Baltic Dry Index. 753 +05
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
“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.
They came, they saw, they crumpled, in the
face of an unstoppable race to devalue by Japan. The other members of the G-20
bowed to the inevitable. Japan is determined to kick of an aggressive new round
of Yen debasement. I suspect that we will not have to wait long for a response
from China, South Korea and Taiwan. Germany, however, trapped in the Germanic euro,
is not in control of its own currency. A stronger euro versus the yen now lies
ahead. All Chancellor Merkel and the industrialists can do is pray for the
return of Prime Minister Berlusconi in the coming Italian election, and with
him chaos and a much weaker euro.
It’s a funny old world in the 21st
century version of the Great Nixonian Error of fiat money. A German Pope gets
to resign, the ECB is run by Mario dei Paschi as a sort of half-way house to
the easy come-easy go QE casino banking policies of the BOE and the US Fed.
Tiny insignificant corrupt Cyprus, threatens to bring down the whole European
Monetary Union if it isn’t given and immediate 17.5 billion euros in dubious
aid. Could Europe really collapse for what amounts to a rounding error in most
bankster bonus pools?
We open with the weekend triumph in Moscow by
Japan.
Japan stocks rally, yen resumes fall after G20
TOKYO |(Reuters) - Japanese shares jumped closer to a four-year high as the yen slumped on Monday after Tokyo dodged direct criticism from G20 peers on the aggressive reflation plans that have weakened the currency.
The G20 opted not to single out Tokyo, but committed members to refrain from competitive devaluations and said monetary policy would be directed only at price stability and growth. Japan said this decision is a green light to pursue its expansionary policies.
----"The G20's message is
that monetary easing is OK, but not to imply anything about leading a currency
weaker. The G20 effect is already seen in Abe's general comments on forex today
which steered away from giving specifics on a preferred level or direction for
the yen," said Yunosuke Ikeda, a senior FX strategist at Nomura Securities.
More
Staying with Asia, “Happy Days are Here
Again,” in China says Japanese heavy construction equipment manufacturer
Komatsu. Well maybe, but until Japan gives back China’s Diaoyu Islands in the
East China Sea, Komatsu’s optimism might just be a tad premature.
Komatsu CEO Sees China Construction Rebound Next Fiscal Year
By Masumi Suga & Yasumasa Song - Feb 18, 2013 4:38 AM GMT
Komatsu Ltd., the Japanese maker of construction equipment whose sales have
fallen for seven consecutive quarters in China, expects demand from the Asian
nation to recover this year, aided by stimulus spending. The world’s top producer of diggers and the second-biggest maker of bulldozers and dump trucks after Peoria, Illinois-based Caterpillar Inc. forecasts China demand to grow 5 percent to 10 percent in the year starting April 1, said President Kunio Noji. The yen’s slide to its lowest since May 2010 will also help boost competitiveness, he said.
----Total retail sales of construction equipment in China, the world’s biggest market, slid about 19 percent in 2012 to $32.3 billion, according to data compiled by Bloomberg. While construction may rebound after China’s Lunar New Year holidays, inventory levels may weigh on excavator production, said Karen Ubelhart, a Bloomberg Industries analyst in New York.
The yen,
which last week traded as low as 94.46 to the U.S. dollar, is about 7 percent
weaker than the 88 yen the company has budgeted on for the current quarter. A
drop in the currency’s value bolsters Japan’s exporters when overseas earnings
are repatriated.
More
Now back to the idiocy of one size fits all EU
Germania. In Europe’s never ending fight against the demons of man-made global
warming from carbon, Germany’s electricity market suffers from a surfeit of subsidised
“green” electricity. Unfortunately nothing can be done until after Mrs Merkel’s
re-election in September. In Europe, the inmates long ago took over running the
asylum. One unintended consequence though, all that subsidised cheap electricity
conveniently provides a hidden subsidy for German industry. Not so for German
electricity consumers, who pay for the subsidy with every bill. It gets tougher
for Club Med to compete with every turn of the wind turbine.
