Wednesday, 27 November 2013

USA 1, China 0.

Baltic Dry Index. 1512 +20

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

“There are some bored foreigners, with full stomachs, who have nothing better to do than point fingers at us [China]. First, China doesn’t export revolution; second, China doesn’t export hunger and poverty; third, China doesn’t come and cause you headaches, what more is there to be said?”

President Xi Jinping

Well it didn’t take long for Uncle Scam to very publicly stick his thumb into China’s eye. As reported by the WSJ, taking its feed from the Pentagon, the US directly challenged China’s new air-defence zone,  aged US B-52 bombers flew directly over the disputed Diaoyu Islands that are administered by Japan under the name Senkaku Islands. Will China now fly some aged planes towards Guam?

As reported by Bloomberg “the Chinese Defense Ministry said in a statement that the military kept the flights under surveillance and they travelled “along the eastern edge” of the zone.” Whichever version is correct doesn’t really matter, China will be disgruntled to say the least. And China has many means of retaliating against the world’s leading debtor if it so chooses, and at a time and place at its option too. Nothing good for the world lies down this road.

A newspaper is a device for making the ignorant more ignorant and the crazy crazier.

H. L. Mencken.

U.S. Directly Challenges China's Air Defense Zone

Pair of American B-52 Bombers Fly Over Disputed Islands; China Says It Can Exercise 'Effective Control' of Zone

The U.S. moved forcefully to try to counter China's bid for influence over increasingly jittery Asian neighbors by sending a pair of B-52 bombers over disputed islands in the East China Sea, U.S. officials said Tuesday.

The B-52s took off from Andersen Air Force Base in Guam and flew more than 1,500 miles northwest, crossing into what China has declared as its new air-defense identification zone, at about 7 p.m. ET Monday. 
The U.S. deliberately violated rules set by China by refusing to inform Beijing about the flight, officials said.
China had warned of military action against aircraft entering the zone without notification, but didn't respond to the B-52s, which weren't armed and were part of a long-planned military exercise. A U.S. official said there was no attempt by the Chinese military to contact the B-52s. "The flight was without incident," a U.S. official said.

Wednesday morning, in Beijing's first public comment on the flight, the Ministry of National Defense said in a faxed response to The Wall Street Journal that the Chinese military monitored and identified the U.S. aircraft. It also said that China would identify all aircraft entering the zone and has the capability to exercise "effective control" of the zone.

U.S. Bombers Fly Through China Air Zone in Boost for Japan

By Bloomberg News - Nov 27, 2013 6:44 AM GMT
Two unarmed American B-52 bombers flew through disputed areas of the East China Sea covered by China’s new air defense zone, a show of support for Japan as Prime Minister Shinzo Abe seeks to expand his nation’s military.

The U.S. planes spent less than an hour in the China-claimed zone as part of an annual training exercise, said a U.S. defense official who asked not to be named discussing the deployment. The Chinese Defense Ministry said in a statement that the military kept the flights under surveillance and they traveled “along the eastern edge” of the zone

China’s creation of the zone on Nov. 23 may spur Abe to take a more hard-line stance as his government studies changing how it interprets the U.S.-imposed pacifist constitution to deploy the armed forces more freely. Abe is undertaking a review for a 10-year defense plan to be announced next month that may see Japan’s government add ballistic missile defense ships and refueling planes.

----The Chinese move may also tighten the alliance between Japan and the U.S. The USS George Washington carrier strike group began annual exercises with the Japan Maritime Self-Defense Force on Nov. 25 “to effectively and mutually respond to the defense of Japan or to a regional crisis,” according to a statement on the U.S. Navy’s website.

Obama Sends B-52s, and a Message, to China

By James Gibney Nov 26, 2013 10:24 PM GMT
The U.S. decision to fly two B-52s through China's claimed "air defense identification zone" around a set of islands disputed between China and Japan was significant in several ways. First, it was a blunt reminder that Northeast Asia remains the world's most combustible geopolitical hot spot. Second, it's a strong signal that the Barack Obama administration is going to stand by its Asia-Pacific allies against Chinese aggression.

