Baltic Dry Index. 2113 -164
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
"As fewer and fewer people have confidence in paper as a store of value, the price of gold will continue to rise. The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register."
Hans F. Sennholz
We open this
morning with uncharacteristic honesty from the IMF. Despite QE Forever and ZIRP,
our newly lawless world is on the cusp of mass write-offs of debt. Time once
again, to swap more fiat paper pictures of dead US Presidents and fictitious
European buildings, for central bankster rigged, bargain basement, fully paid up physical gold
and silver. President Nixon and central bankster fraudsters Greenspan and BS Bernanke,
wrecked the system as we knew it 1945-1970. “Capitalism’s broken”, famously
wailed fallen guru Greenspan. Two decades late the IMF now agrees.
While Asia
drains the west of its physical gold, the wise in the west will scramble on to
the last carriage of the bullion train leaving the station.
"When paper money systems begin to crack at the seams, the run to gold could be explosive."
Harry Browne
IMF paper warns of 'savings tax' and mass write-offs as West's debt hits 200-year high
Debt burdens in developed nations have become extreme by any historical measure and will require a wave of haircuts, warns IMF paper
Much of the Western world will
require defaults, a savings tax and higher inflation to clear the way for
recovery as debt levels reach a 200-year high, according to a new report by the
International Monetary Fund.
The IMF working paper said debt
burdens in developed nations have become extreme by any historical measure and
will require a wave of haircuts, either negotiated 1930s-style write-offs or
the standard mix of measures used by the IMF in its “toolkit” for emerging
market blow-ups.
“The size of the problem suggests
that restructurings will be needed, for example, in the periphery of Europe,
far beyond anything discussed in public to this point,” said the paper, by
Harvard professors Carmen Reinhart and Kenneth Rogoff.
The paper said policy elites in
the West are still clinging to the illusion that rich countries are different
from poorer regions and can therefore chip away at their debts with a blend of
austerity cuts, growth, and tinkering (“forbearance”).
The presumption
is that advanced economies “do not resort to such gimmicks” such as debt
restructuring and repression, which would “give up hard-earned credibility” and
throw the economy into a “vicious circle”.
But the paper
says this mantra borders on “collective amnesia” of European and US history,
and is built on “overly optimistic” assumptions that risk doing far more damage
to credibility in the end. It is causing the crisis to drag on, blocking a
lasting solution. “This denial has led to policies that in some cases risk
exacerbating the final costs,” it said.
---- The paper
says the Western debt burden is now so big that rich states will need same
tonic of debt haircuts, higher inflation and financial repression - defined as
an “opaque tax on savers” - as used in countless IMF rescues for emerging
markets.
More
As we reach
the first weekend of 2014, we have unwanted news from the orient. China’s
economy continues to wobble, and 2014 looks likely to be the year that China turns
up the heat on Japan over the Diaoyu Islands. Fiat dollars or euros anyone?
Gold Heads for Best Week Since October on Asian Demand Outlook
Jan 3, 2014 4:08 AM GMT
Gold headed for the biggest weekly gain since October on speculation that
demand will increase in Asia, the largest consuming
region. Platinum rose to the highest price since November. Bullion for immediate delivery climbed as much as 1 percent to $1,237.03 an ounce, the highest level since Dec. 18, and was at $1,230.46 at 11:51 a.m. in Singapore, 1.4 percent higher this week. Gold dropped to $1,182.27 on Dec. 31, the lowest level since June 28, capping the metal’s worst annual rout since 1981.
The volume for bullion of 99.99 percent purity on the Shanghai Gold Exchange climbed to 10,400 kilograms yesterday from 7,849 kilograms on Dec. 31, the least since Dec. 2. The premium to take immediate delivery in China, which probably overtook India as the largest user in 2013, was about $21.07 an ounce yesterday compared with last year’s average of $18.72.
More
China’s Runaway Train Is Running Out of Track
Jan 2, 2014 11:00 PM GMT
A financial drama is unfolding in China as the new year begins. Last week,
for the second time in six months, interest rates in the critical interbank
lending market spiked above 10 percent, prompting fears of a liquidity crisis that
would trigger mass defaults and cripple the world’s second-largest
economy. Western investors largely ignored the cash crunch and failed to grasp its potential significance. Although the situation has largely eased after the People’s Bank of China hastily injected at least $55 billion into the market, that isn’t the end of the story. These repeated crises are a sign that the foundations of China’s investment-driven growth model are crumbling -- with unsettling implications for the rest of the global economy.
To those who wrote off China’s first banking seizure in June as a fluke, this latest episode appeared to come out of nowhere.
More
Jan. 1, 2014, 9:39 p.m. EST
China manufacturing growth slows, data show
Export orders shrink for first time since August, HSBC says
LOS ANGELES (MarketWatch) —
China’s manufacturing activity grew further in December but at a slightly
slower pace than in the previous month, HSBC reported Thursday.
