Baltic Dry Index. 1453 -127
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
With Russia’s
Crimea highly likely to vote for a formal return to Russia on Sunday, and with
it triggering economic sanctions against Russia, and the Mutual Assured
Destruction of much of continental Europe, starting next week, Europe’s hapless
Euroserfs have just today and tomorrow to exit the euro for gold and silver,
and in fact anything of tangible value that is likely to last in the coming
sanctions war. America is out beating sanctions war against Russia out of pique,
since its Kiev Coup went so disastrously awry and handed the Crimea back to
Russia. But the USA has little skin in the game. America’s trade with Russia at
risk, amounts to a tiny 40 billion or so, in an economy of over 16 trillion
dollars. In continental Europe there is far more at risk in an Eurozone economy
already on the ropes, or flat out on the floor in Club Med.
Europe would
be crazy to follow America’s lead and impose meaningful sanctions on Russia,
yet that is exactly what Europe’s deluded leaders, led by “the Greats,”
Cameron, Merkel and Hollande, propose. There is a high probability of Europe
starting out on economic suicide, sometime after St Patrick’s Day, Monday March
17th. If Europe slavishly follows America’s lead, the losers will be
Russia, the Ukraine and Europe. The winners will be America and China, which
will probably not go along with sanctions.
Below,
America’s Great Leader sets out another famous “red line.” Russia prepares.
Little wonder Russia, China and much of Asia have been draining the west of its
gold. Before this is all over, I suspect that we will learn just how little
gold is left and how many times, MF Global style it’s been hypothecated. Best
not to bring up yesterday’s slump in the Baltic Dry Index.
"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
Obama Warns Putin of Cost to Russia for Annexing Ukraine
Mar 13, 2014 4:05 AM GMT
U.S. President Barack Obama and the head of Ukraine’s acting government are
making an 11th-hour bid to head off a referendum on Crimea joining Russia with a show
of solidarity and warnings of economic consequences. The U.S. pressed Russia to cancel or postpone the March 16 ballot or at least agree not to implement any annexation vote as Obama met at the White House yesterday with Ukrainian interim Prime Minister Arseniy Yatsenyuk.
Obama warned that unless Russian President Vladimir Putin pulls back, the U.S. and its allies “will be forced to apply a cost to Russia’s violations of international law and its encroachments on Ukraine.”
He also signaled the U.S. may not oppose negotiations with the government in Kiev on “different arrangements” for the autonomous region of Crimea in the future. U.S. Secretary of State John Kerry will meet in London today with his Russian counterpart, Sergei Lavrov, to seek a way forward.
Yatsenyuk said Ukraine will “never surrender” to Russia. In remarks to reporters, he called on Putin to “tear down this wall,” a pointed reference to Ronald Reagan’s message to Mikhail Gorbachev delivered in a 1987 speech just before the collapse of the Soviet Union.
With the approach of the referendum in Crimea on reuniting with Russia, Obama and U.S. allies in Europe are ratcheting up the threat of sanctions if Putin doesn’t take steps to defuse the situation.
The standoff has boiled over into the biggest confrontation between Russia and the West since the end of the Cold War. The U.S. and other members of the Group of Seven countries said in a statement yesterday that Russian annexation of Crimea “could have grave implications.”
More
Russia Said to Be Preparing for Iran-Style Sanctions
Mar 13, 2014 1:24 AM GMT
Russian government officials and businessmen are readying for sanctions
resembling those applied to Iran after what they see as the inevitable annexation of Ukraine’s Crimea
region, according to four people with knowledge of the preparations. Iran-style retaliation from the West, which would include freezing Russia’s foreign reserves, banking assets and halting lending to companies, is being treated as an unlikely worst-case scenario, according to the people who asked not to be identified as the talks are under way. Officials are calculating the cost to the economy, the people said.
Some political leaders are hoping that President Vladimir Putin will moderate his response to the crisis, the people said. A sanctions war, with Russia retaliating against the West, could wipe out 10 years of achievements in financial and monetary policy, one of them said. Such escalation could erase as much as a third of the ruble’s value, another said.
Dmitry Peskov, Putin’s spokesman, declined to comment on the matter.
The Ukraine crisis triggered the worst standoff between Russia and the West since the end of the Cold War after Russian forces seized the Crimean peninsula. German Chancellor Angela Merkel yesterday said a round of European Union sanctions is “unavoidable” if Putin’s government fails to take steps to ease tensions.
More
Below, behold
the state of Europe, with one foot in the grave and America about to kick in
the other.
