Baltic Dry Index. 1075 --07
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
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
It is day one of the two day meeting of the lame
duck Bernanke lead Fed. With the Fed running scared from the effects of their
last disastrous meeting, when Bernocchio’s loose lipped leak to his favourite
hack at the Wall Street Journal, about “QE tapers” and an end to QE forever in
2014, this month’s meeting is likely to be tame. With Bernocchio headed back to
the Ivory tower existence from whence he came, this month’s meeting is likely
to be all spin to burnish up the calamitous Greenspan-Bernanke era of serial
bubbles, casino crony capitalism, and the central bank socialism for banksters
that continues on to this day. Welfare for the Dim un’s and Ebenezer Squids,
austerity for Main Street and the sick, disabled and working poor.
That Greenspan-Bernanke era will take the rest of
this century to burnish up, and that assumes that QE forever, and the theft of
the savings of the thrifty, to pass on to the feckless, reckless, gambling
banksters, doesn’t still end in an eventual systemic collapse of the Great
Nixonian Error of fiat money. Soon we will have newbies at the helm of the Fed
and the BOE, and a fallen “Super Mario” about to be tested over Club Mad. With
the German general election just two months away, the ECB has just two months
of relative leeway left. Stay long physical precious metals. H2 13 is likely to
become manic.
On the other side of the Pacific a different drama
is unfolding. One that makes anything the Fed does irrelevant, save only for
more unwise talk of tapers and ending QE forever. Below, the PBOC pre-empts the Fed by easing
and tightening at the same time. China responds to the IMF. China steps up its
trade war with the EU, retaliating against Germany rather than France. Our
unstable global economy is getting more unstable with each passing month.
PBOC Conducts First Reverse Repos Since February; Swaps Decline
By Lilian Karunungan - Jul 30, 2013 4:15 AM GMT
China’s central bank
conducted reverse-repurchase operations for the first time in five months,
helping alleviate a cash squeeze that drove the benchmark interbank lending
rate to a four-week high. The People’s Bank of China added 17 billion yuan ($2.8 billion) to the financial system today at a yield of 4.4 percent using seven-day reverse repos. That compares with 3.35 percent when the contracts were last used on Jan. 31 and a Feb. 7 auction of 14-day agreements at 3.45 percent, according to central bank data compiled by Bloomberg. Interest-rate swaps and money-market rates declined.
“The
PBOC is not prepared to ease liquidity aggressively; that’s why they offered
these reverse repos at a higher rate than before,” said Albert Leung, a
strategist at Bank of America Merrill Lynch in Hong Kong. “At the same time
they are also prepared to step in when the liquidity is too tight, so most
likely the situation will be that liquidity will be tighter in the second half
of the year than the first half.”
----The
seven-day repo
rate,
a gauge of the availability of cash in the banking system, fell 14 basis
points, or 0.14 percentage point, to 4.98 percent, according to a weighted
average compiled by the National Interbank Funding Center. It exceeded 5
percent yesterday for the first time in four weeks and reached a record 12.45
percent on June 20. Liquidity is often tight at month-end as banks hoard money
to meet regulatory requirements, Bank of America’s Leung said.
More
China orders 'urgent' audit of debts after IMF warnings
China’s leaders have ordered an “urgent” audit of local government debt, responding to warnings from the International Monetary Fund that rampant borrowing by the regions could trigger a serious crisis.
The State
Council told the country’s audit office to suspend work on other projects and
launch an immediate inquiry to assess the gravity of the risk. The audit office
in the northern port city of Dalian has cancelled holiday leave, and will
dispatch inspectors this week.
Andy Xie,
a financial commentator at news website Caixin, said reliance on land sales to
fund regional spending was an accident waiting to happen. “While household
income may have tripled in a decade, the average land price has risen by over
30 times. Income growth to come cannot justify the current price of land. Nor
can a supply shortage. China has no shortage of land. The sustainable land
value is probably 70pc to 80pc below current levels,” he said.
Mr Xie
said there may be financial panic over coming months but the government should
ride out the storm. “The impact on the real economy will be limited. China’s
land bubble has become almost entirely a financial phenomenon. Its problems
should be contained within a small if vocal community,” he said.
The IMF
is less sanguine. It warned last week that local government reliance on
“off-budget activity” and land sales to pay its bills have pushed China’s
underlying fiscal deficit to 10pc of GDP. “Fiscal space is considerably more
limited than headline data suggest,” it said.