German power market paralysed by subsidised renewables
Mon Feb
18, 2013 6:00am GMT
*
Renewable overcapacity hurting prices
* Reforms
seen difficult ahead of election
*
Utilities hurt by high fuel prices, cheap wholesale electricity
FRANKFURT/LONDON, Feb 18 (Reuters) - Germany's wholesale power market is
teetering as long-term prices trade near eight-year lows and September
elections dim hopes for any speedy reform of renewable subsidies blamed for
overcapacity and weak utilities' margins.Successive German governments have paid out generous subsidies to develop wind, solar and biomass power generation capacity. This has guaranteed producers fixed prices and given green power priority access on transmission grids.
As a result, German renewable power generation capacity from wind, solar, biomass and small-scale hydro plants has more than doubled in the past four years.
It has risen to more than 80 gigawatts (GW) from less than 40 GW in 2008, in theory enough to cover Germany's maximum demand of 82 GW.
But renewables typically only generate around a third of their installed capacity, so effectively this boom has resulted in some 25 percent of Germany's total power generation being generated from renewables.
Spurred by subsidies, the problem is that Germany now suffers from overcapacity which is pulling down wholesale prices while gas and coal needed for electricity production in thermal power stations have remained expensive.
"The current prices have dire consequences for utilities. As such, we believe the outlook for European utilities remains gloomy," said Michael Bret, head of thematic research at AXA Investment Managers.
Wholesale forward power prices have fallen about 30 percent on the back of the renewables build-up, and currently languish close to 8-year lows, Reuters data shows.
----The rise of renewable power capacity - now more than 60 GW for wind and solar - also means a high degree of volatility as both depend not on demand, but weather conditions.
That has
hurt forward contract trading in Europe's biggest power market, according to
Steffen Koehler, chief operating officer of the European Energy Exchange (EEX).
"Market
participants have to deal with great change and uncertainty at the moment, and
traders deal with uncertainty by shifting positions from long-term to
short-term products," Koehler said.
"The
more renewables you add to the grid, the more the market will shift towards
short-term trading."
More
Meanwhile, the co-CEO of Denmark’s Saxo Bank,
who for some reason lives in not so nearby Switzerland, thinks the euro is
doomed, and unusually for most continentals, is quite prepared to say so.
Possibly why he has to live in the safety of non EU member Switzerland. The
euro might just about be able to stagger on destroying Europe’s wealth until
France blows up, but probably ends sooner. All the more so, if Japan’s new G-20
green for a competitive currency devaluation steals Germany’s prowess in the
global export markets. Stay long physical gold and silver.
Saxo Bank CEO Says Euro Is Doomed as Currency Woes Resurface
By Mahmoud Kassem - Feb 18, 2013 6:36 AM GMT
Lars Seier Christensen, co-chief executive officer of Danish bank Saxo Bank
A/S, said the euro’s recent rally is illusory and the shared currency is set to
fail because the continent hasn’t supported it with a fiscal union. “The whole thing is doomed,” Christensen said yesterday in an interview at the bank’s Dubai office. “Right now we’re in one of those fake solutions where people think that the problem is contained or being addressed, which it isn’t at all.”
The euro has gained 8.2 percent versus the dollar in the past six months and reached as high as $1.3711 on Feb. 1, the strongest since Nov. 14, 2011. The European Central Bank forecasts the euro-area economy will shrink 0.3 percent this year and ECB President Mario Draghi said on Feb. 7 that the currency’s gains pose a risk for growth and inflation.
While the euro has strengthened, the economies of Germany, France and Italy all shrank more than estimated in the fourth quarter. Ministers from the 17-member euro area met during the week to discuss aid to Cyprus and Greece as a tightening election contest in Italy and a political scandal in Spain threaten to reignite the region’s debt crisis.
