Baltic Dry Index. 850 -11
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people."
F.A. von Hayek
No one will win in the new round of trade wars,
triggered by the new beggar thy neighbour policy sweeping the planet. But that
won’t stop them form happening. While Japan sets out to take on all comers, the
EU has set out to take on China. Two can play at that game, says an
increasingly touchy China.
“When
we remember we are all mad, the mysteries disappear and life stands explained.”
Mark
Twain.
Japan storms back on weak yen but Asia trembles
Japan’s economy has roared back to life as the radical reflation policies of premier Shinzo Abe drive a surge of consumer spending, but fears are growing that the tumbling yen could set off a broader Asian crisis.
Growth
jumped to a 3.5pc rate in the first quarter, vindicating the government’s
efforts to break Japan’s deflation psychology and lift the country out of its
20-year ice age. “Abe’s kickstart appears to have succeeded,” said Flemming
Nielsen from Danske Bank.
Retail
sales are soaring as a “wealth shock” electrifies the economy. The Nikkei index
has risen has 70pc since November, with foreign hedge funds among the first to
jump on the bandwagon.
The
weaker yen is already delivering a powerful punch, accounting for almost half
the growth. The currency has dropped 30pc against the dollar and China’s yuan
since August, and 37pc against the euro.
The
yen-slide - or "Enyasu" - has raised concerns that Japan is exporting
deflation through a "beggar-thy-neighbour" push for export share, a
claim rejected by Tokyo.
Stephanie
Kretz from Lombard Odier said the falling yen looks like a replay of the
mid-1990s before the onset of the East Asian crisis, when external funding
dried up in a “sudden stop”.
It poses
a direct threat to Malaysia, Vietnam, Thailand, Korea and others with a high
trade gearing, as well as for China, though foreign debts are lower this time.
She warned that the trade surpluses of these countries could evaporate,
“silently planting the seeds for the next Asian crisis down the road”.
Albert
Edwards from Societe General said "Enyasu" may be the catalyst that
pops China’s credit bubble. He warns that loss of exchange competitiveness
after years of soaring wages leaves China vulnerable to a deflationary monetary
squeeze and should ring alarm bells. “This closely echoes the situation in the
run-up to the 1997 Asian currency crisis.”
The G7
global powers have so far turned a blind eye to the falling yen, deeming it a
side-effect of Japan’s fight against deflation. Washington has grumbled
privately but broadly accepts that a revival of growth in Japan is a net gain
for the world economy. However, the protests from Korea and China are growing
louder.
Jean-Michel
Six from Standard & Poor’s said the yen effect risks pushing the eurozone
towards deflation.
“Japan competes head on with Germany in the same products
and this is already putting pressure on German exporters in the Chinese and US
markets. Korea is very worried about the yen, and Germany should be too,” he
said.
More
China threatens own trade action if EU opens telecoms case
BRUSSELS |(Reuters) - China threatened on Thursday to retaliate if the European Union formally opens an investigation into alleged anti-competitive behavior by Chinese mobile telecom equipment companies.
European Trade Commissioner Karel De Gucht said on Wednesday he and fellow commissioners had agreed in principle to open an anti-dumping and anti-subsidy case against China, but would first seek to negotiate a solution with Chinese authorities.
Although not mentioned in the statement, EU officials told Reuters the primary targets of the investigation would be world No. 2 telecoms equipment maker Huawei HWT.UL and smaller Chinese company ZTE
"If the European side insists on opening an investigation, the Chinese side will according to WTO rules and Chinese law take firm measures to safeguard its legitimate rights and interests, and the consequences must be borne by the party provoking the friction," Chinese Ministry of Commerce spokesman Shen Danyang told reporters in Beijing.
The case would be the first to be launched without a complaint by European companies, but rather by the Commission itself.
Manufacturers such as Ericsson (ERICb.ST), Nokia Siemens Networks (NOK1V.HE) (SIEGn.DE) NOKI.UL and Alcatel-Lucent (ALUA.PA) have suffered as a result of cheap Asian imports but will not make formal complaints for fear of Chinese reprisals, which has made it hard for the Commission to gather evidence.
