Baltic Dry Index. 1130 +10
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
The
grand old Duke of York,
He had ten thousand men;
He marched them up to the top of the hill,
And he marched them down again.
And when they were up, they were up,
And when they were down, they were down,
And when they were only half-way up,
They were neither up nor down.
He had ten thousand men;
He marched them up to the top of the hill,
And he marched them down again.
And when they were up, they were up,
And when they were down, they were down,
And when they were only half-way up,
They were neither up nor down.
This morning the Bernanke Fed is neither up nor
down. Once on QE forever, forever is a long, long time. Panicked by the bond
market reaction to his leaks to his favourite hack at Murdoch’s Wall Street
Journal that the Bernanke Fed was about to “taper” it’s QE program in 2013, and
end it altogether by the end of 2014, the latest Bernanke spin is “just kidding.”
From America, to China, to Europe to India, the central banksters have lost
control as the global economy slows. Wisely, those invested in government bonds
have started scaling back holdings. After 32 years of ever lower interest rates,
to the lunacy of crushing savers and the retired by ZIRP, the next move in global
interest rates is higher, whether brought about by Bernanke himself, or by an
inflationary scramble out of fiat currency and into tangible assets. The free
lunch of fiat currency is coming to its end.
"Lenin is
said to have declared that the best way to destroy the Capitalistic System was
to debauch the currency. . . Lenin was certainly right. There is no
subtler, no surer means of overturning the existing basis of society than to
debauch the currency. The process engages all the hidden forces of economic law
on the side of destruction, and does it in a manner which not one man in a million
can diagnose."
Lord Keynes.
Bernanke Supports Continuing Stimulus Amid Debate Over QE
By Joshua Zumbrun, Craig
Torres & Steve Matthews - Jul 11, 2013 5:00 AM GMT
Federal Reserve Chairman Ben S.
Bernanke called for maintaining accommodation even as the minutes of policy
makers’ June meeting showed them debating whether to stop bond buying by the
Fed in 2013. “Highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy,”
Bernanke said yesterday in response to a question after a speech in Cambridge, Massachusetts.
The
Fed chairman spoke just three hours after the central bank released minutes of
the June 18-19 gathering showing that about half of the 19 participants in the Federal
Open Market Committee wanted to halt $85 billion in monthly bond purchases
by year end. At the same time, the minutes showed many Fed officials wanted to
see more signs employment is improving before backing a trim to bond purchases
known as quantitative easing.
----“It is clear they want to pull the trigger on the wind-down of QE, but they also want to calm market anxieties about raising rates for the foreseeable future,” said Ward McCarthy, chief financial economist at Jefferies Group LLC in New York and a former Richmond Fed economist. Their attempts at providing clarity are further complicated because of “pretty significant divisions among policy makers on a number of issues.”
Stock and bond futures rose as Bernanke’s comments reassured investors that the days of loose U.S. monetary policy aren’t over
More
July 10,
2013, 3:12 p.m. EDT
The Fed’s more hawkish than minutes suggest
Commentary: Jobs data and stock market have changed Fed
WASHINGTON (MarketWatch) — If you look at the minutes
of the June 18-19 meeting, you certainly don’t get confirmation that the
Federal Reserve will reduce the rate of its $85 billion-per-month bond purchase
program in September.
Sure,
half of the Fed members said they could end all bond purchases
this year. But “many” others are comfortable stretching the bond purchases
into next year.
Assuming,
in the colorful words of the hawkish Dallas Fed President Richard
Fisher, that the central bank doesn’t want to go “cold turkey,” it
has to start reducing the rate of bond buys soon.
And
“soon” could well be September. But it could also be October or December,
providing time in, say, March 2014 for an extra step down in its
bond-purchasing pace.
But,
remember, new information has come into the Fed since June 19. Two pieces of
new information, in fact.
The
first is that 195,000 jobs were created in June. Upward revisions show
basically the same rate of jobs growth in April and May.
So,
barring some dreadful July and August news — you never know — the Fed will be
comfortable the labor market is stronger than when it undertook its
bond-purchase program last September.
More
Not that things are any better in dying continental
Europe. While the politicians and Brussels fat cats fiddle and steal any and
everything not screwed down, Club Med is rapidly going up in smoke.