“I’d be a bigger seller of the euro at anything near 1.4,” according to Christensen, who said he isn’t making any speculative bets against the currency.
----“Another possible fallout is getting rid of some of the countries that are being ruined by being in the euro, notably the southern European economies,” Christensen said. “People have been dramatically underestimating the problems the French are going to get from this. Once the French get into a full- scale crisis, it’s over. Even the Germans cannot pay for that one and probably will not.”
More
http://www.bloomberg.com/news/2013-02-17/saxo-bank-ceo-says-euro-doomed-as-single-currency-woes-resurface.html
Italian Undecided Voters Targeted in Campaign’s Closing Week
By Andrew Frye - Feb 17, 2013 11:01 PM GMT
talian
voters are braced for an onslaught of tax-cut promises and attacks on the
European Union as the four leading candidates take to the airwaves and criss-
cross the country in the election campaign’s final days.
Italy
goes to the polls Feb. 24-25 in the first parliamentary election since Europe’s
sovereign debt crisis threw its political establishment into disarray. Still up
for grabs is the 20 percent of voters that pollsters say decide in the final
week. The risk is an inconclusive result that denies victory to any and leads
to gridlock, requiring a second vote.
The biggest issue is, is it going to be easy to form a government?” said Marc Ostwald, a rates strategist at Monument Securities Ltd. in London.
Silvio Berlusconi kicks off the week with a rally today in Milan, capital of the battleground region of Lombardy near the Alpine foothills. The billionaire former premier will repeat his pledge to hand out more than $5 billion in property-tax refunds as he seeks to build a blocking minority in the Senate. Berlusconi’s main rival, front-runner Pier Luigi Bersani, may appear on the other end of Italy in Cosenza, Calabria.
More
http://www.bloomberg.com/news/2013-02-17/italian-undecided-voters-targeted-in-campaign-s-closing-week.html
FACTBOX-Financial woes in tiny Cyprus are big euro zone headache
NICOSIA |(Reuters) - Cypriots voted on Sunday to elect a new president who must negotiate a financial rescue package to keep the island nation from a bankruptcy that would reignite the euro zone debt crisis.
A deal is proving tricky to nail down since virtually all options to avoid a Cypriot default are dead-end solutions or risk hurting investor sentiment in the euro zone just as confidence slowly returns to the bloc.
Here are some of the options:
More
http://uk.reuters.com/article/2013/02/17/uk-cyprus-factbox-idUKBRE91G0AI20130217
As a service for the LIR’s more superstitious readers, since Pope Benedict announced his resignation just about a week ago, the Vatican has been hit by a lightning strike, while Rome itself was rattled by a 4.8 earthquake at the weekend, just 50 miles away. What else could possibly go wrong?
There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
Ludwig Von Mises. Human Action
At the Comex silver depositories Friday final figures were: Registered 37.52
Moz, Eligible 122.72 Moz, Total 160.24 Moz.
Crooks and
Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, yes you
guessed it, it’s the banksters again. No banksters’ suffered pain or distress
in the making of the 2007-2013 and counting, Great Calamity.
Socialise
losses, privatise profits. Rinse and repeat.
Ebenezer
Squid. 21st century capitalist
Don’t Blink, or You’ll Miss Another Bailout
By GRETCHEN MORGENSON Published: February 16, 2013
MANY people became rightfully upset
about bailouts given to big banks during the mortgage crisis. But it turns out
that they are still going on, if more quietly, through the back door.
The existence of one such secret deal, struck in July between the Federal Reserve Bank of New York and Bank of America, came to light just last week in court filings.
That the New York Fed would shower favors on a big financial institution may not surprise. It has long shielded large banks from assertive regulation and increased capital requirements.
Still, last week’s details of the undisclosed settlement between the New York Fed and Bank of America are remarkable. Not only do the filings show the New York Fed helping to thwart another institution’s fraud case against the bank, they also reveal that the New York Fed agreed to give away what may be billions of dollars in potential legal claims.
