Baltic Dry Index. 1117 -10
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
A large Bank is exactly the place where a vain and shallow person in authority, if he be a man of gravity and method, as such men often are, may do infinite evil in no long time, and before he is detected. If he is lucky enough to begin at a time of expansion in trade, he is nearly sure not to be found out till the time of contraction has arrived, and then very large figures will be required to reckon the evil he has done.
Walter Bagehot. Lombard Street. 1873
Japan’s trade war against all comers is working, at
least for now. Abenomics, the policy of beggaring thy neighbour by stealing
their export markets is working for Japan extraordinarily well. It’s for now
mostly beggaring Japan’s old enemies China and Korea. But intense resentment is
building across Asia, and a sales tax storm lies ahead.
Abenomics has worked wonders but can it save Japan?
Japan refuses to go quietly into genteel decline. The revolutionary policies of premier Shinzo Abe have done exactly what they were intended to do – a triumph of political will over the defeatist inertia of Japan's establishment.
Abenomics has not caused a collapse of
confidence in Japanese debt after all. The bond vigilantes are, for now,
resigned, as the Bank of Japan soaks up 70pc of state bond issuance each month,
printing almost as much money as the Fed in an economy one third the size.
"Abenomics
is working," says Klaus Baader, from Societe Generale. The economy has
roared back to life with growth of 4pc over the past two quarters – the best in
the G7 bloc this year. The Bank of Japan's business index is the highest since
2007. Equities have jumped 70pc since November, an electric wealth shock.
"Escaping
15 years of deflation is no easy matter," said Mr Abe this week, after
winning control over both houses of parliament, yet it may at last be
happening.
Prices
have been rising for three months, and for six months in Tokyo. Department
store sales rose 7.2pc in June from a year earlier, the strongest in 20 years.
"Above
all, Abenomics has shifted the yen," said Mr Baader. The 22pc devaluation
since October has held, rather than snapping back as usual. The psychology of
yen appreciation is breaking. Exports have jumped 7.4pc from a year ago.
The nasty
side-effect is a deflationary trade shock for China, now paying the price for
pegging its currency to the US dollar. Veterans will remember the Asian crisis
in 1997-98 when Fed tightening slowly choked China's economy.
Yet for
Japan the weak yen is the Holy Grail. We forget that it rose 45pc on a
trade-weighted basis from 2007 to late 2012, and by 70pc against the euro and
90pc against Korea's won.
More
Japan Seen Needing $50 Billion to Cushion Sales-Tax Rise
By James Mayger & Cynthia Li - Jul 25, 2013 4:21 AM GMT
Japanese Prime Minister Shinzo Abe, now sitting on the biggest parliamentary
majority in six years, faces the threat of political dissent within months as a
planned sales-tax
rise threatens to arrest an economic rebound. The world’s third-largest economy has 30 percent odds of tipping into the fourth recession since 2008 should Abe bump the consumption levy to 8 percent in April from 5 percent, according to the median of 23 estimates in a Bloomberg News survey. He’ll need a 5 trillion yen ($50 billion) fiscal package to cushion the impact of the increase, the survey showed.
----“The market
would raise a question mark about Abenomics if the economy fell into a
recession after raising the sales tax,” said Yoshimasa
Maruyama, chief economist at trading company Itochu Corp. (8001) in Tokyo. “Members of Abe’s
ruling party will request extra spending -- especially people who represent
sectors that will be badly affected by deregulation and the TPP free-trade
negotiation.”
----Abe,
58, has already sown division in the ruling party with promises of structural
reforms that include joining the U.S.-led Trans Pacific Partnership trade
talks, which could open up Japan’s agriculture to greater competition. Former
Health Minister Hidehisa Otsuji, who won a seat in the July 21 election for the
LDP, already put Abe on notice he’ll oppose TPP, the Sankei newspaper reported
this week.
More
As Japan booms, China slows. While China will hit
its newly ordered 7% minimum annual growth rate, it’s a command economy after
all, and not reporting hitting the target can come with a transfer to Inner Mongolia
or worse, China’s reality looks more like it’s flirting with a hard landing.
All made worse by Japan’s beggar thy neighbour trade war policy. How long
Beijing will play by the G-20 rules while Japan openly flouts them is a big
unknown. Manipulating the Yuan lower would be a big setback to China’s move to
make the Yuan a global reserve currency.
