Thursday, 24 October 2013

Get Gold!

Baltic Dry Index. 1786 -61

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

"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

Get gold, get silver, get platinum, get land, get old masters, get tangibles. The era of the Great Inflation or the next Great Depression is only a heartbeat away. Our central banksters are of course trying for the Great Inflation, as shown by the Bloomberg article below. QE forever, forever. But such is the Great Disaster that the policies of the Greenspan Fed led us too in the Great Nixonian Error of fiat money, the next Lehman probably triggers a default in the daisy chain of a Quadrillion Dollars of derivatives gambling contracts. Equally bad, if interest rates merely double in the land of Uncle Scam and civil war, let alone normalise to five to eight percent, Uncle Scam’s Ponzi Scheme collapses, and with it the fiat dollar reserve standard. We are drinking in the last chance saloon, with impunity. The whole world and their dog think that central banksters are the solution and don’t see that they are the problem! At some point this decade we are all about to find out just how wrong this perception was.

"The first requisite of a sound monetary system is that it put the least possible power over the quantity or quality of money in the hands of the politicians."

Henry Hazlitt

Central Banks Drop Tightening Talk as Easy Money Goes On

By Simon Kennedy & Jeff Kearns - Oct 24, 2013 12:00 AM GMT
The era of easy money is shaping up to keep going into 2014.

The Bank of Canada’s decision yesterday to drop language about the need for future interest-rate increases unites it with other central banks reinforcing rather than retracting loose monetary policy. The Federal Reserve delayed a pullback in its monthly asset purchases, while emerging markets from Hungary to Chile cut borrowing costs in the past two months

“We are at the cusp of another round of global monetary easing,” said Joachim Fels, co-chief global economist at Morgan Stanley in London.

Policy makers are reacting to another cooling of global growth, led this time by weakening in developing nations while inflation and job growth remain stagnant in much of the industrial world. The risk is that continued stimulus will inflate asset bubbles central bankers will have to deal with later. Already, talk of unsustainable home-price increases is spreading from Germany to New Zealand, while the MSCI World Index of developed-world stock markets is near its highest level since 2007.

“We are undoubtedly seeing these central bankers go wild,” said Richard Gilhooly, an interest-rate strategist at TD Securities Inc. in New York. They “are just pumping liquidity hand over fist and promising to keep rates down. It’s not normal.”

Normal or not, that’s been the environment now for five years after monetary authorities fought to protect the world economy from deflation and to hasten its recovery. In the advanced world, central banks drove interest rates close to zero and ballooned their balance sheets beyond $20 trillion through repeated rounds of bond purchases, a policy known as quantitative easing.

Europe already has one foot in 'Japanese’ deflation grave

Europe is sliding into a deflationary trap, displacing Japan as the world's epicentre of policy error. The effect is already causing debt ratios in half a dozen countries to ratchet upwards to the point of no return, making a mockery of the EMU debt crisis strategy.

The EU authorities would do well to study Professor Irving Fisher's seminal paper from Econometrica in 1933, The Debt Deflation Theory of Great Depressions. The central argument should by now be self-evident, though a certain sort of mind had trouble grasping it then, just as it does today. If the price level is falling - the "swelling dollar" in Hoover's America - the real burden of the debt keeps rising.

Deflation may seem relatively benign in "low-debt" countries at certain times, though less benign than claimed by a rentier class that lives off coupons. People forget that it was a major cause of the American Revolution, since British-imposed monetary contraction after the Seven Years War caused an economic depression, crippling Virginia planters like Thomas Jefferson. It was also the cause of the US agrarian revolt of the 1880s and 1890s, culminating in William Jennings Bryan's plaintive cry: "We shall not be crucified upon a cross of gold."

What is clear is that once total debt exceeds 300pc of GDP, deflation becomes lethal. That is now the case across most of western Europe.

The headline inflation rate for EMU understates the risk, especially for countries in the eye of the storm. A Eurostat index called "HICP inflation at constant taxes" that strips out distortions created by austerity itself - chiefly VAT rises and other taxes - shows that inflation dropped to 0.9pc for the eurozone as a whole in September. This is the lowest since the Lehman crisis and far below the European Central Bank's target of 2pc.

Over the past three months the trend has intensified. France, Italy, Spain, Portugal, Greece, Cyprus, Ireland, Slovakia, Slovenia, Estonia and Latvia have all seen price falls, and already have one foot in deflation. Much the same is happening in the EMU sphere of Bulgaria, Romania, Hungary and the Czech Republic. Poland is at zero. Denmark is close, and so is Sweden, prompting the angry resignation of Riksbank deputy governor Lars Svennson, one of the world's great monetary economists. He too has been citing Irving Fisher's debt-deflation theories in disputes with colleagues.

The eurozone is one shock away from the Japan syndrome, and therefore the danger of exploding debt ratios. As Fed chair Ben Bernanke famously said in his 2002 speech, "Deflation: Making Sure 'It' Doesn't Happen Here", it is unforgivable for any central bank to let this happen. "Sustained deflation can be highly destructive to a modern economy and should be strongly resisted," he said.

