Monday, 21 October 2013

To Live Better.

Baltic Dry Index. 1901 -59

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

"Gold bears the confidence of the world's millions, who value it far above the promises of politicians, far above the unbacked paper issued by governments as money substitutes. It has been that way through all recorded history. There is no reason to believe it will lose the confidence of people in the future."

Oakley R. Bramble

Stay long fully paid up physical gold and silver held outside of Uncle Scam and John Bull’s larcenous reach. Below, what just might be the beginning of the end for Uncle Scam’s Ponzi scheme. With 17 trillion of Federal debt and rising, of Uncle Scam’s unrepayable debt, to keep the whole scam running the Fed will soon be the only buyer left in the US treasury market. ZIRP only works in a world that trusts US politician’s to do the right thing. Last week’s truce only lasts into early 2014. With the spoils of the mid-term elections to fight over next year, pressing on with ZIRP looks hard for the Fed to accomplish.

But any return of US interest rates to normality, set by the markets and not by Fed monetisation, risks bringing the whole house of cards crashing down. Ending the Great Nixonian Error of fiat money. Mrs Yellen might soon find out that QE Forever, isn’t actually forever after all, no matter how many angels  the Fedster’s declare may dance on the head of a pin.

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.

Uncle Scam, with apologies to Cary Grant. To Catch A Thief.

Treasuries Losing Cachet With Weakest Foreign Demand Since 2001

By Daniel Kruger & Anchalee Worrachate - Oct 21, 2013 6:02 AM GMT
The $11.6 trillion U.S. government bond market is losing some of its luster.

America’s borrowing costs are on the cusp of exceeding the rest of the world for the first time since 2010 after a political stalemate over public funding triggered a 16-day government shutdown and jeopardized the nation’s ability to pay its debt. Yields on Treasuries, which averaged less than 1 percent as recently as May, are now within 0.2 percentage point of the 1.57 percent for sovereign debt outside the U.S., according to Bank of America Merrill Lynch indexes.

While lawmakers reached an agreement last week to avert the country’s first default in its 237-year history, overseas investors who own almost half the Treasuries outstanding have reduced holdings for four straight months, the longest stretch since 2001. Their growing reluctance to finance the world’s biggest debtor nation may lift borrowing costs further and harm an economy that has yet to fully recover from the deepest recession since the 1930s. Each percentage point increase in Treasuries would boost annual U.S. funding costs by $20 billion, based on the amount of debt issued in the year ended Sept. 30.

“Default or no default, the damage is already done,” Steve Major, the London-based global head of rates strategy at HSBC Holdings Plc, Europe’s largest bank, said in a telephone interview. “Politicians are kicking the can down the road when the world needs a longer-term solution. This sort of political brinkmanship undermines confidence.”

Major, whose firm is also one of the 21 primary dealers of U.S. government securities that are obligated to bid at Treasury auctions, says that while the Federal Reserve will keep suppressing borrowing costs to buffer the economy, lingering doubts wrought by the political discord will likely cause bondholders to demand more to own the longest-dated Treasuries relative to shorter-term debt over the next year.

Again, it may be said that we need not be alarmed at the magnitude of our credit system or at its refinement, for that we have learned by experience the way of controlling it, and always manage it with discretion. But we do not always manage it with discretion. There is the astounding instance of Overend, Gurney, and Co. to the contrary. Ten years ago that house stood next to the Bank of England in the City of London; it was better known abroad than any similar firm—known, perhaps, better than any purely English firm. The partners had great estates, which had mostly been made in the business. They still derived an immense income from it. Yet in six years they lost all their own wealth, sold the business to the company, and then lost a large part of the company's capital. And these losses were made in a manner so reckless and so foolish, that one would think a child who had lent money in the City of London would have lent it better.  After this example, we must not confide too surely in long-established credit, or in firmly-rooted traditions of business. We must examine the system on which these great masses of money are manipulated, and assure ourselves that it is safe and right.

Walter Bagehot. Lombard Street. 1873

In Asian news today, Japan very publically pokes China in the eye with a sharp stick. I doubt that we will wait very long for China’s considered response. Japan is dangerously playing with fire.

"Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state."

William F. Rickenbacker

Abe Will Decide for Himself on Yasukuni Shrine Visit, Suga Says

By Isabel Reynolds & Takashi Hirokawa - Oct 21, 2013 4:45 AM GMT
Japanese Prime Minister Shinzo Abe will make his own decision on visiting the Yasukuni Shrine, Chief Cabinet Secretary Yoshihide Suga said, after an aide to the premier indicated he may go before the end of the year.

“As I have said many times, the prime minister feels deep regret that he was not able to pay his respects during his first term in office,” Suga told reporters in Tokyo today. “In any case, the prime minister will make the decision himself from a broad perspective” on whether to visit, he said.

