is
impossible in a federation. The EU should move in an opposite direction,"
he said.
Last
week, Germany, France and nine other of Europe's largest countries called for
an end to national vetoes over defence policy as Guido Westerwelle, the German
foreign minister, urged the creation of a directly elected EU president
"who personally appoints the members of his European government".
Mr
Westerwelle, in a reference to British opposition, called for nation states to
be stripped of vetoes on defence to "prevent one single member state from
being able to obstruct initiatives" which "could eventually involve a
European army".
The new
offensive followed the unprecedented declaration by the Commission's president,
José Manuel Barroso, during his "state of union" address to the
European Parliament on 12 September, that he would make proposals for a
fully-fledged EU "federation" in 2014. "Let's not be afraid of
the word," he said.
Speaking
in Hradcany Castle, a complex of majestic buildings that soars above Prague,
and is a symbol of Czech national identity, Mr Klaus described Mr Barroso's
call for a federation, quickly followed by the German-led intervention, as an
important turning point.
"This
is the first time he has acknowledged the real ambitions of today's
protagonists of a further deepening of European integration. Until today,
people, like Mr Barroso, held these ambitions in secret from the European
public," he said. "I'm afraid that Barroso has the feeling that the time
is right to announce such an absolutely wrong development.
"They
think they are finalising the concept of Europe, but in my understanding they
are destroying it."
September 21, 2012, 8:01 a.m. ET
Finns Veto ESM Boost
Europe's permanent bailout mechanism is almost certain to
start its life next month without the two leverage vehicles that were agreed
for its predecessor because of Finland's concerns about its exposure to the
funds, several people familiar with the situation said.
The leverage options were designed to allow the euro zone
to mobilize far more than the €500 billion ($648.4 billion) lending capacity
ceiling on the new bailout fund, the European Stability Mechanism, by offering
extra protection to investors. Officials had not given exact figures but Klaus
Regling, chief executive officer of the bailout fund, has said they would allow
the euro zone to mobilize more than €1 trillion in resources to stem the debt
crisis.
Finance ministers from the euro zone discussed transferring the leverage vehicles to the ESM at a meeting in Cyprus last Friday. According to officials, there was broad support for the idea but objections from Finland blocked agreement.
One European Union official said he believes Finland's objections could be worked out. However, with the ESM due to be launched Oct. 8, the leverage vehicles now won't be included in the ESM guidelines that will detail the tools available to the new rescue fund and the conditions for using them, two officials said.
That means the leverage vehicles aren't likely to be available for use if a broader Spanish request for a bailout from the ESM were to come soon.
More
While Europe bickers and drifts, across the
Atlantic America has entered crazy season, the final run up to the winner take
all presidential election. A sitting president has all the advantages of
incumbency, so a challenger needs to have a strong momentum in the final phase.
In this particular election, the challenger seems to be losing momentum at
present, he will need to score big in the coming series of presidential
debates. Adding to the power of the incumbency this election, the Fed seems to
have swung behind the status quo with its latest round of QE forever MBS
purchases. American’s now have every bit as much need of physical precious
metals, as their hapless European serfs.
It’s morally wrong to let a sucker keep his money.
W. C. Fields. Wall Street Ethicist.
At the Comex silver depositories Friday final figures were: Registered 39.45 Moz,
Eligible 100.53 Moz, Total 139.88 Moz.
Crooks and
Scoundrels Corner
The bent,
the seriously bent, and the totally doubled over.
Today, China. It’s
not just Chinese capital and entrepreneurs leaving China. Ex-pats are leaving
too, plus China seems to have stopped granting visas to Japanese companies
seeking to replace personnel in China. Presumably a ratcheting up of the consequences
of the China v Japan fight over the Diaoyu/Senkaku Islands dispute. It’s hard
to see how Japan wins this fight in the long run.
You’ll never be Chinese
by Mark Kitto August 8, 2012Why I’m leaving the country I loved.
