Baltic Dry Index. 734 - +22
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
“I have always found the word ‘Europe’ on the lips of those who wanted something from others which they dared not demand in their own names!”
German Chancellor Otto von Bismarck, 1880
There was good and bad news for snake bit
Euroland yesterday, though I think the bad news outweighed the good. As such we’ll
open with the bad reality surfacing again, after last week’s optimistic spin that
the European never ending crisis had ended.
Unemployment in the Eurozone just
keeps moving relentlessly higher. The death spiral for the young is now
claiming slightly more than one in every two in the youth category in Club Med.
The euro simply isn’t working for over half of Europe, with more and more
hapless Europeans getting crushed with each passing month. Now even the
Bilderberger, elitist Davos set can read the writing on the wall. Their giant
fiat euro, top down imposed, hare brained experiment, went off half cocked. Now
the damage is on view in plain sight, yet Euroland’s bureaucrats and
politicians struggle on in deep denial.
“This will provide an engine, an example that will allow Europe to go faster, further and better.”
French President Jacques Chirac. 2003.
Brussels fears 'poverty trap' for half of Europe as North-South gap widens
Unemployment in the eurozone jumped to a record high of 11.8pc in November as the region slid deeper into recession, with alarming rises across the Mediterranean that threaten extreme social distress.
The jobless
rate has reached an all-time high of 26.6pc in Spain, rising to 56.5pc for
youth. It is much the same picture in Greece, where unemployment has spiked
from 19pc to 26pc over the past year as austerity bites in earnest, with
Portugal not far behind as it follows suit with draconian cuts. There are now
18.8m people looking for work across the eurozone.
“A
widening gap is emerging,” said Laszlo Andor, the European Social Affairs
Commissioner. “Peripheral states appear to be caught in a downward spiral of
falling economic output, rapidly rising unemployment and eroding individual
incomes.”
Mr
Andor’s unemployment report said the welfare systems of southern Europe are
unravelling as governments slash benefits, leaving families exposed to the full
brunt of the crisis. The “automatic stabilisers” are no longer functioning
properly.
He said
there is a rising risk that the long-term jobless will fall into an “enormous
poverty trap” if the crisis is allowed to drag on. “Severe material
deprivation” has surged to 31pc in Latvia and 44pc in Bulgaria, casting doubts
on claims that these two euro-pegged countries have shaken off the crisis .
Spain’s
long-term jobless now number 2m, while the country’s GINI coefficient measuring
inequality has risen from 31.2 to 34 since the crisis began.
The
report said the biggest single cause of the jobs crisis is a “demand shock” to
the Euroland economy, deeming other factors to be “less relevant”. The findings
reflect deep dissent within the EU policy apparatus over the contractionary
policy settings, and undercut claims by hard-liners that labour reforms in the
Club Med bloc are enough to pull the region out of slump.
Mr
Andor’s grim warnings came a day after Commission chief Manuel Barroso claimed
the eurozone crisis had “essentially been overcome”.
Graeme
Leach, from the Institute of Directors, said the European Central Bank has
bought time with its bond-buying pledge but the deeper economic crisis grinds
on with a “terrifying” human cost. “The figures are shockingly bad. This saga
is far from over,” he said.
The
North-South gap makes it very hard for the ECB to run monetary policy for the
whole bloc.
More
Eurozone meltdown 'cannot be discarded' in dangerous mix of global risks, warns World Economic Forum
A dangerous mix of fragile economies and extreme weather has increased global risks, with a meltdown in the eurozone still a threat, the World Economic Forum said.
11:17AM GMT 08 Jan 2013
In its Global Risks
2013 report, the
WEF said eurozone instability will weigh on world prospects in coming year and
the threat of "systemic financial failure cannot be completely
discarded".
The
report warned that anti-austerity protests across the eurozone and the election
of “rejectionist” governments this year could bring the crisis to a head,
"potentially destabilising the global financial system".
As the
report came out, European Union data showed the unemployment rate across the
troubled eurozone rose to
a record 11.8pc in November, with those out of work now nudging 19m and youth
unemployment at 24.4pc.
The
survey of more than 1,000 experts and industry leaders fears that persistent
global economic fragility is diverting attention of governments from
longer-term solutions by limiting resources and investment.
Its more
pessimistic outlook "reflects a loss of confidence in leadership from
governments", said Lee Howell, the WEF managing director responsible for
the report.
The
80-page analysis of 50 risks for the next 10 years comes ahead of the WEF's annual
meeting in the Swiss ski resort of Davos from January 23 to 27, which brings
political, business and financial leaders together to consider the planet's
future.
