Baltic Dry Index. 1012 +17
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
"Stocks
have reached what looks like a permanently high plateau."
Irving
Fisher, Professor of Economics, Yale University, 1929.
It’s over. The great Volker bond bull market of
1981-2013 has come to its end. Ben Bernanke bluffed and got called. This week
the markets woke up to the end of zero interest rates. Although the Fed hasn’t
actually taken any action at all, let alone tapered its QE forever programs or
raised interest rates, the Fed miscalculation was bigger than that of February
1994. Then Greenspan miscalculated that the markets would take a small interest
rate rise as a sign of strength and would absorb it well. Instead Orange County
California blew up and Proctor and Gamble nearly disintegrated, all due to
derivatives gambling in the early days of the financialised casino capitalism. This
week Dr Bernanke gambled that the markets would react well to suggesting that
the US economy is doing so well that QE and Zirp can be ended. Yesterday that markets
called his bluff. The Great Disconnect began ending.
In 2013, we have massive manufacturing over
capacity in China and Europe, massive commodity over dependence on China by Australia,
Brazil, and South Africa, among others, Club Med smashed on the rocks of German
austerity, and a global economy dependent on QE to infinity and forever. Like
it or not, the Fed just signalled that there’s to be no QE to infinity and
forever. Though the Fed may try to zig and zag, we have reached the bottom of
the low interest rate cycle and the Fed just rang a bell at the bottom. For the best part of three decades it was buy
stocks and sell gold. For the next thirty years the opposite is now likely to
come true. Note, it is not yet clear if the majority of that reversal will come
from a rising gold price, a collapsing stock market or a combination of both. My
money if on a rising gold price as the fiat money excess of the
Greenspan-Bernanke era gets worked out of the system.
With the rout of the global stock markets well
covered in mainstream media, except they haven’t yet drawn the connection to
the rising failure of fiat money in places like Turkey and Brazil and the
social unrest, (India next?,) we open instead this morning with China. China’s
shadow banking system is under direct attack by the authorities. While official
statistics mean nothing in China, high interest rates will set off a massive
round of defaults. We haven’t seen anything yet. Is the next Lehman about to
hit over the weekend? With the Fed calling time on QE and Zirp, how long before
Club Med figures out staying in the Euro doesn’t work?
If you do not change direction, you may end up where you are
heading.
Lao
Tzu
Bond rout sends 10-year yield to 22-month high
NEW YORK (MarketWatch) — A Treasury market slump that began
when the Federal Reserve said its bond purchases may be scaled back later this year
continued through a volatile trading session Thursday that sent the 10-year
yield to a 22-month high.
Treasurys
bounced up and down, but they were unable to overcome the bearish momentum that
gripped global markets as they were jolted out of the lull created by the
central bank’s easy monetary policy.
The
10-year Treasury note 10_YEAR
+0.70% yield,
which moves inversely to price, rose 11 basis points to 2.425%, its highest
close since August 2011, according to Tradeweb. The benchmark note yield broke
through a 2.40% threshold that has in the past brought buyers back into the
market, and climbed as high as 2.461% in morning trading.
That
leaves the 10-year yield trading higher above its 52-week moving average than
it ever has since the bull-market in bonds began in 1981, according to Stone
& McCarthy Research Associates.
More
China Money-Market Turmoil Poses Test for New Leaders: Economy
By Bloomberg News - Jun 21, 2013 6:24 AM GMT
China’s cash squeeze over
the past two weeks is testing the management skills of new Communist Party leaders
saddled with risks from a record credit expansion under their predecessors. The one-day repurchase rate touched an unprecedented high of 13.91 percent yesterday, prompting speculation the central bank was forced to pump liquidity, before diving today by the most since 2007. Premier Li Keqiang signaled determination to stamp out speculation funded by cheap money with a June 19 State Council statement saying banks must make better use of existing credit and step up efforts to contain financial risks.
“It’s really hard to deflate these things in an orderly way,” said Michael Pettis, a finance professor at Peking University in Beijing. “The problem is that when debt levels have got so high, and it’s more debt that keeps the existing debt afloat, you absolutely have to stop the process but it’s very difficult to stop the process in an orderly way.”
Pettis said the situation is putting pressure on smaller banks because they fund more of their long-term loans from interbank borrowing. The government aims to direct money toward growth rather than speculation after a credit boom that has fueled property-price gains, local-government debt risks, and a wave of wealth-management products.
