Baltic Dry Index. 669 -06
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
"It
will drive Germans to the barricades," said the unusually unflappable
Suddeutsche Zeitung; it is "blank cheque", said Bild Zeitung. The
euro is "kaput".
For more on the “kaput” euro and ECB mice,
scroll down to Crooks Corner, where yet another Euro rescue isn’t quite what it
seemed.
We open today with the Baltic Dry (shipping)
Index just 6 points above its post Lehman crash 2008 low. While the
circumstances are different here in 2012, one thing is certain that global
trade is slowing, the shipping industry is unprofitable, and that global stock
markets have risen well in advance of any ECB, Fed, BOE and BOJ new money. But
with new money from thin air supposed to appear later this month, barring an
unexpected decision by Germany’s constitutional court on Wednesday, gold,
silver and crude oil all rocketed on Friday. New money from nothing eventually
devalues all the old money, and this time round the only thing blocking it at
present is our new developing global recession. Though madness, according to
Einstein, was doing the same thing over and over again and expecting a
different result, our central banksters are doing just that in trying to
monetise their way out of this new recession. We are entering the last chapter
of the Great Nixonian Error of fiat money. Stay long physical precious metals,
we haven’t seen anything yet.
"The battle to stop gold has been lost."
James Sinclair.
Sept. 5,
2012, 4:17 p.m. EDT
Why is Putin stockpiling gold?
Commentary: Russia is bulking up its gold reserve
I can’t
imagine it means anything cheerful that Vladimir Putin, the Russian czar, is
stockpiling gold as fast as he can get his hands on it.
According
to the World Gold Council, Russia has more than doubled its gold reserves in
the past five years. Putin has taken advantage of the financial crisis to build
the world’s fifth-biggest gold pile in a handful of years, and is buying about
half a billion dollars’ worth every month.
It
emerged last month that financial gurus George Soros and John Paulson had also
increased their bullion exposure, but it’s Putin that’s really caught my eye.
----On
the one hand, it’s an investment that by most modern standards seems to make no
sense. It generates no cash flow and serves no practical purpose. Warren
Buffett has pointed out that we dig it out of one hole in the ground only to
stick it in another, and anyone watching this from Mars would be very confused.
----But
there’s another way to look at gold: As the most liquid reserve in times of
turmoil, or worse.
The big
story of our era is not that the Spanish government is broke, nor is it that
Paul Ryan apparently feels the need to embellish his running record. It’s that
the United States, which has dominated the world’s economy for several
lifetimes, is in relative decline.
As was
first reported here in April of last year, according to International Monetary
Fund calculations, the U.S. is on track to lose its status as the world’s
biggest economy—when measured in real, purchasing-power terms—to China by 2017.
We
will soon be the first people in two hundred years to live in a world not
dominated by either Pax Americana or Pax Britannica. This sort of changing of
the guard has never been peaceful. The declines of the Spanish, French and
British empires were all accompanied by conflict. The decline of British
hegemony was a leading cause of the First and Second World Wars.
More
Elsewhere, the China warns on its economy again
even as they announce some new infrastructure projects for next year. The trick
is getting from here to there.
Hu Says China Growth Is Facing ‘Notable Downward Pressure’
By Bloomberg News - Sep 8, 2012 6:06 AM GMT
Chinese President Hu Jintao said a slowdown in exports is putting downward
pressure on the world’s second-biggest economy, and he pledged to boost
domestic demand and promote more balanced growth. “Economic growth is facing notable downward pressure, some small and medium enterprises are facing a hard time and exporters are facing more difficulties,” Hu said today at the Asia-Pacific Economic Cooperation CEO Summit in Vladivostok, Russia. “We have an arduous task of creating jobs for new entrants to the labor force.”
The slowdown is increasing pressure on Hu as China tries to ensure a smooth transition of power to a new generation of leaders at a once-in-a-decade Communist Party Congress this year. Europe’s debt crisis and anemic U.S. growth may hinder a rebound in exports while at home a slump in earnings is deterring companies from spending and banks face rising debts.
Asia’s biggest economy expanded 7.6 percent in the second quarter from a year earlier, the slowest pace in three years, after the government moved to counter inflation and surging property prices after its 2009 stimulus. Exports in July rose 1 percent from a year earlier and shipments in the first seven months rose 7.8 percent, compared with a 23.4 percent rise in the same period in 2011.
More
The Chinese Steel Production Paradox
Added September 6th, 2012 by
Anthony David
With
demand for steel on the wane, producers across the world have reported losses
or sharp drops in profitability. The slowdown in the steel market has been
attributed to the slowdown in the Chinese economy, the ongoing euro zone crisis
and a sluggish U.S. economy. Though China, the largest consumer of steel has
taken measures to boost its economy, it is not expected to result in an
increased demand for steel in the short term.
Raw steel
production in China recorded a 2% increase in early August this year taking the
country’s steel production to a record 400% increase over a period of 10 years.
In 2012 China’s steel production is expected to touch 715 million tons. Despite
production cuts, slackening demand and rising stockpiles China’s output for
2012 is expected to be 5.2% up from 2011.