Here’s the skinny: Late last Wednesday, the New York Fed said in a court filing that in July it had released Bank of America from all legal claims arising from losses in some mortgage-backed securities the Fed received when the government bailed out the American International Group in 2008. One surprise in the filing, which was part of a case brought by A.I.G., was that the New York Fed let Bank of America off the hook even as A.I.G. was seeking to recover $7 billion in losses on those very mortgage securities.
It gets better.
What did the New York Fed get from Bank of America in this settlement? Some $43 million, it seems, from a small dispute the New York Fed had with the bank on two of the mortgage securities. At the same time, and for no compensation, it released Bank of America from all other legal claims.
When I asked the Fed to discuss this gift to the bank, it declined. To understand how the settlement happened, we must go back to the dark days of September 2008. With the giant insurer A.I.G. teetering, the government stepped in. As part of the rescue, A.I.G. sold mortgage securities to an investment vehicle called Maiden Lane II overseen by the New York Fed. A.I.G. was bleeding from its toxic mortgage holdings, many of which were issued by Bank of America, and it received $20.8 billion for securities with a face value of $39.2 billion.
In 2011, aiming to recover some of that $18 billion loss, the insurer sued Bank of America for fraud. The case, filed in New York state court, sought $10 billion in damages from the bank, $7 billion of that related to securities that A.I.G. sold to Maiden Lane II. Bank of America, for its part, argued that A.I.G. had no standing to sue for fraud on the Maiden Lane securities. With the sale, Bank of America contended, the right to bring a legal claim against the bank for fraud passed to Maiden Lane II. That entity, controlled by the New York Fed, never brought fraud claims against the bank.
Not so fast, said A.I.G. Under New York law, which governs Maiden Lane II, an entity has to explicitly transfer the right to sue for fraud, it said. The original agreement between the New York Fed and A.I.G. never specified such a transfer, the insurer contended.
To settle this question, A.I.G. filed a separate lawsuit against Maiden Lane II in a New York court last month.
A.I.G.’s $10 billion fraud case against Bank of America, meanwhile, was moved to federal court. For pretrial purposes, the bank asked that Mariana R. Pfaelzer, a federal judge in the central district of California, oversee aspects of the case involving the bank’s Countrywide unit, which was in California. Its request was granted. On Jan. 30, Judge Pfaelzer said she would rule on the issue of who owns the legal claims.
Initially, in an October 2011 letter to A.I.G., the New York Fed agreed that the insurer had the right to seek damages under securities laws on instruments it sold to Maiden Lane II.
But more recently, the New York Fed began helping Bank of America battle A.I.G. In late December, the New York Fed provided two declarations to the bank. One stated that Maiden Lane II had “intended” to receive all litigation claims relating to the mortgage securities, meaning that it alone would have had the right to sue. Another said that the October letter was not an interpretation of the Maiden Lane agreement.
But Jon Diat, an A.I.G. spokesman, said in a statement that “A.I.G. and the Federal Reserve Bank of New York never discussed or agreed on any transfer of A.I.G.’s residential mortgage-backed securities fraud claims to Maiden Lane II.” He added that A.I.G. believes “it is the rightful owner of these claims and remains committed to holding Bank of America and other counterparties responsible for the harm caused.”
LAST week, the New York Fed opposed A.I.G.’s efforts to have the question of who owns the legal rights decided in New York, whose law governs the Maiden Lane II agreement, rather than in California. It was in this filing that the New York Fed disclosed its confidential July 2012 deal with Bank of America, releasing it of any liability arising from fraud in the Maiden Lane II securities.
More
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 soon or late and to bring about a depression.
Ludwig Von Mises. Omnipotent Government
The monthly Coppock Indicators finished January:
DJIA: +106 Up. NASDAQ: +126 Up. SP500: +140 Up. All three indexes are giving the same signal,
up.
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