The manufacturing Purchasing
Managers’ Index compiled by HSBC and Markit eased to 50.5, unchanged from the
initial “flash” reading released earlier last month but lower than the final
November print of 50.8. It marked a three-month low for the index.
Still, the result remained above
the 50 level, which separates growth from contraction. The index last dipped
below 50 in July.
Among the report’s sub-indexes,
the indicator for new export orders registered its first decline since August,
while those for output and overall new orders showed growth but at a weaker
pace. The employment component of the report also decreased for the second
month in a row.
----The report came
one day after China’s government-sponsored version of the manufacturing PMI also showed a
slowdown
in the sector, with the official headline index falling to 51.0 from November’s
51.4. The government’s PMI tends to include more large, state-owned
manufacturers than does the HSBC edition.
More
Japan risks threat to global peace by rekindling militaristic spirit of Second World War, senior Chinese official warns
Liu Xiaoming, China’s ambassador to London, launches a strong criticism of the Japanese prime minister, Shinzo Abe, accusing him of deliberately raising tensions in Asia and putting the world on a “perilous path”
By James Kirkup, Political Editor
10:29PM GMT 01 Jan 2014
Japan risks a “serious threat to
global peace” by “rekindling” the militaristic spirit that helped cause the
Second World War, a senior Chinese official has warned.
Liu Xiaoming, China’s ambassador
to London, has launched a strong criticism of the Japanese prime minister,
Shinzo Abe, accusing him of deliberately raising tensions in Asia and putting
the world on a “perilous path”.
Writing in The Daily Telegraph,
Mr Liu warns that under Mr Abe, Japan is seeking to rewrite the history of its
role in the war and restore its status as an aggressive military power. China
“will not allow” such plans, he said.
In unusually vivid language, Mr
Liu even compares modern Japan to Lord Voldemort, the villain of the Harry
Potter stories who eventually “dies hard”. The ambassador appealed to Britain
to side with China against Japan in the escalating row between Beijing and
Tokyo, invoking Britain’s role fighting against Japan in the war.
The growing China-Japan dispute
has raised fears of a major military conflict in Asia that could draw in the US
in support of Japan.
Mr Abe last week infuriated China
by visiting the Yasukuni shrine honouring Japan’s war dead. The shrine
commemorates several “class A” war criminals, the Japanese leaders who were
responsible for starting and waging the war in Asia.
The visit is part of a pattern of
behaviour by Mr Abe that has “raised the spectre of militarism rising again in
Japan”, Mr Liu said.
The Japanese leader is pandering
to nationalists who take pride in the country’s history before and during the
Second World War, the ambassador said.
“There are always some
incorrigible people in Japan who have shown no sign of remorse for war crimes.
“Instead, they seek to
reinterpret the history. These people pose a serious threat to global peace,”
he said.
More
Liu Xiaoming: China and Britain won the war together
Japan’s refusal to face up to its aggressive past is posing a serious threat to global peace
By Liu Xiaoming 10:36PM GMT 01
Jan 2014
http://www.telegraph.co.uk/comment/10546442/Liu-Xiaoming-China-and-Britain-won-the-war-together.html
Japan Population Falls by Record in Challenge for Abe’s Campaign
Jan 2, 2014 6:48 AM GMT
Japan’s population declined
by the most on record in 2013, highlighting the demographic challenges faced by
Prime Minister Shinzo Abe in his campaign to revive the world’s third-biggest
economy. The population fell by 244,000, according to Health Ministry estimates released yesterday, a seventh straight year of decline. Births fell about 6,000 from a year earlier to 1,031,000 and deaths increased about 19,000 to 1,275,000.
Rising welfare costs for an ageing nation threaten to worsen a debt burden that is already twice the size of the Japanese economy. At the same time, a shrinking population caps consumer demand, making it harder for Abe to drive an exit from 15 years of deflation.
The government’s decision to raise a sales tax to 8 percent from 5 percent in April is aimed at helping to secure funds for social welfare payments. That move threatens to undermine the momentum building in the economy from unprecedented monetary stimulus.
In the
inmate run asylum of the EUSSR, it’s a case of dumb France and smart Italy. In
fact Fiat motors just ate Chrysler’s US taxpayer funded lunch.
François Hollande concedes taxes 'too heavy' in admission that annoys all sides in France
French president's vague promise of lower taxes in future infuriates French households facing tax rises
By David Chazan in Paris 7:18PM
GMT 01 Jan 2014
A New Year's message from François
Hollande backfired as his vague promise that taxes
would be lowered some time in the future jarred with French voters facing tax
increases that took effect as he was speaking. Instead of winning plaudits for his unexpected admission that taxes had become "too heavy, much too heavy", the unpopular socialist president - weakened by tax increases, rising unemployment and a shrinking economy - provoked incredulity and scepticism among critics on both Left and Right.
