Japan Adds More QE.

Baltic Dry Index. 697  +34 Potential Double Bottom!

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

"Gold bears the confidence of the world's millions, who value it far above the promises of politicians, far above the unbacked paper issued by governments as money substitutes. It has been that way through all recorded history. There is no reason to believe it will lose the confidence of people in the future."

Oakley R. Bramble

First the good news. Potentially the Baltic Dry [shipping] Index might just have double bottomed, 663 in post Lehman December 2008, 661 in a slowing Chinese economy September 2012. If so, the BDI might just be an early outlier for a trade pick up in the months ahead. Adding to the good news, the BOJ has unexpectedly today added to it QE forever asset purchasing programs. We now have money creation, stimulation programs of one type or another in America, China, the Eurozone and Japan. The Bank of England for some reason seems to want to miss this new party.

BOJ Follows Fed to Bolster Stimulus as Growth Falters

By Toru Fujioka - Sep 19, 2012 5:52 AM GMT

The Bank of Japan unexpectedly expanded its asset-purchase fund by 10 trillion yen ($126 billion), seeking to counter an increasing danger of contraction in the world’s third-largest economy.

The BOJ’s program, in which it buys mainly government debt, was enlarged to 55 trillion yen in a unanimous decision by the board, the bank said in a statement in Tokyo today. A separate fund that extends credit to banks was held at 25 trillion yen.

----With today’s move, the BOJ joins counterparts from the Federal Reserve to the European Central Bank in taking steps to address persistent risks to growth five years after the U.S. mortgage meltdown derailed the global economy.

“Further easing is still possible this year because the BOJ is emphasizing uncertainties in its outlook,” said Masamichi Adachi, a senior economist at JPMorgan Securities in Tokyo.

----The bank downgraded its economic assessment, saying that Japan’s growth has “come to a pause” while overseas economies have moved “somewhat deeper into a deceleration phase.”
More
http://www.bloomberg.com/news/2012-09-19/boj-follows-fed-to-bolster-stimulus-as-economic-recovery-falters.html

Now the bad news. China is so irate with Japan’s latest provocation in the Diaoyu/Senkaku Islands dispute, that as Japan’s largest creditor they are thinking of nuking Japan’s bond market, and dumping Japan from the proposed China-Japan-ROK free trade area. While the Bank of Japan would be forced to step in to buy China’s dumped bonds, preventing a rout, demographics mean that Japan will soon be selling most of its bonds to the world market. China’s signal means that Japan would soon be paying vastly higher interest rates.

Last week it was China’s top military man ordering the Chinese Army to be prepared for war with Japan. This week it’s China’s Commerce Ministry suggesting bringing Japan’s economy to its knees. Stay long physical precious metals. The world’s number two national economy is thinking about taking out the world’s number three national economy.  This being China’s equivalent of re-taking the Falkland Islands, be prepared for China to take further action against Japan.

Beijing hints at bond attack on Japan

A senior advisor to the Chinese government has called for an attack on the Japanese bond market to precipitate a funding crisis and bring the country to its knees, unless Tokyo reverses its decision to nationalise the disputed Senkaku/Diaoyu islands in the East China Sea.

By Ambrose Evans-Pritchard 8:31PM BST 18 Sep 2012

Jin Baisong from the Chinese Academy of International Trade – a branch of the commerce ministry – said China should use its power as Japan’s biggest creditor with $230bn (£141bn) of bonds to “impose sanctions on Japan in the most effective manner” and bring Tokyo’s festering fiscal crisis to a head.

Writing in the Communist Party newspaper China Daily, Mr Jin called on China to invoke the “security exception” rule under the World Trade Organisation to punish Japan, rejecting arguments that a trade war between the two Pacific giants would be mutually destructive.

Separately, the Hong Kong Economic Journal reported that China is drawing up plans to cut off Japan’s supplies of rare earth metals needed for hi-tech industry.

The warnings came as anti-Japanese protests spread to 85 cities across China, forcing Japanese companies to shutter factories and suspend operations.

Fitch Ratings threatened to downgrade a clutch of Japanese exporters if the clash drags on. It warned that Nissan is heavily at risk with 26p of its global car sales in China, followed by Honda with 20pc. Sharp and Panasonic both have major exposure. Japan’s exports to China were $74bn in the first half of this year. Bilateral trade reached $345bn last year.

Mr Jin said China can afford to sacrifice its “low-value-added” exports to Japan at a small cost. By contrast, Japan relies on Chinese demand to keep its economy afloat and stave off “irreversible” decline.

