Baltic Dry Index. 1146 +16
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
The
dollar is our currency, but your problem.
John
Connolly, US Treasury Secretary 1971.
This week’s G-20 meeting promises to be ugly. The
message from America and Europe to the lesser states, seems to be “you’re about
to get tossed under the bus.” As the US economy seems to be slowing again, even
before the snow effect from the harsh winter, and Euroland flirts with Japanese
style deflation coupled to near depression levels of unemployment, the message
from America, Europe and Japan seems to be every man for himself. With global cooperation
like this, what is the point of the G-20?
Happily for the emerging markets, now facing a
rising global slowdown, a wobbly America and an increasingly rickety China, plus
a dead in the water EUSSR, make it highly likely that the US Fedster’s will be
forced to up QE Forever later in the year. Unhappily for the EM’s, it will
likely come too late.
Below, if it wasn’t for red flags we wouldn’t have
any flags at all. Stay long fully paid up physical precious metals. 2014 has
all the makings of an epic year.
"Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood. For these few gold has been the asset of last resort."
Antony C. Sutton
Merkel Joins Developed Nations Backing Fed Taper Before G-20
Feb 19, 2014 4:18 AM GMT
Developed nations are voicing support for the withdrawal of U.S. monetary
stimulus and signaling emerging markets will have to cope with the fallout
as best as they can. German Chancellor Angela Merkel’s administration sees U.S. monetary normalization as necessary, a government official told reporters in Berlin overnight. The comment echoes Australian Treasurer Joe Hockey, who in a Feb. 13 interview likened Federal Reserve bond purchases to a drug that the world can’t rely on forever.
Market upheaval caused by reduced Fed stimulus is shaping up as a central theme for a Group of 20 meeting in Sydney this weekend, when central bankers and finance ministers will discuss the global economy. Policy makers in developing markets including Turkey and South Africa have been forced into emergency steps as investors sold off currencies, stocks and bonds after the Fed’s decision to scale back asset purchases.
India’s central bank Governor Raghuram Rajan last month warned of a breakdown in global coordination due to the tapering.
It’s up to each individual country to ensure it is robust enough to cope with the normalization of U.S. monetary policy, the Berlin official said on condition of anonymity. While the G-20 will discuss how emerging economies can prepare for the change, politicians shouldn’t interfere with the policies of independent central banks, the official said.
----Finance ministers and central bankers will discuss the global economy at a time of “great transition” as the U.S. tapers stimulus, South Korean Finance Minister Hyun Oh Seok said in a briefing in Sejong today.
More
China Trust Defaults Seen as Coal Maturities Quadruple
Feb 19, 2014 5:02 AM GMT
The number of trust products tied to China’s flagging coal miners maturing
this year will almost quadruple, as rising borrowing costs for the industry
make it harder to avoid defaults. The number of redemptions of such products sold to multiple investors will jump to 19 this year from five in 2013, according to Cnbenefit, a consulting firm based in the southwest city of Chengdu. The yield premium on the June 2014 securities of China Shenhua Energy Co. (1088), the country’s largest coal producer, over similar-maturity government notes surged to a record 231 basis points on Feb. 8. That compares with 152 basis points for energy debt globally, Bank of America Merrill Lynch indexes show.
Repayment difficulties among miners including Shanxi Liansheng Energy Co. and the failed Shanxi Zhenfu Energy Group have already emerged this year, as slowing economic growth and anti-pollution policies drive coal prices to near a four-year low. Thirteen of China’s 50 publicly traded coal companies have a debt-to-equity ratio exceeding 100 percent.
“Trust products have a very high probability of default this year,” said Shi Lei, Beijing-based head of fixed-income research at Ping An Securities Co., a unit of the nation’s second-biggest insurance company. “Coal mines’ trust products are the weakest link.”
----As default
concerns escalate, the cost of insuring China’s sovereign debt against
non-payment is rising. The nation’s credit-default swaps have increased 6.5
basis points in 2014 to 86.5. The yuan fell today to the lowest this year at
6.0764 per dollar.
