Friday, 20 September 2013

Shock And Awe.

Baltic Dry Index. 1860 +38

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

Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become 'profiteers,' who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.
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 is able to diagnose.

John Maynard Keynes.

The Fed has become the “Greatest Hedge Fund in History,” says an admiring Warren Buffett, who benefits from this transformation, and of course predictably, sees nothing wrong in this development. While savers and the prudent get robbed blind by this usurpation of power from the masses to the central bankster few, the reckless and the feckless benefit at their expense. The elderly Mr. Buffett can be excused the error of seeing nothing wrong with this enslavement of future generations, they never were asked to invest their futures in this new hedge fund that all are now trapped in, a least people knowingly and voluntarily put money into Mr. Buffett’s Berkshire Hathaway. The serfs of today and tomorrow, are now hostage to fortune of this new alarming development. Central banks are not meant to be gambling hedge funds.

"Were we to be directed from Washington when to sow and when to reap, we should soon want bread."

Thomas Jefferson

Buffett Says Federal Reserve Is Greatest Hedge Fund in History

By Noah Buhayar - Sep 20, 2013 5:00 AM GMT
Billionaire investor Warren Buffett compared the U.S. Federal Reserve to a hedge fund because of the central bank’s ability to profit from bond purchases while accumulating a balance sheet of more than $3 trillion.

“The Fed is the greatest hedge fund in history,” Buffett told students yesterday at Georgetown University in Washington. It’s generating “$80 billion or $90 billion a year probably” in revenue for the U.S. government, he said. “And that wasn’t the case a few years back.”

The central bank has been buying $85 billion of bonds a month to help the U.S. recover as it emerges from the deepest slump since the Great Depression. Chairman Ben S. Bernanke and other Fed policy makers unexpectedly opted this week to sustain that pace of asset purchases instead of tapering it, saying they need to see more signs of lasting improvement in the economy.

The Fed remitted $88.4 billion to the U.S. Treasury Department last year. The payments have ballooned as the central bank built its balance sheet during the past five years.

The Fed “is under no pressure, none whatsoever to have to deleverage,” Buffett said. “So it can pick it’s time, and if you have somebody wise there -- and I think Bernanke is wise, and I certainly expect his successor to be -- it can be handled. But it is something that’s never quite been done on this scale. It will be interesting to watch.”

By standing pat, Fed's Bernanke leaves successor with no map

NEW YORK/SAN FRANCISCO | Thu Sep 19, 2013 8:03pm EDT
(Reuters) - Federal Reserve Chairman Ben Bernanke's shock announcement on Wednesday that the U.S. central bank was not ready to pare back its stimulus program could make it more difficult for his successor to navigate the Fed's way out of its extraordinarily aggressive policy.

Economists had expected Bernanke to follow through with the rough chart he had drafted in June: trimming the Fed's bond-buying program before year-end and ending it by mid-2014, when he expected the unemployment rate to be around 7 percent.

On Wednesday, however, he said only that tapering the purchases could "possibly" begin later this year and that there was no "magic number" for unemployment to mark its end.

Delaying a reduction in the Fed's $85 billion-a-month bond-buying will likely make only a small impact on the overall size of Fed's balance sheet, now at $3.6 trillion and counting. But it injects a huge amount of uncertainty into the equation, and leaves Bernanke's successor without a useful roadmap.

"Part of the reason I thought the Fed was committing to some type of tapering was because they wanted to set a course, to make it more difficult for (Bernanke's) successor to deviate from it," said Eric Stein, a portfolio manager for Eaton Vance.

He said the Fed now risked further misalignments between its intentions and financial market expectations, particularly given that a new chairman is expected to be at the helm by February 1. "I do think it will be harder because markets do misjudge."

Bernanke's second term atop the world's most influential central bank ends in January and President Barack Obama has made clear he is searching for a successor, with Fed Vice Chair Janet Yellen now the front-runner for the job. An announcement could come as soon as next week.

Even if Bernanke announces a reduction in the bond buying at the next Fed meeting in October, he will likely be a weakened "lame duck."

Whoever succeeds him will inherit both the massive balance sheet and a series of policy promises that stretch ahead for years. He or she will also need to contend with the disappointing economic recovery and stubbornly high jobless rate four-and-a-half years after the recession ended.

"It does leave a bigger job for the next chairman," said Scott Anderson, an economist at Bank of the West in San Francisco. "I think there's a good chance that the Fed hasn't even started the taper when the new chairman comes in."