More

http://www.telegraph.co.uk/finance/china-business/9551727/Beijing-hints-at-bond-attack-on-Japan.html

Japan's "purchase" of Diaoyu Islands affects China-Japan-ROK FTA talks

BEIJING, Sept. 19 (Xinhua) -- China said Wednesday that Japan's unlawful "purchase" of the Diaoyu Islands will definitely affect planned talks on a free trade area (FTA) between China, Japan and the Republic of Korea (ROK).

At a press conference here, Ministry of Commerce spokesman Shen Danyang said Japan's acts will impose adverse impact on Sino-Japanese economic and trade ties and will consequentially affect the planned trilateral FTA talks

More

http://news.xinhuanet.com/english/china/2012-09/19/c_131860137.htm

Japan's 'purchase' of Diaoyu to damage trade

2012-09-19

BEIJING - Japan's unlawful "purchase" of China's Diaoyu Islands will certainly affect and damage development of economic and trade relations between the two countries, the Ministry of Commerce (MOC) said Wednesday.

"It is not what we wish to see, for which Japan should take full responsibility," MOC spokesman Shen Danyang said at a regular press conference.

The Diaoyu Islands have been China's inherent territory since ancient times, Shen said. Historical documents showed that the islands appeared on China's map since the Ming Dynasty (1368-1644), more than 400 years before Japan claimed discovery of the islands in 1884.

"The farce of buying the Diaoyu Islands seriously violates China's territorial sovereignty and severely hurts the feelings of the Chinese people, which have aroused strong indignation and opposition across the nation," the spokesman said.

----Shen voiced support to rational patriotic activities, saying that the ministry will firmly oppose illegal behaviors involving smashing and looting during protests.

Legitimate interests of foreign companies are under the protection of Chinese laws, Shen said, adding that foreign companies should seek help from local authorities when encountering offences.

More

http://www.chinadaily.com.cn/china/2012-09/19/content_15768269.htm

Beijing stresses peaceful solution

2012-09-19

Military leaders meet Panetta and urge Washington not to take sides
China told Japan and the United States on Tuesday that it hopes the Diaoyu Islands issue can be resolved peacefully but Beijing reserves the right to "take further action".

Top military officials made the comments during a meeting with US Defense Secretary Leon Panetta. The Pentagon chief is visiting China for the first time.

Defense Minister Liang Guanglie, during a joint news briefing with Panetta, said China urged Washington to honor its promise of not taking sides.

Panetta arrived in Beijing on Monday evening following a visit to Japan. His visit to Beijing, including talks with senior military and government leaders, has coincided with an eruption in tension between China and Japan over the islands, which have belonged to China for centuries.

Tokyo said it completed a "purchase" of the islands last week.

More

http://www.chinadaily.com.cn/china/2012-09/19/content_15766653.htm

We end on Asia today, with China’s latest update on foreign direct investment. Unsurprisingly it’s down year on year, and in the current dispute with Japan, likely to fall further faster.

China's FDI inflow falls for third month

BEIJING, Sept. 19 (Xinhua) -- Foreign direct investment (FDI) into China fell for the third consecutive month in August as global economic woes continued to weigh heavily, new data revealed on Wednesday.

The FDI the country drew last month dropped 1.43 percent from a year earlier to 8.33 billion U.S. dollars, the Ministry of Commerce announced.

This brought the total FDI inflow for the first eight months of 2012 to 74.99 billion U.S. dollars, down 3.4 percent year on year, said ministry spokesman Shen Danyang.

Investment from the debt-plagued European Union (EU) dropped 4.1 percent year on year in the January-August period and that from the United States was down 2.85 percent, according to Shen.

More

http://news.xinhuanet.com/english/business/2012-09/19/c_131859938.htm

Back in the land of the never ending crisis, watch what Europe’s bankrupt banks do, not what they say they are going to do. Thanks to free money from the ECB’s “Super Mario” earlier in the year, instead of slimming down risky assets they gorged on more. It’s a funny old world on the error of fiat money, but more and more people and countries know how it all ends.  Stay long physical gold and silver.

"The history of paper money is an account of abuse, mismanagement, and financial disaster."

Richard M. Ebeling

Europe Banks Fail to Cut as Draghi Loans Defer Deleverage

By Anne-Sylvaine Chassany - Sep 18, 2012 12:01 AM GMT

European banks pledged last year to cut more than $1.2 trillion of assets to help them weather the sovereign-debt crisis. Since then they’ve grown only fatter.