More
China says EU solar duties to "seriously harm" trade ties
BEIJING |(Reuters) - China warned the European Union on Thursday that imposing duties on Chinese solar panels would "seriously harm" bilateral trade ties, upping the tone of its criticism a week after the EU said it would move ahead with hefty penalties in June.
The European Commission has agreed to impose average import duties of 47 percent on solar panels from China, according to officials, a move they say is to guard against the dumping of cheap goods in Europe.
China's Ministry of Commerce spokesman Shen Danyang said he hoped reports about the duties were unreliable.
"If this information is true, this action by the European Union would seriously harm China-Europe trade relations," Shen told a news conference.
Shen said "provoking trade friction with China" was like "dropping a boulder on one's own foot" and would not help Europe break free from economic crisis.
----China is expected to decide in June whether to levy its own duties on imported European, U.S. and South Korean solar-grade polysilicon, a raw material used in solar panel production.
The
English-language China Daily newspaper cited an official with the surname Zhang
as saying the Ministry of Commerce was likely waiting for an official EU
decision before issuing its polysilicon ruling.
The EU
solar duties would come into effect once the Commission publishes the decision
in its Official Journal. Beijing has said it will defend against what is calls
protectionist behavior.
More
Now back to the EUSSR. If one didn’t know better
that it’s just serial incompetence, you would think that there was a deliberate
agenda to force the EUSSR into a depression. With Europe deliberately rushing
around in a minefield, keep swapping unloved terminal fiat euros and Pounds for
physical precious metals.
“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.
There may be no halting this tax juggernaut
The latest brainwave from Brussels has the City in its sights, even if Britain goes it alone
Of all
the nonsense to have come out of Brussels over the years, there is little quite
so self-defeating, politically driven, and generally threatening to economic
wellbeing as the proposed new Financial Transaction Tax (FTT), which, as the
name suggests, imposes a levy on every transaction between financial
institutions.
As this week’s dismal GDP figures demonstrate, Europe desperately
needs some kind of deregulatory growth agenda, and yet it seems determined only
on the reverse. To be pushing ahead with such a stifling and invasive
initiative at a time of deepening recession fair takes the breath away.
There is
not a central banker in Europe who thinks the FTT is a good idea, and even
among those who publicly support the tax there are grave reservations in
private. Yet the proposal seems to have developed a momentum all of its own,
which even the British Government’s legal challenge through the European courts
will struggle to halt. And they wonder why so many in Britain want to leave the
European Union.
Not that
exit would in this case do any good, for being out doesn’t enable the UK to
avoid the destructive impact of the tax.
----In any case, the City is only just
beginning to wake up to the existential threat posed by the new tax, due for
implementation at the start of next year. Even the European Commission, which
naturally tends to play down the destructive impact of its directives, concedes
that the proposal could result in a 75 per cent drop in derivative transactions
and a 15 per cent reduction in cash volumes.
Others
think the impact will be greater still. Since much of this business goes
through London, the tax has become a real and present danger to the British
economy. Analysis by Goldman Sachs finds that the FTT in its proposed form
would render some business lines, including large areas of the swaps and repo
market, completely unviable.
The cost
to profits among Europe’s major banks is estimated at around 170 billion euros,
or 16 per cent of their capital – this at a time when regulators are demanding
that banks hold much more capital to bolster solvency.
Five
years of mayhem and scandal have largely stripped finance of any defence it may
once have deserved; and it is indeed hard to feel much sympathy over bankers’
bonuses. Yet the damage outside the seemingly worthless rent-seeking
characteristics of finance looks set to be equally catastrophic, significantly
raising the cost of capital, adding to consumer prices and further undermining
pension savings. German industrialists have warned that the tax will seriously
impair their ability to hedge risk, and therefore be yet another negative for
competitiveness.
More
France's Hollande urges euro zone government
PARIS |(Reuters) - French President Francois Hollande called on Thursday for an economic government for the euro zone with its own budget, the right to borrow, a harmonized tax system and a full-time president.