More on the Fed’s “Shock and Awe.” In our new lawless age, we have been thrust by the central banks into an era of unpredictable markets and unprecedented erratic volatility. As corporations and mankind are about to find out, prosperity doesn’t thrive in the Great Instability. Sadly we are only at the start of our new age.  Stay long fully paid up physical precious metals. When the gambling “hedge fund” casino(s) comes crashing down in multiple Lehman’s, it will become a life and deaths struggle for the masses. Do not become part of the masses.

"If ever there was an area in which to do the exact opposite of that which government and the media urge you to do, that area is the purchasing of gold."

Robert Ringer

Sharpe Ratio Shows Rupiah Is Worst Carry Trade Bet: Asean Credit

By Lilian Karunungan & Yumi Teso - Sep 20, 2013 6:06 AM GMT
Indonesia’s rupiah is delivering the developing world’s worst carry trade returns this month and Barclays Plc says volatility won’t end just because the U.S. Federal Reserve is maintaining stimulus.

The currency’s Sharpe ratio, which measures returns adjusted for price fluctuations, was 0.18, the least among 23 emerging markets tracked by Bloomberg. That compares with 13 for the Philippine peso and the Thai baht’s 12, placing them in the top 10. One-month implied volatility in the rupiah almost tripled to 17 percent this year, at least double the readings for Thailand and the Philippines.

The rupiah, Southeast Asia’s worst-performing currency this quarter, remains vulnerable to capital outflows because of its record current-account deficit and prospects the Fed will pare stimulus later this year, according to Barclays Plc. Amundi says the Philippines, Malaysia and Thailand are the first countries investors should look at because their economic fundamentals are better than Indonesia.

“In the near term, the delay on the tapering will support risk assets, with Indonesia also benefitting,” Prakriti Sofat, a Singapore-based economist at Barclays, said in an interview yesterday. “However, when the dust settles the uncertainty on when the Fed is finally going to start tapering will mean volatility will still remain in the markets.”

Indian Shares Fall Emerging Currencies; Silver Decreases

By Pratish Narayanan & Emma O’Brien - Sep 20, 2013 7:19 AM GMT
Indian stocks slumped the most in almost three weeks after an unexpected rate rise and emerging-market currencies fell as Malaysia’s ringgit retreated from its biggest rally since 1998. Precious metals declined with oil.

India’s S&P BSE Sensex (SENSEX) tumbled 2.6 percent at 3.18 p.m. in Tokyo, poised for its biggest one-day fall since Sept. 3 and paring gains in the MSCI Asia Pacific Index to 0.1 percent. Euro Stoxx 50 futures contracts were up 0.1 percent while Standard & Poor’s 500 Index futures slipped 0.1 percent. The ringgit was down 0.4 percent, paring this week’s biggest global currency rally, while the Indian rupee slid 1 percent. Spot silver lost 0.3 percent and West Texas Intermediate oil declined 0.2 percent.

The Reserve Bank of India raised the repurchase rate to damp inflation while easing a cash squeeze aimed at aiding the rupee, as emerging-market currencies were spurred this week after the Federal Reserve unexpectedly retained stimulus.

---- “Investors reversed positions built up across the board on speculation about the stimulus reduction,” said Tohru Nishihama, an economist covering emerging markets at Dai-ichi Life Research Institute Inc. in Tokyo. “But the Fed will eventually trim stimulus, and investors will become more selective.”

Onion Shortage Seen Worsening in India as Rain Delays Crop

By Prabhudatta Mishra & Kartik Goyal - Sep 20, 2013 7:49 AM GMT
Onion prices in India may extend a record rally as heavy monsoon rains delay harvests and worsen a shortage, potentially accelerating food inflation in Asia’s third-largest economy.

Retail prices of the vegetable used in everything from soups to curries soared to 70 rupees ($1.13) a kilogram (2.2 pounds) in New Delhi this week from 20 rupees three months earlier, according to the Consumer Affairs Ministry. Prices may increase further as farmers are unable to pick the crop due to monsoon rains, said C.B. Holkar, a director at the National Agricultural Cooperative Marketing Federation of India Ltd.

Surging onion prices may fuel inflation and limit the Reserve Bank of India’s room to ease interest rates to revive the weakest economic growth in a decade. Prime Minister Manmohan Singh needs to curb food prices and stem a decline in the rupee to boost the prospects of his Congress party in state polls later this year and the general elections due by May. The central bank today unexpectedly raised the repurchase rate to 7.5 percent from 7.25 percent to damp inflation.

