Baltic Dry Index. 885 +05
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
“Sometimes I wonder whether the world is being run by smart people who are putting us on or by imbeciles who really mean it.”
Mark Twain.
Having tossed most of Club Med’s youth onto the
scrapheap of dire unemployment, with little to no prospects for life, in the
name of German imposed austerity, it now looks like all the bloodletting might
have been based on a false premise. A 101 angels can dance on the head of a pin
after all, says new research, and not just the 90 previously thought of by
global economists. Tumbrils and choppers come to mind.
If
all else fails, immortality can always be assured by spectacular error.
J. K.
Galbraith.
A Study That Set the Tone for Austerity Is Challenged
April 16, 2013, 2:36 pm
WASHINGTON — In recent years, policy makers in Europe and the United States
have fastened on the notion that reaching a certain heavy burden of debt would
threaten future economic health — often to justify austerity budgets that
increased unemployment and sapped economic strength in the here and now.But now some economists are challenging the very foundations of that idea, raising questions about whether such a debt threshold even exists and setting off a fierce debate that flared up on Tuesday across the Internet about whether potentially flawed research is at least partly responsible for the slow growth that has bedeviled most advanced industrial countries since the recovery from the financial crisis began in 2009.
The debate comes at a particularly perilous time, as economic officials from the United States and other countries gather for the annual spring meeting of the World Bank and International Monetary Fund in Washington, where many are expected to urge high-debt Europe to ease up on its commitment to austerity in the face of rising unemployment and new economic contractions.
The controversy stems from a provocative new paper by economists at the University of Massachusetts, Amherst that claims to have found some basic errors in one of the most pathbreaking and influential economic studies to come out in the last few years.
That was a 2010 research paper by Carmen M. Reinhart and Kenneth Rogoff of Harvard, also authors of a best seller, “This Time Is Different: Eight Centuries of Financial Folly.” The economists, analyzing 3,700 separate economic observations, found little relationship between growth and debt for countries with debt-to-gross-domestic-product ratios of 90 percent or less. But for countries with debt loads equivalent to or greater than 90 percent of annual economic output, “median growth rates fall by 1 percent, and average growth falls considerably more.”
Many politicians interpreted the research as showing a direct relationship between debt and growth. If a country reached a debt burden of more than 90 percent of its annual economic output, the logic went, it would quickly fall into a debt trap that would leave it struggling to grow in the coming years. Prominent politicians — including Olli Rehn of the European Commission and Representative Paul D. Ryan, the chairman of the House Budget Committee — cited it as a reason to try to impose major budget cuts.
The Harvard economists’ research was always more nuanced about the causal relationship between debt and growth than the popular view. Some economists expressed skepticism of the “threshold” theory to begin with. And many others noted how hard it could be to draw straight lines between debt and economic growth, given the panoply of factors at work.
But now, Thomas Herndon, Michael Ash and Robert Pollin of the University of Massachusetts, Amherst, in trying to replicate the Reinhart-Rogoff results, are challenging the conclusions for a different reason. They say they found some simple miscalculations or data exclusions that sharply altered the ultimate results. According to their rerunning of the figures, “the average real G.D.P. growth rate for countries carrying a public debt-to-G.D.P. ratio of over 90 percent is actually 2.2 percent, not –0.1 percent,” they write. In other words, heavy debts were not associated with the malaise that Professors Reinhart and Rogoff — and much of the world’s economic elite — thought that they were.
The new paper, released this week, has set off a storm within the economics profession, with some commentators even arguing that it undermines the austerity policies that have proved so prevalent in the last few years.
“How much unemployment was caused by Reinhart and Rogoff’s arithmetic mistake?” asked Dean Baker of the left-leaning Center for Economic and Policy Research, for instance.
More
Next, just when you think Super Mario has really hammered Cyprus into the ground, those wily Cypriots think they have come up with a plan B. If you’re going to force us into penury we might just take the rest of you along for the ride.
It is
easier to stay out than get out.
Mark
Twain.
Plan for new Cyprus vote casts uncertainty on bailout
NICOSIA, April 17 - A 10 billion euro aid deal to save Cyprus from bankruptcy has been thrown into fresh uncertainty with news that the country's fractious parliament will vote on the final package.
The surprise vote has only just been scheduled, and early signs are that nearly half the members of the 56-seat parliament may oppose the bailout, seen as vital to keep Cyprus in the euro zone.
The tiny opposition Greens Party said on Wednesday its sole parliamentarian would vote to reject the deal, becoming the first party to announce its intentions.
However, the Communist AKEL and Socialist EDEK parties, which together have 24 seats, have been vocal in their opposition to the bailout, and are seen as likely to vote against, although there is some chance they may abstain instead.
"We've fought for freedom, we've fought to maintain the Cypriot Republic," lawmaker George Perdikis said in statement.
"It is, in my opinion, a crime and wrong to deliver Cyprus into the hands of the troika and allow it to become a colony," he said, referring to the country's European Union, European Central Bank and International Monetary Fund lenders.