Hard-pressed French households faced VAT increases on most goods and services from Jan 1 and only days earlier France's supreme court had upheld a new 75 per cent supertax on high-paying companies.
Mr Hollande made his televised address in front of a virtual background, an image of the Elysée Palace, which provoked a flood of comments on Twitter comparing his appearance with that of a Soviet leader of the 1970s.
More
We end for the week in our new lawless age, with the ever stranger case of Fiat and Chrysler. Is a central bank planned new world order great or what? Shame about all those duped American Muppet taxpayers.
The Great Italian Auto Bailout — Courtesy of U.S. Taxpayers
At the beginning of 2014, Detroit may be bankrupt, but they’re cheering the five-year-old U.S. auto bailout in Italy. That’s because after being the beneficiary of billions in U.S. taxpayer largesse, Fiat, the leading Italian auto company, is going to buy its final stake in Chrysler from that other big bailout recipient, the United Auto Workers (UAW).“Chrysler’s Now Fully an Italian Auto Company,” reads the Time magazine online headline. But wait a minute! Wasn’t the bailout supposed to be about saving the American auto industry?
As Mark Beatty and wrote in The Daily Caller in November 2012, after presidential candidate Mitt Romney made the controversial claim that Fiat would be expanding production of Chrysler’s Jeep in China (a claim that turned out to be correct),
----As we noted in the piece, much of Chrysler’s profits from its overhauled line are going to prop up Fiat’s failing, money-losing Italian business, rather than to expanding production and jobs in the U.S. Moody’s had downgraded Fiat’s credit rating to “junk” even before the Obama administration arranged for it to acquire a Chrysler stake, and in Autumn 2012, Moody’s gave Fiat another downgrade that the Financial Times described as even “further into ‘junk’ territory.”
Around this time, Barron’s put it like this in a headline, “This time, Chrysler could bail out Fiat.” Actually, the Barron’s headline is slightly misleading in one respect — Fiat didn’t contribute much of anything to the Chrysler’s bailout.
----Continuing the bailout shell game, Fiat will now pay fellow bailout recipient UAW $4.4 billion for its stake in Chrysler. All the while, the U.S. government has pitched in more than $12 billion in taxpayer infusions.
In “saving” the American auto industry, Obama gave an American company away. And he gave it away at the expense of pension funds and other secured creditors, which were given a much smaller stake in the new company than they would have been given under traditional bankruptcy proceedings. American manufacturing workers also lost out on the deal; many are now hostages to the woes of Fiat and the Italian economy.
According to Barron’s, “Chrysler’s resurgence has been so strong that it now provides a lifeline for Turin’s Fiat, which faces serious challenges in Western Europe.” Fiat and Chrysler CEO Sergio Marchionne told Barron’s: “The Fiat Group has a future because of Chrysler.” Similarly, Bloomberg reported that, “without Chrysler, the Italian automaker would have posted a first-quarter net loss” in 2012.
The divergence between Chrysler’s profits and Fiat’s European losses is striking. In late 2012, Chrysler reported that its third-quarter profit surged 80 percent to $381 million.
But ironically, Fiat’s Marchionne has made Chrysler profitable again not by producing more of Fiat’s mini-cars, as the Obama administration urged it to do, but rather by doubling down on Chrysler’s most “environmentally incorrect” light trucks and sport-utility vehicles, such as the Jeep Grand Cherokee and Dodge Durango.
More
"In Italy for
thirty years under the Borgias they had warfare, terror, murder and bloodshed
but they produced Michelangelo, Leonardo da Vinci and the Renaissance. In
Switzerland, they had brotherly love; they had five hundred years of democracy
and peace and what did that produce? The cuckoo clock."
Orson Welles
At the Comex
silver depositories Thursday
final figures were: Registered 50.19 Moz, Eligible 124.31 Moz, Total 174.50 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, Europe’s going out of business fire sale. Go
west young Club Medder’s, go west. Just go!
Give me your tired, your poor,
Your huddled masses yearning to breathe free;
The wretched refuse of your teeming shore,
Send these, the homeless,
Tempest-tossed to me
I lift my lamp beside the golden door!
Your huddled masses yearning to breathe free;
The wretched refuse of your teeming shore,
Send these, the homeless,
Tempest-tossed to me
I lift my lamp beside the golden door!
"The
New Colossus" is a sonnet
by American poet Emma Lazarus
(1849–87), written in 1883. In 1903, the poem was engraved on a bronze plaque
and mounted inside the lower level of the pedestal of the Statue
of Liberty.
