Baltic Dry Index. 1138 -08
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
"Finance
is the art of passing customer segregated funds from hypothecation to hypothecation
until it finally disappears."
With America booming again, at least according to
the stock market spin meisters, and the Eurozone dying thanks to the wealth
destruction effect of the Great European Error of a one size fits all Germanic
euro, what happens next in our global co-prosperity world, now largely comes
down to what happens next in Asia.
In America, Dr Bernanke has been well and truly
scared off his ill-conceived leak to the Wall Street Journal of a tapering end
to the Fed’s QE forever programs. In addition, a poorly drafted health care
law, looks like converting much of the US workforce into temporary workers
rather than full time workers. In such circumstances, the American locomotive
pulling along the global train will add little speed to the train. Faraway at
the back, the EU locomotive is currently in reverse, with little prospect of
any change any time soon. Though the UK’s tiny steam engine tacked on at the
end is actually doing quite well, its effect on the global train is virtually negligible.
It now all comes down to Asia. And Asia it seems is
at an inflection point. Japan’s ruling coalition just won control over the last
remaining lever of Japanese power, Japan’s currency and trade wars are about to
shift up a gear. A wary China will be watching closely for any sign of Japan
swinging hard, militaristic, right wing. The chances of a clash over the
Daioyu/Senkaku islands became more likely after Sunday’s vote.
In China itself, is a hard landing possible and
already happening? Officially China says no, but no one least of all Chinese
officials have any faith in the official figures. In
India, a collapsing Rupee has just blown up 12 billion of planned new steel projects.
India’s contribution to future global growth is now likely to be muted.
"Of all the contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money."
Daniel Webster
Japan's Abe has chance to show true colors after big election win
TOKYO |(Reuters) - Japanese Prime Minister Shinzo Abe's ruling coalition scored a decisive victory in an election on Sunday - so big that there are suspicions he will lose interest in difficult economic reforms and pursue his nationalist agenda instead.
The victory in the vote for parliament's upper house gives Abe a stronger mandate for his prescription for reviving the stagnant economy. Coincidentally, it could also give lawmakers in his own party, some of whom have little appetite for painful but vital reforms, more clout to resist change.
Public broadcaster NHK said early on Monday Abe's Liberal Democratic Party (LDP) and its coalition partner, the New Komeito party, had won 76 of the 121 seats up for grabs in the 242-seat upper house.
With the coalition's uncontested 59 seats, that ensures it a comfortable majority, tightening Abe's grip on power and raising the chances of a long-term Japanese leader for the first time since the reformist Junichiro Koizumi's rare five-year term ended in 2006.
----But some, including Japanese businesses with a big stake in the matter, worry the hawkish leader will shift to focus on the conservative agenda that has long been central to his ideology.
That
agenda includes revising the post-war pacifist constitution, strengthening
Japan's defense posture and recasting Tokyo's wartime history with a less
apologetic tone.
More
Minister rules out stimulus package
Updated: 2013-07-22 07:04 By
Zheng Yangpeng ( China Daily)
China brushed off global concerns over its economic slowdown, the latest
display of policymakers shifting focus from high growth to structural reforms.The world's second-largest economy won't seek high growth for the sake of other nations, Finance Minister Lou Jiwei said, ruling out large fiscal stimulus measures to boost growth this year.
"Finance ministers from many other countries expressed their hope to see a higher growth rate from China," he was quoted by Xinhua News Agency as saying on the sidelines of the G20 meeting of finance ministers and central bank governors in Moscow on Saturday.
He was referring to hopes voiced by some of his counterparts at the two-day meeting that China's economy could grow faster to stimulate the global recovery.
"I told them 'do not think about it'. China is comfortable with the condition of its employment. I suggest they take care of their own needed work rather than counting on others," Lou said.
The risk of a hard landing of the Chinese economy is not on the horizon, Lou said. "That issue is not on the agenda of the meeting as no participant even believes the risk exists."
More
China risks deflation trap as true GDP crumbles
China is sliding towards a deflation trap and may be in outright recession already if data are measured accurately, with serious knock-on risks for the global economy.