The parliament shocked Europe by voting unanimously in March against an initial bailout plan which featured controversial demands that bank depositors including small savers should have funds seized to pay towards the cost.
More
Below, auto sales continue to plummet in Europe, with austerity’s blow back now extending to Germany. The UK market for cars aside where car sales are relatively firm, Europe’s auto sales are at a 20 year low, and headed towards a ten percent contraction this year. Add in a northern European nightmare of a winter and a late spring, plus open season on bank deposits and a coming European wealth tax, and Europe’s economies are in deep trouble. Stay long physical gold and silver, Japan’s new currency war promises to steal further exports from Germany.
Richard M. Ebeling
Europe Car Sales Heading for 20-Year Low on German Slide
By Tommaso Ebhardt & Scott Hamilton - Apr 17, 2013 5:48 PM GMT
European car sales are sliding to a 20-year low after German concerns over
the debt crisis sent demand plunging last month in the region’s biggest economy
and removed the main buffer protecting automakers. Registrations in March fell 10 percent to 1.35 million vehicles, the 18th consecutive decline, with Germany’s auto market plunging 17 percent, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today. First-quarter deliveries in the region dropped 9.7 percent to a record-low 3.1 million cars.
Volkswagen AG
(VOW3), Bayerische Motoren Werke AG (BMW) and Daimler AG (DAI), which last year shrugged off Europe’s decline,
are forecasting unchanged 2013 earnings as investor and consumer confidence
fall in their home country. A recession stemming from the debt crisis, which
reared back up last month with a rescue for Cyprus, has led to 12 percent
unemployment in the 17 countries sharing the euro, the highest since records
began in 1995.
“The
car boom in Germany has come to an end,” said Hans- Peter Wodniok, an analyst
at Fairesearch GmbH & Co. “People have stopped buying cars as consumers are
much less confident of the future, especially after the latest decision on
Cyprus.”
----The
German car-sales drop was the steepest among Europe’s five biggest auto
markets, and compared with an 11 percent fall in February. The U.K., where
sales increased 5.9 percent, overtook Germany in deliveries in March, according
to the ACEA. Spain, Italy and France all posted declines.
----“The
western European passenger-car market is on track this year to hit levels last
seen in 1993, and Germany seems to be in a free-fall,” Max Warburton,
an analyst at Sanford C. Bernstein Ltd. in Singapore, wrote
in a report to clients yesterday.
More
With the G-20 punch-up just about to get underway later
today in Washington, the “Davos spring” line of “the worst is behind us” has
never looked more phony. Despite QE programs to infinity, plus central
banksters and bent politicians cooking up the figures, the slump in commodities
prices suggest that something ugly is now underway in the global economy. Soon
we will very likely all be Japan. All the more sooner as Japan has kicked off
its new beggar thy neighbour 1930s policy.
"The paper standard is self-destructive."
Hans F. Sennholz
Copper to Gold Slump as Miners Lead Stock Drop on Growth Concern
By Pratish Narayanan & Adam Haigh - Apr 18, 2013 6:37 AM GMT
Commodities dropped to the lowest level since July, led by copper and gold, on
concern a global economic recovery will flag. Asian materials stocks headed for
their biggest four-day loss in nine months. The S&P GSCI Index of 24 commodities fell 0.3 percent at 2:00 p.m. in Tokyo, with copper below $7,000 a ton for the first time since October 2011. Gold lost 0.6 percent and zinc slumped 1.7 percent. The MSCI Asia Pacific Index (MXAP) of shares was 0.8 percent lower, with commodity producers down 2.2 percent. Standard & Poor’s 500 Index futures were little changed.
Commodities are collapsing as finance ministers from around the world travel to Washington to discuss policies aimed at sustaining the global recovery. Data this week showed slower- than-expected Chinese economic growth and European car sales sliding to a 20-year low, while U.S. stocks dropped yesterday after disappointing results by companies from Bank of America Corp. to Textron Inc.
“Weak corporate earnings results and renewed concerns about the global economy saw traders switch to a risk-off mode,” said Matthew Sherwood, head of investment markets research in Sydney at Perpetual Investments, which manages about $25 billion.
Copper for delivery in three months on the London Metal Exchange plunged as much as 4 percent to $6,800 a metric ton and was recently at $6,859.75. Nickel fell as much as 1.6 percent to the lowest since July 2009, while zinc lost as much as 3.2 percent to a five-month low.
More
We end for the day with Asian demand soaring for
fire sale physical gold. With every fiat currency in a new currency war race to
the bottom, canny Asian savers would rather hold gold than paper pictures of
dead statesmen.
"Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium."