If
all else fails, immortality can always be assured by spectacular error.
J. K.
Galbraith
Paralysed ECB leaves Europe at the mercy of deflation shock from China
China will seek to pass its deflationary parcel to Europe, the one region that lacks a proper central bank and the governing coherence to protect its own interests
Most of western Europe is already
in outright deflation. So are the Balkans, the Baltic states and the old
Habsburg core.
The Continent has left its flank
open to an external shock from Asia. There is a high chance that this will
occur as China attempts to extricate itself from a $24 trillion credit
misadventure by debasing its currency to regain lost competitiveness and bail
out its export industry.
The yuan has fallen by nearly 2pc
against the dollar since early January, and 4pc against the euro. For all the
talk of weaning China off chronic over-investment, Beijing engineered a record
$5 trillion of investment in fixed capital last year - up 20pc from the year
before, and as much as the US and Europe combined.
This has created a vast overhang
of excess manufacturing capacity in the global system. It is coming our way in
the form of a slow, powerful, deflationary undercurrent.
Europe's headline price data
understate the full deflation risk. Eurostat's HICP index "at constant
taxes" - stripping out the one-off effects of austerity - shows that 23 of
the EU's 28 countries have seen a fall in prices over the past seven months.
"The risk of deflation is definitely before us," said Olivier
Blanchard, the International Monetary Fund's chief economist.
By this measure, inflation since
June has been running at a rate of -1pc in France, -2pc in Holland, Belgium and
Slovenia, -4pc in Italy, Spain and Portugal, -6pc in Greece and -10pc in
Cyprus. Sweden and Switzerland are also in deflation.
Germany rolled over in July. The
UK still clings to a little inflation - now a precious commodity - but it too
turned negative in September.
This is a nightmare for the
debt-stricken states of southern Europe, still trapped in a slump with mass
unemployment regardless of whether they manage to eke out the odd quarter of
miserable growth. With Germany at zero inflation, they have to go into even
deeper deflation to claw back lost competitiveness within EMU under
"internal devaluations".
This, in turn, plays havoc with
debt dynamics through the denominator effect. Their debt loads are rising on a
base of flat or contracting nominal GDP. It is a key reason why Italy's public
debt has risen from 119pc to 133pc of GDP since 2010 despite achieving a
primary budget surplus, or why Portugal's debt jumped from 94pc to 129pc (IMF
data).
These countries have an
impossible task, damned if they do and damned if they don't. Mr Blanchard said
their gains in competitiveness risk being overwhelmed by a rise in the
"real value" of their debt.
More
China Data Show Economy Cooling
Mar 13, 2014 7:36 AM GMT
China’s industrial-output,
investment and retail-sales growth cooled more than estimated in January and
February, signaling an economic slowdown that makes the government’s 2014
expansion target harder to reach. Factory production rose 8.6 percent in the two-month period from a year earlier, the National Bureau of Statistics said today in Beijing, the weakest start to a year since 2009. Retail sales advanced 11.8 percent, the slowest pace for the period since 2004, while the 17.9 percent increase in fixed-asset investment was a 13-year low for the months.
Hong Kong stocks fell and copper extended declines following the data, which came two hours after Premier Li Keqiang indicated he was confident the nation would meet what he said was a flexible growth target of “about” 7.5 percent.
More
We end for
the day with an ominous sign of what is to come to all developed countries just
as many are embarking on economic suicide. Stay long cash, fully paid up
physical gold and silver, and for all but the riskiest of degenerate gamblers,
be out of all leverage risk, for the coming Spring.
N.Z. Raises Key Rate to Become First Developed Nation to Tighten
Mar 13, 2014 5:16 AM GMT
New Zealand raised its key interest rate, the first developed nation
to exit record-low borrowing costs this year, and said it plans to remove
stimulus faster than previously forecast to contain inflation. “It is necessary to raise interest rates toward a level at which they are no longer adding to demand,” Reserve Bank of New Zealand Governor Graeme Wheeler said in a statement in Wellington after increasing the official cash rate by a quarter percentage point to 2.75 percent, as forecast by all 15 economists in a Bloomberg News survey. The Kiwi gained after Wheeler said further increases are likely in coming months and the OCR may rise by a total of 125 basis points this year.
Soaring dairy prices, the NZ$40 billion ($34 billion) rebuild of earthquake-damaged Christchurch and the strongest immigration in 10 years are fueling growth in the South Pacific economy. Wheeler is departing from global peers as surging house prices in the nation’s biggest city of Auckland stoke concerns of a bubble and add to inflationary pressures.
