Baltic Dry Index. 941 +15
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
Back “in the 1980s and 1990s, deep economic crises occurred
primarily in middle- and low-income countries that were too small to have
direct global effects. The crises we should fear today are in relatively rich
countries that are big enough to reduce growth around the world.”
“The Doomsday Cycle Turns: Who’s Next?”
For more on the doomsday Cycle scroll down to
Crooks Corner, where economists Simon Johnson and
Peter Boone layout the case that our Greenspan-Bernanke financialised casino
economy was never fixed, and that the big one is coming, this time with dire
consequences.
The “big one” as
far as the Eurozone is concerned is France, the number two economy in Euroland.
Forget the troubles in Italy and Spain, when France blows up, as it will under
old socialist and apparently “hen pecked”
President Hollande according to French media, only is left to bailout
France, an obvious impossibility. The European Monetary Union is doomed, the
only question is how much more European wealth will be destroyed in the process
before Europe comes to its senses and starts the process of allowing Club Med
to exit. Stay long physical precious metals at the maximum prudent level for
each individual circumstance. On present French policy, France detonates sometime
next year. Euroland is probably unsaveable
anyway, but with the second largest Eurozone economy opting for economic suicide,
the whole interlinked Eurozone will come crashing down. When the next Lehman
hits as in the Doomsday Cycle, history will probably blame France rather than
the banksters and Great Vampire Squids who set it all up.
The
trouble with socialism is that eventually you run out of other people’s money.
Margaret
Thatcher.
French business erupts in fury against "disastrous" Hollande
France is sliding into a grave economic crisis and risks a full-blown “hurricane” as investors flee rocketing tax rates, the country’s business federation has warned.
“The
situation is very serious. Some business leaders are in a state of
quasi-panic,” said Laurence Parisot, head of employers’ group MEDEF.
“The pace
of bankruptcies has accelerated over the summer. We are seeing a general loss
of confidence by investors. Large foreign investors are shunning France altogether. It’s becoming really dramatic.”
MEDEF,
France’s equivalent of the CBI, said the threat has risen from “a storm warning
to a hurricane warning”, adding that the Socialist government of François
Hollande has yet to understand the “extreme gravity” of the crisis.
The immediate
bone of contention is Article 6 of the new tax law, which raises the top rate
of capital gains tax from 34.5pc to 62.2pc. This compares with 21pc in Spain,
26.4pc in Germany and 28pc in Britain.
“Let’s be
clear, Article 6 is not acceptable, even if modified. We will not be complicit
in a disastrous economic mistake,” Mrs Parisot told Le Figaro.
An
alliance of private organisations in France has issued a protest entitled
“State of Emergency for Business”, warning that confiscatory tax rates threaten
lasting damage to the French economy.
Mrs
Parisot said the policies border on economic illiteracy: “The idea of aligning
taxes on capital with those on wages is a profound economic error. It is
scandalous that the French have been left in such economic ignorance for
years.”
French
business has called for “competiveness shock” of business tax cuts to claw back
lost ground against Germany. Instead, it faces an extra €10bn (£8.1bn) of
business costs from the budget unveiled in September.
Mr
Hollande is tightening fiscal policy by 2pc of GDP
next year to meet EU deficit targets, with two-thirds
coming from higher taxes. The budget does little to shrink the French state.
Spending has risen to 55pc of GDP, similar to Sweden but without Nordic labour
flexibility.
French
economic growth has been near zero for the past five quarters. It may have tipped into recession over
the summer as
the malaise spread from Italy and Spain, according to Banque de France.
More
Renault Leads Biggest Europe Car Sales Drop in Two Years
By Ola Kinnander - Oct 16, 2012 7:00 AM GMT
European car sales plunged the most in almost two years, with Renault
SA (RNO) and Fiat SpA (F) posting the steepest
declines, as the region’s sovereign-debt crisis led to reduced demand in Germany,
its largest economy. Registrations plummeted 11 percent to 1.13 million vehicles last month from 1.27 million a year earlier, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today in a statement. It was the 12th consecutive monthly drop and the biggest decline since October 2010. Nine-month sales dropped 7.2 percent to 9.72 million cars.
