Baltic Dry Index. 875 -08
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
----For
now, it seems likely that Germany will back the next €31.5bn tranche of aid for
Greece. Jean-Claude Juncker the Eurogroup leader, said there had been
"substantial progress" on a list of 89 conditions imposed by
creditors.
"When it becomes serious, you have to lie"
Jean-Claude Juncker. Luxembourg Prime Minister and president of the Euro Group of Finance Ministers. Confessed liar.
On Monday Germany, via their Finance Minister, seemed to be pursuing a policy of forcing Greece out of the snake bit European Monetary Union. Yesterday in riot torn Athens, Chancellor Merkel seemed to signal just the opposite. Greece’s newest best friend Germany, will bankroll Greece forever, whatever it takes. Luxembourg’s Grand Pooh-Bah and Europe’s leading liar, was even trotted out to claim that somehow Athens had made substantial progress on the 89 trioka imposed demands, allegedly not met according to Berlin the previous day. Does European paymaster Germany even have an EMU bailout policy anymore, or is everything now orchestrated from Washington to get past the upcoming US election?
Stay long physical precious metals, this good German cop, bad German cop routine, might be highly entertaining to everyone outside of Club Med, but it’s no substitute for logically addressing sorting out the problems of Club Med. Pouring more money into a bottomless pit, only ensures that even more European wealth gets destroyed when Club Med finally leaves. The trade-off of getting President Obama re-elected is meaningless to anyone outside of the USA. Besides, there’s no guarantee that it might work. In the grand scheme of things, where the Great Nixonian Error of fiat money blew up in 2007-2008, it doesn’t much matter which organ grinder American’s pick for the next 4 years. Until someone comes up with a policy of getting the world back on to sound money, we are trapped in a serial crises driven world headed towards eventual fiat revulsion.
"There is no way
that Greece's austerity programme can ever work. The credit circuits have
broken down completely. Companies with full order books are going bankrupt
because they can't obtain foreign supplies. Nobody in the eurozone wants to
admit it so they're trying to put off the day of reckoning."
Professor Yannis Varoufakis, Athens University.
Angela Merkel recoils from Greek showdown on Spain contagion fears
Angela Merkel, the German chancellor, has stamped her seal of approval on Greece's austerity plan and vowed to stand by the country as "partner and friend", signalling almost certain approval for the next tranche of EU-IMF Troika aid.
The
German leader – protected by 6,000 police – braved hostile crowds in Syntagma
Square and Nazi insults in the Greek press as she made her first visit to
Athens since the debt crisis erupted three years ago. The Frankfurter
Allgemeine newspaper said Chancellor Konrad Adenauer had an easier time
visiting Greece in 1954, just a decade after Wehrmacht occupation.
The
unflappable Mrs Merkel offered a symbolic message of solidarity for the Greek
people – now in their fifth year of recession, with an economy reduced by 22pc
and youth unemployment at 55pc.
"I
have not come here as teacher or judge," she said after meeting premier
Antonis Samaras. "I come in the full awareness that the Greek people are
going through a difficult period, and that many are suffering badly.
"You
are making progress, you are coming to grips with the hard task ahead. It is in
all our interests to ensure that Europe regains credibility, and to make it
clear that we members of the eurozone can solve our problems."
The
conciliatory tone marks a clear shift in German policy, a recognition after
months of hardline talk by her ministers that a full debacle in Greece would be
hard to contain. "This is all about Spain," said Mats Persson from
Open Europe. "They concluded that it would be too risky to kick Greece out
now: contagion would spread to Spain and lead to a euro break-up."
Christian
Schulz, from the German bank Berenberg, said Mrs Merkel has come under heavy
pressure from the US and NATO allies to prevent a strategic debacle in the Eastern
Mediterranean. "There is a geopolitical story behind this. The Samaras
coalition is seen as the last chance for a stable, pro-European government. If
they let Greece go into default and leave the euro, the next government will
either be extreme Right-wing or Left-wing.
----It
is unclear whether Berlin has genuinely changed its stance. Finance minister
Wolfgang Schauble has said repeatedly that Germany will not pour money into a
"bottomless pit". He has accused Greece of failing to comply with
Troika terms – even when the Troika itself is less categorical, admitting that
economic collapse is the chief cause of fiscal slippage. Many investors suspect
that he is looking for an excuse to eject Greece as punishment for past sins.