And third, for students of the region's recent history, it also brings back memories of another tit-for-tat episode: the March 1996 shadow confrontation between the U.S. and China over Taiwan. That incident and its aftermath suggest that, for both sides, a show of force produced mixed results.

If you want the long version of what happened in 1995-1996, read this piece by Robert S. Ross from International Security.

That Japan administers the island but doesn’t have sovereignty, is all down to another Great Nixonian Error of the early 70s. In the second world war with the Cairo conference exactly  70 years ago today, later reaffirmed at Potsdam and in the treaty that ended the war with Japan, Japan was supposed to relinquish all the territories it accumulated by wars and greed. The USA administered the disputed islands from 1945 to 1972, but never claimed sovereignty over them. President Nixon simply didn’t want to pass the islands back to Mao’s murderous China, couldn’t pass administration to Taiwan who also claimed them, for fear of setting back warming relations with mainland China, and so passed administration of the islands over to Japan. Having never claimed sovereignty, the USA couldn’t pass sovereignty on to Japan. Why did the Nixon presidency want to give up administration at all? Possibly some signal to China to get some help in ending the Vietnam war. And so today we have arrived at the final act of the Second World War or possibly the first precursor act of World War Three.

Ironically, Japan is in a no-win losing position. By arguing sovereignty through seizure and possession, Japan incurs the enmity of its largest closest neighbour and trading market by far, and validates the Russian possession of the Kuril Islands just north of Japan, via the same argument. And so on towards World War Three, right now China’s leaders might favour a foreign adventure, but don’t let on to our ever complacent disconnected from reality stock markets.

"There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

Ludwig von Mises

Record Spread Blowout Sparks Mini-Crisis Warning: China Credit

By Justina Lee - Nov 27, 2013 3:47 AM GMT
Chinese companies’ borrowing costs are climbing at a record pace relative to the government’s, increasing the risk of defaults and prompting state newspapers to warn of a limited debt crisis.

The extra yield investors demand to hold three-year AAA corporate bonds instead of government notes surged 35 basis points last week to 182 basis points, the biggest increase since data became available in September 2007, Chinabond indexes show. That exceeds the similar spread in India of 120 basis points.
The benchmark seven-day repurchase rate has averaged 4.47 percent in November, the highest since a record cash crunch in June and up from 3.21 percent a year earlier.

---- A People’s Bank of China pledge to prevent excessive leveraging has contributed to the surge in borrowing costs, prompting state-run newspapers from China Securities Journal to Economic Information Daily to call for easier monetary policy to prevent a slump in economic growth. The debt of listed companies excluding financial firms has doubled since 2009 to some $2 trillion. Local governments may owe 20 trillion yuan ($3.3 trillion), Liu Yuhui, a researcher at the Chinese Academy of Social Sciences, said in September.

Cairo Declaration

The Cairo Declaration was the outcome of the Cairo Conference in Cairo, Egypt, on November 27, 1943. President Franklin Roosevelt of the United States, Prime Minister Winston Churchill of the United Kingdom, and Generalissimo Chiang Kai-shek of the Republic of China were present. The declaration developed ideas from the 1941 Atlantic Charter, which was issued by the Allies of World War II to set goals for the post-war order. The Cairo Communiqué was broadcast through radio on December 1, 1943.[1] The Cairo Declaration is cited in Clause Eight (8) of the Potsdam Declaration, which is referred to by the Japanese Instrument of Surrender.

The main points of the document were:
  • The Allies are not fighting Japan for their own territorial expansion.
  • The Allies are resolved to bring unrelenting military pressure against Japan until it agrees to unconditional surrender.
  • Japan shall be stripped of all islands she has seized or occupied in the Pacific since the beginning of World War I in 1914.
  • All the territories Japan has taken from China such as Manchuria (Dongbei), Formosa (Taiwan), and the Pescadores (Penghu), shall be restored to the Republic of China.
  • The Allies are determined that Korea shall become free and independent.
  • Japan will also be expelled from all other territories which she has taken by violence and greed.

We close for the US Thanksgiving Day break tomorrow with yet more interesting news from America. “Don’t tread on us,” say the banksters. It looks from London that Main Street is about to get the Nicosia bank depositors’ medicine.