The
paradox here is that though the demand for steel is down and reaching lower
levels daily, Chinese steel mills are still producing to achieve record steel
output figures. According to China Iron and Steel Association (CISA), the
country’s steel stockpile is up by 26% from last year. The CISA also reports
that the country’s steelmakers saw profits fall by 96% on the back of slowing
demand, triggering speculations about a possible revival of tax breaks for
Chinese steel producers. However, the country’s steel production shows no signs
of letting up barring a few production cuts.
----That the country’s steel production is heading for a serious downswing is evident by the fact that for the second time this year, China’s steel mills have defaulted on, or deferred taking shipments of almost four million tons of iron-ore. The Shanghai rebar futures was down at $560 per ton. China’s slowdown has impacted iron ore prices; the price of high grade iron ore is down by 2.7% to $106.40 last week, the lowest since 2009.
Baosteel,
China’s largest steel manufacturer expects steel prices to continue to be under
pressure as the industry’s output hasn’t slowed even while the economy has
slowed down. Analysts expect that steel prices may hit rock bottom by around
March 2013. China’s excessive production despite weakening demand could totally
wipe out its steel sector’s profitability.
More
China approves $157 billion infrastructure spending to energize the economy
SHANGHAI/BEIJING: China has given the green light for 60 infrastructure
projects worth more than $150 billion as it looks to energise an economy mired
in its worst slowdown in three years, fuelling hopes the world's growth engine
may get a lift from the fourth quarter.
Shares and steel futures jumped on the plans to build highways, ports and airport runways, among the most ambitious unveiled in China this year, which analysts say signalled growing intent to bolster economic growth as the country's once-a-decade leadership change looms.
China's powerful economic planning body, the National Development and Reform Commission, announced approvals for projects that analysts estimate total more than 1 trillion yuan ($157 billion), roughly a quarter of the total size of the massive stimulus package unleashed in response to the global financial crisis.
The announcement comes just before a deluge of economic data due on Sunday that could confirm investors' worst fears that a downswing in the world's second-biggest economy has stretched into a seventh straight quarter.
Shares and steel futures jumped on the plans to build highways, ports and airport runways, among the most ambitious unveiled in China this year, which analysts say signalled growing intent to bolster economic growth as the country's once-a-decade leadership change looms.
China's powerful economic planning body, the National Development and Reform Commission, announced approvals for projects that analysts estimate total more than 1 trillion yuan ($157 billion), roughly a quarter of the total size of the massive stimulus package unleashed in response to the global financial crisis.
The announcement comes just before a deluge of economic data due on Sunday that could confirm investors' worst fears that a downswing in the world's second-biggest economy has stretched into a seventh straight quarter.
More
Global economy must brace itself for ‘perfect storm’
Sep 7, 2012Cernobbio: Experts and leaders gathered in Italy may disagree on the cure, but the malady seems clear: the world economy faces a “perfect storm” of risks that include prolonged crisis in a structurally flawed Europe, political paralysis pushing America off a “fiscal cliff,” a slowdown in the emerging economies drying up the last of global growth, and the spectacularly destabilizing prospect of war over Iran’s nuclear program.
A world of such unpredictable peril is also one in which jitters suppress the appetite for private and corporate risk, yielding meager investment and low consumption and prolonging the woes that snuck up on a booming world in the summer of 2007 as a “credit crunch”, mushrooming a year later into the Great Recession.
Many attendees at the annual Ambrosetti Forum at Lake Como on Friday fretted about mounting U.S. debt and the Europe’s inability to balance electorates’ apparent insistence on national sovereignty with the need for regional coherence to salvage the teetering euro.
But economist Nouriel Roubini predicted years of gloom almost regardless of what is decided.
That analysis is rooted in the specific nature of this crisis, a downward spiral in which a financial meltdown largely caused by excess credit was defused by a blast of public spending; that 2009 stimulus, widely credited with avoiding a global depression, pushed some governments too far into the red for the markets’ liking — a “sovereign debt crisis”; and this is turn was attacked through severe austerity measures that suppressed spending to the point that countries cannot grow their way back to prosperity.
"A
United States of Europe is an impossible idea. It is a very serious mistake to
try to destroy the nation states. You cannot go against the cultural beliefs of
the people and the forces of history."
Former
Spanish premier Jose Maria Aznar. Cernobbio, Italy.
At the Comex silver depositories Friday final figures were: Registered 38.43
Moz, Eligible 102.95 Moz, Total 141.38 Moz.
Crooks and
Scoundrels Corner
The bent,
the seriously bent, and the totally doubled over.
Today, totally doubled
over Europe. Europe’s rescue plan might not fly, with or without approval by Germany’s
constitutional court on Wednesday. If Germany’s not willing to play the role of
Euroland leader and paymaster, says George Soros, Germany itself should leave
Euroland as a French lead weak Latin euro currency. The Great Bilderberger
Experiment imposed on Europe teeters on the edge of ignominy. If only they had
ever read Robert Burns.