More
IMF Sees European Banks Facing $4.5 Trillion Sell-Off
By Sandrine Rastello - Oct 10, 2012 4:15 AM GMT
The International Monetary Fund said European banks may
need to sell as much as $4.5 trillion in assets through 2013 if policy makers
fall short of pledges to stem the fiscal crisis, up 18 percent from its April
estimate.
Failure to implement fiscal tightening or set up a single
supervisory system in the timing agreed could force 58 European Union banks
from UniCredit SpA (UCG) to Deutsche Bank AG (DBK) to shrink assets, the IMF
said. That would hurt credit and crimp growth by 4 percentage points next year
in Greece, Cyprus, Ireland, Italy, Portugal and Spain, Europe’s periphery.
“Intensification of the crisis has manifested itself in
capital outflows from the periphery to the core at a pace typically associated
with currency crises or sudden stops,” the IMF wrote in its Global Financial
Stability Report released today
More
In Asia, the unofficial trade war between Asia’s
two largest economies over a group of uninhabited islands, just keeps heating
up. While China boycotts the Tokyo round of IMF meetings now underway, Taiwan’s
President has forcefully asserted Taiwan’s claim to the island group. Japan has
now managed to achieve a lose – lose position. Whatever it does now, short of
abandoning its very dodgy claim, is only likely to stir up memories of Japan’s
abuse of its neighbours last century. Japanese goods are likely to be shunned
in China and Taiwan. Probably in South Korea too, which has its own dispute
with Japan over a different set of islands further north. Japan is in a deep
hole but continuing to dig. This trade war will act as a further drag on the
global economy.
If a shooting war breaks out the US is committed to
Japan, though the US has been ominously silent in its defence of its rash ally
Japan. No Iran style rhetoric v China in favour of Japan. Something all too likely
to be misread in Beijing, unless the USA really is signalling China has a free
hand. But if America votes in a China belligerent President Romney, who is
already threatening a trade war with China and to slap Russia’s President Putin
around, China’s free hand might end in snowy January. Stay long physical
precious metals ahead of 2013.
China PBOC Chief Won’t Attend IMF Meetings Amid Island Spat
By Bloomberg News - Oct 10, 2012 6:50 AM GMT
China’s central bank governor won’t go to International Monetary Fund and
World Bank meetings in Japan this week amid a standoff over disputed islands
that’s soured ties between Asia’s two biggest economies. Yi Gang, a deputy governor of the People’s Bank of China, and Vice Finance Minister Zhu Guangyao will lead the group, the Xinhua News Agency reported last night. Governor Zhou Xiaochuan won’t attend, IMF spokeswoman Yoshiko Kamata said in Tokyo. She couldn’t confirm if Finance Minister Xie Xuren would go.
Relations
have been strained since Japan moved to buy the islands from their private
owner last month. The decision over the islands, called Senkaku in Japanese and
Diaoyu in Chinese, sparked nationwide protests across China and clouded a trade
relationship that has tripled in the past decade to more than $340 billion.
China’s
four biggest state-owned banks have said they won’t attend the Oct. 9-14
meetings, which will be attended by about 10,000 participants, according to
Xinhua. Zhou’s name was listed on schedules to speak at IMF and Institute of
International Finance events in Tokyo. The Chinese central bank didn’t
immediately respond to faxed questions today seeking comment, and calls to the
Chinese finance ministry’s news department went unanswered.
----Celebrating Taiwan’s National Day holiday today, President Ma Ying-jeou reiterated his government’s claim on the islands, saying in a speech that it will protect its fishing rights in the area. At least 50 Taiwanese fishing boats were in the area in late September under escort from patrol boats before returning home because of a typhoon.
“From a historical, geographical or international law perspective, the Diaoyu Islands belong to Taiwan,” Ma said in the speech
----The crisis may cause the Japanese economy to contract this quarter and hasten a current account slide as exports decline and Chinese tourism to Japan drops off, according to JPMorgan Chase & Co.