At a 150-minute news conference marking his first year in office, a day after economic data showed France had slipped into recession, the Socialist leader defended his record on economic reform and budget discipline and told the French people they would have to work "a bit longer" for a full pension in future.
----Rebutting criticism that France has lost its leadership role in Europe because of its dwindling economic competitiveness, Hollande said he wanted to create a fully-fledged political European Union within two years.
"It is my responsibility as the leader of a founder member of the European Union... to pull Europe out of this torpor that has gripped it, and to reduce people's disenchantment with it," Hollande said.
"If Europe stays in the state it is now, it could be the end of the project."
He acknowledged he could face resistance from Germany, Europe's dominant power, which opposes mutualising debt among member states. Berlin is also reluctant to give the euro zone its own secretariat for fear of deepening division in the EU, between the 17 members of the single currency and the 10 others.
----Hollande's call for a stronger social Europe came as Spanish Prime Minister Mariano Rajoy in Madrid rejected demands by unions for greater protection for workers, saying he would pursue cuts in education and health spending to reduce the Spain's large structural deficit.
More
Car burnings rise as France threatens to take euro crisis to 'higher plane' , says hedge fund boss Michael Hintze
A stagnant economy, a weak President and a jump in car burnings are all signs of a looming crisis in France that is threatening to drive the eurozone’s problems to a “higher plane”, according to Michael Hintze.
The billionaire boss of CQS, one of London’s biggest hedge funds, has written to investors warning them that the France could trigger another more dangerous phase of the debt crisis and rock the fragile global recovery.In a note to investors, Mr Hintze has said: “While Cyprus has stolen the news headlines of late, I am concerned that the eurozone’s problems could soon turn to the ‘core’, and in particular the focus could be on France.”
He added: “A loss of confidence in France would shift the eurozone’s troubles to a higher plane. France lies not only at the core of the eurozone, but is also one of the original architects of the European Union. Clearly, a loss in confidence in France would likely have far-reaching consequences; its impact on the EU, the broader global economy and markets.”
France, which yesterday was shown to have plunged back into recession, represents 19.6pc of eurozone GDP and 14.4pc of European Union GDP. Its share of the European Central Bank’s capital is 14.2pc.
Mr Hintze, a Tory donor and leading philanthropist, said that rising social unrest, especially among young people, could hamper the French government’s ability to push through “deeper economic reforms that are required.”
----The discontent, which is being fuelled by rising unemployment, is leading to a “strong revival” in smaller political parties, including the National Front, he argued. Meanwhile, the approval rating of President Francois Hollande has crashed from 61pc at his election a year ago to 27pc today.
As a
result France, which desperate needs economic reforms, could languish in
political paralysis instead.
Mr Hintze
said: “President Hollande’s ability to drive structural reform may be limited
by his ability and willingness (and the Socialist Party’s support of him) to
pursue the deeper economic reforms that are required – the tax and benefits
system, deep reductions in government spending and public administration, and
extensive reforms to pensions and the labour market.”
He added:
“In a country where more than half of the voting population is employed
(directly or indirectly) by the state, can France’s leadership tackle the
difficult choices that exist?”
More
We close for the week with America. According to
the voice of the San Francisco Fed, the 85 billion a month of QE money printing
can be reduced soon, and the whole program ended this year. If San Francisco
Fed President John Williams is even half right, the great 30+ year bond bubble
will collapse. The Great Disconnect, the Fed’s final bubble, will implode. The
crash of 87 will look like a children’s birthday party in comparison. Still it
might be why Bernoccio is passing on the Fed’s annual Jackson Hole junket this
year. Time for some synthetic doubles on
stock indexes, you never know the Fed could be lying. Time for a few purchased
deep out of the money year end puts on US bonds.
“Never
tell the truth to people who are not worthy of it.”
Mark Twain.
May 16, 2013, 4:31 p.m. EDT
Talk of Fed wind down grows louder
WASHINGTON
(MarketWatch) — The drumbeat to reduce the rate of bond purchases by the
Federal Reserve grew louder Thursday, with a dovish voice joining the group.