But I suspect that China has many arrows in its quiver to fire at Japan,
if needed, including the nationalism arrow, and I suspect that we will not have
to wait much longer for a Beijing response.
From copper to cameras; feeling the heat from China slowdown
By Langi Chiang and Jonathan Standing
BEIJING | (Reuters) - China's manufacturing engine lost further momentum in July and the job market weakened, a survey showed on Wednesday, complicating a transition to consumer-driven growth and boding ill for so many leveraged to the world's second-largest economy.
The knock-on effects are already being felt farther afield - from a slowdown in Japanese export growth despite a weaker yen to Apple Inc lamenting a rare drop in Chinese demand for its premium brand of gadgets.
"China's slowdown is starting to become more dangerous," warned Yasuo Yamamoto, a senior economist at Mizuho Research Institute in Tokyo.
Since taking office in March, China's new leaders have said they are prepared to tolerate tamer growth and push a restructuring of the economy toward domestic consumption, but there have been mixed messages on how much of a slowing they would tolerate. The flow of data suggests their task of changing the shape of the massive economy will only get harder.
Wednesday's flash HSBC/Markit Purchasing Managers' Index showed output, employment and new orders all declining at a faster pace in July. The overall index of business conditions fell to 47.7 from June's final reading of 48.2, a third straight month below the watershed 50 line which divides expansion from contraction, and the weakest level since August 2012.
The employment sub-index slid to 47.3 in July, the weakest since the depths of the global financial crisis in early 2009.
"This print could reignite fears of a Chinese hard landing," said Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore. "We expect economic growth to continue moderating towards 7 percent."
----"China cannot change its weak economic growth situation due to still weak external demand and overcapacity problems in the domestic market," said Wang Jian, a senior researcher with the China Society of Macroeconomics, a research body affiliated with the National Development and Reform Commission (NDRC).
"China's economic growth rate will probably fall below 7 percent in the fourth quarter this year and may fall under 6 percent in some quarter next year," Wang wrote in the China Securities Journal on Wednesday
More
China’s Li Vows Support Measures From Rail to Tax Breaks
By Bloomberg News - Jul 25, 2013 4:41 AM GMT
Chinese Premier Li Keqiang said the nation will speed railway construction,
especially in central and western regions, adding support for an economy that’s
set to expand at the slowest pace in 23 years. The State Council also yesterday approved tax breaks for small companies and reduced fees for exporters as it pledged to keep the yuan’s exchange rate “basically stable at a reasonable and balanced level,” according to a statement after a meeting led by Li. China plans a railway development fund, the government said.
Additional spending would help the world’s second-largest economy, after the government signaled this week it will protect its 7.5 percent growth target for this year following a second straight quarterly slowdown. Economists surveyed by Bloomberg News cut expansion forecasts this month, reaching a new median estimate of 7.5 percent, which would be the lowest since 1990.
“Premier Li’s team has been surely working around the clock” to arrest the slowdown, said Lu Ting, head of Greater China economics at Bank of America Corp. in Hong Kong. “It’s a small stimulus” that may boost confidence while having a limited effect in boosting demand, Lu said by e-mail today.
---- For the five years through 2015, the cabinet set a goal of investing 3.3 trillion yuan, or 500 billion yuan more than in the previous plan, according to the Beijing News. The State Council Information office didn’t immediately respond to a faxed question from Bloomberg News on the authenticity of the newspaper report.
More
http://www.bloomberg.com/news/2013-07-24/li-keqiang-says-china-to-speed-up-railway-construction.html
Below, has China already thrown a tiny dart? H2 13
is starting to look interesting.
May you live in interesting times.
Chinese curse.
Japan scrambles jets after China plane flies by southern islands
TOKYO |(Reuters) - Japan scrambled fighter jets on Wednesday after a Chinese military aircraft flew for the first time through international airspace near its southern islands out over the Pacific, in a move seen by Japan as underlining China's maritime expansion.
Ties between China and Japan have been strained by a territorial dispute over uninhabited East China Sea islets and hawkish Japanese Prime Minister Shinzo Abe won a decisive victory in upper house elections on Sunday.