A Greek archipelago for €8.5m, a Maltese passport for €1m and Polish castles going for a song... welcome to the great European fire sale
Wednesday 01 January 2014
For a non-EU citizen with
dreams of the good life and a few million in the bank, 2014 could be a good
year. First, snap up Maltese citizenship, and thus a European Union passport,
for €1.15m (£960,000). Then splurge on a former cardinal's villa in Italy as
the principle residence. For a fairytale winter getaway, Polish castles are
going for a song. And what could be better for a summer bolt-hole than a Greek
archipelago, a snip at €8.5m?
Europe's fire sale, which began
as the economic crisis forced governments to find innovative ways to plug holes
in their dwindling budgets, has reached new heights as ever-more intriguing
state assets are touted for sale.
But a backlash is brewing, with
governments and enraged citizens clashing over exactly who has the right to
flog a nation's history and culture.
The Maltese passport bonanza has
provoked public outcry and forced the government to rethink its plans. Outraged
locals have scuppered the sale of an Italian island to a businessman from New
Zealand. Even if governments can overcome political opposition to “selling the
family silver”, the privatisation expert Professor William Megginson says they
face an array of hurdles ranging from a simple lack of interest in unattractive
state assets to hazy ownership rights.
Dr Megginson, a professor of
finance at the University of Oklahoma and a former advisor to the Italian
government's privatisation committee, says: “In Greece's case they have had a
few sales but they have fundamental problems that the assets they could logically
sell - land - they don't even have an accurate land registry. It's not clear
who owns land to sell. At a superficial level it sounds great, but there are
real political problems with selling off bits of your country.”
While there has so far been no
great surge in privatisation in post-crisis Europe, there have been some
headline-grabbing sales, particularly in hard-hit Greece. In May, a month
before he abdicated in favour of his son,the Emir of Qatar, Hamad bin Khalifa
Al Thani, bought six islands in the Ionian Sea - which were already in private
hands - for €8.5m. The sale was considered a bargain for the Emir, who is
reported to be building a luxurious retreat for his three wives and 24
children, and has raised hopes of a mini-gold rush in the region.
Italian authorities looking to
line their coffers by selling an island or two may not have it so easy. In
October a New Zealand businessman, Michael Harte, spent €2.9m on Budelli
Island, a national park fringed with pink sand beaches just off the coast of Sardinia.
He said he wanted to preserve it, but environmentalists were outraged. They
collected 85,000 signatures urging a U-turn, and the government is now
considering buying the island back.
Italy could face similar hurdles
with dozens of historic properties it plans to put under the hammer in the
coming months. Austerity budgets have meant less money for the upkeep of
state-owned sites, leaving many abandoned or in disrepair. For big tourist
draws such as Rome's Colosseum and the Rialto Bridge in Venice, the government
hit upon the idea of letting well-heeled fashion companies film advertisements
at the sites in exchange for cash for repairs.
But for less illustrious sites an
alternative plan was needed. The Local, a website covering Italian news in
English, reported last month that 50 such properties were to be auctioned to
raise €500m towards repaying Italy's national debt. They include the castle
where the actors Tom Cruise and Katie Holmes were married, a former prison
colony, and Villa Mirabellino, an 18th century former cardinal's residence in
Lombardy.
While the authorities argue that
such sales are the only way to preserve crumbling historic monuments, others
are aghast at national treasures falling into private hands, and locals have
launched a campaign aimed at stopping the sale of Villa Mirabellino.
If that campaign succeeds,
would-be lords of the manor could instead consider one of 30 state-owned
castles that Poland put on the market last year. The Wall Street Journal
reported in November that the Ministry of Agriculture was preparing another 140
for sale in 2014. Buying them, however, is easier with an EU passport, and this
is where Malta may be able to help.
Several European countries offer
citizenship to foreign nationals who invest large sums in the country, but most
require a few years residency as well. The Maltese plan announced in November
skipped the residency and simply asked aspiring nationals to stump up €650,000,
in a scheme Prime Minister Joseph Muscat said could raise as much as €30m a
year.
The plans provoked outrage from
across the political spectrum. They were temporarily shelved, before being
revived a few days ago with new conditions. The cost has rocketed to €1.15m,
with €500,000 required to be invested in property, bonds and shares on the
island. Even if the controversial law does pass, future citizens should think
twice before buying up their dream European life: the opposition Nationalist
Party says it will not rule out repealing the new citizenships if it regains
government.
"Until government administrators can so identify the interests of government with those of the people and refrain from defrauding the masses through the device of currency depreciation for the sake of remaining in office, the wiser ones will prefer to keep as much of their wealth in the most stable and marketable forms possible - forms which only the precious metals provide."
Elgin Groseclose
Have a great weekend everyone.
The monthly Coppock Indicators finished December and 2013.
DJIA: +204 Up. NASDAQ: +311 Up. SP500: +247 Up.
The new Fed bubble continues, but for how much longer?.
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