More
China Cuts Treasury Holdings Most Since 2011 Amid Taper
Feb 19,
2014 4:59 AM GMT
China, the
largest foreign U.S. creditor, reduced holdings of U.S. Treasury debt in
December by the most in two years as the Federal Reserve announced plans to
slow asset purchases. The nation pared its position in U.S. government bonds by $47.8 billion, or 3.6 percent, to $1.27 trillion, the largest decline since December 2011, according to U.S. Treasury Department data released yesterday. At the same time, international investors increased holdings by 1.4 percent, or by $78 billion, in December, pushing foreign holdings to a record $5.79 trillion.
Yields on benchmark 10-year notes rose to 3 percent in December, the most since July 2011, after Fed officials announced plans to begin scaling back the central bank’s bond purchase program, designed to keep borrowing rates low and jump start the U.S. economy. The prospect of tapering sent U.S. government securities down 3.4 percent in 2013, the first annual decline since 2009’s record 3.7 percent loss, the Bank of America Merrill Lynch U.S. Treasury Index shows.
“The Chinese move to sell suggests central banks are becoming more wary of taking duration risk now with the Federal Reserve firmly into the tapering process,” saidAaron Kohli, an interest-rate strategist in New York at BNP Paribas SA, one of 22 primary dealers that trade with the Fed. “If China continues to sell again in the next month or two, than more worries will arise as to who will buy the country’s debt.”
More
Elsewhere, anarchy is starting to breakout.
"The paper standard is self-destructive."
Hans F. Sennholz
What the Heck Is Going on in Venezuela? (Could the Maduro Regime Fall?)
----Something more
serious than material shortages has been prompting Venezuelans to take to the
streets; they also resent the mounting repression of any who dare speak out.
The three protesters shot during the demonstration were young students, and
died on Venezuela’s Youth Day. The vast majority of those in attendance were
between 18 and 25 years old. Most came of age when Chavismo, the ideology
espoused by Chávez, was already in crisis, and its leader ailing and
increasingly unpopular. For many, Chávez’s choice of Maduro, a lackluster
National Assembly deputy, was an insult. And now the question is being asked:
Can Maduro be thrown out? Is López aiming for a coup? He and another fast-rising
opposition leader, María Corina Machado, have tried it before.
Maduro won the presidency in 2013, but the election left Venezuela more politically divided than it’s been in years. When Maduro took to the campaign trail in March, he had a double-digit lead on his rival, Miranda State Governor Henrique Capriles, a centrist. But Maduro soon squandered it, defeating Capriles with 50.7 percent of the vote—a margin-of-error “victory” that Capriles, alleging fraud, contested to no effect in Chavista-stacked courts. With new presidential polls not scheduled until 2019, it looked as if Maduro’s grip on power was secure. But then the shortages started, possibly owing to shortages in hard currency. Almost everything in Venezuela except oil is now imported.
Maduro and his entourage took to blaming them on U.S.-backed “fascists” and a “parasitic bourgeoisie” plotting to overthrow him. (On Feb. 17, Maduro’s government demanded that three American officials working in the U.S. embassy leave the country because they had been recruiting students to take part in protests.) The economy began crumbling, with inflation hitting 56 percent, the budget deficit soaring by almost 50 percent, China cutting back on its lifeline $20 billion loan, and Moody’s and Standard & Poor’s downgrading Venezuelan bonds to junk status. The bolivar fuerte (or “strong bolivar,” as Chávez had the currency renamed) weakened precipitously against the U.S. dollar, and dropped, on the black market, from roughly 8 to 1 (at Chávez’s death) to now 87 to 1. Maduro’s response? State intervention that has worsened matters, making it harder and harder for the private sector, on which Venezuelans rely for food, to operate.
More
Rice Rout Seen Extending as Thai Sales Quicken: Southeast Asia
Feb 19, 2014 4:09 AM GMT
Global rice prices will extend declines as Thailand
is forced to offload grain from record stockpiles accumulated under a
state-buying program, according to the Vietnam Food Association, the main
shippers’ group. Exports to China and Africa from the second-largest shipper will drop this year on increased competition from Thailand as well as from India and Pakistan amid a global glut, said Truong Thanh Phong, chairman of the Ho Chi Minh City-based group.