“Rise in onion prices has always been a very sensitive issue,” said P.N. Vasanti, director of New Delhi-based Centre for Media Studies. “It has affected the poorest of the poor the most. It has become an electoral issue earlier.”

Food prices climbed 18.2 percent in August from a year earlier, with onion costs surging 245 percent, official data showed Sept. 16. The economy expanded at the slowest pace since 2003 in the year ended March as investment fell and consumer spending moderated.

We end for the week with a glimpse of the future. Latvia is only an early outlier for what comes next.

Latvian Wage Hacker Risks Jail After Fat Cat Heart Attack Call

By Aaron Eglitis - Sep 19, 2013 10:00 PM GMT
After Latvia slashed wages and spending to keep bailout cash flowing in 2009, a Twitter user by the name of Neo published tax data showing the pain wasn’t being shared equally. The Matrix fan behind the leaks now faces jail.

Ilmars Poikans, a researcher at the University of Latvia, revealed some executives at state-owned companies got $50,000 bonuses weeks after public wages were cut amid the world’s deepest recession. He’ll stand trial next year for illegally acquiring private and commercial data, charges he denies.

“You could see in some institutions that the crisis hadn’t touched them at all, or that the cuts hadn’t taken place fairly,” Poikans said last month in an interview in a cafe in Riga, Latvia’s capital. “Belts should have been tightened in solidarity, but some were more equal than others.”

Latvia’s austerity drive won plaudits from European Union officials, who held it up as a model for struggling southern nations, and helped pave the way for euro adoption next year. State wages were cut by a third as part of measures to tame the budget gap after a property bubble burst and foreign loans dried up, prompting a 7.5 billion-euro ($10 billion) rescue.

Poikans, a computer programmer whose alter ego on his Twitter Inc. account was inspired by Keanu Reeves’s character in the futuristic Matrix movies, discovered he could access companies’ income-tax records by changing the combinations of letters and numbers at the end of tax authority web links. He obtained 7.5 million documents, according to his indictment.

"$1,000 left to earn interest at 8% annually will grow to $43 quadrillion in 400 years, but the first hundred years are the hardest.

Sidney Homer, Salomon Bros. Sid meet Benny.

At the Comex silver depositories Thursday final figures were: Registered 43.22 Moz, Eligible 119.41 Moz, Total 162.63 Moz.  

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

Today, more comeuppance for Herr Sourkraut, the Adonis of Athens. Plus how not to vet in America. Should have gone to “Specsavers” it seems. Of course they could have just asked the NSA for the file.

Cpt. George Mainwaring: I could have sworn that they would never break through the Maginot line.

Sgt. Arthur Wilson: Quite right sir, they didn't.

Cpt. George Mainwaring: I thought now I'm a pretty good judge of these matters you know Wilson. 

Sgt. Arthur Wilson: They went round the side.

Cpt. George Mainwaring: I see... they what!

Sgt. Arthur Wilson: They went round the side.

Cpt. George Mainwaring: That's a typical shabby Nazi trick, you see the sort of people we're up against Wilson.

Who do you think you’re kidding, Mr Schauble?

The eurozone may have avoided calamity, but all the underlying problems are still there - despite what Germany's finance minister.

It was perhaps unwise of George Osborne to cite the recent run of relatively positive data on the economy as final vindication of his policies – for by doing so, the Chancellor has made himself a hostage to fortune.

Yet as calculated gambles on eventually being right go, it looks a rather better bet than the almost delusional triumphalism of Mr Osborne’s opposite number in Germany, Wolfgang Schauble. “Rejoice,” the latter said in an article this week for the Financial Times, “at the positive economic signals the eurozone is sending almost continuously these days… The eurozone is clearly on the mend, both structurally and cyclically.”

That five years after the collapse of Lehman Brothers, the US Federal Reserve still finds itself unable to give up its monthly injection of quantitative easing demonstrates that nowhere is the world economy even remotely “fixed”. And the place where it remains most unfixed of all is the eurozone, where Germany’s disciplinarian mix of austerity and structural reform has manifestly failed on a monumental scale.

This is not to argue that the deficit economies of the eurozone periphery don’t need structural reform, or even some degree of austerity. After years of living well beyond their means, they most certainly do. In this regard, they are in the same boat as Britain. Unfortunately, they’re never going to restore meaningful growth, job creation and debt reduction as long as they remain trapped in a monetary union with Germany.

