Baltic Dry Index. 698 -01
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
Patriotism is the last refuge of a scoundrel.
Samuel Johnson.
After yesterday’s global stock markets relief
rally that the USA wasn’t going to push the global economy into an instant man
made recession, today it’s time for a more sober look at the real economic reality.
The USA may not be entering a Republican Party made instant recession, but it’s
still likely entering an ordinary trade recession in 2013, especially so if in
two months time the USA actually implements any meaningful spending cuts. But a
crushed Republican Party might just decide that fight is no longer worth the
effort. Just let the Democrats keep taxing and spending the USA into oblivion,
and try to make the case in two year’s time at the mid-term elections, when the
US voters will likely be faced with the stark choice of real reform, or the
decline and fall of the American Empire.
In Europe, despite the relief rally
yesterday, stock should be falling not rallying. The Eurozone recession is
deepening with Germany now joining in, and France off pursuing national suicide
policies. Only China offers a glimmer of hope, assuming one believes the
official statistics and assuming, a newly belligerent Japan doesn’t start a war
with China over “the Chinese Falklands.” For more on that scroll down to Crooks
Corner.
"Let us take a patriot, where we can meet him; and, that we
may not flatter ourselves by false appearances, distinguish those marks which
are certain, from those which may deceive; for a man may have the external
appearance of a patriot, without the constituent qualities; as false coins have
often lustre, though they want weight."
Samuel Johnson.
Euro zone factory slump deepens, U.S., Asia perk up
WASHINGTON/LONDON |(Reuters) - Manufacturing in the United States and China grew in December, suggesting the global economy was on course for moderate growth this year, even as the euro zone looked set to sink deeper into recession.
U.S. factory activity rebounded last month after stumbling to a 40-month low in November, with new export orders growing for the first time since May. That mirrored growth in Chinese manufacturing reported earlier this week.
The Institute for Supply Management said its index of U.S. manufacturing activity rose to 50.7 from 49.5 in November.
The improvement came despite concerns over a wave of sharp government spending cuts and high taxes, the so-called fiscal cliff, that would have sucked $600 billion from the U.S. economy and push it into recession.
In much of Europe, the mood was downbeat. Purchasing managers' surveys in the 17-nation euro zone showed economic decline among some of its biggest member countries.
Markit's Eurozone Manufacturing Purchasing Managers' Index (PMI) edged down to 46.1 in December from November's 46.2, below a preliminary reading of 46.3.
It has been below the 50 mark that divides growth from contraction since August 2011.
----In China, a manufacturing survey by HSBC, which focuses more on smaller and mid-sized firms, suggested activity was at its strongest since May 2011. China's official manufacturing PMI, released on Tuesday held steady in December at 50.6, matching November's seven-month high.
The surveys add to signs economic activity in China picked up between October and December after growth slowed for seven consecutive quarters to 7.4 percent in the third quarter. That helped offset persistent weakness in Europe and Japan.
----While Congress and the Obama administration managed to steer the economy away from the worst of the so-called fiscal cliff, Americans face a higher tax burden this year and government spending cuts.
Analysts estimate that could cut as much as one percentage point from gross domestic product this year.
----Germany, Europe's largest economy, saw its crucial manufacturing sector shrink for the 10th straight month and at a faster pace, while French data showed a decline in all but one of the past 17 months.
The slump in Spain deepened and Italy's index, although improved, remained below 50 for the 17th month.
Ireland was the only member of the currency union to show manufacturing growth in December.
"It's pretty grim really," said Jonathan Loynes at Capital Economics. "These surveys are pointing to a pretty deep recession. If the German industrial sector is contracting quite sharply, it is pretty hard to see where growth across the euro zone as a whole is going to come from."
More
Portugal warns EU-IMF troika to back off on austerity demands
Portugal's president has ordered a legal inquiry into the country’s austerity policies and threatened a showdown with creditors over the draconian terms of its EU-IMF bail-out.
President
Anibal Cavaco Silva called for urgent action to halt the “recessionary spiral”,
warning Europe’s leaders that the current course had become “socially
unsustainable”.
In a
speech to the nation, he said Portugal would “honour its international
obligations”, but in the same breath called for a tough line with the European
Union-International Monetary Fund Troika over the pace of fiscal tightening
under Portugal’s €78bn (£63bn) loan package. “We have arguments, and we should
use them firmly,” he said.
“Fiscal
austerity is leading to declining output and lower tax revenue. We must stop
this vicious circle,” he said, cautioning the Troika that there would be no way
out of the crisis until policy was set in the interests of the “Portuguese
people” as well as foreign creditors.
His
sombre speech was a reminder that Europe’s crisis is far from over.
Portugal’s
jobless rate has risen from 13.7pc to 16.3pc over the past year, reaching 39pc
for youth, even before the full impact of austerity hits.
In a
stinging rebuke to the country’s free market premier, Pedro Passos Coelho, the
president asked the constitutional court to rule on the legality of tax rises
that come into force this January as well as on further moves to dismantle the
welfare state in the 2013 budget.
“There
are well-founded doubts over whether the distribution of sacrifice is just,” he
said. Mr Cavaco Silva’s broadside against ministers from his own centre-right
Social Democrat party leaves the government starkly isolated, and increasingly
in danger of losing its authority.