“What has changed remarkably to the negative recently is the German market,” Juergen Pieper, a Frankfurt-based analyst at Bankhaus Metzler, said before the figures were released.
----Four of Europe’s five biggest automotive markets shrank last month, with drops of 11 percent in Germany, 18 percent in France, 26 percent in Italy and 37 percent in Spain. The debt crisis has pushed at least five of the 17 countries using the euro into recession, and there’s a 55 percent likelihood Europe will slide into such a slowdown in the next 12 months, according to a Bloomberg survey of economists.
More
http://www.bloomberg.com/news/2012-10-16/renault-leads-biggest-europe-car-sales-drop-in-two-years.html
Elsewhere in fantasy Euroland, Spain’s government goes for a MAD defence
as in Mutual Assured Destruction. We want a bailout on our terms or nothing.
Ironically they do have Germany over a barrel. Chancellor Merkel doesn’t want
the blame for ending the euro. It doesn’t really matter at this point unless
France alters its policy. Any so called fix at the upcoming leader’s summit
merely buys the bigger problem of Italy and next year France. This morning,
Portugal opted to join Greece in a death spiral.
In
holding out, the Spanish leader is playing with fire, said Ebrahim Rahbari, an
economist at Citigroup Inc. in London.
Rajoy Delay Marks Bet on Turmoil Making Bailout Terms Easier
By Ben Sills - Oct 16, 2012 5:49 AM GMT
Spanish Prime Minister Mariano Rajoy’s equivocation on
seeking a European bailout amounts to a bet that another bout of market turmoil
will enable him to broker better terms over German resistance. In Rajoy’s thinking, “the worse it gets, the better for Spain,” said Jose Garcia-Montalvo, a former Harvard University economist who teaches at Pompeu Fabra University in Barcelona. “That would make the Germans think more deeply about the cost of letting the southern countries sink. But it’s a very risky strategy.”
Heading into a European Union summit in two days, Rajoy has brushed off pressure to reach for a lifeline from investors such as Pacific Investment Management Co.’s Bill Gross, who manages the world’s biggest bond fund. EU counterparts are divided. Germany is pushing back against prodding by France and Italy to exploit bond buying by the European Central Bank and counter a financial storm entering its fourth year.
Defending Spain is crucial because its economy doubles the output of Greece, Ireland, Portugal and Cyprus combined, testing the capacity of aid mechanisms. Its borrowing costs are a reference for Italy and even France, which has so far seen its yields contained even with unemployment at a euro-era record, the economy stagnant and its debt levels climbing.
----The long-term credit ratings of 11 Spanish banks including Banco Bilbao Vizcaya Argentaria SA (BBVA) and Banco Santander SA (SAN) were cut today by Standard & Poor’s a week after lowering Spain’s sovereign rating to one level above junk status.
More
Draft austerity budget unveiled
by TPN/ Lusa, in General · 16-10-2012 08:15:00
The unveiling of the 2013 draft budget proposal, which is
markedly focused on unprecedented tax hikes, was further marred by clashes
between protestors outside Parliament and police, resulting in 11 injuries, ten
of whom police officers.
In line
with raising taxes, Finance Minister Vítor Gaspar presented a series of
expenditure reduction measures for a year when the Portuguese economy is
expected to contract a further 1% with unemployment hitting another historical
high of 16.4%.
Firstly,
the 2013 state budget attempts to square the circle of austerity by taking
steps to limit the state’s exposure to the social consequences of recession.
Hence,
there is an across the board cut of wage-linked unemployment benefit of 6% that
also follows on from length of payment reductions that came into effect earlier
in the year.
Furthermore,
sickness benefit also takes a 5% hit to leave the minimum monthly unemployment
payment at €419.22 with the lowest level of sickness entitlement down on
€125.77.
The
outlook is also grim for state pensions – also paid out at levels reflecting
the citizen's historical social security contributions and not capped at a
fixed amount.
As a
result, pensioners receiving over €1,350 will see a 3.5% cut in the amount
received up to €1,800, with 16% lopped off payments over this level.