That Mr Schauble cannot see this – or rather, chooses not to – demonstrates a bloody-minded disregard for the accepted rules of economics. Worse, that he can declare a minor cyclical rebound – most likely caused by restocking – as evidence that Europe is on the mend is silly. It’s not only far too early to make such a call, it would cause virtually all of us to reconsider our worldview if he turns out to be right.

----Now the boot is on the other foot, Mr Schauble claims. To the chagrin of the doomsters, Europe is rising, phoenix-like, from the ashes. I sincerely hope he is right. With much of the Continent mired in record levels of unemployment, its populations have suffered enough. If there is indeed respite on the horizon, it is very much to be welcomed. Nor is the German view on all this entirely crazy. Mr Schauble is right to point to previous examples of structural reform that have proved spectacularly successful – including Britain in the Eighties. Mrs Thatcher was warned in a letter signed by 365 economists that she had got it totally wrong.
Two years later they were forced to eat their words. With each economic crisis, the lesson for policy is always the same: those who fail to reform during the good times pay disproportionately in the bad, when they find solutions forced painfully upon them.

There is also a little bit of truth in the standard German analysis of why the aftershock of the financial crisis has proved quite so devastating for the eurozone. This was well articulated at a Centre for European Reform (CER) event in London this week by Holger Schmiedling, chief economist at Berenburg Bank. In his account of events, the decision to restructure Greek debt, without first providing a safety net for larger deficit economies such as Italy and Spain, completely shattered financial and business confidence throughout the region.

It was only after the European Central Bank (ECB) agreed to provide this safety net, by acting as lender of last resort to banks and sovereigns, that the downward spiral in confidence was broken. Now that the uncertainty over break-up has been removed, Europe can begin growing again.

He’s partially right about this. Certainly it is undeniable that the ECB has succeeded in stabilising matters. But that it has laid the foundations for sustainable monetary union is, regrettably, just poppycock. Nor is there any evidence that Germany will significantly shift its mindset once Angela Merkel is safely back in power and therefore free of present electoral constraints. Germany will continue to inch its position, but in terms of fundamental change – no, there is no reason to believe this will occur.

Equally regrettably, there is even less evidence to support the view that monetary union in its present half-baked form can be made to work – in terms of jobs, growth and debt reduction – for the periphery. 
Stuck as they are with a wildly inappropriate exchange rate, the eurozone’s deficit nations are not going to be made more competitive simply by shrinking the size of their economy, which is what the likes of Mr Schauble seem to count as structural reform.

Company Behind Snowden Check Also Vetted D.C. Shooter

By Danielle Ivory & Kathleen Miller - Sep 20, 2013 5:00 AM GMT
The same federal contractor that vetted Edward Snowden, who leaked information about classified U.S. spying programs, also performed a background check that let the Washington Navy Yard shooter obtain a security clearance.

Now the contractor, USIS, is drawing fire from a U.S. senator asking how Snowden and Navy Yard shooter Aaron Alexis slipped through the cracks. The vetting process has also been included in an inquiry by law enforcement agencies into Alexis’s activities before his deadly rampage this week.

No company does more U.S. government background checks for clearances than USIS, which was awarded $253 million by the Office of Personnel Management last year. The company did about two-thirds of background investigations done by contractors, and more than half of all those performed by the U.S. personnel office, according to Senator Claire McCaskill’s office.

"The international monetary order is more precarious by far today than it was in 1929. Then, gold was international money, incorruptible, unmanageable, and unchangeable. Today, the U.S. dollar serves as the international medium of exchange, managed by Washington politicians and Federal Reserve officials, manipulated from day to day, and serving political goals and ambitions. This difference alone sounds the alarm to all perceptive observers."

Hans F. Sennholz

Another weekend, and the multi-millionaire drivers of Formula One head into Singapore for another round of increasingly boring racing. In the northern hemisphere, autumn advances and winter gets nearer by the day. When the hedge funds, sorry central banksters get it all wrong, for many of the masses in the cold north, the future lies between choosing food or heat. At least, until the next great technology advance from 21st century super material graphene kicks in next decade. And I don’t mean just stronger, lighter, faster Android and iPhones. The coming Graphene Age will be as different as before electricity to after. Our hedge funds, sorry central banksters, may yet get out of jail, if we can manage to get from here to there before disaster hits. It’s a big ask. Right now our central banksters are still just printing money for the one percent. A world of revolution and anarchy lies ahead if that doesn’t change.


Noun. Decree, command, edict, mandate, permission. A cheap Italian car.


A currency whose value is whatever it is decreed to be, undetermined by market forces. One Italian Lira. One Dollar, Euro, Pound, Yen, Yuan.

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? Of course not.

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