Lenders in the euro area increased assets by 7 percent to 34.4 trillion euros ($45 trillion) in the year ended July 31, according to data compiled by the European Central Bank. BNP Paribas SA (BNP), Banco Santander (SAN) SA, and UniCredit (UCG) SpA, the biggest banks in France, Spain and Italy, all expanded their balance sheets in the 12 months through the end of June.

They have Mario Draghi to thank. The ECB president’s decision nine months ago to provide more than 1 trillion euros of three-year loans to banks eased the pressure to sell assets at depressed prices. The infusion, designed to encourage firms to lend, succeeded in averting a short-term credit crunch by reducing their reliance on markets for funding. It also may be making European lenders dependent on more central-bank aid.

“Deleveraging isn’t taking place, especially in Spain and Italy,” said Simon Maughan, a bank analyst at Olivetree Securities Ltd. in London. “The fact that we haven’t got on with it, or very slowly, suggests that when the time comes we’ll need another ECB injection to roll over the first one, just to keep the balance sheets of Italian banks in business.”

----Banks across Europe bolstered capital instead of selling assets and curbing lending. They did it by retaining profit and swapping debt with other securities, such as subordinated debt, considered to have better loss-absorbing qualities, the European Banking Authority said in July.

Some lenders used the ECB’s loans to purchase sovereign bonds. Under current Basel Committee on Banking Supervision rules, banks don’t have to hold any capital against government debt because it’s considered risk-free.

More

http://www.bloomberg.com/news/2012-09-17/europe-banks-fail-to-cut-as-draghi-loans-defer-deleverage.html

Debt crisis: central bank action is work of the devil, says Germany's Jens Weidmann

The head of Germany’s Bundesbank has raised eyebrows across Europe after he appeared to compare Mario Draghi’s bond buying programme with the "devil’s work".

By Louise Armitstead, Chief Business Correspondent 5:56PM BST 18 Sep 2012

Jens Weidmann said that efforts by central banks to pump money into the economy reminded him of the scene in Faust, when the devil Mephistopheles, “disguised as a fool”, convinces an emperor to issue large amounts of paper money. In Goethe’s classic, the money printing solves the kingdom’s financial problems but the tale ends badly with rampant inflation.

Without specifically mentioning Mario Draghi’s bond-buying programme, he said: “If a central bank can potentially create unlimited money from nothing, how can it ensure that money is sufficiently scarce to retain its value?” He added: “Yes, this temptation certainly exists, and many in monetary history have succumbed to it,” Mr Weidmann warned.

Although the remarks were in context - Frankfurt is currently marking the 180th anniversary of the death of Goethe - they defy calls by leaders for Mr Weidmann to tone down his criticism of the ECB, particularly at a febrile moment in the crisis. The launch by Mr Draghi of an unlimited bond-buying programme has boosted both confidence and markets.

Spanish and Italian borrowing costs dropped marginally on Tuesday. The yield on Spain’s benchmark 10-year bonds dropped to 5.8pc from 6pc earlier in the week; equivalent Italian debt hovered around 5pc.

But pressure continued to mount on Spain to officially request a bail-out from Brussels to stabilise its economy and the rest of the eurozone.

----Bad loans held by Spanish banks climbed to a record high in July, with nearly 10pc of households and business in arrears on their loans. The Bank of Spain said the bad loan rate, which showed that €169.3bn of loans were more than three months overdue, was the highest since records began in 1962.

Spain managed to auction some short-term debt on Tuesday but experts said the markets would not tolerate the uncertainty for long. Economist Nicolas Spiro said: “The window of opportunity for Spain to issue debt at what are still relatively favourable yields appears to be closing. The markets have priced in an ECB-backed bond-buying programme for Spain. The longer Madrid dithers, the more likely it is that the markets will turn decisively against Spain.”

More
http://www.telegraph.co.uk/finance/financialcrisis/9551348/Debt-crisis-central-bank-action-is-work-of-the-devil-says-Germanys-Jens-Weidmann.html

"Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood. For these few gold has been the asset of last resort."

Antony C. Sutton

At the Comex silver depositories Tuesday final figures were: Registered 39.28 Moz, Eligible 100.24 Moz, Total 139.52 Moz.  

Crooks and Scoundrels Corner

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

No crooks today, we’re preoccupied watching Iran, China and Japan. The action in the oil market suggests someone thinks a new war is near.

The monthly Coppock Indicators finished August:

DJIA: +76 Up. NASDAQ: +97 Up. SP500: +69 Up. All three indicators have reversed from down to up.