While Thailand’s reserves built up as the government paid farmers above-market prices since 2011, the program is now short of funds and unpaid growers are demanding stockpile sales. The unrest by the growers adds to opposition targeting Yingluck Shinawatra’s caretaker administration, which has faced months of demonstrations. Phong’s comments reflect concern among exporters about the pace of sales from holdings that are large enough to cover 39 percent of annual world import demand.
More
Thai Police Clashes With Protesters in Bangkok Leave 5 Dead
Feb 19, 2014 3:01 AM GMT
Clashes between anti-government
protesters and police in Bangkok killed five people and wounded at least 65
yesterday, as the opposition edged a step forward in legal efforts to oust
Prime Minister Yingluck Shinawatra.
Protesters fired guns and threw a
grenade at police, injuring 33 officers seeking to clear demonstrators from an
area in the historic district of the capital, said Songpol Watanachai, deputy
chief of the Metropolitan Police. National Security Council head Paradon
Pattanatabut said one officer was fatally shot in yesterday’s clash near
Government House.
More
19 February 2014 Last updated at 04:15
Ukraine crisis: Police storm main Kiev 'Maidan' protest camp
Police are storming the main protest camp in Ukraine's
capital, Kiev, which has been occupied since November.
Explosions are taking place, fireworks are being thrown and large fires have broken out in Independence Square.
On Tuesday at least 18 people were killed, including seven policemen, in the worst violence seen in weeks.
President Viktor Yanukovych blamed the violence on opposition leaders, but said it was still "not too late to stop the conflict".
He was speaking after a late-night meeting with opposition figures Vitaly Klitschko and Arseniy Yatsenyuk.
Mr Klitschko, who leads the Udar (Punch) party, told Ukraine's Hromadske TV that the president had given the protesters only one option, leave the Maidan and go home.
Security forces had given
protesters a deadline of 18:00 local time (16:00 GMT) to leave Independence
Square, the scene of a mostly peaceful protest camp since November.
The city's metro service was
completely shut down, and there were reports that cars were being prevented
from coming in to the capital.
Then shortly before 18:00 GMT,
police announced over loudspeakers that they were about to begin "an
anti-terror operation".
They advanced with an armoured
vehicle, dismantling barricades and firing stun grenades and water cannon.
Protesters threw fireworks and
petrol bombs, and lit fires to block off police. Many tents have been burned
but it was unclear whether there had been casualties.
More
18 February 2014 Last updated at 23:16
Egypt taking 'ultimatum against tourists' seriously
Egyptian Prime Minister Hazem
Beblawi has said Islamist militants in the Sinai peninsula are becoming a
threat to foreign tourists, state TV reports.
Officials say they are taking
seriously a reported ultimatum by Islamist militant group Ansar Beit al-Maqdis
for tourists to leave the country.
The threat was reportedly made on
a private Twitter account affiliated with the group, according to Reuters.
The Egyptian government has
struggled against rising militancy in the Sinai.
The Twitter message gave all
tourists until Thursday to leave Egypt or face attacks.
Ansar Beit al-Maqdis has denied
using social media, but Reuters says the account has spoken for the group in
the past.
A spokeswoman at the Egyptian
embassy in London said that while the government could not be sure of the
authenticity of the threat, "extra precautions have been taken in recent
days to protect tourists in the resort area of Sharm El Sheikh".
More
Argentina tries to delay $1.3bn repayment to creditors
5 hours
ago
Argentina has petitioned the US courts to try to stall a $1.3bn (£0.8bn)
repayment to its creditors. If the petition to the Supreme Court is not successful, the country risks triggering a default and debt crisis.
The money is owed to creditors who refused to participate in a debt restructuring process arising from the country's $100bn default 12 years ago.
Most bondholders agreed to accept a hefty discount on what they were owed, but those who held out are demanding to be repaid in full.
President Cristina Fernandez de Kirchner has said her government will honour payments to those who accepted the debt swaps, but will pay nothing to the creditors who held out, including hedge funds NML Capital and Aurelius Capital Management.
She has described the hold-out creditors as "vulture funds".
The move by Argentina reignites investors' worries about a new debt crisis in the country.
More
“The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.”
“Adam Smith” aka George Goodman.
