Wednesday 19 December 2012

The End of Rule of Law.



Baltic Dry Index. 743 -23

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

"As fewer and fewer people have confidence in paper as a store of value, the price of gold will continue to rise. The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register."

Hans F. Sennholz

More on the end of the rule of law later. First this bad news from America. While everyone and their dog expects a last minute deal to avert going over the “fiscal cliff” triggering a new US recession, MarketWatch posits a new recession is about to hit no matter what. Stay long physical precious metals. The Fed would then print even more QE monetisation, it’s the only weapon they have left. From QE 85 billion a month to infinity and beyond.

Why a recession may be coming no matter what fiscal-cliff deal is reached

December 18, 2012, 12:49 PM
How will the fiscal cliff talks end? Will the leaders reach a last-minute deal, saving the economy from disaster, like a script of a typical television drama?

Spoiler alert: We could already be in a recession. This is not the conventional wisdom. The common narrative goes some like talks look ugly, but in the end things will get resolved either before Jan. 1 or later in the month and the economy gets a new lease on life.

The recession signal is being sent from the latest U.S. current account deficit report released earlier Tuesday.
According to the data, imports are now down two months in a row having fallen 8.4% in the third quarter and 2% in the prior quarter.  This is a rare event and has definitely raises the recessionary “red flag,” according to Robert Brusca, chief economist at FAO Economics. When the economy weakens, imports weaken rather quickly, Brusca notes.

The last time imports declined for two quarters was in 2009, the end of a four-quarter slide in imports during the Great Recession.

Fewer imports is a sign that domestic demand is faltering. A recession is “a real risk,” Brusca said.

It is definitely not a great economic environment for the austerity that is coming next year, regardless of the outcome of the fiscal-cliff  negotiations.

Brusca suggest congressional Republicans and the White House make a small deal to avoid the fiscal cliff and put off major deficit reduction until the economic outlook clears up.
More
http://blogs.marketwatch.com/thetell/2012/12/18/why-a-recession-may-be-coming-no-matter-what-fiscal-cliff-deal-is-reached/

Nor is the Fed the only central bank racing to weaken its national currency. Japan is about to re-enter that race. The Age of the Great Inflation is about to take a giant leap closer.

Japan's Shinzo Abe prepares to print money for the whole world

Japan’s incoming leader Shinzo Abe has vowed to ram through full-blown reflation policies to pull his country out of slump and drive down the yen, warning Japan's central bank not to defy the will of the people.

The profound shift in economic strategy by the world’s top creditor nation could prove a powerful tonic for the global economy, with stimulus leaking into bourses and bond markets - a variant of the "carry trade" earlier this decade but potentially on a larger scale.

"We think this could be the beginning of a fresh reflation cycle for the global system, combining with the US recovery to mark a turning point in the crisis," said Simon Derrick from BNY Mellon.

"It is tremendously important for global growth, and markets are starting to take note," said Lars Christensen from Danske Bank.

Mr Abe’s Liberal Democratic Party (LDP) won a landslide victory on Sunday, securing a two-thirds "super-majority" in the Diet with allies that can override senate vetoes.

Armed with a crushing mandate, Mr Abe said he would "set a policy accord" with the Bank of Japan for a mandatory inflation target of 2pc, backed by "unlimited" monetary stimulus.

In the madhouse of bankrupt Club Med yesterday, it was more of the same. While Greece got a meaningless upgrade from S&P, Spain and Italy look like they’ve lost the plot.

Spain $185 Billion Refinancing Tests Rajoy’s Bank Cleanup Effort

By Charles Penty & Sharon Smyth - Dec 18, 2012 11:01 PM GMT
A rush by recession-hit Spanish businessmen and consumers to restructure their loans will test Prime Minister Mariano Rajoy’s pledge of a “definitive” cleanup of the nation’s crisis-hit banks.

Spain’s banks have refinanced about 140 billion euros ($185 billion) of loans outside the country’s crippled real estate industry, according to Oliver Wyman, a consulting firm that did a stress test of Spanish lenders.
Bad loans surged to a record 11.2 percent of total lending, the Bank of Spain said yesterday.

-----Spain has ordered banks to recognize 84 billion euros of losses to purge their balance sheets of real estate as Rajoy recapitalizes at least four failed lenders with about 40 billion euros of European bailout funds. The strategy focuses on soured property assets and may neglect impending losses on loans to firms and homeowners as the economy shrinks, analysts say.