Murray N. Rothbard
Gold Drop Spurs Demand From Indian Bazaar to Chinese Mall
By Glenys Sim & Michelle Yun - Apr 18, 2013 12:00 AM GMT
Shoppers in China
lined up for gold this week, while in Hong Kong they rushed to buy bracelets
and in India
sought jewelry for weddings not set until December. The metal’s biggest price
drop in three decades provoked the clamor. From Zaveri Bazaar in Mumbai, India’s largest bullion market, to Australia’s Perth Mint, where sales doubled from last week, consumers headed to shops after the commodity entered into a bear market last week. As gold plunged 13 percent in the two sessions through April 15, retail sales tripled across China on April 15-16, the China Gold Association reported.
The frenzy appeared in India and China, the biggest gold- consuming nations, with cultures that traditionally acquire the metal for brides, babies or strongboxes. This year’s 18 percent decline may reignite demand that last year fell for the first time in three years, with Asian investors in particular seeing the drop as a buying opportunity.
“The culture in Asia is such that they will absorb the physical metal when the price drops,” Dick Poon, general manager at refiner and trader Heraeus Metals Hong Kong Ltd., said in a telephone interview. “Jewelry demand is improving and industrial customers are also buying on the dip.”
In India, where coins and mass-market jewelry often are priced by weight, demand in the world’s biggest buyer during recent days was the most this year, the All India Gems & Jewellery Trade Federation reported. Daily customer traffic in Hong Kong and Macau rose as much as 25 percent April 13-16, said Chow Tai Fook Jewellery Group Ltd. (1929), the world’s largest jewelry chain.
More
If the ECB is foolish enough to force through the
fire sale of Cyprus’ gold bullion, to be followed later by Portugal and Italy’s
gold, Europe’s gold will flow from west to east, from weak holders to strong.
While there might be some turmoil in gold prices while sales last, once the
fire sales end gold prices will reset massively higher, but not before the ECB
will have force gold mine closures all over the planet. I will take the
opportunity to swap some fiat tokens for some gold in what will probably go
down as the sale of the century.
"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
At the Comex silver depositories Wednesday final figures were: Registered 41.93
Moz, Eligible 123.50 Moz, Total 165.43 Moz.
Crooks and
Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
In our new lawless
21st century, Germany has signalled that it will be an eastern
front, “take no prisoners” style war against alleged tax evaders. Germany’s 21st
century serfs, find having a bank manager friend in Switzerland might be the
fast route to Germany’s jails. If the Germans are just going to steal the
deposits anyway, perhaps the Swiss should just get in first.
They
seek him here, They seek him there,
Those Gerries seek him everywhere.
Is he in heaven? — Is he in hell?
Or in that Zurich tax motel.
Those Gerries seek him everywhere.
Is he in heaven? — Is he in hell?
Or in that Zurich tax motel.
With apologies
to Charles Dickens. Baroness Emma Orczy surely!
Swiss Bank Data: German Tax Officials Launch Nationwide Raids
April 16, 2013 – 03:50 PM
German tax authorities have bought a new CD
containing bank account details of thousands of alleged tax evaders with
accounts in Switzerland. They conducted 200 raids on Tuesday and expect to
recoup more than half a billion euros in lost tax revenues.
German tax
investigators conducted 200 raids on alleged tax evaders with bank accounts in
Switzerland on Tuesday, prosecutors said.
According to information obtained by
SPIEGEL ONLINE, the authorities launched the nationwide searches after
obtaining a CD containing bank deposit details. The CD was purchased by the
government of the western state of Rhineland-Palatinate and other German states
earlier this year.
The CD has information on more than 10,000 bank customers with Swiss accounts, investigators said. The volume of data is even bigger than similar CDs purchased in recent years, mainly by the state of North Rhine-Westphalia. The purchase of such CDs has angered Switzerland but strengthened the resolve of German opposition parties, which object to a government-backed data sharing deal they say amounts to amnesty for German tax evaders. The upper house of the German parliament rejected the agreement last year.
Many of the accounts contain relatively small sums but the Rhineland-Palatinate government expects to be able to recoup some €500 million ($650 million) in lost tax revenues.
"The material is extraordinarily lucrative," said a member of the minister's staff. Some 4,000 suspected cases of tax evasion are being investigated in an initial round of probes. A large proportion of the deposits checked so far hadn't been declared to German tax offices by the account holders, the official said.
A total of five German states clubbed
together to buy the CD for €4 million from an anonymous informant, said sources
close to the Rhineland-Palatinate government, which arranged the deal. The
information was distributed to tax authorities across Germany some six weeks
ago. Tuesday's raids only mark the start of an extensive investigation that
could last until the end of the year.
Authorities expect that the media coverage of the raids will prompt many tax evaders to turn themselves in to authorities so that they can lessen their penalties.
The current raids affected customers with accounts in Credit Suisse, the former Clariden Leu AG and Neue Aargauer Bank.
The only function of economic forecasting is to make astrology
look respectable.
J. K. Galbraith.
The monthly Coppock Indicators finished March:
DJIA: +119 Up. NASDAQ: +132 Up. SP500: +157 Up. Another Fed bubble, but now it’s challenged.
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