-----Modern
day mainland Chinese society is focused on one object: money and the
acquisition thereof. The politically correct term in China is “economic
benefit.” The country and its people, on average, are far wealthier than they
were 25 years ago. Traditional family culture, thanks to 60 years of
self-serving socialism followed by another 30 of the “one child policy,” has
become a “me” culture. Except where there is economic benefit to be had,
communities do not act together, and when they do it is only to ensure equal
financial compensation for the pollution, or the government-sponsored illegal
land grab, or the poisoned children. Social status, so important in Chinese
culture and more so thanks to those 60 years of communism, is defined by the
display of wealth. Cars, apartments, personal jewellery, clothing, pets: all
must be new and shiny, and carry a famous foreign brand name. In the small
rural village where we live I am not asked about my health or that of my family,
I am asked how much money our small business is making, how much our car cost,
our dog.
The
trouble with money of course, and showing off how much you have, is that you
upset the people who have very little. Hence the Party’s campaign to promote a “harmonious
society,” its vast spending on urban and rural beautification projects, and
reliance on the sale of “land rights” more than personal taxes.
Once
you’ve purchased the necessary baubles, you’ll want to invest the rest
somewhere safe, preferably with a decent return—all the more important because
one day you will have to pay your own medical bills and pension, besides
overseas school and college fees. But there is nowhere to put it except into
property or under the mattress. The stock markets are rigged, the banks operate
in a way that is non-commercial, and the yuan is still strictly
non-convertible. While the privileged, powerful and well-connected transfer
their wealth overseas via legally questionable channels, the remainder can only
buy yet more apartments or thicker mattresses. The result is the biggest
property bubble in history, which when it pops will sound like a thousand
firework accidents.
In brief,
Chinese property prices have rocketed; owning a home has become unaffordable
for the young urban workers; and vast residential developments continue to be
built across the country whose units are primarily sold as investments, not
homes. If you own a property you are more than likely to own at least three.
Many of our friends do. If you don’t own a property, you are stuck.
When the
bubble pops, or in the remote chance that it deflates gradually, the wealth the
Party gave the people will deflate too. The promise will have been broken. And
there’ll still be the medical bills, pensions and school fees. The people will
want their money back, or a say in their future, which amounts to a political
voice. If they are denied, they will cease to be harmonious.
More
Criticising China
The response to my farewell
by Mark Kitto September 19, 2012 For the August issue of Prospect I wrote an article entitled, “You’ll never be Chinese”. I expressed thoughts and ideas I have held for some time, backed up by observations and personal experiences from 16 years in China. It was not easy to write. Much of it was negative. I was keenly aware that I might upset my friends and family in China. I had also naively expected the words to come flooding out, rather like a sigh of relief. I found myself choking on them. It’s hard to say goodbye.The article is proving a challenge to live with as well. Thanks to it being freely available online, the readership has been far greater than expected. It was published as I left the UK, where I had been doing a recce for our move, and flew back to China. The first person to comment was at the baggage carousel in Pudong Airport. For approximately one week, I heard from foreign friends and acquaintances in China. The consensus was: “Good points, we all agree, but we can’t say so because we have interests to protect.” Those who had already left China were less inhibited. I watched as the comments piled up on the Prospect website. It was good to see old friends, and enemies, put in their five cents. It was more of a challenge to spot the notorious “fifty cent” gang, the commentators encouraged by the authorities to help with “soft power projection.” They can be subtle.
At the end of that week the article was translated into Chinese and appeared on various discussion boards and the Chinese version of Twitter and Facebook, Weibo. It went from a readership of tens of thousands to hundreds of them, potentially millions. The effect was immediate. I happened to be away from home travelling again. That was fortuitous.
My wife was called into the police station, not as we both feared, for a dressing down, but so the police chief could pass on, from the local, county, and provincial governments, all of which had called him in person, their concern that I might have felt hard done by. “Was everything all right?” he asked.
My wife also had to face her business partner, who has become a close friend. He is of the older generation, and did not like what I had written. He took it personally. If I had been present I fear we would have argued, but while I was away the People’s Daily published an op-ed piece on how not to get upset when foreigners comment on China in negative ways. On my return my friend greeted me warmly and looks forward to a long chat.
More http://www.prospectmagazine.co.uk/magazine/mark-kitto-china-criticism-response/ “Those who don't know history are destined to repeat it.”
Edmund Burke
The monthly
Coppock Indicators finished August:
DJIA: +76 Up. NASDAQ: +97 Up. SP500: +69 Up. All
three indicators have reversed from down to up.
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