Baltic Dry Index. 862 -01
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
One of the penalties for refusing to participate in politics is
that you end up being governed by your inferiors.
Plato.
The end nears for the ECB, virtually out of ammo
and any means of turning around the Great European Recession, with its 19
million unemployed and rising. Poor Mr. Euro at the ECB was forced yesterday
into tinkering with the bank’s interest rate, and mumbling gibberish about
being “technically ready” to introduce negative deposit rates for money banks
place on deposit at the ECB. He also revealed a split ECB decision on tinkering
with the ECB’s key rate, with one member voting for a higher rate and one
member voting for an even bigger cut. With that ignominy over, everyone left
Bratislava fast.
Stay long physical precious metals. Other than the
seasonal lift to the European economy from the arrival of spring and summer, the
ECB is dead ended and it and everyone else knows it. It is now dependent on
what happens next in France, Italy and Spain, anyone of which can lurch into
crisis and social unrest in the next six months.
Even worse from the ECB’s
perspective, is the emergence of a Eurosceptic political party in Germany. Too
new to probably really affect Mrs. Merkel’s re-election prospects in September,
all German political parties except the Greens, will now have to move to a harder
European line to undercut their appeal. However, the surge in the vote for the
UK Independence Party, if it happens, might influence what happens in Germany
in September. Mr. Euro now has little to no influence on what happens next.
Anyone
who lives within their means suffers from a lack of imagination.
Oscar
Wilde.
ECB ready to enter uncharted waters as bank cuts interest rate to fresh low of 0.5pc
Mario Draghi has revealed that some eurozone policymakers wanted to slash interest rates more aggressively this month, as the president of the European Central Bank said it was ready to enter uncharted territory and introduce a negative deposit rate.
The ECB's
decision to cut its main interest rate to a record low of 0.5pc from 0.75pc was
widely expected by economists, and came amid signs that the eurozone crisis is
still hurting the real economy. The marginal lending rate, used as a last
resort for banks unable to obtain funding in the wholesale market, was also cut
by 50 basis points to 1pc.
Mr Draghi
said the bank was also "technically ready" to introduce a negative
overnight deposit rate – held at zero on Thursday - which would mean banks
would have to pay the ECB to hold money there overnight.
Such a
move would be aimed at getting eurozone banks to lend to each other and the
wider economy, although Mr Draghi admitted that there were “several unintended
consequences” that could arise from introducing this measure.
----Others said introducing negative rates would be a sign of "desperation" by the central bank. Marc Ostwald, a strategist at Monument Securities, even compared it to the raid on Cyprus deposits.
“Cyprus
was an outright bail-in of depositors, but if we get to the process of turning
deposit rates at the ECB negative then that will feed through to the banking
sector, and asking simple depositors to pay for the honour of putting their
money with the bank is effectively bailing those depositors in,” he said.
Mr Draghi admitted in March that introducing negative rates
would take the central bank into “uncharted waters”.
More
Italy should use its gold reserves to force a change in EMU policy
Economics Last updated: May 2
The World
Gold Council has advised Italy to deploy its 2,000 tonnes of gold to break free
of EMU austerity dictates.
By using
the reserves – the world's fourth largest – to collateralise the first chunk of
any losses for bondholders, Italy could raise €400bn or so on the capital
markets and determine its own future for a while.
Italy did
this in 1974 when it borrowed $2bn from the Bundesbank, using gold as
collateral.
Portugal
did the same thing to borrow $1bn from the BIS in the 1975-1977, and India used
its gold to borrow from Japan in 1991.
A joint
WGC-Ipsos survey found that 61pc of Italian business leaders, and 52pc of the
general public would support the idea, with only a small minority opposed.
The
report said:
With
Italy still facing significant financial challenges, national assets – such as
gold reserves – present an opportunity to buy some vital breathing space.
Gold-backed
sovereign debt, or ‘gold-backed bonds’, is issued debt that is underpinned by
gold collateral. By using a portion of their gold reserves in this way,
sovereign states could borrow more cheaply, without selling an ounce.
This use
of gold would help sovereign governments to regain the confidence of the bond
markets and lower funding costs. Nations could raise between four and five
times the value of their gold reserves – a bond 20% collateralised by gold
could raise around 80% of Italy’s two year refinancing needs.
This
would buy time for growth to take hold. It would lower sovereign debt yields
without increasing inflation and would give Italy time and resources to work on
economic reform and recovery. Using gold for the purposes of sovereign debt
issuance would allow greater flexibility beyond austerity.
