Baltic Dry Index. 904
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
Politics
is the art of looking for trouble, finding it everywhere, diagnosing it
incorrectly and applying the wrong remedies.
Jean-Claude
Juncker with apologies to Grouch Marx.
Today, we focus on
when things go wrong, but don’t expect reality to interfere with the Fed
promoting the biggest stock market bubble of all time. Up first, the latest disastrous
news from the Middle East. Is the war about to spill into Jordan? Does the West
has any policy at all? Stay long fully paid up gold and silver. The answers
might just be yes and no. Washington seems to have written off Syria, Iraq and
Jordan.
Militants Seize Iraqi Town Near Border With Jordan
Jun 22,
2014 10:43 PM GMT
Gunmen fighting Iraqi forces seized more territory along the country’s
borders with Jordan and Syria, as President Barack Obama
warned that advances by militants could spill over into neighboring countries. Fighters from the Islamic State in Iraq and the Levant, an al-Qaeda breakaway group, took all the border crossings with Jordan and Syria, Hameed Ahmed Hashim, a member of the Anbar provincial council, said by telephone yesterday. Militants took Rutba, about 145 kilometers (90 miles) east of the Jordanian border, Faleh al-Issawi, the deputy chief of the council, said by phone. Anbar province in western Iraq borders both countries. The Jordanian army didn’t immediately respond to a request for information about the situation on the border.
Obama told CBS in an interview that will be aired in full today that the fighting could spread to “allies like Jordan.” The militants “are engaged in wars in Syria where -- in that vacuum that’s been created -- they could amass more arms, more resources,” the president said, according to a transcript.
More
Tearful Flight of Iraq Deserter Shows Challenge for Routed Army
Jun 22, 2014 10:11 PM GMT
Iraqi soldier Shaalan Abdel-Wahab says he was ready for a battle to the
death to defend the northern city of Mosul from Islamist militants: “We either
kill them or get killed.” That changed on a day of fighting on an empty stomach, as food and reinforcements failed to arrive while attackers from the Islamic State in Iraq and the Levant struck with an explosive-laden truck, followed by heavy gunfire. For Abdel-Wahab, the last straw came with word that senior commanders had fled. He soon joined the soldiers shedding their uniforms and melting away, overrun by the al-Qaeda breakaway group.
“Our morale collapsed and we lost the motivation to fight,” the 25-year-old Sunni Muslim said in a phone interview last week from the Kurdish-controlled part of northern Iraq, which he says he reached after hiking for hours with tears pouring down his face. “If there’s a strong Iraqi army, why didn’t it come for Mosul, and how come more areas have fallen? There is no more hope in the army.”
His despair shows the challenge ahead for Iraq to rebuild a military that wasn’t able to defend the strategic prize of Mosul from the Islamists, even after U.S. training and billions of dollars of support. Calls by Prime Minister Nouri al-Maliki and Shiite religious leaders for volunteers to take up arms risk embedding the sectarian tensions more deeply within the armed forces.
More
Iran rejects U.S. action in Iraq, ISIL tightens Syria border grip
By Kamal Namaa ANBAR Iraq
(Reuters) - Iran's supreme leader accused the United States on Sunday of
trying to retake control of Iraq by exploiting sectarian rivalries, as Sunni
insurgents drove towards Baghdad from new strongholds along the Syrian border.Ayatollah Ali Khamenei's condemnation of U.S. action came three days after President Barack Obama offered to send 300 military advisers to help the Iraqi government. Khamenei may want to block any U.S. choice of a new prime minister after grumbling in Washington about Shi'ite premier Nuri al-Maliki.
The supreme leader did not mention the Iranian president's recent suggestion of cooperation with Shi'ite Tehran's old U.S. adversary in defense of their mutual ally in Baghdad.
On Sunday, militants overran a second frontier post on the Syrian border, extending two weeks of swift territorial gains as the Islamic State of Iraq and the Levant (ISIL) pursues the goal of its own power base, a "caliphate" straddling both countries that has raised alarm across the Middle East and in the West.
"We are strongly opposed to U.S. and other intervention in Iraq," IRNA news agency quoted Khamenei as saying. "We don’t approve of it as we believe the Iraqi government, nation and religious authorities are capable of ending the sedition."
Some Iraqi analysts interpreted his remarks as a warning to the United States not to try to pick its own replacement for Maliki, whom many in the West and Iraq hold responsible for the crisis. In eight years in power, he has alienated many in the Sunni minority that dominated the country under ousted dictator Saddam Hussein.
