Baltic Dry Index. 845 +47
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
True, governments
can reduce the rate of interest in the short run, issue additional paper
currency, open the way to credit expansion by the banks. They can thus create
an artificial boom and the appearance of prosperity. But such a boom is bound
to collapse sooner or later and to bring about a depression.
Ludwig von Mises.
Another day, and another day of confusion,
dither, doubt and conflict in Euroland’s never ending existential suicidal
crisis. Someone needs to step in and take away the German V-2 austerity weapon
ravaging Mediterranean Europe. But no one will. Stay long physical gold and
silver. Before Europe’s suicide ends, much of continental Europe is headed for
Greece’s fate. Wrecked, polarised, wealth destroyed, but lacking a devaluation,
still hopelessly uncompetitive inside the Eurozone. Greece hopelessly uncompetitive
as a tourist destination compared to next door Turkey.
But first this. Just how bad is China’s
slowdown?
Abbott: Strange as it may seem, they give ball
players nowadays very peculiar names.
Costello: Funny names?
Abbott: Nicknames, nicknames. Now, on the St. Louis
team we have Who's on first, What's on second, I Don't Know is on third--
Oct. 5, 2012, 1:47 a.m. EDT
Hong Kong holiday sales suffer from China housing
HONG KONG
(MarketWatch) — Mainland Chinese tourists are spending less than usual in Hong
Kong during this year’s key Golden Week holidays, in what some analysts view as
the diminished wealth effect from China’s softening housing market.
Anecdotal
evidence indicated this year’s eight-day holiday is turning into a
disappointment for Hong Kong retailers, who say they’ve noticed a drop in spending
by mainland tourists on big-ticket items, from luxury watches to high-end
fashion.
Overall
visitor numbers from the Chinese mainland are also down this year, with
arrivals off 6% on the first official day of the holiday period Sunday,
according to figures cited by the South China Morning Post.
The
decline marked the first drop in mainland Chinese tourism since the financial
crisis in 2009.
UBS
analyst Carl Berrisford warned last year of visitors-flows from the mainland
had peaked and their Hong Kong spending would likely plateau.
“It’s a
reflection of the slowing economy,” Berrisford told MarketWatch. “A lot of
wealth creation in the last few years has been on the back of the property
market.”
----The
slowdown in overall spending by Chinese mainlanders was already evident in the
fourth quarter last year, according to Berrisford, who said that even China’s
affluent are being more careful with their outlays.
“High-end
shoppers are beginning to become price-sensitive,” he said.
More
Now back to dying Euroland.
Debt crisis: Spain's forecasts are 'optimistic', says Governor of the Bank of Spain
The Governor of the Bank of Spain warned that Madrid’s financial forecasts are “optimistic” adding to the mounting pressure on Mariano Rajoy from European Central Bank and the International Monetary Fund.
Luis Maria Linde, who was appointed as Governor in May, said Madrid’s official forecasts seemed out of step internationally and there was risk of “slippage.”He said that Spain needed to impose more austerity measures, on top of the billions of euros of cuts already announced, in order to meet the 2013 deficit target of 4.5pc of GDP.
“The information now available for the state up to August indicates there are risks of slippage on the goal fixed for this year,” he told a parliamentary committee. “This outlook...is certainly optimistic in comparison with the outlook shared by the majority of international organisations and analysts.”
His comments clashed with Luis de Guindos, Spain’s finance minister, who insisted that the country “doesn’t need a bail-out at all.” In a speech in London that was interrupted by anti-austerity protesters, Mr Guindos said Spain was “doing its homework”. He said it was “crazy” to suggest the eurozone would fall apart.
Mario Draghi, president of the ECB, renewed his offer to Spain to seek help by repeating that his bond buying programme, the Outright Monetary Transactions (OMT) was ready to step in. At a press conference where he announced a hold in interest rates, Mr Draghi directly addressed Mr Rajoy’s fear that aid would bring draconian austerity too.
He
repeated that OMT could only be used to help countries that had agreed a
programme with the bail-out funds, the European Financial Stability Facility
(EFSF) or the European Stability Mechanism (ESM) but that was not bad news for
Spain. “There is a tendency to identify conditionality with harsh conditions,”
he said. “Conditions don’t need to be necessarily punitive. Actually many of
the conditions have to do with structural reforms, which have both social cost,
but also great social benefits. And if they are well-designed, the second are
going to be greater than the first.”
His
comments clashed with Luis de Guindos, Spain’s finance minister, who insisted
that the country “doesn’t need a bail-out at all.” In a speech in London that
was interrupted by anti-austerity protesters at one point, Mr Guindos said
Spain was “doing its homework”. He said it was “crazy” to suggest the eurozone
would fall apart.
EU Doubts on Deficit Cutting May Hinder Spain’s Path to Bailout
By Ben Sills - Oct 4, 2012 11:01 PM GMT
Olli Rehn, the European commissioner in charge of policing budget rules, told Spanish officials their plans to reduce the shortfall to 4.5 percent of gross domestic product next year are based on excessively optimistic assumptions about economic growth, two people familiar with the issue said. Central bank governor Luis Maria Linde, who met Rehn on his Oct. 1 visit to Madrid, echoed that view in comments to lawmakers yesterday.