Respondents
said the world was more at risk as persistent economic weakness sapped our ability
to tackle environmental challenges.
It also
highlighted a widening gap between rich and poor and unsustainable government
debt as the top two most prevalent risks – as they were last January.
More
Irish house prices to fall another 20pc, warns Fitch
Irish house prices could fall a further 20pc and inflict stiff losses on holders of mortgage bonds, with a growing risk of property defaults across the eurozone periphery, according to Fitch Ratings.
The
agency said the foreclosure process was now at the mercy of politics in
Ireland, as well as Greece and Spain, as each takes steps to prevent
repossession of homes by lenders.
This has
already led to a surge in 90-day arrears to 11.3pc in Ireland, where distressed
borrowers no longer feel constrained to pay their mortgages, knowing that they
are safe and can expect big debt write-offs under new insolvency laws. “There
is a moral hazard concern,” said Fitch.
A decree
suspending home evictions has also raised the same risk for lenders in Spain,
while Greece has suspended foreclosure sales on main homes.
Fitch
raised “substantial concerns” about the prospects for housing debt across the
EMU periphery, including Italy, as prices tumble and banks ration lending.
More
In better European news, Germany is going to boost
wages this year, say the German unions, and politicians on all sides. This is
supposed to happen just as German growth has started slowing significantly.
German employers might not see it quite so clearly, but if it happens it will ease
some of the scale of the Club Med internal devaluation. My guess is it will all
be too little too late. Jam tomorrow doesn’t feed a starving man today. In any
case with France, the number two Eurozone economy, doing its best to blow up
the Eurozone in 2013, any German wage inflation relief is likely to become
irrelevant, even were it to happen.
“Our future begins on January 1 1999. The euro is Europe’s key to the 21st century. The era of solo national fiscal and economic policy is over.”
German Chancellor Gerhard Schröder, December 31, 1998
Possible Boost for EU Economy
Germany Gears Up for Big Pay Hikes
By Sven Böll and Janko Tietz 01/08/2013
---After metalworkers' union IG Metall fought for improvements in the treatment of temporary workers and more assistance for trainees in the last bargaining round, the union's main focus in the new round beginning in May will be on money. "Our demand will focus on a decent pay increase," says IG Metall regional director Meinhard Geiken. Michael Sommer, head of the German Federation of Trade Unions (DGB), is convinced that "the people who keep the country running and generate its wealth deserve to get their fair share."
Although
it sounds like union ritual, the labor organizations are getting more support
than they have in a long time. For more than a decade, it was considered
reasonable in Germany to keep wage increases moderate at best, in light of high
unemployment. But now the country is getting used to a new logic, namely that
Germany, more than any other European economy, can afford pay increases.
The
German economy got through the euro crisis in much better shape than almost all
of its neighbors. Employment, at more than 41 million, is at the highest level
ever recorded, and many companies have recently reported record profits.
Nevertheless,
most employees have less disposable income, when adjusted for inflation, than
they did 10 years ago. "The working world has to be reorganized in
2013," says Stefan Körzell, the DGB chairman for the two states of Hesse
and Thuringia. "We cannot allow more and more people to be poor despite
being employed."
----Politicians from the ruling center-right coalition are also tapping into the general sentiment. Labor Minister Ursula von der Leyen already called for a "noticeable increase" last year, and even Finance Minister Wolfgang Schäuble agreed in principle. Rising wages, he argued, "also contribute to eliminating imbalances within Europe."
Essentially,
this means that in times of the euro crisis, Germany's collective bargaining
negotiations have a different meaning than during the deutschmark era. Many
economists agree. When employers and union officials in Germany sit down to
hammer out their wage deals, they have to look beyond the economic situation in
Germany and think of growth and employment in the entire euro zone.
“The euro is a sickly premature infant, the result of an over-hasty monetary union.”
German Opposition leader Gerhard Schröder, March 1998
Japan to buy EU bailout bonds to ease eurozone crisis
Japan's new finance minister said Tokyo would buy bonds issued by Europe's permanent bailout fund to help soothe the eurozone's debt problems and stabilise the under-pressure yen.
1:47PM
GMT 08 Jan 2013
Taro Aso
said the new government would tap foreign exchange reserves to pay for the
bonds, but declined to say how much it planned to buy.
A finance
ministry official told AFP the bond buying could start as early as Tuesday,
when the European Stability Mechanism (ESM) begins selling the paper, adding
that Japan "will make a purchasing decision after seeing the terms of the
issuance".