This is
exactly the sort of thinking that is needed in the occupied EMU states, and
Italy has been under occupation since the ECB effectively toppled the elected
the government in the coup d'etat of November 2011 – with the active
collusion of President Napolitano, a former Stalinist who later transferred his
ideological mania to the EU Project.
However,
it would require the new premier Enrico Letta to tell Europe to jump in the
lake, since "reflation in one country" would violate the EMU club
rules.
Mr Letta
is highly unlikely to do so. He is a child of the EU Project – literally, since
he grew up in Strasbourg. He formed his views in the entourage of Prodi and
Andreotti.
More
In other EU news, German imposed austerity if off
the agenda, says Italy’s new man in Rome pushing on strings. Italy will work
with France and EU President Barroso to clip Germany’s wings at yet another
coming EU summit of “leaders.”
"Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state."
William F. Rickenbacker
Italy's Letta says June EU summit must focus on youth jobs
BRUSSELS
| Thu May 2, 2013 4:04am EDT
(Reuters)
- The June summit of European Union leaders must focus on cutting disastrously
high levels of youth unemployment, Italian Prime Minister Enrico Letta said on
Thursday after a meeting with European Commission President Jose Manuel
Barroso.
Speaking
at the end of a series of visits in Berlin, Paris and Brussels, he said he was
returning to Rome more optimistic that European leaders were ready to give more
priority to boosting economic growth and said the June summit had to give
"concrete messages."
"We would ask above all that the fight against youth
unemployment should be the most important, most concrete message to come out of
the June European Council," he said.
We end for the week awaiting the result of the UK
local elections. The early results suggest that Her Majesty’s weak coalition
government parties are about to get hammered. Even though the UK is only
undergoing austerity-lite, compared to Ireland and continental Europe, UK
voters seem all too willing to call time on this accident prone, coalition of
the unready. The Lib-Dems seem to be about to all but disappear. The
Conservative leadership declared war on their own natural supporters driving
many over to the UK Independence Party. If the worst happens later today as the
results get announced, UK politics will turn far more anti-European. If
Brussels thought that it had a UK problem before, just wait until after the
weekend media troll through the snake bit UK coalition government wreckage. The
coming June EU leader’s summit looks set to be more interesting than most.
"The history of paper money is an account of abuse, mismanagement, and financial disaster."
Richard M. Ebeling
U.K. Labour Keeps Commons Seat as UKIP Surges Past Tories
By Thomas Penny - May 3, 2013 5:49 AM GMT
Britain’s opposition Labour Party retained the House of Commons district of South
Shields in northeast England in a special election as the U.K. Independence Party
outpolled Prime Minister David Cameron’s Conservatives. Labour and UKIP, which campaigns for British withdrawal from the European Union, also gained seats from the Tories and their Liberal Democrat coalition partners in yesterday’s local elections in England, according to results from about 20 percent of the districts.
In South
Shields, Labour’s Emma Lewell-Buck won with 12,493 votes, or 51 percent of the
total, compared with 5,988 for Richard Elvin of UKIP. The Tories, who came
second in the district in 2010, finished third with 2,857 votes, while the
Liberal Democrat candidate was seventh with 352 votes. UKIP managed 24 percent
of the vote after not running in the district in the 2010 general election.
The
results confirm trends shown in national opinion polls, in which the
Conservatives trail behind Labour by about eight points. With two years to go
before the next general election, support for the governing parties has been
hit by the deepest budget cuts since World War II, while Cameron has been
criticized by his own lawmakers over policies on gay marriage and immigration
that have seen supporters turning to UKIP.
Results from the seven local-government districts where votes were counted overnight showed Labour and UKIP winning a net 42 seats each, while the Tories lost 66 and the Liberal Democrats 15, according to a breakdown by the BBC. The Conservatives lost control of the county councils in Lincolnshire in eastern England and Gloucestershire in the west.
Most of the elections were in traditionally Conservative- voting counties, and Cameron’s party was defending 1,452 seats, with the Liberal Democrats trying to hold on to 481. Labour, which was at the depths of its unpopularity under Prime Minister Gordon Brown when the seats were last contested in 2009, was defending 245. Counts in the remaining areas take place today.
More
The truth is incontrovertible. Malice may attack it, ignorance
may deride it, but in the end, there it is.
Winston
Churchill
At the Comex silver depositories Thursday final figures were: Registered 45.47
Moz, Eligible 120.61 Moz, Total 166.08 Moz.
Crooks and
Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, more on the rising unofficial trade war between the USA and
China. Between the world’s leading debtor and the world’s leading creditor.