More
Britain and US 'neglected alert to Iraq jihadist takeover’
Head of Kurdish intelligence in Iraq says MI6 and CIA were warned of impending Isis-Baathist attack on Mosul and Baghdad but British and US governments failed to act
MI6 and the CIA were handed intelligence outlining the planned takeover of northern Iraq by jihadists and their allies five months ago but the British and American governments failed to act on it, senior officials in Iraq have told The Telegraph.The head of intelligence for the autonomous Kurdish regional government, which has links with the West, said he had repeatedly tried to send warnings both to the central government in Baghdad and to its allies, Britain and America.
But despite repeated attempts to impress on Washington and London the seriousness of the unfolding situation, he said there was no response from either government.
President Barack Obama on Sunday
rejected fresh calls for early intervention in Iraq, saying: “What
we can’t do is think that we’re
just going to play whack-a-mole and send US troops occupying various countries
wherever these organisations pop up.”
The Kurds are trying to force the
West to intervene again to protect them from the jihadi threat sweeping across
the region. The Kurdish regional government’s autonomy is partly due to
American and British intervention to provide military cover for their campaign
against Saddam Hussein’s Iraq in the early Nineties after the first Gulf War.
“I have completely lost hope in
America after listening to President Barack Obama,” the head of Kurdish
intelligence, Lahur Talabani, said
More
Next, today’s update from the Ukraine, which is expected to
be high on the agenda at this week’s coming EU summit. I suspect that we will
soon see a lot more action like this.
Ukraine railroad blown up, Russian train derails (PHOTOS, VIDEO)
Published time: June 23, 2014 03:42
The railroad tracks in Ukraine’s
Donetsk Region have been blown up as a freight train belonging to Russian
Railways was passing by. Fourteen freight cars were derailed, with Russian
Railways employees on the train avoiding injuries.
The explosion happened on Sunday
evening damaging the railroad tracks on a stretch between Ilovajs and
Kuteynikovo, Russian Railways said in a statement.
As a result of the incident 14
cargo cars derailed. The locomotive crew of the North Caucasian railway was not
affected, the company said.
The tracks are now being repaired
by Ukrainian Railways staff, while all the trains have been redirected.
In the meantime another blast
occurred on the Ilovajsk-Mospino stretch, damaging concrete sleepers and
breaking rails, Ukrainian railways said in a statement. The circumstances of
the incidents are being investigated it added.
More
Now an example from Germany of what can go wrong on
an epic scale. The tale of Berlin’s new unused airport, where the lights stay
on 24 hours a day despite no passengers, and costs have soared from two billion
euros to 5.4 billion euros and counting. Four, yes four years behind opening
schedule, the new Berlin airport is the face of the modern, dumbed down 21st
century EUSSR. How not to plan, finance and build, a ghost airport. Below, Der
Spiegel on the airport project from hell. No telling yet if the baggage
handling system works.
For
every complex problem there is an answer that is clear, simple, and wrong.
H. L.
Mencken.
Mayday: Berlin's Ill-Fated Airport Faces Insolvency
By Christoph Pauly and Andreas
Wassermann June 20, 2014 – 03:40 PM
After countless delays,
technical problems and cost overruns, the German capital's troubled new
airport faces another obstacle: It is running out of money. With the current
CEO refusing to give detailed plans, it seems likely taxpayers will have to
foot the bill.
Hartmut
Mehdorn, CEO of Berlin's still unfinished
new airport,
isn't one for transparency. "This isn't a sandbox where everyone can just
snoop around," he said in March. In other words, comptrollers looking into
his project's finances are decidedly unwelcome, and indeed, when federal
auditors from the Bundesrechnungshof, Germany's Federal Court of Auditors,
recommended an independent audit, Mehdorn wanted none of it, and the public
officials backed down.
But because the EU provided some of the funding for the
problem-plagued airport, the 71-year-old Mehdorn was unable to prevent comptrollers
from the European Court of Auditors from digging around in his sandbox last
year, in an effort to find out what had happened to that money.
Now, the group has completed a report critical of the multi-billion euro project in Berlin. Even the cover letter addressed to Siim Kallas, the European Commission vice president responsible for the Mobility and Transport portfolio, notes "manifold errors" and a "weakness of management and monitoring systems."
Generally, the European Commission reacts to these kinds of findings by demanding that its subsidies be reimbursed, which would mean that Berlin's airport consortium, already short of cash, might be forced to send €30 million ($41 million) back to Brussels.
Additional consequences could also be in the offing for the project's future financing. Mehdorn may soon have to defend the recent approval of almost a billion euros in additional state funding before the European Commission. It is difficult to imagine Brussels simply rubber-stamping the new subsidies.
For months, Mehdorn and his team
have been insisting that the airport's recalcitrant fire safety system was the
only hurdle remaining before the facility can open. But now, people's attention
has returned to the airport's financing, and it looks as though the airport
consortium's money problems are at least as significant as its technical
difficulties.