Japan,
which counts Europe as a major export market, previously bought billions of
dollars in bonds issued by the ESM's predecessor, the European Financial
Stability Facility.
"Stabilising
Europe's financial crisis will
eventually contribute to the stability of currency (prices) including the yen,
and so we plan to keep purchasing ESM bonds using foreign reserves," Mr
Aso said.
China-Japan Dispute Takes Rising Toll of Top Asian Economies
By Bloomberg News - Jan 9, 2013 1:37 AM GMT
The last
time a dispute between Japan and China blew up in 2010 over eight uninhabited
islands, the economic fallout lasted less than a month. This time, the spat is
prolonging a recession in the world’s third-largest economy.
Four
months after Chinese consumers staged a boycott of Japanese products over the
islands in the East China Sea, sales of Japanese autos in China have yet to
recover, Chinese factories began to favor South Korean component suppliers, and
the U.S. has displaced China as Japan’s largest export market.
---- As China’s confidence in asserting its territorial claims has grown, and trade between the two nations has tripled since 2000 to more than $300 billion, the commercial cost of failing to resolve the dispute keeps rising. The latest flare-up came after property developer Kunioki Kurihara sold three of the islands to the Japanese government for 2.05 billion yen ($23 million) in September, a transaction Xi Jinping, the new head of the Chinese Communist Party, called “a farce.”
The
fallout from the sale may have cut Japan’s growth in the latest quarter by
about one percentage point, JPMorgan Chase & Co. estimated. That would be
enough to keep the economy in recession after two quarters of contraction up to
Sept. 30. Gross domestic product may have shrunk an annualized 0.5 percent in
the final three months of 2012, according to the median forecast in a Bloomberg
News survey.
---- China’s official Xinhua news agency on Dec. 2 criticized the U.S. Senate’s approval of an amendment to show the islands fall under a U.S.-Japan defense treaty, calling it a “disturbing message” to the world that the Senate is seeking an escalation of tensions between China and Japan.
“The row has changed the landscape of China-Japan relations,” said Taylor Fravel, a professor at Massachusetts Institute of Technology who specializes in Chinese politics. “As a territory dispute, it’s prone to spirals of escalation.”
---- “As Japan’s politics turn decisively to
the right, more and frequent spats between Japan and China are expected,” said
Liu Li-Gang, chief economist for Greater China at Australia and New Zealand
Banking Group Ltd. who used to work for the World Bank. “Both economies will
lose in the end. Japan will lose a big market, and China will not be able to
leverage on Japan’s technology and investment for growth.”
More.
The global economy has seen debt growing faster than income for
the past decade. It is obviously not sustainable. After the 2008 global
financial crisis the pattern has continued with debt formation shifting to the
government. Now the fiscal crisis is engulfing Europe, Japan and the United
States. Government debt can’t grow fast in the future.
Andy Xie. Caixin Online January 8, 2013.
At the Comex silver depositories Tuesday final figures were: Registered 39.52
Moz, Eligible 110.063 Moz, Total 149.58 Moz.
Crooks and
Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, more
on the fraud of global warming, man-made or not. Carbon taxes anyone? Carbon
trading schemes perhaps?
Global warming at a standstill, new Met Office figures show
The Met Office has downgraded its forecast for global warming to suggest that by 2017 temperatures will have remained about the same for two decades.
A new
scientific model has revised previous figures for the next five years downwards
by around a fifth.
The
forecast compares how much higher average world temperatures are likely to be
than the “long-term average” from 1971-2000.
It had
been thought that this would be 0.54C during the period 2012 -2016 but new data
puts the figure for the 2013-2017 period at 0.43C.
This
figure is little higher than the 0.40C recorded in 1998, the warmest year in
the Met Office Hadley Centre’s 160-year record – suggesting global warming will
have stalled in the intervening two-decade period.
However,
it is thought that factors such as ocean current patterns may be behind the
slowdown and scientists say the “variability” in climate change does not alter
the long-term trend of rising temperatures.
The new
annual forecast, published on December 24, is the first to make use of the Met
Office’s latest climate model, HadGEM3, which it said “includes a comprehensive
set of improvements based on the latest scientific understanding”.
It
suggests that global average temperature will remain between 0.28C and 0.59C
above the long-term average “with values most likely to be about 0.43C higher
than average”.
----Figures
from last November, showing that 2012 would be cooler than average for the past
decade, had already indicated that global warming was slowing down.
More
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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