The IMF
said these deficits “raise questions about local governments’ ability to
continue financing the current level of spending and service their debts, which
has implications for financial system asset quality. Further rapid growth of
debts would raise the risk of a disorderly adjustment in local government
spending. Financial distress would lead to a contraction in credit, a fall in
domestic demand, and lower growth, which would make it more difficult for
highly leveraged borrowers to grow out of their debt. The timing and
coincidence of events that would trigger such an adverse feedback loop are
difficult to predict,” it said.
More
China fires warning shot at foreign carmakers
China has fired a warning shot at foreign makers of luxury cars, as it accused them of reaping exorbitant profits and called for them to face an antitrust investigation.
Reuters 3:45PM
BST 29 Jul 2013
Xinhua,
which acts as a mouthpiece for the Chinese government, said some imported cars
were twice as expensive in China than in overseas markets. It added that the
price of imported cars had become a contentious topic following investigations
into how foreign companies in other sectors priced their goods.
The
Xinhua report used the example of Audi Q7's model, which it said could be
bought in Canada for 78,000 Canadian dollars, or about 460,000 yuan (£48,900).
It claimed the same car was on sale in China for 1m yuan.
Xinhua
said similar price differences existed between some unspecified Land Rover
models, as well as the BMW X5.
In a
statement, Audi said that allowing for taxes and differing vehicle specifications,
prices were comparable.
More
On the subject of the German general election,
things get more interesting by the day. After a dozen years of the Gestapo, and
a lifetime under the Stassi, NSA whistle blower Snowy has breathed some life back
into the “Hammer of the Greeks,” all too easy path to guaranteed re-election. Below,
the Nixon-Obama tag team call Chancellor Merkel a “hypocrite.” That ought to
play well on the Unter den Linden.
“The Germans
outside looked from America to Russia, and from Russia to America, and from
America to Russia again; but already it was impossible to say which was which.”
With
apologies to George Orwell and Animal Farm.
John Podesta on the NSA Scandal: 'We Need Better Oversight'
In a SPIEGEL interview, Obama
advisor John Podesta calls Europe's outrage over the NSA spying scandal
hypocritical, but says America needs a national debate on surveillance laws
too.
July 29, 2013 – 04:47 PM
SPIEGEL: According to a recent survey, nearly
three-quarters of Americans believe National Security Agency (NSA) spying is
infringing on their privacy rights. A proposal to restrict such programs failed
only by a narrow margin in Congress. Are Americans beginning to fear a
surveillance state?
Podesta: We are in uncharted territory,
facing rapid technological change that has simply swamped our existing legal
regime. The media's focus in recent weeks has circled almost exclusively around
Edward Snowden's attempt to earn the world record for longest airport layover.
But the focus on Snowden distracts from what is most problematic about the
information he provided to the media.
SPIEGEL: And that is?
Podesta: Unlike the last time we had a
national conversation about the NSA and domestic surveillance during the days
of "warrantless wiretapping" in 2005, a legal framework exists today
to support PRISM and the other programs. Therefore, the challenge is not rooted
in the NSA overstepping its legal boundaries. Instead, new products and
services, increasing processing power, and the decreasing cost of storing huge
amounts of data means that surveillance on an unprecedented scale is now not
just technologically possible but is also financially feasible for the first
time. It is past time for us to begin a new national debate about what we want
our surveillance laws to permit, particularly in light of how rapidly
technology and society are changing.
----SPIEGEL: You talk a lot about the rights of Americans. But Europeans are furious that the NSA can spy on them with barely any restrictions.
Podesta: We need better oversight of our
surveillance agencies and we need increased transparency at the Foreign
Intelligence Surveillance Court. Surely we can meet our national security needs
without sacrificing the respect for personal privacy that has long been a
hallmark of American life. The president could quiet some of the international
critics if he explained better what the US is doing.
SPIEGEL: Instead you hear in Washington
that Europeans are "whiners" and "hypocrites".
Podesta: Well, I agree that European
anger is largely hypocritical. Most of the governments there have known for a
long time what the US has been doing and they have often cooperated closely and
willingly. I understand why leaders in Europe need to speak out against PRISM
and other programs, but they still act like hypocrites.
More
We close for day one of the Fed’s quackery, with
something to ponder on the rest of our decade. Is the Middle East about to lose
the House of Saud? Electric vehicles anyone?
"[the] process of industrial mutation that incessantly
revolutionizes the economic structure from within, incessantly destroying the
old one, incessantly creating a new one."
Creative Destruction. Joseph Schumpeter, 1942.
US shale threatens Saudi funding crisis and demise of OPEC
Saudi Arabia and the Opec oil states must wean their economies off energy exports immediately or spiral into decline as America’s shale revolution shatters the world order, a top Saudi business leader has warned.