The wheels are coming off the whole of southern Europe
Europe’s debt-crisis strategy is near collapse. The long-awaited recovery has failed to take wing. Debt ratios across southern Europe are rising at an accelerating pace. Political consent for extreme austerity is breaking down in almost every EMU crisis state. And now the US Federal Reserve has inflicted a full-blown credit shock for good measure.
None of
Euroland’s key actors seems willing to admit that the current strategy is
untenable. They hope to paper over the cracks until the German elections in
September, as if that is going to make any difference.
A leaked
report from the European Commission confirms that Greece will miss its
austerity targets yet again by a wide margin. It alleges that Greece lacks the
“willingness and capacity” to collect taxes. In fact, Athens is missing targets
because the economy is still in freefall and that is because of austerity
overkill. The Greek think-tank IOBE expects GDP to fall 5pc this year. It has
told journalists privately that the final figure may be -7pc. The Greek
stabilisation is a mirage.
Italy’s
slow crisis is again flaring up. Its debt trajectory has punched through the
danger line over the past two years. The country’s €2.1 trillion (£1.8
trillion) debt – 129pc of GDP – may already be beyond the point of no return
for a country without its own currency.
Standard
& Poor’s did not say this outright when it downgraded the country to
near-junk BBB on Tuesday. But if you read between the lines, it is close to
saying the game is up for Italy.
----Spain’s crisis has a new twist. The ruling Partido Popular is caught in a slush-fund scandal of such gravity that it cannot plausibly brazen out the allegations any longer, let alone rally the nation behind another year of scorched-earth cuts. El Mundo says a “pre-revolutionary” mood is taking hold.
A
magistrate has obtained the original “smoking gun” alleging that Premier
Mariano Rajoy accepted illegal payments as a minister. The Left is calling for
his head but so are members of the Consejo General del Poder Judicial, the
justice watchdog.
----Portugal is slipping away. Professor João Ferreira do Amaral’s book - Why We Should Leave The Euro – has been a bestseller for months. He accuses Brussels of serving as an enforcer for Germany and the creditor powers.
Like
Greece before it, Portugal is chasing its tail in a downward spiral. Economic
contraction of 3pc a year is eroding the tax base, causing Lisbon to miss
deficit targets. A new working paper by the Bank of Portugal explains why it
has gone wrong. The fiscal multiplier is “twice as large as normal”, or 2.0, in
small open economies during crisis times
More
PP’s former treasurer breaks silence on Spanish slush fund scandal
----“The
former treasurer of Spain’s ruling Popular party (PP) has broken his silence
over a slush fund scandal that has rocked the country for the past six months,
claiming in an interview that the party had broken campaign finance laws for at
least 20 years.
Luis Bárcenas, the man at the heart of the scandal,
was arrested and detained late last month in connection with an inquiry into
the €48m fortune he is said to have amassed in Swiss bank accounts. The
investigating judge ruled that the former party treasurer will have to remain
in prison until his trial, and fixed his bail at €28m.
His decision to give an interview after
months of blanket denials, and to threaten further revelations, marks a
potentially dramatic turn in the high-profile scandal. It suggests that Mr Bárcenas is disappointed
with the lack of support he has received from PP leaders since the affair
broke, and that he may be ready to implicate other senior party leaders.
According
to the front
page report in the Sunday edition of El Mundo newspaper, Mr Bárcenas claims to have documents and hard
discs that chronicle the systematic violation of party finance laws. Their
publication, he adds, would “bring down the government”. The
interview – which appeared carefully worded and contained only a handful of
direct quotes from the former treasurer – was conducted by the editor of El
Mundo several days before Mr Bárcenas went to jail.
Financial Times July 7th,
Spain's obsession with high-speed trains runs into budget reality
ONBOARD
MADRID-ALICANTE HIGH-SPEED TRAIN | Mon Jun 17, 2013 1:34pm EDT
(Reuters)
- A one-track dirt road used by local farmers is the main access to a
magnificent glass-and-steel train station in the small city of Villena, on
Spain's latest high-speed rail route.
It is a
spanking new 4,500 square meter building - essentially in the middle of
nowhere.