The
pension cuts continue with 10% and 15% cuts through to pensions in excess of
€7,545.96 monthly, which lose 40% of any pension payments in excess of that
amount.
More
China Credit Card Romney Assails Gives Way to Japan
By Wes Goodman and Daniel
Kruger - Oct 16, 2012 4:42 AM GMT
China is poised to lose its place as the U.S.’s biggest
creditor for the first time since the height of the financial crisis, blunting
one of Mitt Romney’s favored attacks in the presidential
campaign. Chinese holdings of Treasuries fell 0.2 percent this year through July to $1.15 trillion, the latest government data show. Japan, a stronger ally of the U.S., raised its stake by 5.6 percent to $1.12 trillion, on pace to top the list of foreign creditors by November. The Treasury Department will release its tally of international capital flows for August today.
While Romney promises to label China a currency manipulator
if he wins the election and says President Barack Obama has been too lenient in
trade disputes, foreign demand is a reason Treasury yields remain close to
record lows, reducing the cost of credit for the government, companies and
individuals. Whoever wins Nov. 6 will depend on both nations to finance a
budget deficit that surpassed $1 trillion for a fourth year in fiscal 2012. The
candidates hold their second debate tonight.
More
http://www.bloomberg.com/news/2012-10-15/romney-can-invoke-japan-overtaking-china-as-u-s-lender.html
We end for the day with a tree cloning horror story
from Indonesia. Along with all of our other problems, including a developing El
Nino in the Pacific, I suspect that we are just one GM food event away from a
food disaster.
Indonesia's "Frankentrees" turn cocoa dream into nightmare
PINRANG/JAKARTA
| Mon Oct 15, 2012 7:50pm EDT
(Reuters) - Nurhaedah, a vivacious Indonesian cocoa trader, shakes her head
in disappointment as she sifts through a pile of blackened, shriveled beans.
Yet another crop from "Frankentrees": weak, misshapen cocoa trees
toppling under their own weight.A $350-million campaign to boost cocoa yields in Indonesia, the world's third largest producer of the commodity, is turning sour as farmers send streams of poor-quality beans plucked from the defective trees to a collecting center Nurhaedah runs.
"Farmers are complaining the beans are so small they look like roasted peanuts," said Nurhaedah, as her deft fingers sought out the bigger beans whose size indicated better quality.
----To meet the growing appetite for chocolate in Asia, fed by rising incomes and growing populations, multinational firms such as Cargill and Barry Callebaut, the world's top chocolate maker, have built grinding projects in Indonesia.
In the
last five years, the country's grinding capacity has doubled to reach around
400,000 metric tons (440,925 tons) this year, making it Asia's largest after
Malaysia.
----Moreover, farmers say output from cocoa trees in much of Sulawesi appears to have been hurt by the cloning technique, originally intended to hasten seed production, but which has led instead to sickly trees that yield small, discolored beans.
The
technique called somatic embryogenesis, or SE, was invented to produce
high-yielding, disease-resistant seeds. A success in Ecuador in the early
2000s, it had never been used on a large scale until Indonesia adopted it in
2009.
Seedlings
from the new clone take only three years to produce cocoa pods, versus four
years for non-cloned varieties.
But in
Indonesia, farmers say, it has produced trees that are a meter taller than
usual with extra branches, which need support from stakes tied to their trunks
to keep upright, yet are still prone to disease.
The trees
have been producing elongated cocoa pods in strange orange-red hues, compared
to the usual reddish-purple.
Cocoa
trees planted in 2009 have matured this year to yield poor quality pods, with
up to 160 beans in every 100 grams, far more than the national standard of 110.
Plantations normally yield up to 450 kg of cocoa per hectare a year, but small
beans cut that output in half.
More
At the Comex silver depositories Monday final figures were: Registered 38.03 Moz,
Eligible 103.57 Moz, Total 141.60 Moz.
Crooks and
Scoundrels Corner
The bent,
the seriously bent, and the totally doubled over.