Popular
anger is building over the over the Troika’s fiscal shock therapy, which will
push up average income tax rates by 3.4 percentage points and bring in a
plethora of surcharges and fees. It aims to cut the budget deficit to 4.5pc
this year, largely through tax rises.
More
At the Comex silver depositories Wednesday final figures were: Registered 40.30
Moz, Eligible 108.37 Moz, Total 148.81 Moz.
Crooks and
Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
No crooks today,
just scoundrels stumbling their way to a major Asian war that just might end in
World War Three. Stay long physical
precious metals. Two Asia nations can’t back down without losing face, while
Japan was just given last month, a blank cheque for war from the USA. One or all
are going to lose out in this dispute, that looks certain to rapidly escalate as
2013 plays out.
"In
a time of war the nation is always of one mind, eager to hear something good of
themselves and ill of the enemy. At this time the task of the news-writer is
easy; they have nothing to do but to tell that a battle is expected, and
afterwards that a battle has been fought, in which we and our friends, whether
conquering or conquered, did all, and our enemies did nothing."
Samuel
Johnson.
Caught in a bind that threatens an Asian war nobody wants
Date December 26, 2012
Hugh White
Creative diplomacy is urgently needed for a face-saving solution.
THIS is how wars usually start: with a steadily escalating stand-off over something intrinsically worthless. So don't be too surprised if the US and Japan go to war with China next year over the uninhabited rocks that Japan calls the Senkakus and China calls the Diaoyu islands. And don't assume the war would be contained and short.Of course we should all hope that common sense prevails.
------The analogy with Asia today is uncomfortably close and not at all reassuring. No one in 431BC really wanted a war, but when Athens threatened one of Sparta's allies over a disputed colony, the Spartans felt they had to intervene. They feared that to step back in the face of Athens' growing power would fatally compromise Sparta's position in the Greek world, and concede supremacy to Athens.
The Senkakus issue is likewise a symptom of tensions whose cause lies elsewhere, in China's growing challenge to America's long-standing leadership in Asia, and America's response. In the past few years China has become both markedly stronger and notably more assertive. America has countered with the strategic pivot to Asia. Now, China is pushing back against President Barack Obama's pivot by targeting Japan in the Senkakus.
The Japanese themselves genuinely fear that China will become even more overbearing as its strength grows, and they depend on America to protect them. But they also worry whether they can rely on Washington as China becomes more formidable. China's ratcheting pressure over the Senkakus strikes at both these anxieties.
The push and shove over the islands has been escalating for months. Just before Japan's recent election, China flew surveillance aircraft over the islands for the first time, and since the election both sides have reiterated their tough talk.
Where will it end? The risk is that, without a clear circuit-breaker, the escalation will continue until at some point shots are exchanged, and a spiral to war begins that no one can stop. Neither side could win such a war, and it would be devastating not just for them but for the rest of us.
No one wants this, but the crisis will not stop by itself. One side or other, or both, will have to take positive steps to break the cycle of action and reaction. This will be difficult, because any concession by either side would so easily be seen as a backdown, with huge domestic political costs and international implications.
It would therefore need real political strength and skill, which is in short supply all round - especially in Tokyo and Beijing, which both have new and untested leaders. And each side apparently hopes that they will not have to face this test, because they expect the other side will back down first.
Beijing apparently believes that if it keeps pushing, Washington will persuade Tokyo to make concessions over the disputed islands in order to avoid being dragged into a war with China, which would be a big win for them. Tokyo on the other hand fervently hopes that, faced with firm US support for Japan, China will have no choice but to back down.
And in Washington, too, most people seem to think China will back off. They argue that China needs America more than America needs China, and that Beijing will back down rather than risk a break with the US which would devastate China's economy.
Unfortunately, the Chinese seem to see things differently. They believe America will not risk a break with China because America's economy would suffer so much.
These mutual misconceptions carry the seeds of a
terrible miscalculation, as each side underestimates how much is at stake for
the other. For Japan, bowing to Chinese pressure would feel like acknowledging
China's right to push them around, and accepting that America can't help them.
For Washington, not supporting Tokyo would not only fatally damage the alliance
with Japan, it would amount to an acknowledgment America is no longer Asia's
leading power, and that the ''pivot'' is just posturing. And for Beijing, a
backdown would mean that instead of proving its growing power, its foray into
the Senkakus would simply have demonstrated America's continued primacy. So for
all of them, the largest issues of power and status are at stake. These are
exactly the kind of issues that great powers have often gone to war over.
More
"A
man sometimes starts up a patriot, only by disseminating discontent, and
propagating reports of secret influence, of dangerous counsels, of violated
rights, and encroaching usurpation. This practice is no certain note of patriotism.
To instigate the populace with rage beyond the provocation, is to suspend
publick happiness, if not to destroy it. He is no lover of his country, that
unnecessarily disturbs its peace. Few errours and few faults of government, can
justify an appeal to the rabble; who ought not to judge of what they cannot
understand, and whose opinions are not propagated by reason, but caught by
contagion."
Samuel
Johnson.
The monthly
Coppock Indicators finished December:
DJIA: +100 Down. NASDAQ: +123 Unch. SP500: +129 Up.
All three indexes are giving different
signals. A time for caution.
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