More
Emerging markets crushed by double squeeze in China and America
Short-term borrowing rates in China have soared to record highs as credit seizes up, prompting fears that the country’s liquidity squeeze may be spinning out of control.
The
Shibor overnight lending rate in Shanghai spiked violently to 29pc, with wild
moves in seven-day and one-month money. The central bank refused to intervene
to calm markets, apparently determined to purge excess from the credit system.
China
Securities Journal, a voice
of the regulators, said: “We cannot use a fast money supply growth as in the
past, or even faster, to promote economic growth.”
“I am
extremely concerned about China,” said Lars Christensen from Danske Bank. “They
are overdoing it and are on the verge of making the same mistake as the Fed and
the European Central Bank before the Lehman crisis in 2008, when they failed to
see how much the economy was slowing.”
Mr
Christensen said the world now risks a “perfect storm” as the Fed prepares to
taper its bond purchases (QE) at the same time as tightening the spigot of
worldwide dollar liquidity.
The twin
effects are cascading through emerging markets, pummelling commodity exporters
such as Brazil, South Africa and Russia that sell to China, but also tripping
up Turkey, Ukraine, Hungary and others that rely on external funding.
“Everything is being hit indiscriminately,” said Neil Shearing from Capital
Economics.
More
June 20, 2013, 4:37 p.m. EDT
One million march across Brazil in biggest protests yet
RIO DE JANEIRO/BRASILIA |(Reuters) - An estimated 1 million people took to the streets in cities across Brazil on Thursday as the country's biggest protests in two decades intensified despite government concessions meant to quell the demonstrations.
Undeterred by the reversal of transport fare hikes that sparked the protests, and promises of better public services, demonstrators marched around two international soccer matches and in locales as diverse as the Amazon capital of Manaus and the prosperous southern city of Florianopolis.
While the protests remained mostly peaceful, the growing number of participants led to occasional outbursts of violence and vandalism in some cities. In central Rio de Janeiro, where 300,000 people marched, police afterwards chased looters and dispersed people crowding into surrounding areas.
"Twenty cents was just the start," read signs held by many converging along the Avenida Paulista, the broad avenue in central São Paulo, referring to the bus fare reductions. Police there said 110,000 people lined the avenue.
In the capital, Brasilia, tens of thousands of protesters marched around the landmark modernist buildings that house Congress and the Supreme Court and briefly set fire to the outside of the Foreign Ministry. Police said about 80 of the protesters, some with homemade explosives, made it into the ministry building before they were repelled.
----The targets of the protests, now in their second week, have broadened to include high taxes, inflation, corruption and poor public services ranging from hospitals and schools to roads and police forces.
With an international soccer tournament as a backdrop, demonstrators are also denouncing the more than $26 billion of public money that will be spent on the 2014 World Cup and 2016 Olympics, two events meant to showcase a modern, developed Brazil.
More
We end, as so often, with yet more trouble in the dying
EUSSR. Euro zone banks fear the breakup of the monetary union, even if they won’t
say so publically. Quietly, they are all making preparations for the day after
tomorrow. Would you lend even fiat money to Europe as it presently exists? EU
bank account anyone?
One of the penalties for refusing to participate in politics is
that you end up being governed by your inferiors.
Plato
Analysis: Creeping mistrust stops euro zone banks lending to peers across bloc
BRUSSELS/FRANKFURT |(Reuters) - Euro zone banks are refusing to lend to peers in other countries in the common currency bloc, signaling a worrying fall in confidence that appears to have worsened since the Cyprus bailout earlier this year, data analyzed by Reuters showed.
In a trend that could reignite fears about the euro and its banks, European Central Bank data shows the share of interbank funding that crosses borders within the euro zone dropped by a third, to just 22.5 percent in April from 34.5 percent at the beginning of 2008.
Banks are now lending to other banks across euro zone borders at only about the same rate as when the single currency was first launched, 15 years ago.
The silent retreat to within national borders is most pronounced in the troubled economies of southern Europe but is seen even in Germany.
Cross-border interbank funding of German banks was down by 11.2 percent year on year in March, equivalent to banks elsewhere in Europe withdrawing 29.5 billion euros from its biggest economy.
"We have seen the banks very much reverting to their domestic markets and not wanting to extend credit abroad," said Tony Stringer, a government debt analyst with ratings agency Fitch.
"Interbank deposits have been reduced. Confidence in banks across the euro zone has been reduced. If banks continue to struggle, then they can't extend credit to the real economy."