Today another
warning from some economists who ought to know about what they warn. The casino
economy that blew up in 2007-2008 is still unfixed. The next Lehman triggers a
crisis bigger than the last. Stay long physical precious metals. If they’re
even halfway right, the next Lehman triggers the death of the fiat currency
era.
"The paper standard is self-destructive."
Hans F. Sennholz
Oct. 16,
2012, 12:03 a.m. EDT
Doomsday Cycle targets America next
Commentary: Warning: Money + politics = ticking time bomb
By
Paul B. Farrell, MarketWatch
SAN LUIS
OBISPO, Calif. (MarketWatch) — Warning bells, alarms scream louder. But our
banks and politicians can’t hear, are deaf, in denial. Won’t take action ...
not until it is too late.
That’s
the latest from Simon Johnson and Peter Boone in “The Doomsday Cycle Turns:
Who’s Next?” Who is next? America, Japan, the euro zone are the triple threat
next in the line of fire, in danger of collapsing, thanks to a doomsday
conspiracy where global “political and financial systems have aligned to build
these dangers rather than suppress them.”
----First. Risks shifted from emerging nations to big developed nations
Why?
The “next time” is accelerating. But Americans are distracted by election
drama, can’t see the oncoming train. Are Johnson and Boone alarmists crying wolf?
Chicken Littles? Cassandras? No, they do see the collapse coming, its driven by
a conspiracy of “political and financial systems” that will not act “until it
is too late.”
So in
this new warning, they ask: “Who’s Next? ” Here’s a summary, some paraphrased,
some direct quotes:
Earlier,
smaller emerging nations were at risk of collapsing. The threat has now shifted
to developed countries, their financial institutions, government finances, and
economic growth prospects are at great risk: And that world has “created
enormous, complex financial structures that can inflict tragic consequences
with failure and yet are inherently difficult to regulate and control ... there
are more and worse crises to come.”
Second. Financiers and politicians align in ‘symbiotic’ conspiracy
“There
is a common problem underlying the economic troubles of Europe, Japan, and the
US: the symbiotic relationship between politicians who heed narrow interests
and the growth of a financial sector that has become increasingly opaque. Bailouts
have encouraged reckless behavior in the financial sector, which builds up
further risks — and will lead to another round of shocks, collapses, and
bailouts.” That’s a doomsday conspiracy: money and politics.
The
Doomsday Cycle became visible in 2007-08 in the months following the fall of
Lehman, and Iceland, Irish banks and “endless lending programs by the IMF and
the EU” for Greece, Ireland, Portugal, Italy, Spain, other euro-zone countries.
Today some are claiming that the euro zone “put the worst of their problems
behind them.”
Wrong,
they’re in denial: “The doomsday cycle is indeed turning,” but it’s “heading
towards Japan and the U.S.” where “the current level of complacency among
policy makers in those countries is alarming,” warn Johnson and Booth.
Worse,
they’re now predicting the cycle will “hit Europe again and probably harder
than before.” Yes, Europe “is in big trouble:” Massive budgets, no growth, no
bailout money and a loss of political support.
-----Worse, “the expectation of
bailouts has become built into the system,” from Treasury and the Fed. Unfortunately,
what’s owed is far “more than can ultimately be paid,” and growing fast.
From a
behavioral-economics standpoint, our financiers are now so totally addicted to
these unrealistic expectations and delusions they cannot see the risks from
inside the “thought bubble” we’re trapped in. Johnson and Boone see into our
warped reality in three key areas:
----Johnson
and Boone see Japan on a “long march to collapse”: an aging population,
declining population, slowing growth, and a debt-to-GDP ratio that’s skyrocketed
from about 70 to over 200 in the past 30 years.
“The
symptoms are different in the U.S.” but the impact will be the same: collapse.
The 2008 crisis increased debt by 50%. Banks got bailouts, now too-big-to-fail.
That created an army of lobbyists and “pro-bailout” politicians. After each new
crisis, politicians promise it’ll “never happen again ... but still it happens,
again and again.”
And “with
each crisis, the financial risks are getting larger ... more unaffordable.”
More
"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
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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