Friday, 13 September 2013

Europe’s Roach Motel.

Baltic Dry Index. 1621 -07

LIR Gold Target by 2019: $30,000.  Revised due to QE programs.

The bankster in his mansion,
The taxpayer at his gate,
Draghi made them High or lowly,
He disordered their estate.

With apologies to All things bright and beautiful.

Today, confirmation of what we’ve suspected all along. In the roach motel of the European Monetary Union, European nations can check-in but they can’t check-out. They become serfs to the unloved, wealth destroying, EUSSR Euro. It’s too late, even for the Germans who think that they’re in charge of continental Europe. Once they’re dragged under by the folly of France and the rest of Club Med, even hard working, tax paying Germany is destined to fail. Today, how continental Europe turned itself into the Bilderberger bankster version of the USSR.

It’s morally wrong to let a sucker keep his money.

W. C. Fields. Bilderberger Ethicist.

Italy floated plans to leave euro in 2011, says ECB insider

By Ambrose Evans-Pritchard Economics Last updated: September 12th, 2013
So, we now know: Silvio Berlusconi seriously floated plans to pull Italy out of the euro in October/November 2011, precipitating his immediate removal from office and decapitation by EMU policy gendarmes.

Ex-ECB insider Lorenzo Bini-Smaghi has quietly dropped a few bombshells in his new book Morire di Austerita (Dying of Austerity), worth a read if you know Italian.

Mr Bini-Smaghi – until recently on the ECB's six-man executive council, and for many years Italy's man in Frankfurt – states that Silvio Berlusconi was toppled as Italian premier in November 2011 as soon as he began to rattle the EMU cage in earnest.

Specifically, he discussed (threatened?) Italian withdrawal from the euro in private meetings with other EMU governments, presumably with Chancellor Angela Merkel and France's Nicolas Sarkozy, since he does not negotiate with underlings. ("L'ipotesi d'uscita dall euro era stata ventilata in colloqui privati con i governi degli altri paesi dell'euro").

We have long suspected this. Now it is confirmed.

Mr Bini-Smaghi also reveals that Merkel continued to think that Greece could be thrown out of the euro safely as late as the early autumn of 2012, when the Pfennig finally dropped that all hell would break lose, with chain reactions engulfing the whole system. She then switched tack abruptly, rushing to Athens to praise the new government for its heroic efforts. "Merkel l'ha capito sole nell' Autunno del 2012".

He confirms that Germany is indeed on the hook for €574bn of credits from the Bundesbank to the central banks of Greece, Portugal, Ireland, Italy, Cyprus, and Slovenia.

We have always been assured that the so-called Target2 credits within the ECB's internal payments system is a technical adjustment, without significant risk.

Mr Bini-Smaghi states that any EMU state leaving the euro would face likely default on external obligations. "The national central bank would not be able to repay liabilities accumulated in relation to other members of the euro system, which are registered in the internal payments system of the Union (known as Target2). The insolvency would provoke substantial losses for counter-parties in other eurozone countries, including central banks and states."

German voters may wish to know this before the elections on Sunday week, since they are told otherwise by their own leaders. The anti-euro AfD party – now running at 4pc in the polls, with a shot at the Bundestag – might also find this to be of interest.

As I understand it, the Bundesbank (and the central banks of Finland, Holland, and Luxembourg, likewise) offsets the Target2 claims on the Club Med bloc by selling securities to banks registered in Germany. It does this for monetary policy reasons.

This means that if the euro blows up, the Bundesbank still owes this money to the same private banks, which could be Deutsche Bank, but could also be Nomura, Citigroup, or Barclays. This is not fictitious. The Bundesbank cannot default on these securities.

It’s back. Europe’s never ending crisis just keeps rolling on, month after wealth destroying month. Just wait until next week, if the USA’s Fedster’s actually go through with what’s been trailed.

"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

September 12, 2013, 6:51 a.m. ET

Euro-Zone Factory Output Plunges

Figure Is Lowest Since April 2010

Output from factories in the euro zone fell sharply in July to the lowest level in more than three years, raising new questions about the bloc's ability to keep a modest economic recovery alive.