Euro zone banks' stock of lending to their Greek peers was a startling 68 percent lower in April than in the same month a year earlier - equivalent to 18 billion euros withdrawn. In Portugal, the decrease was roughly one quarter.
More
EU to decide who pays when banks fail
LUXEMBOURG |(Reuters) - The European Union will seek on Friday to forge rules to force losses on large savers when banks fail, a sensitive reform that could shape how the euro zone deals with its sickly banks.
Finance ministers in Luxembourg will try to resolve one of the most difficult questions posed by Europe's banking crisis - how to shut failed banks without sowing panic or burdening taxpayers.
"The costs of future restructurings can't be wished away," said a senior EU official involved in the talks. "We need a mechanism to shift the burden away from taxpayers."
The European Union spent the equivalent of a third of its economic output on saving its banks between 2008 and 2011, plundering taxpayer cash but struggling to contain the crisis and in the case of Ireland, almost bankrupting the country.
---- A draft EU law that will form the basis of discussions recommends a pecking order in which first bank shareholders would take losses, then bondholders and finally depositors with more than 100,000 euros ($132,000) in their account.
That
would make the harsh treatment of savers, which was part of Cyprus's bailout in
March, a permanent feature of Europe's response to future banking crises. EU
countries would be required to follow these rules when closing banks
More
"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
At the Comex silver depositories Thursday final figures were: Registered 41.76
Moz, Eligible 122.56 Moz, Total 164.32 Moz.
Crooks and
Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
We end for the week with more on our new lawless
age. With Google and Facebook reporting to the NSA, and Chinese exiled
dissidents seemingly working for unknown forces in Beijing, trust no one and
nothing seems to be our new fate. Even the fiat currency is suspect. All the
more so now that Bernocchio has signalled he’s run out of ammo. Stay long
physical precious metals outside of the banking system. It goes without saying
not to keep any money in the world’s MF Globals.
Exclusive: Spyware claims emerge in row over Chinese dissident at NYU
NEW YORK |(Reuters) - When Chinese activist Chen Guangcheng arrived in the United States in May last year he was given a fellowship at New York University, use of a Greenwich Village apartment, and a pile of gifts from supporters, including smartphones and an iPad.
But at least two of the gadgets presented to Chen as gifts may not have been quite what they seemed: They included software intended to spy on the blind dissident, according to Jerome Cohen, an NYU professor who has been Chen's mentor, and another source familiar with the episode.
Like nearly everything surrounding Chen these days, the existence of the spyware is in dispute, and only adds to the public recriminations there have been between NYU and Chen's supporters over events surrounding the end of his fellowship.
Last weekend, Chen accused NYU of bowing to pressure from China by ending the fellowship, and his supporters have suggested that the university is wary of displeasing the Chinese authorities because of its plans for a campus in Shanghai. The allegations are vigorously denied by NYU, which says the fellowship was only ever planned to last a year.
At issue in the latest escalation in the argument are an iPad and at least one of the smartphones that were given to Chen days after he fled China and arrived in Manhattan. The devices were found by NYU technicians to have been loaded with software that made it possible to track the dissident's movements and communications, according to Cohen and the second source, who was not authorized to speak on the matter.
The episode suggests that from almost the day that he arrived at the university there was an uneasy atmosphere between Chen, his supporters, and NYU
Among the first visitors in May 2012 to the New York apartment Chen had moved into with his family after a dramatic escape from house arrest in China was Heidi Cai, the wife of activist Bob Fu. She brought an iPad and iPhone as gifts.
The devices were screened by NYU technicians within a few days and were found to have been loaded with hidden spying software, said Cohen, who arranged the fellowship for Chen at NYU Law School, helping defuse a diplomatic crisis between the United States and China after Chen took refuge in the U.S. Embassy in Beijing.
"These people supposedly were out to help him and they give him a kind of Trojan horse that would have enabled them to monitor his communications secretly," said Cohen.
More
"Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood. For these few gold has been the asset of last resort."
Antony C. Sutton
Another weekend and worrying one at that. As the
realisation sets in that the golden age of 1945-2013 is ending, are we facing
another “Black Monday” next week? Have a good weekend everyone. With the
passing of the summer solstice in the northern hemisphere, it’s all downhill
from here.
The monthly Coppock Indicators finished May:
DJIA: +142 Up. NASDAQ: +144 Up. SP500: +177 Up. The Fed’s
Final Bubble continues. But hurricanes and tornadoes appear. Getting out first
beats getting out last.
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