Mehdorn, who took over the
airport project at the beginning of 2013, has still not presented a realistic
prognosis on what the final price tag might be. Banks have stopped providing
financing for the project and even payouts on existing loans have been frozen
absent reliable figures
More
Anything Germany can do, we can do bigger and
better and more often, says America. But we’ll let
America’s hidden genius David Stockman take up the case of GM, Government
Motors. When something truly massive goes wrong and gets covered up for years,
blame and fire the lowliest engineer on the stepladder. Welcome to the 21st
century.
“If
there is a possibility of several things going wrong, the one that will cause
the most damage will be the one to go wrong first.”
Anon.
The Stench Of Crony Capitalist Corruption At GM
by David Stockman • June 20, 2014
So GM is now trying to blame its
ignition switch safety scandal on a low-ranking “lone wolf” engineer. That
doesn’t even merit an “oh puleese”! Instead, it deserves scorn, derision and
sharp poke in the eye.
The fact is, no “lone wolf” has
ever survived long enough to collect a single paycheck at General Motors
anytime during the last century. It has always been the ultimate corporate
bureaucracy ever since the legendary Alfred P. Sloan Jr. organized it that way
back in the 1920s.
After all, GM did originally
master the art of mass production. You don’t roll-off the assembly line 1500
cars in one day from a three shift operation without layers upon layers of
management, and without procedural manuals and operational paper flows that in
the pre-computer era took down a good sized forest every month.
---- Business meetings at GM were held in small auditoriums. Even mid-ranking executives were accompanied by a posse of aides every step of the day. And the layers of bureaucratic approval were so dense and deep that it is amazing that the GM monster actually functioned—so sclerotic had its bureaucratic arteries become after the temporary boom of the 1990s.
But nowhere in the vast
expanse of GM did bureaucratic layering and encrustation reach a more absurd
level than in its so-called PPAP (“production parts approval process”)
procedures—– a regime that governed every waking move of the tens of
thousands of executives and functionaries that compromised its purchasing and
engineering departments.
---- But this episode is not about culpability for one failed part—especially since it now appears that GM is close to achieving the recall of every single car it has ever made in the last several decades. The real issue is the corruption of crony capitalism.
An out-of-control, dysfunctional,
dangerous, red-ink bleeding industrial dinosaur like GM should have been
put out of its misery in Chapter 11 in 2008. After all, folks, GM did
manage to loose the stunning sum of $85 billion during the five years leading
up to 2008, and it did so after selling 35 million vehicles at total revenues
of nearly $1 trillion. No industrial managers have ever—before or
since—managed to accomplish such an economic fiasco.
----The GM recovery was no
miracle of statist intervention. It was a travesty on capitalism and the
taxpayers of America. And the unraveling is just getting underway. Just
wait until its junk-bond financed sales to sub-prime borrowers collapse and it
uses up the tens of billion of phony “fresh start” cookies jar reserves
provided by its quick rinse bankruptcy.
GM is an ugly mess–made all the
more so by an ugly government bailout that has destroyed the last vestiges
of accountability and honesty in American capitalism.
More
We close for today with Asia. China issues yet another
warning to Japan, but one specifically aimed at Washington. But is anyone listening in Tokyo or Washington? And anyway, didn’t President Obama already give
Tokyo a blank cheque?
Senior Chinese military official warns against Japanese militarism
BEIJING, June 22 (Xinhua) -- A senior Chinese military official said on Sunday that all peace-loving people should keep alert about Japan's further inclination toward a wrong and dangerous path and the revival of its militarism.Sun Jianguo, deputy chief of the General Staff of the People's Liberation Army, made the comment at a luncheon during the Third World Peace Forum (WPF) at Tsinghua University in Beijing.
"All the countries should learn from history and aspire for peace and development, rather than clinging to outdated ideas or going against the tide of history," Sun said.
Instead of repenting and correcting the country's past invasion, Japan's right-wing leaders blatantly visited the Yasukuni Shrine honoring 14 Class-A war criminals in World War II, Sun said.
He listed Japan's attempts to deny history, including revising school textbooks and reviewing Kono statement over wartime sex slavery, revising its pacifist constitution and exercising the rights to collective self-defense.
"Japan is intensifying military buildup to break the post-war order," he said, adding that it stirred up island disputes with neighbors to deliberately escalate regional tension.
Japan's moves have sparked opposition from home and neighboring Republic of Korea (ROK).
Abe's administration, by revising constitution, hopes to break away from the post-war order in the end, said Haruo Nishihara, former president of Waseda University in Japan.
----Academics voiced anxiety about Japan's political security development. "The year 2015 marks the 70th anniversary of the end of World War II but Japan is on its way to becoming a nation that can fight wars," said Li Wei, a Chinese researcher on Japanese studies.