More
"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people."
F. A. von Hayek
At the Comex
silver depositories Wednesday
final figures were: Registered 52.35 Moz, Eligible 130.96 Moz, Total 183.31 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, David Stockman, yes that David Stockman of
Reagan’s “woodshed” fame, skewers the Fed, its talking “Chair,” and the
Keynesian bubble years from 1971 to its bust in 2007. It was a one off debt aberration
that’s over and never coming back, he posits, in this must read article below.
It warns of trying times ahead. Be aware though, the full excellent article is
six pages long.
"In
economics, hope and faith coexist with great scientific pretension."
J. K.
Galbraith.
Yellenomics: The Folly of Free Money
by David Stockman •
The Fed and the other major central banks have been planting time bombs all over the global financial system for years, but especially since their post-crisis money printing spree incepted in the fall of 2008. Now comes a new leader to the Eccles Building who is not only bubble-blind like her two predecessors, but is also apparently bubble-mute. Janet Yellen is pleased to speak of financial bubbles as a “misalignment of asset prices,” and professes not to espy any on the horizon.Let’s see. The Russell 2000 is trading at 85X actual earnings and that’s apparently “within normal valuation parameters.” Likewise, the social media stocks are replicating the eyeballs and clicks based valuation madness of Greenspan’s dot-com bubble. But there is nothing to see there, either–not even Twitter at 35X its current run-rate of sales or the $19 billion WhatsApp deal. Given the latter’s lack of revenues, patents and entry barriers to the red hot business of free texting, its key valuation metric reduces to market cap per employee–which computes out to a cool $350 million for each of its 55 payrollers. Never before has QuickBooks for startups listed, apparently, so many geniuses on a single page of spreadsheet.
Tesla: Valuation Lunacy Straight From the Goldman IPO Hatchery
Indeed, as during the prior two Fed-inspired bubbles of this century, the stock market is riddled with white-hot mo-mo plays which amount to lunatic speculations. Tesla, for example, has sold exactly 27,000 cars since its 2010 birth in Goldman’s IPO hatchery and has generated $1 billion in cumulative losses over the last six years—–a flood of red ink that would actually be far greater without the book income from its huge “green” tax credits which, of course, are completely unrelated to making cars. Yet it is valued at $31 billion or more than the born-again General Motors, which sells about 27,000 autos every day counting weekends.
----The household sector data tell the story of the cheap debt trick which is now over. The relevant leverage ratio here is household debt to wage and salary income, because the NIPA “personal income” metric is now massively bloated by $2.5 trillion of transfer payments—-flows which come from debt and taxes, not production and supply.
As shown below, the ratchet was
powerful. During the 1980-1985 cycle, the household debt ratio jumped from 105%
to 117% of wage and salary income; then it ratcheted from 130% to 147%
during the 1990-1995 cycle; thereafter it climbed from 160% to 190% during
2000-2005; and it finally peaked out at almost 210% at the 2007 peak.
That’s the Keynesian cheap debt
trick in a nutshell: it does not describe a timeless science that can
be applied over and over again, but merely a one-time party that is over. As
shown below, the ratio has now retraced to the 180s, but that’s still high by
historic standards, and more importantly, is the reason that Professor Larry
Summers can be seen on most days sucking his thumb, looking for “escape velocity”
that can’t happen.
The up-ratchet in private and
public leverage ratios is over, and that means that the Keynesian monetary
policy is done, too. It worked for a few decades thru the credit transmission
mechanism to the household sector, but one thing is now certain: the only part
of household debt that is growing is NINJA loans to students and what amounts
to de facto rent-a-car deals in autos, which in due course will lead to a new
pile-up of defaulted paper and acres of repossessed used cars.
Meanwhile, Yellen and her mad
money printers keep “accommodating” as they try to fill to the brim an
imaginary bathtub of potential GDP. The exercise would be laughable, even
stupid, if it were not for its true impact, which is ZERO-COGS. The latter, unfortunately, is
fueling the mother of all bubbles here and abroad; crushing savers and fixed
income retirees; showering the fast money traders and 1% with unspeakable
windfalls of ill-gotten “trickle-down”; and placing control of the very warp
and woof of our $17 trillion national economy in the hands of unelected,
academic zealots.
The worst thing is that
Yellenomics is just getting started because the whole crony capitalist dystopia
that has become America can not function for more than a few days without
another dose of its deadly monetary heroin.
More
You will find that the State is the kind of organization which,
though it does big things badly, does small things badly, too.
J. K.
Galbraith.
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