John
Williams, the San Francisco Fed president, indicated the $85 billion per month
of bond purchases can be reduced soon, and that the whole program may be halted
this year.
He
pointed out the pace of job growth has picked up since the program was launched
in September, with an average pace of job growth of 200,000 over the last six
months.
“Assuming
my economic forecast holds true and various labor-market indicators continue to
register appreciable improvement in coming months, we could reduce somewhat the
pace of our securities purchases, perhaps as early as this summer. Then, if all
goes as hoped, we could end the purchase program sometime late this year,” said
Williams in a speech in Portland, Ore.
----Williams
made clear that even if the bond purchases slow down, they could be ramped
backed up if the economy flounders.
And the
Fed even when it halts bond purchases will still have trillions of dollars of
Treasury and mortgage-backed securities (around $3 trillion to be precise) on
its balance sheet, Williams pointed out.
Joseph
LaVorgna, chief U.S. economist at Deutsche Bank, tweeted that the forecast from
the San Francisco Fed chief sounds right. “If jobs hold up, we agree,” he said.
More
At the Comex silver depositories Thursday final figures were: Registered 43.90
Moz, Eligible 120.97 Moz, Total 164.87 Moz.
Crooks and
Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
We end for the week with the US Nixonian scandal that has legs, and looks
set to run for months. Who ordered the IRS to draw up an Obama enemies list?
Who knew what and when? Who was on the enemies list and what happened to them? Who
ordered a cover up from the Congress? Since no one likes the IRS, this is a
scandal that resonates with the US electorate. Unlike Wall Street banksterism,
this is a good old fashioned scandal that the voters can understand. If it
reaches up into the White House, a Nixonian ending might just be on the table.
“Reader, suppose you were an idiot. And suppose you were a
member of Congress. But I repeat myself.”
Mark Twain.
Political storm over IRS targeting scandal shifts to Congress
WASHINGTON
| Fri May 17, 2013 6:11am BST
(Reuters)
- A U.S. House of Representatives panel on Friday opens the first in a series
of investigative hearings in Congress on the Internal Revenue Service's
targeting of conservative groups for extra tax scrutiny, as the political storm
over the scandal shifts to Capitol Hill.
Lawmakers
from both parties are expected to grill the outgoing acting head of the agency,
Steven Miller, and the Treasury Department inspector general for tax administration,
J. Russell George, about the growing scandal that threatens to eclipse
President Barack Obama's second-term agenda.
Miller
was forced to resign on Wednesday, and Obama has since appeared in public twice
to condemn the IRS's actions and promise full cooperation with three
congressional investigations and a Justice Department probe.
Members
of the House Ways and Means Committee are expected to press Miller at the
hearing about why he did not disclose the practice of targeting conservative
groups after learning about it in 2012, even when he was questioned about it by
members of Congress.
Republicans,
who have demanded more answers and angrily accused the administration of using
government powers to target political foes, also are likely to question whether
other groups or donors were singled out because of their political views, and
whether the White House knew of the practice.
The
hearing is scheduled to start at 9 a.m. EDT (1300 GMT).
More
Another weekend, and complacency rules
everywhere. Yet the Great Disconnect gets bigger with each passing week, a
disunited Europe is about to start a ruinous trade war with China, Japan has
started a ruinous currency devaluation against everyone else, and America has a
good old fashioned political party scandal that can’t be ducked by the
President saying “I didn’t know.” In the UK, a suicidal coalition government
seems to have backed the UK into leaving the EU although this wasn’t its actual
policy, inadvertently in the process greatly complicating next year’s Scottish
Independence vote. Time to let the Great Disconnect stew for the weekend, and
to get out to take in God’s great beauty of a late spring. Have a great weekend
everyone.
“Always
do what is right. It will gratify half of mankind and astound the other.”
Mark Twain.
The monthly Coppock Indicators finished April:
DJIA: +133 Up. NASDAQ: +139 Up. SP500: +170 Up. Another Fed bubble underway. But when to jump
off before it ends?
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