Once Japan exercises the rights to collective self-defense, Japan will be able to send troops overseas and fight wars, which sends an alarming signal to neighboring countries, said Wang Taiping, former Chinese Consul General to Osaka of Japan.
For China and Japan, it means the East China Sea tension may escalate, Wang added.
China and the United States have no reason for military confrontation. However, He Yafei, deputy head of the Overseas Chinese Affairs Office of the State Council, expressed concern about the possibility that the two powers might be dragged into conflict by a third party, as Japan is trying to change the status quo and challenge post-war order.
More
Will this be the
week reality intrudes in stocks?
"The history of paper money is an account of abuse, mismanagement, and financial disaster."
Richard M. Ebeling
At the Comex silver depositories Friday final figures were: Registered 57.05 Moz,
Eligible 117.42 Moz, Total 174.47 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, more on China’s growing MF Global scandal.
"Commodities
trading is the art of hypothecating inventory from bank to bank until it
finally disappears."
With
apologies to Robert W. Sarnoff
June 19, 2014 6:23 AM
Probe May Hit China's Imports of Copper, Iron Ore
Traders Report Disruptions to Trade
BEIJING—China's imports of copper
and iron ore may drop due to an alleged financing scandal, as banks withhold
credit and customs officials tighten checks on incoming shipments, metals
traders say.
Western banks are looking into
allegations that a Chinese trading company illegally pledged metals as
collateral to more than one lender. The operator of Qingdao Port, the eastern
Chinese port where the metals are stored, has confirmed that Chinese
authorities are investigating allegations of fraud relating to stockpiles of
metals.
China's government hasn't commented publicly.
Traders have used metals as collateral to bring some $110 billion into China since 2010, Goldman Sachs Group Inc. estimates. Traders who import the metal use the commodity to secure loans from abroad.
That trade, which allows people to take advantage of the fact that interest rates in China are higher than on the offshore loans, is a legal way to circumvent China's capital controls. It has helped keep metal import volumes high even as China's economic growth has slowed.
Now, traders say, there are a number of disruptions to this trade related to the ongoing probe and China's efforts to tamp down big capital inflows that have fueled rapid credit growth.
Customs officials are taking longer to clear metal imports since the allegations of fraud emerged, traders say. "Customs are taking anywhere from 15 to 20 days to up to a month to clear shipments of copper cathodes. Earlier, it used to take seven to 10 days," said a Qingdao-based metals trader.
Customs officials weren't immediately available to comment.
Authorities were worried about the pace of growth of metals-backed financing even before the current allegations. In April, regulators raised concerns with local governments about the practice. That sent shivers through the market, traders said. In May, iron-ore imports fell 7% from the previous month, while copper imports tumbled 16%.
Imports in the months ahead could be even weaker, traders say. Many banks are starting to withhold letters of credit that are used in commodities financing, they add.
"Things are getting worse and worse. Imports have shrunk in May. It could fall even further in June and July," said an executive with a Hong Kong-based commodities trading company. "Already, people are finding it very difficult to open letters of credit for import of copper and other metals in banks in China."
An estimated one-third or more of Chinese metal imports are believed to be used as collateral for loans from China's "shadow banks," a vast network of loosely regulated lenders. Rather than being used to meet actual demand, these stocks are imported into so-called bonded zones, areas where import taxes don't apply, and re-exported when they are no longer needed as collateral.
China is the world's largest importer of many commodities. Its imports represent one of the most closely watched indicators of economic activity in the world's second-largest economy.
Copper stocks in bonded zones nationwide stand at around 800,000 metric tons, said Li Chunlan, a Beijing-based analyst with the metals consultancy CRU Group. At current prices, that is worth about $5.4 billion.
The premium over spot copper prices buyers must pay to get metal for immediate delivery from Shanghai warehouses has shrunk to $70 a ton, down by more than half from around $185 in December, a signal that more people want to sell rather than hold the stocks, said the Hong Kong-based executive.
Three-month copper prices on the London Metals Exchange are down nearly 10% since the start of 2014. After news of the probe emerged two weeks ago, prices fell sharply but have remained mostly flat in recent days.
Some traders say imports could fall more sharply beginning in August. That is because purchases are made in advance: Problems with financing now would take a couple of months to show up in lower shipments.
Helen Lau, senior analyst with UOB Kay Hian, a Singapore investment and securities-trading company, said prices could fall further if traders are forced to sell collateral to repay loans, dumping metals onto the market.
More
"For more than two thousand years gold's natural qualities made it man's universal medium of exchange. In contrast to political money, gold is honest money that survived the ages and will live on long after the political fiats of today have gone the way of all paper."
Hans F. Sennholz
The monthly Coppock Indicators finished May
DJIA: +181 Down. NASDAQ: +340 Down. SP500: +246 Down. Crisis? What crisis?
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