While small and medium-sized businesses have refinanced as much as 21 percent of the 230 billion euros they owe, according to Oliver Wyman, total non-performing loans in the country grew by 7.8 billion euros to 190 billion euros in October, the Bank of Spain said. The nation's bad loan ratio will jump to 14.5 percent of all lending, assuming that 30 percent of restructured credit turns sour within a year, said Daragh Quinn, a banking analyst at Nomura Holdings Inc. (8604) in Madrid.

----Larger companies have renegotiated as much as 29 billion euros of loans, or 11 percent of total borrowing, and homeowners 9 percent of 600 billion euros in mortgages, according to Oliver Wyman data.

“Nobody should be invested in the domestic-focused banks in Spain,” Dirk Becker, head of banking research at Kepler Capital Markets, said in an interview with Bloomberg Television in Frankfurt yesterday.
More
http://www.bloomberg.com/news/2012-12-18/spain-185-billion-refinancing-tests-rajoy-s-bank-cleanup-effort.html

Silvio Berlusconi: Italy could be forced to leave the euro

Former prime minister Silvio Berlusconi has said Italy would be forced to leave the eurozone unless the European Central Bank gets more powers to ensure lower borrowing costs.

6:45AM GMT 19 Dec 2012
Berlusconi, who announced this month he will again lead his People of Freedom party (PDL) in a national election expected in February, said on a talk-show on state broadcaster RAI that the ECB should become a lender of last resort for the currency bloc.

"If Germany doesn't accept that the ECB must be a real central bank, if interest rates don't come down, we will be forced to leave the euro and return to our own currency in order to be competitive," Berlusconi said in comments reported by Italian news agencies Ansa and Agi.

The 76-year-old media tycoon has made similar remarks in the past about the possibility of Italy, or even Germany, leaving the euro, but has often at least partially rectified them later, Reuters reported.

Berlusconi is already campaigning hard for the election with a spate of television interviews in an attempt to close the wide gap with the centre-left Democratic Party which is polling at above 30pc, some 14 points above the PDL.
More
http://www.telegraph.co.uk/finance/financialcrisis/9754358/Silvio-Berlusconi-Italy-could-be-forced-to-leave-the-euro.html

Greeks Can’t Find Euros to Buy Heating Oil With Winter Economy

By Oliver Staley - Dec 18, 2012 10:29 PM GMT
In the Greek mountain town of Kastoria, less than an hour from the Albanian border, Kostas Tsitskos, 88, can’t afford fuel to heat his home against the winter’s cold. So he and his son live in a single bedroom, warmed by a small electric heater.

“One room is enough,” said Tsitskos, who lives on a 734 euro-a-month ($971) pension and doesn’t have the 1,000 euros a month he needs to buy heating oil.

Greece is facing a heating-oil crisis. With an economy that has contracted for five years and an unemployment rate at a record 25 percent, residents in northern Greece can’t heat their homes. Kastoria hasn’t received funds from the central government to warm schools and the mayor said he will close all 53 of them rather than let children freeze, a step already taken in a nearby town. Truckloads of wood are arriving from Bulgaria as families search for alternative fuels.

----Austerity measures have cut government salaries and benefits, raised the retirement age and reduced services.

The household price for heating oil in Greece reached 1,266 euros per 1,000 liters (264 gallons) in the second quarter of 2012, surging 48 percent from a year earlier, according to the International Energy Agency, a Paris-based organization.

----Greeks pay both excise and value-added taxes on heating oil that can make up 42 percent of the total cost. The mayors of the region are petitioning the government to be exempted from the tax.

Greece’s oil prices are high because of laws that protect the country’s two refining companies and prevent competition, said Pavlos Eleftheriadis, a lecturer in law at the University of Oxford in England, who studies monopolies.
More
http://www.bloomberg.com/news/2012-12-18/greeks-can-t-find-euros-to-buy-heating-oil-with-winter-economy.html

Greek Credit Rating Raised at S&P After Debt Buyback Program

By Marcus Bensasson - Dec 19, 2012 2:20 AM GMT
Greece had its credit rating raised by Standard & Poor’s after a debt buyback as the ratings company cited the “strong determination” of euro-area governments to keep the nation in the currency zone.