The
central government financed the rail route, inaugurated on Monday, between
Madrid and Alicante on the Costa Blanca. The Valencia regional government was
supposed to fund works to connect it to the nearby motorway and Villena, home
to 35,000.
But it
ran out of money, leaving the station high and dry.
The disconnect says a lot about both Spain and its current finances, about a love affair with grand projects to showcase its modernity and a diminishing ability to pay for them.
The Valencia government has pledged to complete the works but it is now not clear when and where it will be able to find the funds as it is already cutting spending on schools and hospitals as it tries to reduce a deficit.
Ximo Puig, the head of the Socialist opposition in Valencia, says the station is likely to become yet another white elephant in a country where dozens of airports, train stations, motorways or cultural centers built during a decade-long property boom are under-used or have been abandoned.
More
In Asia, trouble looms again in China. Our markets
are again dangerously disconnected from the reality of the real world. A
massive reconnect is next, I think.
China warns of 'grim' trade outlook after surprise exports fall
BEIJING |(Reuters) - China warned on Wednesday of a "grim" outlook for trade after a surprise fall in June exports, raising fresh concerns about the extent of the slowdown in the world's second-largest economy and increasing the pressure on the government to act.
China's reform-minded new leaders, including Premier Li Keqiang, have shown a tolerance for slower growth, while pressing ahead with efforts to revamp the economy for the longer term, but any continued slide in economic performance could test their resolve.
The customs data showed that exports fell 3.1 percent in June against forecasts for a rise of 4 percent, casting a shadow over second-quarter GDP figures due on Monday that are already expected to show growth slowed down to 7.5 percent as weak demand dented factory output and the pace of investment.
"Next week will be a testing time for the government in revealing just how much of a growth slowdown it is willing to tolerate," Zhiwei Zhang, China chief economist at Nomura in Hong Kong, said in a client note.
More
Chinese banks lend aggressively in early July, risking another crackdown
SHANGHAI |(Reuters) - New local currency yuan loans extended by China's big four state-owned banks stood at an unusually large 170 billion yuan ($27.7 billion) in the first week of July, the official Shanghai Securities News said on Thursday, a move that may alarm regulators trying to strangle distorted credit growth.
Traders said similarly aggressive lending by Chinese banks in early June caused the central bank to set off an acute liquidity squeeze in the country's interbank market.
The credit crunch caused a panic among money dealers, provoking a dramatic decline in domestic equity indexes and raised international concern about the health of the country's financial system.
New loans extended in early July by the big four banks -- the Industrial and Commercial Bank of China 601389.SS (0398.HK), China Construction Bank (601939.SS) (0939.HK), Agricultural Bank of China (601288.SS) (1288.HK) and Bank of China (601988.SS) (3988.HK) -- were unusually high compared with the estimated 270 billion yuan for all of June, the newspaper said.
"The abnormality is believed to be a burst of new lending after restrictions at the end of June," the report said.
In the beginning of June the big four banks extended 217 billion yuan in new loans in the first 10 days.
Traders said the People's Bank of China (PBOC) convened a meeting in response, warning banks of aggressive lending, and pointing out that some banks had borrowed short-term money on the money markets and used it to extend medium- and long-term loans -- a mismatching of assets and liabilities which increased systemic risk.
More
More Chinese cities to curb auto sales - industry group
BEIJING |(Reuters) - Eight more cities in China, the world's biggest auto market, are likely to announce policies restricting new vehicle purchases, an official at the automakers association said, as Beijing tries to control air pollution.
Shi Jianhua, deputy secretary general at the China Association of Automobile Manufacturers (CAAM), did not give details on the new measures and there has been no word from the government.
But the industry group warned the planned restrictions could cut vehicle sales by 400,000 units, equivalent to 2 percent of annual domestic sales in 2012.
----In June, sales of German cars accounted for 26 percent of total sales in China, followed by Chinese vehicles at 25 percent, Japanese with 18 percent and U.S. cars with 16 percent, according to CAAM data.
Four Chinese cities - Beijing, Shanghai, Guiyang and Guangzhou - already restrict vehicles on the road by using auctions and lotteries to sell a limited number of license plates.