There’s “a potential slowdown in Spain’s application for a European program,” Thomas Costerg, an economist at Standard Chartered Bank in London, said yesterday by e-mail. “There is a rising fear that the 2013 budget and the stress tests may have been some sort of window dressing to get European assistance.”
----- Spain’s 2013 budget assumes the economy will shrink 0.5 percent, less than the 1.3 percent median contraction predicted by 21 analysts surveyed by Bloomberg. Linde, the Bank of Spain chief, said that targets were “certainly optimistic” in testimony to the parliament’s budget committee.
Weaker
economic performance would widen the deficit, forecast at 6.3 percent of GDP in
2012, forcing the government to impose more austerity or plead for a looser
target. Spain has been let out of its 2013 commitments before. European
governments in July raised the deficit target from 3 percent.
Multiplying Europe's fiscal suicide (technical)
Last updated: October 3rd, 2012
The
entire EU austerity plan is based on a false premise. This disastrous error is
now clear beyond any reasonable doubt.
The
Teuto-Calvinists believe – or profess to believe, since much of their dogma is
national self-interest dressed up as theory – that the fiscal multiplier is around
0.5.
That is
to say, fiscal retrenchment worth 1pc of GDP will cut output by half as much,
or around 0.5pc over two years. There is pain, but at least there is gain.
This is
based on the IMF's analysis of fiscal crises over the decades.
Well, it
has not worked out like that. Ireland has contracted at nearly seven times the
speed, Spain four times, and Greece three times.
----So what went wrong? It is blindingly obvious. The IMF data – and indeed the more extreme theory of `expansionary fiscal contractions' (which the IMF does not endorse) – is based on past cases where individual countries were able to claw their way out of trouble by exporting to a healthy global economy, usually by devaluing first and often by slashing interest rates as well.
Greece,
Spain and Italy cannot devalue. Most of Europe is tightening fiscal policy in
lockstep. They are all dragging each other down. It is synchronised policy
suicide.
The
European Central Bank has made matters worse. It has withheld the monetary
stimulus desperately needed to cushion the fiscal shock. It allowed broad M3
money to contract earlier this year, in violation of its twin pillar mandate
(the M3 growth target is 4.5pc).
The ECB
has quite simply abandoned its monetarist heritage. What has it become instead?
Just a plain-vanilla inflation targeter, even as inflation targeting is thrown
on the scrap heap by everybody else.
Yet that
is not the whole story. Monetarists themselves have to confront an unpleasant
fact. Vast amounts of QE in Britain did less than hoped to offset the fiscal
squeeze. The UK multiplier has been around 1.0. (though not 2.0, thank God)
It is the
same story in the US, though America's QE has been much less as a share of GDP.
Richard
Koo from Nomura – an expert on Japan's twenty year ordeal – argues that the
monetary lever is almost useless once firms and households batten down the
hatches in a "balance sheet recession".
Morehttp://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100020504/multiplying-europes-fiscal-suicide-technical/
We end for the week with gold, alternative money for most. QE forever will take gold up to $2,400 next year, thinks BlackRock. $30,000 by 2019 think I, if as I suspect, once on QE interventions it’s impossible to end them without triggering the event QE was started to avoid. Fiat money is just that, fiat. Created out of nothing, with plenty more where fiat came from. But the benefits of fiat money were all front loaded. We long ago dissipated away the dubious benefits of the Great Nixonian Error of fiat money. Conspicuous consumption, and deficits don’t matter, saw to that. We have only just enetered the downside of fiat money.
QE3 could push gold up to $2,400/oz
Quantitative easing could cause a rally in the gold price, with the precious metal hitting $2,400/oz by next summer.
Gold
could hit an all-time high of $2,400 by next summer, driven up by a third round
of quantitative easing in the US. The first round of QE in February 2009 caused
the gold price to increase rapidly from a base of $900/oz – from which it has
never looked back.
BlackRock
fund manager Evy Hambro who invests in the precious metal and gold equities,
predicted that QE3 could result in the gold price hitting US$2,400/oz by the
middle of next summer.
In his
gold report this week he said: "The gold chart has turned decidedly
bullish with the 50-day moving average rising above the 200-day moving average.
The last time this happened was in February 2009, which interestingly was
shortly after the implementation of QE1. Then, gold was $900/oz and never
looked back. Should we witness a similar rally, prices would be taken to
$2,400/oz by midsummer next year – and $1,760/oz would be the new floor."
The International
Monetary Fund released data this week which revealed central banks continue to
buy gold with both South Korea and Paraguay recently adding to their reserves.
South
Korea has doubled its bullion assets over the past year, purchasing 16 tonnes
in July alone.
"Until government administrators can so identify the interests of government with those of the people and refrain from defrauding the masses through the device of currency depreciation for the sake of remaining in office, the wiser ones will prefer to keep as much of their wealth in the most stable and marketable forms possible - forms which only the precious metals provide."