Trips by Japanese leaders to the shrine, which honors the country’s war dead including World War II leaders convicted as Class A war criminals, spark anger in parts of Asia that suffered under Japanese occupation.
Abe has not visited Yasukuni publicly since his election win in December, amid a territorial dispute with China that has prevented the two countries from holding a summit for almost 18 months.

Ruling Liberal Democratic Party lawmaker Koichi Hagiuda said he thought Abe would visit the shrine during his first year as leader. “I believe that he will definitely visit at some point,” Hagiuda said yesterday on Fuji Television.

Abe opted against a visit during the autumn festival which ended yesterday, sending a traditional “masakaki” offering, according to an official in the shrine’s public relations department who asked not to be named because of policy. Two members of the cabinet, Internal Affairs Minister Yoshitaka Shindo and National Public Safety Commission chairman Keiji Furuya, made the pilgrimage and about 160 lawmakers paid their respects as a group, Kyodo News reported.

The Chinese government summoned Japan’s ambassador to lodge a protest, with Foreign Ministry spokeswoman Hua Chunying on Oct. 18 calling the shrine “a Japanese militarism symbol,” and lawmaker visits “a blatant attempt to whitewash the Japanese military’s history of aggression.”

It’s not yet the end of the world as we know it, but watch Japan’s debt grow

Japan has managed to muddle through, but it now looks as though it is close to a tipping point.

---- Whereas the US debt crisis has been triggered by a disagreement between Democrats and Republicans over the role of the state in the economy and society, and specifically over “Obamacare”, Japan’s debt problem is a slow burner.

As a share of GDP, government debt has been growing since the early 1990s. This is the result of the long-running weakness of economic growth, repeated fiscal stimulus packages and a long period in which the overall price level has stagnated or fallen. Japan has managed to muddle through, but it now looks as though it is close to a tipping point.

The scale of the problem is staggering. Japan’s net government debt is about 140pc of GDP. This is way ahead of the US, which is on 87pc, and not that far below Greece. What’s more, it is easy to see the ratio increasing further. The IMF expects net debt to rise to 148pc of GDP over the next five years. In fact, if the economy performs badly, inflation remains low or borrowing costs rise, debt could easily follow an explosive path, with the ratio quickly rising towards 300pc of GDP.

So what to do? If Japan followed anything like this path, then some form of default would eventually become inevitable. Accordingly, why not cut the whole process short and get the thing over and done with by defaulting now?

Quite apart from all the usual objections to default, Japan suffers from another major obstacle, namely that its debt is overwhelmingly held by Japanese financial institutions, including banks. A default would land the financial sector with massive losses and could cause a catastrophic financial crisis.

In the Americas, Uncle Sam just can’t help it, he spies on everyone, friend or foe. Today it’s the Mexican’s turn to get upset. Short to taking over the USA, Mexican Presidents will just have to get used to having their personal communications read in Washington DC.

Fresh Leak on US Spying: NSA Accessed Mexican President's Email

By Jens Glüsing, Laura Poitras, Marcel Rosenbach and Holger Stark
The NSA has been systematically eavesdropping on the Mexican government for years. It hacked into the president's public email account and gained deep insight into policymaking and the political system. The news is likely to hurt ties between the US and Mexico.

The National Security Agency (NSA) has a division for particularly difficult missions. Called "Tailored Access Operations" (TAO), this department devises special methods for special targets.

That category includes surveillance of neighboring Mexico, and in May 2010, the division reported its mission accomplished. A report classified as "top secret" said: "TAO successfully exploited a key mail server in the Mexican Presidencia domain within the Mexican Presidential network to gain first-ever access to President Felipe Calderon's public email account."

According to the NSA, this email domain was also used by cabinet members, and contained "diplomatic, economic and leadership communications which continue to provide insight into Mexico's political system and internal stability." The president's office, the NSA reported, was now "a lucrative source."

This operation, dubbed "Flatliquid," is described in a document leaked by whistleblower Edward Snowden, which SPIEGEL has now had the opportunity to analyze. The case is likely to cause further strain on relations between Mexico and the United States, which have been tense since Brazilian television network TV Globo revealed in September that the NSA monitored then-presidential candidate Enrique Peña Nieto and others around him in the summer of 2012. Peña Nieto, now Mexico's president, summoned the US ambassador in the wake of that news, but confined his reaction to demanding an investigation into the matter.

Now, though, the revelation that the NSA has systematically infiltrated an entire computer network is likely to trigger deeper controversy, especially since the NSA's snooping took place during the term of Peña Nieto's predecessor Felipe Calderón, a leader who worked more closely with Washington than any other Mexican president before him.