But, Mousie, thou art no thy lane,
In proving foresight may be vain;
The best-laid schemes o' mice an 'men
Gang aft agley,
An'lea'e us nought but grief an' pain,
For promis'd joy!
Robert Burns. To A [n ECB] Mouse, On Turning Her Up In Her Nest With The
Plough
Carthaginian terms for Italy and Spain threaten Draghi bond plan
The cold douche begins. Markets will now learn that the European Central Bank's bond plan is a devout wish, not a done deal. Europe's political minefield lies ahead.
Nothing can happen until Spain and then Italy request a rescue from the EU bail-out funds (EFSF/ESM), and sign away their sovereignty. Nothing further can happen until an angry Bundestag approves the terms and signs away its money.Germany has a 27pc voting weight and can veto any rescue.
Even less can happen if the German constitutional court issues a preliminary ruling on Wednesday blocking activation of the €500bn ESM fund. Morgan Stanley's team – mostly Germans as in happens – put a 40pc likelihood on this happening.
This is not to belittle the ECB plan for "unlimited" bond purchases. The Jesuit-trained Mario Draghi has pulled off a masterstroke, securing the assent of every northern ECB governor except the Bundesbank's Jens Weidmann, and crucially the assent of Germany's board member Jorg Asmussen, and indeed Chancellor Angela Merkel herself.
Italy's premier Mario Monti – a fellow `Jesuit' – more or less confessed that this minor revolution could not have happened without the defeat of French leader Nicolas Sarkozy in May. The election upset broke the Franco-German axis and reordered the strategic landscape of Europe.
In a poignant
exchange here at the Ambrosetti forum – a gathering of the world policy elites
at Villa d'Este on Lake Como – he talked of intense "psychological
pressure" from Paris and Berlin in the early months of his tenure. It all
changed three months ago with the liberating arrival of President Francois
Hollande.
This was
the birth of the Latin Bloc. Mr Hollande was no longer willing to stick
doggedly to the same destructive course or endorse the German morality tale
that "sinner states" alone are responsible for Europe's woes.
A
grown-up view has at last prevailed. This is a crisis of capital flows and
trade imbalances, a dysfunctional structure in which Germany itself is an equal
"sinner" – a meaningless term in economics – in as much as it clings
to a mercantilist trade advantage over Club Med through a distorted intra-EMU
exchange rate.
Nor could
the Draghi breakthrough have happened without the diplomatic arm-twisting of
China and America. President Barack Obama found his intellectual soulmate in Mr
Monti, telephoning him for every update on Europe's drama, treating him as de
facto president of Europe, concentrating the full might of the United States
behind the very different Monti narrative of the crisis.
----The reality is that Italy's Left and Right are both deeply wary of EU-IMF Troika intervention, leaving a collapsing centre as elections loom early next year.
Any such
Memorandum would bind the hands of a successor government. It would force the
Left to swallow pro-cyclical austerity ex ante. "It would be self-harming
to request help from the fund if there are any extra conditions," said
Stefano Fassina from the Democrats (Pd).
Il
Giornale – the mouthpiece of the Berlusconi family – called the plan a
"trap", a surrender of sovereignty to German hegemony and the
"party of the bankers." Better a return to the lira.
More.
http://www.telegraph.co.uk/finance/comment/9531764/Carthaginian-terms-for-Italy-and-Spain-threaten-Draghi-bond-plan.html
George Soros: Germany should back growth or leave euro
Germany should leave the euro zone if it is not prepared to take a more decisive lead in helping the euro zone's weaker nations escape a spiral of increasing indebtedness and economic decline, financier George Soros said.
9:18PM
BST 08 Sep 2012
Soros
said Europe faced a prolonged depression and an acrimonious end to the European
unification project if steps were not taken to help its southern nations grow
their way out of the debt crisis by collectively assuming some of their debt
and relaxing its German-led insistence on austerity.
"Germany
should either lead in developing a growth policy, political union and
burden-sharing, accept the cost of leadership, or leave through an amicable
arrangement," Soros told Reuters in an interview with Reuters television
in Vienna.
Soros, a
liberal philanthropist who rose to fame as an investor on a big bet against the
British pound in 1992, said a Germany-free euro zone could be more competitive
in exports and service its debts more cheaply with a weaker, France-led
"Latin" euro.
Otherwise,
Germany should step up and accept its de-facto leadership role, and abandon its
Bundesbank-led ideological opposition to central bank financing of states and
strict adherence to a goal of inflation close to but below 2 percent.
More
http://www.telegraph.co.uk/finance/financialcrisis/9531029/George-Soros-Germany-should-back-growth-or-leave-euro.html
Still
thou art blest, compar'd wi' me
The present only toucheth thee:
But, Och! I backward cast my e'e.
On prospects drear!
An' forward, tho' I canna see,
I guess an' fear!
The present only toucheth thee:
But, Och! I backward cast my e'e.
On prospects drear!
An' forward, tho' I canna see,
I guess an' fear!
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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