Nothing good for the world economy can come from an outright trade war between
the two giants, yet that’s where we seem to be headed. People who live in glass
houses shouldn’t throw bricks, comes to mind. Stay long physical gold and
silver. They may only be tossing pebbles now, but each side has a giant store
of bricks. Earlier in the week there were ominous signs that the US economy is
slowing. Later today the US releases its latest employment report. Will it
confirm or rebuff sign of the economy slowing.
If you do not change
direction, you may end up where you are heading.
Lao Tzu
Huawei-Level 3 Sales Seen Off as China Spy Concerns Ripple: Tech
By Bruce Einhorn & Peter Burrows - May 3, 2013 4:53 AM GMT
Huawei Technologies Co. has emerged as the world’s second-largest maker of
networking gear thanks to growth in China, Europe and emerging markets. The
U.S. business is a different story. Just $1.3 billion of the Shenzhen, southern China-based company’s $35 billion in 2012 sales came from America. Now, amid rising congressional concerns about Chinese government- sanctioned hacking, Huawei may lose one of its most important stateside customers: Level 3 Communications Inc. (LVLT), which runs a broadband network that helps carry traffic for most telecoms.
Level 3 has
bought $200 million in optical networking gear from Huawei since 2009,
according to an estimate by Erik Suppiger, a JMP Securities LLC analyst. The Broomfield,
Colorado-based carrier is soliciting bids for its next three- year order, and
Huawei isn’t likely to win, said two people who have spoken with Level 3
about its intentions and weren’t authorized to discuss them publicly.
----In March, President Barack Obama signed into law an appropriations bill that prohibits federal agencies from buying IT systems from Chinese companies without first getting approval from the FBI or other federal cyber-espionage investigators. U.S. Representative Mike Rogers, a Republican from Michigan, chairman of the House Intelligence Committee, on April 8 reiterated that Huawei is a security risk to the U.S.
Citing similar concerns, AT&T Inc. (T) and Verizon Communications Inc. (VZ) have spurned use of the privately held company’s network gear for years, and SoftBank Corp. (9984)’s attempted takeover of Sprint Nextel Corp. (S) was held up partly because SoftBank uses Huawei equipment. At an April 23 meeting at Huawei’s headquarters, Executive Vice President Eric Xu told stock analysts the company was “not interested in the U.S. market anymore.”
Huawei’s effective blacklisting in the U.S. may result in a backlash against American technology companies in China. The magazine China Economy and Informatization ran a cover story about the security threats of San Jose, California-based Cisco Systems Inc. (CSCO)’s equipment in November, replacing the “S” in Cisco with a snake, shortly after its sales partnership with Shenzhen-based equipment maker ZTE Corp. (000063) ended.
“The Chinese government may choose to retaliate against U.S.-based IT vendors by enacting a similar policy for screening IT system purchases in China,” the U.S. Chamber of Commerce, the Software Alliance, and nine other industry groups wrote in an April 4 letter to congressional leaders.
Cisco’s sales in China fell 4 percent in its most recent quarter, to about $500 million.
More
Companies hire less, manufacturing growth slows in April
NEW YORK |(Reuters) - Companies hired the fewest employees in seven months in April while manufacturing growth slowed to a crawl, suggesting the economy has run into a soft patch as budget-cutting in Washington starts to bite.
Businesses added 119,000 employees to payrolls last month, according to the ADP National Employment Report released on Wednesday, short of economists' expectations for 150,000 jobs and the smallest gain since last September.
The slowdown was primarily due to the effect of tighter fiscal policy through a combination of an increase in payroll taxes at the start of the year and the $85 billion government spending cuts that took effect across the board in March, said Mark Zandi, chief economist at Moody's Analytics, which jointly develops the ADP report.
"They are starting to bite and starting to weaken growth," said Zandi. "It's affecting all industries and almost all company sizes."
----Two
separate reports on manufacturing also showed employment slowed in April as
growth in the sector pulled back. Analysts said there was some risk Friday's
larger employment report from the government could disappoint.
More
Another weekend, and the early Spring bank holiday weekend here in the
UK. After a long, cold and unusually dull cloudy winter, we have finally
emerged into spring. Crops and plants are running two to three weeks late,
where they got planted at all. Northern Europe’s seasonal lift is likely to be
below average this year. In the UK there will be much guessing as to whether
the UK’s unloved coalition government just turned into the lamest of lame
ducks. In America, much pouring over the minutia of today’s employment report.
Have a great weekend everyone. I will spend more time in the warm sunshine
walking the dog.
Be nice to nerds.
Chances are you'll end up working for one.
Bill Gates
The monthly Coppock Indicators finished April:
DJIA: +133 Up. NASDAQ: +139 Up. SP500: +170 Up. Another Fed bubble underway. But how high is
high enough?
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