Japan's Defense Ministry said a Chinese Y-8 airborne early warning plane flew through airspace between Okinawa prefecture's main island and the smaller Miyako island in southern Japan out over the Pacific at around noon and later took the same route back over the East China Sea.
"I believe this indicates China's move toward further maritime expansion," Japanese Defense Minister Itsunori Onodera told reporters, in comments carried on public broadcaster NHK.
Chinese government spokesmen were not immediately available for comment.
The waters around the disputed islands, called the Senkaku in Japan and Diaoyu in China, and which are to the west of Okinawa's main island, are rich fishing grounds and the sea floor around them could hold big oil and gas reserves.
More
Elsewhere in Euroland, the never ending crisis
never ends. Below Reuters ponders on
Spain’s onion-growing commercial land problem. Would you leave your money in a
Spanish bank, let alone money above the so called guaranteed deposit level? I
wouldn’t either. Stay long physical gold
and silver held outside of the felonious reach of John Bull and Uncle Sam. The
euro’s going down and no amount of imposed wealth destruction and penury on
Club Med is going to save it. With the fake money currencies all interlinked,
the crash of the euro will probably bring on “temporary” capital controls
elsewhere.
Worth less. Worth less. Worthless!
Bernocchio (??? Graeme surely.)
Worthless land could prolong Spanish banks' property woes
(Reuters) - Spanish banks may have to swallow more losses to shake off the legacy of a property crash, real estate experts warn, as they struggle to sell plots of land that have ended up on their books and which are now worth less than many have accounted for.
Lenders were forced by the government to take billions of euros in provisions against losses last year after property values collapsed in 2008, with the steepest writedowns destined to cover land they were saddled with as developers went bust.
The weakest lenders were bailed out with European money and others posted steep losses as the result of the clean-up, which was supposed to draw a line under the property problem, as banks try and cope with a deep recession also dragging on earnings.
But much of the old farm land and fields on city outskirts snapped up by construction firms during a decade-long building boom are failing to find buyers even at big discounts, real estate advisers and bank insiders said.
Banks may even be forced to spend money building saleable properties on land, they said, while plots in remote areas may never recover any value, pushing lenders to write them off or sell them at steeper losses than they had provisioned for.
"There
are assets which will practically have to be turned back into the farm land
they once were, to grow onions," said Alvaro Martin-Ropero from real
estate valuation firm Tinsa.
"Just
because they had a 'for sale' sign put up on them does not mean they can be
turned into an urban development," he said, adding that central regions,
far from the Spanish coastlines that still attract buyers, were some of the
most problematic.
Further
losses on land assets would be an unwelcome extra hit for Spanish banks as bad
debts to households and companies keep growing and as they try to shore up
capital bases depleted by earlier property provisions against losses
More
Below our future on fiat money, QE forever and ZIRP theft from savers. Fiat “money” is in fact felonious fake money. A hidden wealth transfer from the thrifty to the feckless and the central bank crony 1 percent.
The coin worth less than any other in the world
26
February 2013
This month the Canadian mint stopped distributing the
penny, or one-cent piece, as it costs more to make than it is worth. It's far
from being the lowest-value coin around, however. Some central banks are
clinging on to coins that are truly "small change".
There are many precedents for scrapping small coins. The US abolished the half-cent in 1857 and the UK's halfpenny was withdrawn in 1984. New Zealand and Australia abandoned the one-cent and two-cent coin in the 1990s.
Now some campaigners in the US and UK want the penny to be scrapped, because nothing can be bought with a one-cent or one-penny coin.
"The point of currency is to facilitate cash transactions. It used to be that a penny could serve that purpose because it was worth something but that's no longer the case" says Jeff Gore, president of Citizens to Retire the US Penny.
Handling
them wastes time at tills, he argues - between two and two-and-a-half seconds
per cash transaction, according to one study.
Imagine,
then, the possible delays if someone in Tanzania insisted in paying for
shopping with a pocket-full - or more likely a bag-full - of five-cent coins.
One UK penny is equal to 494 of these, while a US cent is equal to 325.
But there
are coins, still legal tender, that have even lower value.
Take the
Burmese Pya - the UK penny is worth 1,300 of them (the US cent is worth 850).