“It is
too late to avoid a hard-landing,” said Patrick Chovanec from Silvercrest Asset
Management and a former professor at Beijing’s Tsinghua University. “To keep
growth going they have to push extremely high levels of investment to even more
extreme levels, and that is becoming very hard to do and very hard to finance.”
“The
economic return on credit is rapidly declining. They increased loans by $1
trillion in the first quarter, but growth slid anyway and is now below levels
seen in early 2009 after the Lehman crisis. It is no longer out of the question
that GDP will actually fall,” he said.
Diana
Choyleva, from Lombard Street, said the official Chinese figures show that the
economy contracted by 0.2pc in the second quarter, rather than growing 1.7pc
(7.5pc year-on-year) as claimed by the government.
The
discrepancy comes from the inflation assumptions used by Beijing. The
government relies on a fixed basket of prices that can flatter the true health
of the economy.
A better
benchmark is the “GDP deflator”, which uses an evolving measure of prices that
better reflect the reality of China’s fast-changing economy. “If you measure it
that way, China is much closer to deflation than people realise,” she said
----"China is
within a hair's breadth of outright deflation," said Albert Edwards from
Societe Generale, insisting that the GDP deflator is the key indicator to watch
as the investment bubble deflates. It may prove more of a threat to the world
economy than the tapering of bond purchases by the US Federal Rserve, he said.
----The recent focus by analysts on the GDP deflator is a new twist in a long-standing dispute over the reliability of Chinese statistics. A Wikileaks cable reported premier Li Keqiang during his days as a regional party chief telling a US diplomat that China’s data were “mad-made and for reference only”. Mr Li said he looked at electricity use, rail freight and credit growth to discern the truth.
Chinese
analysts have put together a "Li Keqiang Index" using these three
sets of data. It shows that China’s annual growth rate has collapsed to less
than 2pc, below the worst levels after the Lehman crisis
More
Yuan influence on the rise worldwide
Updated:
2013-07-22 02:00
By WANG
XIAOTIAN and LI XIANG ( China Daily)
More
nations turn to Chinese currency for investment and trade settlement
Although
the money markets have gone into a tizzy recently, there have been some
unrelated developments that clearly underscore the growing global influence of
China's currency, the yuan also known as renminbi.
Indications
that the yuan is well on its way to becoming an "international"
currency heightened after important currency trading centers such as Paris,
Luxembourg, Frankfurt, Sydney and Dubai expressed interest in becoming offshore
yuan-trading centers. Major money markets, including Hong Kong, Taipei,
Singapore and London, are already part of the lucrative offshore yuan-trading
club.
"There
is no doubt that the renminbi is gaining international recognition and that
there is demand for it outside the Chinese mainland," says Ravi Menon,
managing director of the Monetary Authority of Singapore.
"The
expansion of offshore renminbi-funding centers as well as the setting up of
swap lines between the People's Bank of China and various central banks,
including the latest agreement with the UK, bear evidence to this."
He says a
stable and thriving Chinese economy is the best foundation on which to further
the use of the yuan globally.
Zhang
Lei, general manager of the global payment and clearing division at Bank of
China, says: "The internationalization of the yuan has entered a critical
period as yuan usage is strengthening in regions outside the
Asia-Pacific."
----Although there are several contenders, the European cities have the best credentials for bagging yuan deals, he says.
The
Frankfurt-based European Central Bank is likely to enter into a swap agreement
with the People's Bank of China for as much as 800 billion yuan ($130 billion),
Bloomberg reported earlier this month, citing prominent lobby group Frankfurt
Main Finance.
The
deal, four times the 200-billion-yuan agreement signed in June between the Bank
of England and PBOC, is expected to give central banks from the eurozone access
to yuan funds
More
Steel Goal Fades as $12 Billion Projects Dumped: Corporate India
By Abhishek Shanker & Rajesh Kumar Singh - Jul 22, 2013 5:51 AM GMT
ArcelorMittal
(MT) and Posco’s decisions to scrap $12 billion of proposed steel projects
in India and delays in
building plants by Tata Steel Ltd. (TATA) and its peers will probably cut
the nation’s 2020 capacity target by a quarter. India may add about 50 million metric tons in the next eight years, half of an earlier plan, taking total capacity to 150 million tons, according to the average estimate of six analysts, government officials and company executives in a Bloomberg survey. Slowing demand, land acquisition delays, rising funding costs and difficulties in getting iron ore mining permits are diminishing the viability of the projects, said A.S. Firoz, the steel ministry’s chief economist.