----The US surveillance of politicians in Mexico and Brazil is not a one-off. Internal documents show these countries' leaders represent important monitoring targets for the NSA, with both Mexico and Brazil ranking among the nations high on an April 2013 list that enumerates the US' surveillance priorities. That list, classified as "secret," was authorized by the White House and "presidentially approved," according to internal NSA documents.

The list ranks strategic objectives for all US intelligence services using a scale from "1" for high priority to "5" for low priority. In the case of Mexico, the US is interested primarily in the drug trade (priority level 1) and the country's leadership (level 3). Other areas flagged for surveillance include Mexico's economic stability, military capabilities, human rights and international trade relations (all ranked at level 3), as well as counterespionage (level 4). It's much the same with Brazil -- ascertaining the intentions of that country's leadership ranks among the stated espionage targets. Brazil's nuclear program is high on the list as well.

“The Mexicans 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.

At the Comex silver depositories Friday final figures were: Registered 43.84 Moz, Eligible 121.00 Moz, Total 164.84 Moz.  

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

Today, more on our new lawless age. More on the uunintended consequences of the Great Nixonian Error of fiat money. America’s banksters get slapped on the wrist. With the Fedster’s monetising at a trillion a year, and the banksters all fully paid up members of the Fed’s socialism for bankster’s club, on our new QE forever and zero interest rate policies, there’s plenty more billions where that came from. Proof that there is nothing new under the sun. But why do any of these criminal enterprises hold a banking licence? Why no prosecutions under RICO statutes? What” fit and proper” standard does the ABA uphold?

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

JPMorgan Said to Reach Record $13 Billion U.S. Settlement

By Tom Schoenberg, Dawn Kopecki, Hugh Son & Dakin Campbell - Oct 20, 2013 6:27 AM GMT
JPMorgan Chase & Co.’s record $13 billion deal to end U.S. probes of its mortgage-bond sales would free the nation’s largest bank from mounting civil disputes with the government while leaving a criminal inquiry unresolved.

The tentative pact with the Department of Justice increased from an $11 billion proposal last month and would mark the largest amount paid by a financial firm in a settlement with the U.S. The deal wouldn’t release the bank from potential criminal liability, at the insistence of U.S. Attorney General Eric Holder, according to terms described by a person familiar with the talks, who asked not to be named because they were private.

“To not get the waiver from criminal prosecution is not good,” said Nancy Bush, a bank analyst who founded NAB Research LLC in New Jersey. “What we’re looking for in a settlement of this size is certainty from things like the criminal prosecution of a company. The Street wants certainty.”

JPMorgan Chief Executive Officer Jamie Dimon, 57, personally discussed the deal with Holder after markets closed Oct. 18 as the banker sought to end probes that have beset his firm and resulted in its first quarterly loss under his watch. The agreement, which isn’t yet final, includes $4 billion in relief for unspecified consumers and $9 billion in payments and fines, according to another person briefed on the terms.

FHFA Is Said to Seek at Least $6 Billion From BofA for MBS Sales

By Keri Geiger, Clea Benson & Hugh Son - Oct 21, 2013 5:00 AM GMT
A U.S. housing regulator is seeking at least $6 billion from Bank of America Corp. to settle civil claims the firm sold faulty mortgage bonds to government-backed finance companies Fannie Mae and Freddie Mac, according to a person with direct knowledge of the discussions.

The person requested anonymity because negotiations with the Federal Housing Finance Agency, which are continuing and may not result in a deal, are private. Larry DiRita, a spokesman for Charlotte, North Carolina-based Bank of America, declined to comment and the FHFA’s Denise Dunckel said the regulator doesn’t comment on pending litigation. The Financial Times reported on the proposed settlement amount yesterday.

---- The FHFA sued Bank of America and 17 other firms over faulty mortgage bonds two years ago in an effort to recoup some of the losses taxpayers were forced to cover when the U.S. took over the failing mortgage finance companies in the wake of the credit crisis. Fannie Mae and Freddie Mac, which are regulated by FHFA, have received $187.5 billion in federal aid since then.

---- Bank of America, led by Chief Executive Officer Brian T. Moynihan, has sought to limit additional costs from faulty loans after its 2008 takeover of Countrywide Financial Corp. helped saddle the bank with more than $40 billion in expenses. The U.S. Justice Department last year filed a $1 billion fraud complaint against the bank, claiming the lender and its Countrywide unit generated thousands of defective mortgage loans and sold them to Fannie Mae and Freddie Mac.

The FHFA sued the banks in an effort to recover losses on about $200 billion in mortgage-backed securities.

Banks are an almost irresistible attraction for that element of our society which seeks unearned money.

J. Edgar Hoover

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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