Thursday's figures from Eurostat, the European Union's official statistics agency, showed the bloc's manufacturing base made a poor start to the third quarter. That came as something of a surprise, given generally strong survey data from manufacturers over the past couple of months. German and French business confidence indexes in particular have been on a relatively consistent upward path for nearly a year now. Economists in a Wall Street Journal poll had expected a slight rise in output.

Falls in production across the euro zone's largest economies, including Germany, France and Italy, are likely to fuel speculation that the euro-zone economy as a whole will falter during the latest three-month period, having emerged from an 18-month downturn in the second quarter of the year.

Eurostat said industrial production across the region fell 1.5% in July from June, the biggest fall since September last year. Production was down 2.1% from a year earlier. The last time the level of output was lower was in April 2010.


Greek unemployment rises to 27.9%

Associated Press 9:43 a.m. EDT September 12, 2013
ATHENS, Greece (AP) — Unemployment continues to rise in recession-hit Greece, with the overall rate reaching 27.9% in June. Even worse, 58.8% of people under age 25 are out of work.

The Greek Statistical Authority reported Thursday that the jobless rate had risen from 24.6% the previous year. In June 2008 before the global financial crisis bared its teeth and Greece entered recession, the rate stood at 7.3%

The jobless total stood at just over 1.4 million. In addition, around 3.33 million people in Greece are considered inactive, just shy of the 3.63 million in work.

Years of emergency taxes, pay cuts, and other austerity measures implemented as a condition of international bailout loans have hammered Greece's private sector.

Portugal should stick to agreed deficit reduction goals: Eurogroup head

VILNIUS | Fri Sep 13, 2013 3:23am EDT
(Reuters) - Portugal should stick to the budget deficit reduction targets agreed with international lenders, the head of euro zone finance ministers Jeroen Dijsselbloem said on Friday after Lisbon said a softer goal for next year would be better.

Portugal's Deputy Prime Minister Paulo Portas told a parliamentary commission on Wednesday the budget deficit goal set for next year should be 4.5 percent of GDP rather than the agreed 4 percent.

"I think it's important to stick to what we've now agreed within the program, also including the deficit targets," Dijsselbloem told reporters ahead of a meeting of euro zone finance ministers.

"I don't think it's a good signal to keep the discussion alive whether the targets should be more or less," he said.

"The outside world should understand that Portugal and the Portuguese government is committed to what has to be done, what has been agreed. That will help towards an exit from the program as soon as possible," he said.

The next review of the country's bailout from the European Union and the International Monetary Fund begins on Monday. The lenders have already eased Portugal's deficit targets for this year and next year in March, because of a deeper than expected recession.

The interesting thing is that the median cost of capital across the eurozone has not changed significantly during the crisis period; what has shifted is the dispersion around that median. And the countries which are on the wrong side of the spread have seen interest rates remain above their economies’ structural growth rates. The result is a massive deleveraging of the private sector, offset by a huge increase in state spending in the likes of France, Italy, and Spain, etc. The logic of the system is inherently at odds with the budgetary stipulations set within the Maastricht criteria. Hence, so long as interest rates are set way above the growth rate, “austerity” must fail miserably.

This system is inexorably causing the destruction of the industrial bases in Italy, France, Spain and the others. The lost revenues from productive activity is for the moment offset by Germany (together with the likes of Japan, Qatar and Saudi Arabia) accumulating financial assets issued by the governments of those nations that face slow strangulation. It can’t last.

A while ago, I argued that Germans might as well load much of their auto exports headed to eurozone countries on to a boat and sink it outside of Hamburg. It would do as much good as selling Audis in exchange for IOUs issued by bankrupt countries. But no problem—now those IOUs are held by the European Central Bank as shown by the still high Target 2 balances. Of course, what this really means is that no one really knows who is going to take the final loss and so the game continues (and this is the difference with a gold standard where cycles end with a simple depletion of the gold inventory). 

The end game will come when sovereign nations inside and outside Europe stop accepting this rotten paper. This denouement will ultimately be a political decision which is hardly my area of confidence.

What I would say to those tempted by Europe’s “attractively valued” markets, is look elsewhere...