The
Indian rupee’s plunge to a record this year, which lifted equipment and raw
material import costs, has exacerbated the nation’s decline as a favored
steelmaking destination
More
We end for the day, with the weekend’s good news. The G-20 meeting in Moscow of finance ministers, no word yet on if they were bugged and by who, ended with a pledge to “pursue “carefully calibrated and clearly communicated” policy moves,” whatever that means, though China did make a move at the weekend that helps somewhat its banks. The G-20 sometime ago promised no beggar thy neighbour trade wars, but that is exactly what happening just about everywhere, with Japan again just about to up the ante.
"The great merit of gold is precisely that it is scarce; that its quantity is limited by nature; that it is costly to discover, to mine, and to process; and that it cannot be created by political fiat or caprice."
Henry Hazlitt
G-20 Reaches for Growth as China Changes Lending Rules
By Rebecca Christie, Scott
Rose & Joshua Goodman - Jul
21, 2013 9:00 PM GMT
Global finance chiefs sought to buttress the global economic recovery with
pledges to avoid spooking markets as China moved to scrap a lending
rule that had constrained its banks. Group of 20 nations will pursue “carefully calibrated and clearly communicated” policy moves so that the U.S. and Japan don’t cause cross-border damage when they start rolling back stimulus, they said after a two-day meeting of finance chiefs in Moscow. They will move “more rapidly” toward market-determined exchange rate systems, following China’s internal banking change, according to a July 20 statement.
“China’s action is probably the one thing that will help markets,” Lena Komileva, chief economist at G+ Economics in London, said in a July 20 telephone interview. “Global markets are dominated by a butterfly effect. If the Fed is to change domestic policy in response to U.S. economic conditions, it’s going to have global consequences.”
The G-20 heeded calls from emerging-market countries to guard against shockwaves when U.S. growth is secure enough for the Federal Reserve to cut back on its bond buying, according to the statement. It also repeated that nations should avoid competitive currency devaluations.
Speculation
about developed economies scaling back their unprecedented monetary easing has
roiled emerging-market currencies and bonds since G-20 finance chiefs last met
in April
More
http://www.bloomberg.com/news/2013-07-21/g-20-reaches-for-growth-as-china-changes-lending-rules.html
Stay long physical gold and silver held outside of the over hypothecated western banking and financial system. Physical gold in particular, now seems to be flying out of the western depositories and ETFs, most likely ending up in Asia, especially China. How much gold does America and the London Bullion Market Association really have left? How much longer will many of the world’s gold mines be willing to go on producing gold below the cost of production? We are shortly to reconnect with reality, I suspect.
The real interest rate is probably minus 2% in the
world today. It should be in line with the per capita income growth rate or 1%.
The difference is 3%.
This environment redistributes wealth from savers
to debtors on a scale of over $2 trillion per annum or $55 billion per day.
This must be the biggest legal robbery ever in human history. But it is always
coded in arcane academic lingos spoken by respected central bankers with
impeccable CVs. All that is just packaging; it is robbery nevertheless.
Andy
Xie
At the Comex silver depositories Friday final figures were: Registered 48.70 Moz,
Eligible 117.54 Moz, Total 166.24 Moz.
Crooks and
Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
No banksters and Squids today, most were too busy out
in Long Island’s Hamptons, busy planning new ways to steal each other’s dollar,
in the 21st century real life version of “Weekend at Bernie’s.” Able
to resist anything except temptation, normal service will resume tomorrow,
“Call
it the Goldman Sachs test. If this is something Goldman would do to its
clients, don't do it."
Felix
Salmon.
The monthly Coppock Indicators finished June:
DJIA: +145 Up. NASDAQ: +146 Up. SP500: +177 Unch The Fed’s
Final Bubble continues, but is struggling. The S&P500 moved sideways. The Dow and
Nasdaq both barely eked out a gain. In current highly volatile conditions and
controversial uncertain policy indecision at the Fed, Speculators would stay
long, investors would exit stocks for now or get fully hedged.
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