The decision not to attend the talks by Chinese banks, which have become the world’s most profitable with the help of government bailouts, indicates that the fallout of the territorial dispute is spreading from industries such as tourism and automobiles to financials.
----The China crisis may inflict more economic damage on Japan’s automakers than last year’s tsunami, according to the China Passenger Car Association. Their share will fall to 22 percent this year from 23 percent in 2011, according to the group.
Along with Toyota, Nissan Motor Co. yesterday reported its biggest drops in China sales since at least 2008 while Honda Motor Co.’s sales were the lowest since May 2011, according to monthly data compiled by Bloomberg.
More
We close for today
staying with Asia. Something very ugly is rising as India’s economy slows. Too
much unrepayable debt lies on the books of India’s banks. The six worst
performing of India’s top 14 banks are already government owned. India’s middle
class is right to hold much of its wealth in silver and gold. I suspect that in
this new arriving global slowdown, India’s banks will all end up needing some
kind of bailout just as in the EU and USA. Stay long precious metals for the
looming disaster of 2013.
‘Titanic’ Defaults Loom on Restructured India Bank Debt
By George Smith Alexander and
Anto Antony - Oct 10, 2012 5:10 AM GMT
India’s Kingfisher Airlines Ltd. (KAIR) escaped collapse in 2010 by
restructuring 77.2 billion rupees ($1.4 billion) of debt it had run up buying
airlines and adding routes amid the nation’s economic boom. Less than two years later, the carrier controlled by billionaire Vijay Mallya was back in talks with creditors, while its net debt had increased by 9 billion rupees. The airline this month grounded its entire fleet after pilots went on strike to demand seven months of unpaid salaries, and was given time until the end of October by its creditors to submit a funding plan.
Kingfisher
is among Indian companies resorting to an out- of-court loan-restructuring
process that bankers and regulators say is too lenient on borrowers, leading to
restructured debt that has more than doubled since March 2009. A fifth of the
credit may sour as the economy falters and crimp profits at
government-controlled lenders such as State Bank of India that account for
three-quarters of the nation’s loans and deposits.
----The volume of loans that will be restructured may jump 71 percent in the year ending March 2013 to 2.05 trillion rupees from 1.2 trillion rupees a year earlier, according to estimates by Crisil Ltd., the Indian unit of Standard & Poor’s. That would mean 5.7 percent of India’s total bank loans will have been restructured over the two-year period.
Even with easier terms, borrowers have failed to make payments on 15 percent of these loans since 2009, a panel constituted by the Reserve Bank of India (BOI) wrote in a July 20 report. The existing guidelines allow banks to restructure loans for debtors who don’t have viable plans to bolster cash flow, according to the report, delaying the inevitable collapse.
More
http://www.bloomberg.com/news/2012-10-09/-titanic-defaults-loom-on-restructured-india-bank-debt.html
"The most puzzling development in politics during the last decade is the apparent determination of Western European leaders to re-create the Soviet Union in Western Europe."
Mikhail Gorbachev
At the Comex silver depositories Tuesday final figures were: Registered 40.85 Moz,
Eligible 102.72 Moz, Total 143.57 Moz.
Crooks and
Scoundrels Corner
The bent,
the seriously bent, and the totally doubled over.
No need for
Crooks and Scoundrels today, with Europe, China, Japan and India all seemingly
happily heading for Niagara Falls. Sadly all are on the upper river rather than
in the Maid of the Mist.
The Maid of
the Mist.
Every election is a sort of advance auction sale of stolen goods.
H. L. Mencken.
Of course, our vision and our aims go far beyond the complex arguments of economics, but unless we get the economy right we shall deny our people the opportunity to share that vision and to see beyond the narrow horizons of economic necessity. Without a healthy economy we cannot have a healthy society. Without a healthy society the economy will not stay healthy for long.
Margaret Thatcher.
There can be few fields of human endeavour in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.
J. K. Galbraith
The monthly
Coppock Indicators finished September:
DJIA: +66 Up. NASDAQ: +88 DOWN. SP500: +85 Up. All
three indicators had reversed from down to up, but now the NASDAQ has reversed
again to down. While not unprecedented, it is a warning sign a that the July
reversal from up to down is about to fail.
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