The grade was lifted from selective default to B- with a stable outlook, S&P said in a statement yesterday. It was cut to SD from CCC on Dec. 5 amid the buyback. The new grade is the highest Greece has had at S&P since June 2011, when it was cut to CCC from B.
More
http://www.bloomberg.com/news/2012-12-18/greek-credit-rating-raised-at-s-p-after-debt-buyback-program.html

Finally, we end for today with the end of rule of law in England and Wales. Now it’s official, banksters are above the law, according to the chief executive designate of the Prudential Regulation Authority. Instead of generating a public outcry and calls for his dismissal, there is only the sound of silence from UK MPs of all parties. Historically, silence signalled assent. Do not go to jail, pass go and collect another telephone number bonus subsidised by the taxpayer. Her Majesty’s weak coalition government now has a death wish. Not content with forcing homosexual marriage on the UK without a mandate, it now is giving law breaking banksters a walk, while imposing austerity on everyone else. It will be a cold day in hell before either the Tories or the toxic Lib Dems get re-elected.

Banks are 'too big to prosecute', says FSA's Andrew Bailey

Andrew Bailey, chief executive designate of the Prudential Regulation Authority, admitted large banks had become too big to prosecute, raising 'very difficult questions' for regulators.

The largest banks have become too big to prosecute because of the impact criminal charges would have on confidence in them, Britain’s most senior bank regulator has admitted.

In a variant of the “too big to fail” problem, Andrew Bailey, chief executive designate of the Prudential Regulation Authority, said bringing a legal action against a major financial institution raised “very difficult questions”.

Mr Bailey told The Daily Telegraph that some banks had grown too large to prosecute. “It would be a very destabilising issue. It’s another version of too important to fail,” he said,

“Because of the confidence issue with banks, a major criminal indictment, which we haven’t seen and I’m not saying we are going to see… this is not an ordinary criminal indictment,” he said.

His comments come days after HSBC’s record $1.9bn (£1.2bn) settlement with the US authorities over money-laundering linked to drug-trafficking. US assistant attorney general Lanny Breuer said of the decision not to prosecute: “In this day and age we have to evaluate that innocent people will face very big consequences if you make a decision.”

---- A recent spate of settlements have raised concerns banks are effectively buying immunity from past misdeeds.

“If you get caught with your hand in the till you go to jail, but if you’re a big bank and you’re caught breaking the law it seems that all that happens is you’re fined and told you’ll go to jail if you do it again,” said Rosie Sharpe, at campaign group Global Witness.
More
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9743839/Banks-are-too-big-to-prosecute-says-FSAs-Andrew-Bailey.html

Only little people pay taxes.

Leona Helmsley.

At the Comex silver depositories Tuesday final figures were: Registered 42.35 Moz, Eligible 105.08 Moz, Total 147.43 Moz.  


Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over. 

Today, UBS again, the giant Swizz bank with a fetish for deliberately breaking the law.  

Christmas is coming and the geese are getting fat. Please put a trillion in the banksters’ hat. If you haven’t got a trillion a billion will do. If you haven’t got a billion, God damn you!

Ebenezer Squid

UBS admits fraud in $1.5 billion Libor rigging settlement

ZURICH | Wed Dec 19, 2012 1:59am EST
(Reuters) - Swiss bank UBS was hit with a $1.5 billion bill and admitted to fraud on Wednesday in order to settle charges of manipulating global benchmark interest rates.

The penalty agreed with U.S., UK and Swiss regulators is more than three times the $450 million fine levied on Britain's Barclays in June for rigging the Libor benchmark rate used to price financial contracts around the globe.

It is the second-largest fine paid by a bank and comes a week after Britain's HSBC agreed to pay the biggest ever penalty - $1.92 billion - to settle a probe in the United States into laundering money for drug cartels.

"We deeply regret this inappropriate and unethical behavior. No amount of profit is more important than the reputation of this firm, and we are committed to doing business with integrity," UBS Chief Executive Sergio Ermotti said in a statement disclosing the extent of the wrongdoing, which took place over six years from 2005 to 2010.

UBS said it will pay $1.2 billion to the U.S. Department of Justice (DoJ) and the Commodity Futures Trading Commission (CFTC), 160 million pounds to the UK's Financial Services Authority and 59 million Swiss francs from its estimated profit to Swiss regulator Finma.

The FSA said at least 45 people were involved in the rigging, which took place across a range of Libor currencies.
More
http://www.reuters.com/article/2012/12/19/us-ubs-libor-idUSBRE8BI00020121219

"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

The monthly Coppock Indicators finished November:
DJIA: +103 Up. NASDAQ: +123 Up. SP500: +125 Up.  

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