Zsolt Darvas from the Brussels think tank Bruegel argues in an excellent report, Euro Area's Tightrope Walk, that debt dynamics are acutely sensitive to the slightest changes in inflation. He warns that the current downward drift risks pushing Italy and Spain into a "runaway debt trajectory". The closer to deflation, the worse it gets.

Mr Darvas says each one percentage point fall in inflation forces Italy to increase its primary budget surplus by an extra 1.3pc of GDP to stabilise debt. Since it is already targeting a surplus of 5pc, this would lift the bar to 6.3pc, a Sysyphean task. No country except Norway (with oil) has pulled this off over the past half century.

Given what happened in February when Beppe Grillo's Five Star movement became the biggest party in the Italian parliament's lower house with calls (albeit incoherent) for a return to the lira, and almost 60pc voted for anti-austerity parties, this looks like a tall order. Youth unemployment is already almost 40pc.

Mr Darvas puts his finger on the central contradiction of Europe's debt crisis strategy. The victim states are forced to cut real wages to claw back lost competitiveness against the German bloc through "internal devaluations", yet this frustrates the other objective of controlling the debt. They are damned if they do, and damned if they don't.

The verdict is already in. Italy's debt has jumped from 121pc to 132pc of GDP over the past two years (IMF data) despite a draconian fiscal squeeze and a primary surplus. Spain has jumped from 70pc to 94pc, Portugal from 108pc to 124pc and Ireland from 104pc to 123pc. Such is the curse of the "denominator effect". It is what happens when debt rises faster than nominal GDP. Europe's policy regime is inflicting ultra-austerity without offsetting monetary stimulus. You have to weep.

The same vicious dynamic is at work with private debt, which matters just as much. Jamie Dannhauser at Lombard Street Research says the net debt ratio for big companies has risen by more than 100 percentage points in Italy, Spain, France and Portugal since the crisis began, and spiked even more sharply for small firms. "Distressed corporate sectors have not only added to their debt volumes, they have also run down their liquid assets to stay in business. This is where the rotten heart of Europe is to be found. Japanese-style deflation is a disaster for real assets," he says.

Bocom’s Hong Ends Bullish China Stock View After Calling Rally

By Bloomberg News - Oct 24, 2013 7:04 AM GMT
Hao Hong, the Bocom International Holdings Co. strategist who predicted the second-half rally in Chinese stocks, now advises paring holdings on concern economic data will trail estimates as the central bank tightens policy.

“It is time to lock in the gains we have earned since late June,” Hong wrote in an e-mailed note. “Growth expectations have been revised up since the market capitulation in late June, and are now running ahead of themselves.”

Hong advised buying Chinese shares on June 26, saying trading patterns signaled a rebound. The Shanghai Composite Index (SHCOMP) rallied as much as 16 percent from a four-year low on June 27, while the Hang Seng China Enterprises Index (HSCEI) gained as much as 21 percent. China’s economic growth accelerated last quarter as Premier Li Keqiang spurred factory output and investment to meet the government’s expansion goal for 2013.

The People’s Bank of China will probably start “fine-tuning” its monetary policy to curb surging property prices, Hong wrote. China’s benchmark money-market rate jumped the most since July today after the PBOC refrained from conducting reverse repos for a third straight auction. The central bank drained a net 58 billion yuan ($9.5 billion) from the financial system this week as reverse repos matured, said Chen Long, an analyst at Bank of Dongguan.


All previous attempts to base money solely on intangibles such as credit or government edict or fiat have ended in inflationary panic and disaster."

Donald Hoppe

At the Comex silver depositories Wednesday final figures were: Registered 44.06 Moz, Eligible 122.41 Moz, Total 166.47 Moz.  

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

Today, more on the madness of the United States of Europe. The sooner the UK leaves the sooner the UK can get back to wealth creation for future generations. But sadly that might not apply in the land of my birth, Scotland. There in the land of Adam Smith and the Scottish enlightenment, 800 morons lead by the Unite union, in effect the old socialist, wealth hating Scottish Labour Party they bankroll, just voted themselves out of a job eight weeks before Christmas. Some folks don’t know when they are well off. Needless to say, UK media won’t be reporting it that way. It’s a good thing for Scotland that the rest of the UK isn’t getting a vote on their independence next year.

"It is a socialist idea that making profits is a vice. I consider that the real vice is making losses."

Winston Churchill

Yes Man: MEP's Odd Voting Record Raises Suspicion

Dumitru Zamfirescu, a member of the European Parliament, hasn't voted "no" in the last 541 votes held in the assembly. Colleagues suspect the Romanian nationalist is more interested in collecting attendance bonuses than in what he's actually voting on.