Charles Gave. Gavekal Research

We close for the day with more on our new lawless age.

Yes we can.

President Milhous Obama.

NSA disguised itself as Google to spy, say reports

If a recently leaked document is any indication, the US National Security Agency -- or its UK counterpart -- appears to have put on a Google suit to gather intelligence.
September 12, 2013 2:19 PM PDT
Here's one of the latest tidbits on the NSA surveillance scandal (which seems to be generating nearly as many blog items as there are phone numbers in the spy agency's data banks).

Earlier this week, Techdirt picked up on a passing mention in a Brazilian news story and a Slate article to point out that the US National Security Agency had apparently impersonated Google on at least one occasion to gather data on people. (Mother Jones subsequently pointed out Techdirt's point-out.)

Brazilian site Fantastico obtained and published a document leaked by Edward Snowden, which diagrams how a "man in the middle attack" involving Google was apparently carried out.

A technique commonly used by hackers, a MITM attack involves using a fake security certificate to pose as a legitimate Web service, bypass browser security settings, and then intercept data that an unsuspecting person is sending to that service. Hackers could, for example, pose as a banking Web site and steal passwords.

The technique is particularly sly because the hackers then use the password to log in to the real banking site and then serve as a "man in the middle," receiving requests from the banking customer, passing them on to the bank site, and then returning requested info to the customer -- all the while collecting data for themselves, with neither the customer nor the bank realizing what's happening. Such attacks can be used against e-mail providers too.

It's not clear if the supposed attack in the Fantastico document was handled by the NSA or by its UK counterpart, the Government Communications Headquarters (GCHQ). The article by the Brazilian news agency says, "In this case, data is rerouted to the NSA central, and then relayed to its destination, without either end noticing."

"There have been rumors of the NSA and others using those kinds of MITM attacks," Mike Masnick writes on Techdirt, "but to have it confirmed that they're doing them against the likes of Google... is a big deal -- and something I would imagine does not make [Google] particularly happy."

First they came for the Socialists, and I did not speak out--
Because I was not a Socialist.

Then they came for the Trade Unionists, and I did not speak out--
Because I was not a Trade Unionist.

Then they came for the Jews, and I did not speak out--
Because I was not a Jew.

Then they came for me--and there was no one left to speak for me

Martin Niemöller

At the Comex silver depositories Thursday final figures were: Registered 42.25 Moz, Eligible 119.52 Moz, Total 161.77 Moz.  

Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.

No crooks today, why spoil an early autumn weekend as we await next week’s put up or shut up moment at the gangster Fed. Will loose lips Bernanke, blink and dither like his boss over in the White House, punting QE forever out to next year for his successor to sort out, or will he hit the QE taper button marked “DO NOT TOUCH,” forcing much of the rest of the world to drop dead? Hitting the button will cause most of the stock and commodities markets to collapse. Punting out into 2014 sets off a precious metals boom and a new up leg in the great stock market disconnect from reality. Stocks rally on in to 2014, and the arrival of the Great Inflation and the end of the Great Nixonian Error of fiat money. Old Benny and his mob have done one “heck of a job”  in backing themselves into a corner. Now Benny’s got to choose another 2008 or 2005. Just be thankful you’re not an unemployed youngster in Club Med.

I know what you're thinking. "Did Bernanke fire six shots or only five?" Well, to tell you the truth, in all this excitement I kind of lost track myself. But being as this is the worst recession since the 1930s, the most powerful credit shock in the world, and would blow your savings clean off, you've got to ask yourself one question: Do I feel lucky? Well, do ya, punk?

With apologies to Harry Callahan, Dirty Harry

Have a great weekend everyone. Our last weekend in the world as we knew it, or the realisation that QE forever, really is forever, to infinity and beyond. Stay long tangible assets. QE forever sends us on to Reykjavik and bust.

The monthly Coppock Indicators finished August:
DJIA: +162 Down. NASDAQ: +189 Up. SP500: +194 Down. Two red flags. Only the “stock market for the next hundred years,” remains optimistic. But will Benny and the boys really cut the stock market’s throat?

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