The
lowest-value coin of all is the Tiyin from Uzbekistan. Some 3,038 equate to one
UK penny (and 2,000 tot up to one US cent).
more
"As fewer and fewer people have confidence in paper as a store of value, the price of gold will continue to rise. The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register."
Hans F. Sennholz
At the Comex silver depositories Wednesday final figures were: Registered 47.55
Moz, Eligible 116.48 Moz, Total 164.03 Moz.
Crooks and
Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, while the UK stays diverted with rock-a-bye
baby, it’s back to the usual suspects doing “God’s work,” in our 21st
century lawless age.
“Egol and Fabrice were way ahead of their time,” said one of the former Goldman workers.
“They saw the writing on the wall in this market as early as 2005.”
Key witness bolsters SEC case against Fabrice Tourre
NEW YORK
| Tue Jul 23, 2013 7:04pm EDT
(Reuters)
- The U.S. Securities and Exchange Commission called its top witness in the
fraud trial of Fabrice Tourre on Tuesday, a day before the former Goldman Sachs
trader himself takes the stand.
The
testimony of Laura Schwartz, a former managing director at ACA Capital Holdings
Inc, bolstered the U.S. Securities and Exchange Commission's case that Tourre
misled investors in a 2007 deal tied to subprime mortgages.
Schwartz
stopped short of saying Tourre misled her about the role the hedge fund of
billionaire John Paulson planned to play in the deal, known as Abacus 2007-AC1.
But she
said she believed Paulson & Co Inc planned to invest in a 2007 mortgage
deal rather than entirely betting against it.
"I
believed Paulson would be the equity investor in the transaction," she
told the court on Tuesday.
The
Tourre case, which began last week in federal court in New York and is expected
to last three weeks, is one of the biggest brought by the SEC over the events
leading up to the financial crisis of 2008.
More
Exclusive: DOJ starts probe into Wall St. metals warehousing - sources
NEW YORK |(Reuters) - The U.S. Department of Justice has started a preliminary probe into the metals warehousing industry following complaints that storage firms owned by Wall Street banks and major traders have inflated prices, sources familiar with the matter said.
The DOJ has sent letters to at least two companies that own warehouses seeking more information about practices that industrial users allege have led to supply shortages and billions of dollars in extra costs, two sources familiar with the letter said on Wednesday.
A third source said the DOJ had informed at least one metal consumer of the probe.
The move is a further sign that U.S. regulators are increasing their scrutiny of the controversial and lucrative industry after years of complaints from aluminum users such as Coca-Cola Co (KO.N) and its sheet supplier Novelis Inc. Goldman Sachs (GS.N) this week said its warehousing subsidiary was not driving up prices or violating any laws.
The industry is also facing a possible investigation by the U.S. Commodity Futures Trading Commission, which last week told warehousing firms not to destroy any documents related to their business.
"The DOJ has opened a line of questioning to assess whether it needs to take further action," one of the sources said.
The exact nature of the letters was not immediately clear and there has been no public allegation of any illegal activity. It is not clear how advanced or broad the DOJ probe is, nor any certainty that it will result in formal charges.
The DOJ declined to comment on the preliminary investigation and letter.
Goldman Sachs, JPMorgan Chase & Co (JPM.N), Glencore Xstrata Plc (GLEN.L) and Trafigura AG TRAFGF.UL - all of whom have purchased major metals warehouses in the past three years - also declined to comment.
More
Detroit manager scores first win over unions in bankruptcy bid
DETROIT |(Reuters) - A U.S. bankruptcy court judge on Wednesday dealt a blow to Detroit's public employee unions and pension funds opposed to the city's historic bankruptcy filing by suspending legal challenges in Michigan state courts while he reviews the city's petition for protection from creditors.
Judge Steven Rhodes ordered three lawsuits filed by city workers, retirees and pension funds be halted and extended that stay to suits against Michigan's governor, treasurer and Detroit's emergency manager. Rhodes' action ensures that the only path to fight the city's Chapter 9 bankruptcy petition runs through his courtroom in downtown Detroit.
More
"For more than two thousand years gold's natural qualities made it man's universal medium of exchange. In contrast to political money, gold is honest money that survived the ages and will live on long after the political fiats of today have gone the way of all paper."
Hans F. Sennholz
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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