Elgin Groseclose
At the Comex silver depositories Thursday final figures were: Registered 40.58
Moz, Eligible 102.00 Moz, Total 142.58 Moz.
Crooks and
Scoundrels Corner
The bent,
the seriously bent, and the totally doubled over.
Today, more
eloquently and fuller, than my poor efforts at covering the China v Japan Diaoyu/Senkaku
Islands dispute, China’s Ambassador to Great Britain covers the dispute in
detail. China is in the right and Japan knows it. Even British Royal Navy maps
of the islands from the early 19th century list them as being
Chinese islands. But even if none of this was true, Japan signed away any
possible lingering sovereignty by its acceptance of the treaty ending World War
Two with Japan by the Allies. China is a
giant country going nowhere but up in the decades ahead this century. Japan
needs to face up to reality, and seek accommodation with China and Taiwan.
China will not be cheated out of its own version of the Falkland Islands, even
if they are uninhabited. Japan can only lose and lose and lose in pursuing it’s
false claim.
Diaoyu Dao: history shall not be reversed
The purchase of Diaoyu Dao by the Japanese government is invalid, nothing can change the fact that Diaoyu Dao is the territory of China, writes Liu Xiaoming
By Liu
Xiaoming 1:25PM BST 03 Oct 2012
My first
ambassadorial post was to Egypt. I have many memories of this ancient and
beautiful country. One is the Mena House Hotel, which I visited many times.
Situated at the foot of the spectacular Cheops Pyramid, the hotel is the venue
that produced the famous Cairo Declaration. It was published on 27 November
1943 after discussions between the leaders of China, Britain and the United
States, and was the master plan for rebuilding international order following
the war with Nazi Germany and Japan.
The Cairo
Declaration was a laudable outcome of the war against both Germany, with its
repellent Nazism, and Japan, with its equally repugnant military fascism. It
stated in explicit terms that: “all the territories Japan has stolen from the
Chinese, such as Manchuria, Formosa (Taiwan) and the Pescadores, shall be
restored to the Republic of China. Japan
will also be expelled from all other territories she has taken by violence and
greed.”
Less than
two years later the Potsdam Proclamation, released on 26 July 1945, reaffirmed
that: “The terms of the Cairo Declaration shall be carried out.” The Japanese
government accepted the Potsdam Proclamation in the Japanese Instrument of
Surrender, and pledged to faithfully fulfil its obligations stipulated in the
provisions of the Potsdam Proclamation.
All of
these facts show that in accordance with the Cairo Declaration, the Potsdam
Proclamation and the Japanese Instrument of Surrender, Diaoyu Dao, as
affiliated islands of Taiwan, should be returned, together with Taiwan, to
China.
However,
up to now Japan still obstinately clings
to a colonialist mindset. It is turning a blind eye to the international
agreements made at the conclusion of World War II by claiming that Diaoyu Dao
is Japan’s territory. It reveals that Japan has failed to examine its
conscience and remains disappointingly unrepentant about its history of
military fascism. Moreover, it attempted to deny the outcomes of the war
against fascism and challenge the post-war international order.
History shall not be reversed. We must not forget the
untold sufferings incurred during World War II. China and Britain are both
victims of fascism. We have shared memories and pains. Chinese and British
troops fought side by side on the battleground against Japanese military
fascism. It is the common responsibility of China and Britain and the entire
international community to reaffirm the outcomes of the war against fascism and
maintain the post-war international order.
Nazism
was born in Germany. On December 7, 1970, West German Chancellor Willy Brandt
travelled to Poland and dropped to his knees before the monument to the Warsaw
Ghetto uprising of 1943. Many in the world were deeply moved by this famous
gesture of repentance and apology. The extraordinary courage and sincerity of Germany won it trust and respect.
After
World War II, German and Japanese attitudes form a stark contrast. Unlike
Germany, Japan has never seriously reflected on its military fascist past and
made a serious apology. Instead, it tried to reverse the history. Such a
remorseless attitude has made it difficult for Japan to earn the trust of its
neighbours and the forgiveness of people around the world.
Recently
Japan has taken a series of provocative steps. In total disregard of the
established post World War II agreements, Japan implemented its plan of
“purchasing” China’s Diaoyu Dao. The so-called purchase of Diaoyu Dao by the
Japanese government is illegal and invalid. It can in no way change the fact that
Diaoyu Dao is the territory of China.
Historical
records show it is an indisputable fact that Diaoyu Dao belongs to China.
More
Liu Xiaoming is Chinese
ambassador to Britain
Another weekend, and autumn is definitely here in my part of southern England.
Blackberry season has ended and the first of the sweet chestnuts are starting
to fall. The first of the Eurozone are ripe for falling too. October was ever a
dangerous month in the markets. On the other side of the Atlantic, Tweedledee
has seriously wounded Tweedledum. Will Tweedledum just roll over or will
Tweedledum strike back? Have a great weekend everyone. More next week.
“The
boom can last only as long as the credit expansion progresses at an
ever-accelerated pace. The boom comes to an end as soon as additional
quantities of fiduciary media are no longer thrown upon the loan market.”
Ludwig
von Mises.
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
ab
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