Prince
Alwaleed bin Talal, the country’s best-known global investor, said the business
model of Middle East oil exporters risks unravelling rich industrial states
find ways of cutting demand. “Our country is facing a threat with the
continuation of its near-complete reliance on oil: 92pc of the budget for this
year depends on oil,” he said in a letter to Saudi oil minister Ali Al-Naimi.
Mr
Al-Naimi and Opec leaders have taken a relaxed view of growing US shale output.
“This is not the first time new sources of oil are discovered. There was oil
from the North Sea and Brazil, so why is there so much talk about shale oil
now?” he said last month.
Opec
admits that new output from hydraulic “fracking” could chip away its dominant
position in the market but secretary general Abdalla El Badri still insists
that Opec “will be around after shale oil finishes”. The group is more worried
about recession in Europe and a hard landing in China.
Prince
Alwaleed said oil demand from OECD rich states is in “continuous decline”, and
the Saudis will not be able to ratchet up their output from 12.5m to 15m
barrels per day (bpd) to cover growing budget costs. “It is necessary to
diversify sources of revenue, establish a clear vision, and start implementing
it immediately,” he said.
A report
last month by Leonardo Maugeri at Harvard University said US shale oil output
could triple to 5m bpd by 2017, turning America into the world’s top producer
once again.
More
Again,
however, from destruction a new spirit
of creation arises; the scarcity of wood and the needs of
everyday life... forced the discovery or invention of substitutes for wood,
forced the use of coal for heating, forced the invention of coke for the
production of iron.
Werner
Sombart, Krieg und Kapitalismus, 1913.
At the Comex silver depositories Monday final figures were: Registered 46.35 Moz,
Eligible 117.46 Moz, Total 163.91 Moz.
Crooks and
Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Yes it’s the banksters once again. “God’s work” in
California apparently involved fleecing everyone who used electricity. Well at
least they were allegedly fleecing the 1 percent along with the other 99
percent. It’s a funny old world on Nixon’s
fiat money, crony capitalism. I wonder why the NSA never called time?
Banks are an almost irresistible attraction for that element of our society which seeks unearned money.
J. Edgar Hoover
JPMorgan Accused of Gaming Energy Bids as FERC Deal Looms
By Brian
Wingfield & Dawn Kopecki - Jul 30, 2013 5:02 AM GMT
PMorgan
Chase & Co. (JPM) manipulated power markets in California and the
Midwest, the U.S. Federal Energy Regulatory Commission claimed in a proceeding
that sets up a settlement to be announced as early as today. A JPMorgan trading unit gamed wholesale electricity markets from September 2010 to June 2011, leading to overpayment of “tens of millions of dollars at rates far above market prices” in California alone, FERC staff said in a Notice of Alleged Violations yesterday.
The nation’s biggest bank and its chief energy-market regulator have agreed to settle the matter with sanctions that include a fine of about $400 million, according to a person familiar with the case who asked not to be identified because the terms aren’t yet public. Brian Marchiony, a JPMorgan spokesman, declined to comment on the FERC action.
“JPMorgan picked the pockets of California households and businesses, and their manipulation increased the electric bills that people pay,” said Tyson Slocum, director of the energy program at Public Citizen, a Washington-based consumer advocacy group.
The case marks another setback for JPMorgan, which sailed through the 2008 financial crisis without a single quarterly loss. Last year JPMorgan lost more than $6.2 billion from wrong-way derivatives bets placed by traders in London. The incident prompted a U.S. Senate investigation, the departure of two senior executives and a debate over whether Chief Executive Officer Jamie Dimon, 57, should keep his chairman role. In May shareholders re-elected him as chairman.
JPMorgan
said July 26 it was considering the sale or spin off of its physical
commodities business, including energy trading, three days after a congressional
hearing examined whether banks are using their ownership of raw materials to
manipulate markets.
Commodities
chief Blythe Masters oversees the unit, J.P. Morgan Ventures Energy Corp. The
wholly owned subsidiary trades and holds physical commodities, including
agricultural products, metals and energy, as well as derivatives.
The FERC
in November revoked the unit’s right to trade power for six months after
accusing the firm of providing misleading information to regulators. The
suspension, which took effect in April, marked the first such sanction for an
active market participant
More
Why did I take up stealing? To live better, to own things I couldn't afford, to acquire this good taste that you now enjoy and which I should be very reluctant to give up.
Blythe Squid, with apologies to Cary Grant. To Catch A Thief.
The monthly Coppock Indicators finished June:
DJIA: +145 Up. NASDAQ: +146 Up. SP500: +177 Unch
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