“The world is a place that’s gone from being flat to round to crooked.”

“The Banker,” with apologies to Mad Magazine.

Banks look to charge for holding customers’ money, if Fed counters ‘lazy’ behavior

November 25, 2013, 5:12 PM
Bank customers could look forward to being charged to keep their money in U.S. banks.

That’s the latest threat coming out of Wall Street, according to a report in the Financial Times, as financial institutions look to combat a possible interest rate cut from the Federal Reserve on its bank reserves.

This latest potential step would be a hit to depositors, already earning close to zero interest on checking and savings accounts.

But the banks say it’s a side effect of the Fed’s quantitative-easing strategy and its eventual tapering of its asset purchases of $85 billion a month, which has created high liquidity within banks. The report cited executives at two of the top five U.S. banks, who said a cut in the 0.25 percent rate of interest on the $2.4 trillion in reserves they hold at the Fed would lead them to pass on the cost to depositors.

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

J. Edgar Hoover

At the Comex silver depositories Tuesday final figures were: Registered 44.30 Moz, Eligible 126.57 Moz, Total 170.87 Moz.  

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

Today, more on our new lawless age of fiat money. As the USA Fedster’s create over a trillion dollars a year of new money out of nothing for the US bankster and hedge fund class, the banksters and great vampire squids get to invest some of it abroad. In this case distressed rental properties in Spain. While 20 year old Pedro rides his bike towards London and a new job and a life, and Carlos and his ilk send their capital on to London for safe keeping against depositor bail-ins, Ebenezer Squid and the Wall Street gang get to carpetbag for free in Madrid. It’s a funny old world in the Great Nixonian Error of fiat money.

Spain’s Bad Bank Offering Rental Homes Tests Demand

By Sharon Smyth - Nov 26, 2013 11:00 PM GMT
Spain’s bad bank is offering seven residential blocks for sale in Madrid, Barcelona and Guadalajara, taking advantage of demand from international investors building rental-home businesses in the country.

The bank will set a minimum asking price for the portfolio of properties, which includes five buildings in Madrid, one in Barcelona and one in Guadalajara, Juan Barba, head of real estate for the bank, known as Sareb, said in a Nov. 25 interview in Madrid. The homes were built from 2007 through 2011, he said, without disclosing their value.

“This type of sale is going to be our typical bread and butter in years to come,” Barba said.

The rental market in Spain, which has one of Europe’s highest homeownership rates, may double in coming years as government spending cuts, a 26 percent jobless rate and subdued mortgage lending make it more difficult for Spaniards to buy dwellings, according to Irea, a debt-restructuring firm that has advised on 22 billion euros ($30 billion) of refinancing.

Increasing demand for rental properties is prompting foreign funds to invest in Spain’s unsold homes, which may total 1.3 million units, according to, the country’s largest real estate website. New York-based Blackstone Group LP (BX), which has bought about 40,000 homes in the U.S., agreed in July to purchase 18 apartment blocks from the city of Madrid for 125.5 million euros. New York-based Goldman Sachs Group Inc. and Madrid-based Azora Capital SL agreed in August to pay about 20 percent more than the minimum asking price for 32 social-housing developments sold by Madrid’s regional government.

---- Not all of the sales have gone smoothly. Blackstone, the world’s largest private-equity firm, and Goldman dropped out of an auction for 1,458 homes in Madrid, leaving them unsold, two people with knowledge of the matter said. Funds are being selective, focusing on homes with tenants and rental income in urban areas like Madrid, Fernando Encinar, co-founder of, said in an interview in September.

The investors’ strategies in Spain differ from the U.S., where they have targeted mainly foreclosed single-family properties, renovated them and sought tenants. In both countries, they’re aiming to buy cheaply and bet on increased rental demand as more people struggle to qualify for mortgages.

"God, no, we don't club baby seals. We club babies."

Goldmanite, quoted in The Times of London. November 8 2009

The monthly Coppock Indicators finished October:
DJIA: +178 Up. NASDAQ: +238 Up. SP500: +217 Up. The Fed’s final bubble continues to grow, until QE Forever isn’t forever. Up will remain up, until one fine day out of the blue the Fed finally loses control, or the next Lehman hits.

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