More
“In the absence of the gold standard, there is no
way to protect savings from confiscation through inflation… Deficit spending is
simply a scheme for the “hidden” confiscation of wealth. Gold stands in the way
of this insidious process. It stands as a protector of property rights.”
Alan Greenspan, Gold and Economic Freedom (1968)
At the Comex silver depositories Wednesday final figures were: Registered 48.32
Moz, Eligible 116.79 Moz, Total 165.11 Moz.
Silver continues to flow from the non-deliverable Eligible category to
the deliverable Registered category. Is a large delivery planned for H2 13?
Crooks and
Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
No Snow today, just a timely update on Japan’s
preparation for war with China over the Diaoyu Islands. Uncle Sam it seems will
not be neutral. I suspect that we will not have to wait long for China’s
response. Stay long physical gold and silver. The wise will stay far away from
Japanese stocks. In addition to its
currency and trade wars, Japan seems intent on starting a new unwinnable hot
war with China. Remind me again, whose astronauts have just returned from
space?
Japanese Troops Storm California Beaches as Marine Power Eyed
By Isabel Reynolds, Takashi
Hirokawa & Aki Ito - Jul 10, 2013 11:00 PM GMT
A thousand Japanese troops have been learning how to recapture territory in
the face of enemy fire. While the shoreline may be California,
the skills they are building could one day be used closer to home. The two-week “Dawn Blitz” joint drills in June saw a Japanese Self-Defense Force ship launching a hovercraft designed to carry troops and heavy weaponry that roared onto the beach, watched by officers from the U.S. and Japan. Elite rangers rehearsed a night-time beach infiltration.
The operations reflect the ruling Liberal Democratic Party’s interest in developing a Marine corps to counter what Prime Minister Shinzo Abe’s government says are Chinese attempts to change the status quo in maritime disputes. With the LDP poised to win elections to parliament’s upper house this month, Abe will have a Diet majority to push through his legislation.
“There’s a fear of China in Japan that didn’t used to be there,” said Aaron Friedberg, a professor of international relations at Princeton University who advised then-U.S. Vice President Dick Cheney on national security. “They know what kind of military capabilities the Chinese are developing and the threat that it poses,” he said, referring to Japan’s leadership.
The LDP -- which with coalition ally New Komeito will probably win a majority in the July 21 vote, according to a July 4-5 Yomiuri newspaper poll -- presented its proposals on May 30. Building on this year’s first rise in the defense budget in 11 years, the party wants consideration for buying first-strike weapons, such as cruise missiles, and a reinterpretation of the occupation-era constitution so Japan can defend its allies.
More
Japan should face up to history
BEIJING -
For the Chinese people, July 7, 1937 is a day etched on their minds. It was the
day which marked the beginning of the eight-year-long China's War of Resistance
Against Japanese Aggression.
Nowadays,
the 1.3 billion Chinese people could still feel the pain, because of not only
the atrocities of the aggression, but also the current Japanese government's
denial of the history.
Today,
the July 7 Incident, or the Lugouqiao Incident, should bear greater
significance for Japan than for China.
Japanese
Prime Minister Shinzo Abe, since taking office last December, has repeatedly
made remarks seen as attempts to whitewash Japan's wartime atrocity. He has
gone so far as to say that there is no clear definition of aggression and raise
questions over Japan's past war apologies.
Ancient
Chinese talents suggested that people should often look into the mirror of
history to avoid making reckless decisions that could endanger their country.
The
Japanese government, however, is trying to get rid of the mirror. That's why
Tokyo made the decision, among others, to nationalize some of the Diaoyu
Islands, an integral part of the Chinese territory, last year, raising hackles
of Beijing and badly impacting the ties between Asia's two largest economies.
In a
recent development, Abe on Wednesday criticized China for shutting "all
the doors" to dialogue because of the countries' territorial disputes.
The
accusation is ridiculous. Historical issues are the foundation of every
bilateral ties, without a proper settlement of these issues, the skyscraper of
bilateral relationships is doomed to collapse some day in the future.
The
irresponsible remarks and decisions indeed endanger Japan. By indulging the
rightist tilt and engaging in costly territorial disputes with neighbors, Japan
could be drifted away from the endeavor to boost its stagnant economy.
More
The monthly Coppock Indicators finished June:
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