Dan Dumitru Zamfirescu has done it again, for the 63rd time in a row. This time it was regarding one of the most controversial issues before the European Parliament this year: a new set of tobacco regulations. Sixty-three times, European parliamentarians proposed amendments to the law. And despite the fact that some of the amendments directly contradicted each other, the Romanian MEP voted "yes" on every one of them.

Should warning labels and shocking images cover 50 percent of a cigarette package? Yes, Zamfirescu says. Should they cover 65 percent? Also, yes. Should tobacco companies be allowed to chose where the shocking images appear? Sure. Should the images appear on the lower part of the package? Absolutely.
It's been the same for months. Whether the measure at hand deals with youth unemployment, Europe's eel populations or trade relations with Taiwan, Zamfirescu is all for it. Even when the 59-year-old allegedly has no idea what he's voting on.

"At times he has absolutely no voting documents in front of him," says Austrian parliamentarian Martin Ehrenhauser, who sits next to Zamfirescu. And without a list, it's impossible to keep track of the dozens of votes taking place during a plenary week in Strasbourg, Ehrenhauser adds. The votes take place within seconds of each other, and they're announced with nothing more than the file number of the proposed law.

According to the website VoteWatch, a public database of all recorded votes in the European Parliament, Zamfirescu, a Romanian ultra-nationalist, hasn't pressed the "No" button in the past 541 electronic votes. His actual yes-record likely stretches back even farther, since votes by hand-raising are not recorded on the website. Ehrenhauser says his colleague's hand is almost always up.

---- Ehrenhauser has his suspicions about Zamfirescu. "Anyone who votes this randomly and unethically is failing to take his responsibilities seriously as an elected politician and is most probably simply looking to cash in."

The EU, after all, pays members of the European Parliament to vote: Along with their basic salary of approximately €8,000 ($11,000) per month, they receive an additional €152 a day simply to attend plenary sessions. Moreover, anyone who takes part in at least 50 percent of the votes receives a further €152 a day. Money for nothing, in some cases.

In short, Zamfirescu's job at the European Parliament consists merely of saying yes. According to VoteWatch, the man who introduced himself as a "pensioner" when he took his seat has never spoken a word -- never posed a single question, proposed an initiative or even an amendment. His office in corridor 6F is usually empty. And although he is supposedly a member of the Committee on International Trade, few of his colleagues even know who he is.

Ineos maintains that the plant is losing £150m a year and needs £300m of investment in new terminal facilities to ship in cheap ethane from the US to replace declining North Sea feedstocks.

It wanted a deal with Unite to change staff working conditions to make the business more competitive, including closing its final salary retirement scheme to address a £200m pension deficit.

It had set a deadline of 6pm on Monday for workers to sign up to the “survival plan”, which include a £15,000 sweetner and a no-strike pledge, or see the site closed down.

23 October 2013Last updated at 20:35

Grangemouth dispute: Ineos says petrochemical plant will close

The petrochemical plant at the giant Grangemouth complex in central Scotland is to close with the loss of about 800 jobs, owner Ineos has announced.

The news was broken to the workforce at the plant and its associated oil refinery at a meeting on Wednesday.

Ineos said a decision on whether to restart the refinery would be taken once the "threat of strike action" had been removed.

Scotland's first minister said the closure "matches our worst fears".

The Unite union described the closure as "catastrophic and said it had made further proposals in a "last-ditch effort" to keep the plant open.

It remained hopeful, along with the Scottish and UK governments, that the company would reverse its decision.

Unite is to present its new proposals to Ineos at a meeting on Thursday morning.

However, the company said while further meetings would be held in the coming days, there were "no prospects" of returning to conciliation service Acas to revisit the decision to close the petrochemical plant.

About 800 of the 1,370 people directly employed at the complex work at the petrochemical plant, with many more working there as contractors.

The dispute at the plant, near Falkirk, began over the treatment of a Unite union official and escalated to the threat of strike action.

This was dropped but the operator shut down the plant and issued an offer of revised terms and conditions in a "survival plan", which was rejected by union members.

----The worker, who appeared close to tears at points, said he could only listen to about 10 minutes of the meeting, before he felt he had to leave.

He went on: "There are folk in there have a husband and wife work here. That's it. Folk will be lucky if they have a house at Christmas."

"The truth is that capitalism has not only multiplied population figures, but at the same time, improved the people's standard of living in an unprecedented way. Neither economic thinking nor historical experience suggest that any other social system could be as beneficial to the masses as capitalism. The results speak for themselves. The market economy needs no apologists and propagandists. It can apply to itself the words of Sir Christopher Wren's epitaph in St. Paul's: 'Si monumentum requiris, circumspice.' (If you seek his monument, look around.)"

Ludwig von Mises. Sadly capitalism ended August 15, 1971.

The monthly Coppock Indicators finished September:
DJIA: +167 Up. NASDAQ: +213 Up. SP500: +203 Up. All three are back positive again, thanks to continued Fed QE.  High risk speculators will now use any stocks sell-off to go long. After the last Fed meeting and QE U-turn, the Bernocchio put is back on.

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