At the Comex silver depositories Tuesday final figures were: Registered 50.29 Moz,
Eligible 130.11 Moz, Total 180.40 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, the Scottish crooks running the Scottish Nationalist Party making an increasingly dishonest case for an independent Scotland this September. That an independent Scotland could exist like a Malta or Cyprus or Ireland, isn’t in question. But it wouldn’t exist like a Singapore, Luxembourg, or Switzerland. To run an independent Scotland taxes must rise to cover the higher costs of a separate civil service, and living standards must fall to cover the costs of an aging, sicker population sharing a much smaller pension pool. And this is before much of Scotland’s financial services sector heads south to England where most of its clients are based.
Below, The Telegraph sets out some uncomfortable Scottish realities.
“Dreams do come true, if we only wish hard enough. You can have anything in life if you will sacrifice everything else for it.”
James Barrie, Peter Pan.
An independent Scotland risks becoming eurozone mark 2
The SNP is a muddled, confused blend of big state socialists, nationalists, populists and the odd genuine capitalist that will make a disastrous hash of it all
There is a simple yet fatal
contradiction at the heart of Alex Salmond’s case for Scottish independence.
With self-government comes the need to earn economic credibility – and yet
Salmond is threatening a confidence-shattering default on Scotland’s share of
the national debt, is clueless about which currency he will adopt, has no idea
how to retain a financial sector in Edinburgh, doesn’t have a realistic plan to
deal with Scotland’s declining oil revenues, hasn’t thought through his future
trading arrangements and continues to support a nonsensical,
something-for-nothing approach to the public finances.
It’s a recipe for disaster, and
the very opposite of the cautious, prudent, pro-market manifesto that would be
needed to make independence succeed.
I’m a unionist on political
grounds: it would be a tragedy to rip apart the United Kingdom. But while an
independent Scotland could prosper with the right leadership and policies,
there is no way that its present nationalist establishment could possibly pull
this off. Its vision for independence is at once depressingly amateurish,
dystopian and irresponsible.
----A successful Scotland would need a
supply-side revolution to attract investment and jobs and to encourage new
industries; sadly, threats to default on the debt and endless promises to hand
out “freebies” to favoured interest groups will frighten away global business.
What of the currency? Scotland’s
first option is to keep the pound, albeit without the support of the Bank of
England; just like Ecuador, El Salvador and Panama use the dollar, Scotland
could informally use sterling. A much more rigorous alternative would be to
introduce a Hong Kong-style currency board, as advocated by the US economist
Steve H Hanke, and enforce a strict peg between the Scottish and the UK pound.
The critical issue, from the
SNP’s perspective, is that independent countries that don’t control their own
currencies need to be better managed than those, like the US or UK, that print
their own fiat money. This requires, among other things, making sure the
government has a large enough stock of cash to meet interest payments on its
debt, sufficient reserves to defend a currency peg in case of speculative
attack and a credible fiscal policy to borrow cheaply on the global markets.
The chances of any of these
conditions being met in the case of an undisciplined SNP administration are,
sadly, almost nil.
----A small country like Scotland couldn’t afford to bail out a giant financial institution like RBS, so it would need to urgently introduce full-proof resolution mechanisms. These would allow failed banks to be dismantled or bailed-in in a controlled manner, turning bonds and even, in extremis, some pre-agreed bank deposits into equity.
The problem, therefore, is not
the theory: it is that the SNP won’t do any of this, and what’s left of
Scotland’s financial system will migrate to London.
There is a parallel here with the
creation of the eurozone. Optimists thought that the launch of the single
currency would force countries to change for the better, to balance their
budgets, to deregulate their labour and product markets and to slash public
spending. Those, after all, are the kind of policies that are required to make
a monetary union work, especially when labour mobility is limited and where
countries can no longer devalue or turn to the printing press in desperation.
Sadly, it didn’t work out in
Europe, as we sceptics had long warned, and it won’t work out either in the
case of a UK-Scotland monetary union of the sort that would be on offer in
2016.
More
English
Tourist: " I'm sorry, waiter, but I only have enough money for the bill. I
have nothing left for a tip."
Highland
Waiter: " Let me add up that bill again sir."
The monthly Coppock Indicators finished January.
DJIA: +202 Down. NASDAQ: +330 Up. SP500: +249 Up. The new Fed bubble continues, but seems to be running out
of momentum.
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