Friday 29 August 2014

The Botched US Coup in Kiev.

Baltic Dry Index. 1119  +56  

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

"Never, never, never believe any war will be smooth and easy, or that anyone who embarks on the strange voyage can measure the tides and hurricanes he will encounter. The statesman who yields to war fever must realize that once the signal is given, he is no longer the master of policy but the slave of unforeseeable and uncontrollable events."

Winston S. Churchill.

Is someone lining up bulk shipping ahead of war?

So far the big winner in Obama and the American War Party’s botched coup in Kiev has been Putin’s Russia. It wasn’t meant to be this way. By now the Ukraine was supposed to be a tame western puppet state, stuffed to the gills with Victoria “fuck the Europeans” Nuland’s hand-picked American placemen. By now the puppet regime was supposed to be well on its way to EU and NATO membership, setting off collapse in Russia and Belarus, undermining the Shanghai Cooperation Organisation and effectively isolating China. A slam dunk for the American War Party. But Mr Putin was ready for their reckless misadventure.

Instead the coup got taken over by Kiev neo-Nazis and anti-semite parties, whose militia forced the legitimate, if corrupt, elected President to flee. Putin got back the Crimea and as a bonus, seized most of the Ukraine’s rusting navy. The militias had to be quickly converted into oligarch sponsored auxiliary army units, unleashed on the separatist east Ukraine. They wanted no part in the US imposed government of Kiev. A very uncivil war now rages in the east of the Ukraine, with America now crying crocodile tears that Russia in interfering in the east like Reagan’s CIA once did Afghanistan. Who in dumbed down Foggy Bottom knew that Russia might do a thing like that!

In an effort to salvage something from this growing fiasco and war, that still might lead to World War Three, Uncle Scam and John Bull imposed sanctions on Russia, and demanded that everyone else do the same. With almost nothing to lose if Russia retaliated, team Anglo-America thought it had another slam dunk. Suicidally, a continental Europe on the cusp of another recession went along. “Out of the blue” Russia retaliated, sending continental Europe’s dairy and produce exporters heading towards bankruptcy, German auto and industrial exporters into a massive slowdown. The EU itself probably into a new recession followed by a depression. If team Anglo-America succeeds in getting France’s Russian warship deal sunk, sending thousands of French workers to the scrapheap of mass unemployment for life, expect a very anti-EU, anti-American Marine le Pen as the next French President.

This morning we take another look at what the botched coup has brought so far. I think that continental Europe needs to prepare for a new Great Depression and war. The end of the EU as we know it.  Once again western main stream media is conditioning the public via War Party spin. Sooner or later they seem likely to get their wish.

"Get a good night's sleep and don't bug anybody without asking me."

President Obama, with apologies to Richard Nixon.

‘Golden Sanction’ to Halt Putin in Ukraine Stays Elusive

Aug 29, 2014 1:40 AM GMT
As Russian-backed separatists advance in southeastern Ukraine, the U.S. and European Union are still searching for a sanction that can force Vladimir Putin to stop and think again.

More than 1,000 of the Russian president’s troops are operating inside Ukraine, manning sophisticated weaponry and advising local separatists, the North Atlantic Treaty Organization said yesterday. The escalation, denied by Russia, prompted a warning of “consequences” from U.K. Prime Minister David Cameron, and German Chancellor Angela Merkel said EU leaders would discuss new sanctions this weekend.

----There have been many attempts over many years to find the silver bullet, or golden sanction, and I’m pretty convinced it doesn’t exist,” said Gary Hufbauer, a sanctions specialist at the Peterson Institute for International Economics in Washington. “What does exist are very, very heavy sanctions. That’s not what the U.S. and western Europe are doing.”

So far, the sanctions effort has failed, former U.S. Treasury and State Department officials say. New measures would have to strike more deeply and broadly, hitting Russia harder and bringing unavoidable economic pain to Europe, and to a lesser extent the U.S., they said, speaking on the condition of anonymity to discuss internal policy deliberations.

----“The sanctions that we have already applied have been effective,” Obama told a press conference in Washington yesterday. He said he plans to discuss “additional steps” with allies in Europe when he travels there next week. “I think there are ways for us to deepen or expand the scope of some of that work.”

----Cutting off natural-gas imports from Russia would double the energy cost for western European residences and factories that run on the fuel, the Peterson Institute’s Hufbauer estimated. That would be a heavy burden on a stagnant economy with unemployment that remains higher than 10 percent.

Is It War? Ukraine Conflict Definition Softens in West

Aug 28, 2014 10:03 PM GMT
For governments in the Baltic states of Latvia and Lithuania, Russia has invaded Ukraine and the two countries are now at war. Head further west, and they’re less sure what to call it.

While all agree that a line has been crossed, U.S and NATO officials prefer to speak of an “incursion,” the word used by President Barack Obama at a White House press conference yesterday. French and German leaders have warned President Vladimir Putin of further sanctions without defining what Russian forces have done.

“In the past 48 hours, we have tipped into a formal invasion,” Ian Bremmer, president of the Eurasia Group, said in a Bloomberg television interview. “Russia and Ukraine as sovereign countries are now at war and it’s going to be very difficult for the United States and Europe to deny that reality.”

Calling it war or an invasion would force the U.S. and European Union to consider steps they’ve been unwilling to take, short of military action, Bremmer said. While sanctions have been imposed on some areas of the Russian economy, Europe continues to rely on Russia for natural-gas imports and Russian trade with the EU was worth about $390 billion last year.


Putin Has Changed the Game in Ukraine

Regular Russian troops are fighting in Ukraine, and it's a whole new game.

The capture of Russian paratroopers in eastern Ukraine, and the quiet burials of other Russian solders, provided enough evidence that the nature of the conflict had changed. Now, though, Ukrainian President Petro Poroshenko has officially announced that "Russian troops were actually brought into Ukraine."

A second front has been opened against the Ukrainian army in the rebellious Donetsk region. The Ukrainians were forced to give up the town of Novoazovsk on the Sea of Azov, not far from the strategic port of Mariupol, used by Kiev as the supply base for its anti-rebel operation. Ukrainian military commanders say Russian troops entered the town. Although such claims have been made before, there's more reason than ever to believe them today.

It's highly unlikely that the pro-Russian rebels, whom the better-equipped Ukrainian troops had confined to the cities of Donetsk and Lugansk, could have suddenly showed up at the Ukrainians' rear and attacked the seaside towns. The North Atlantic Treaty Organization, which had never before accused Russia of sending in troops, now says there are at least 1,000 Russian service members fighting in Ukraine.

Judging from anecdotal information about troops' funerals and from reports from the Russian Soldiers' Mothers' Committee, the Russian troops are elite airborne units. They will be the most formidable opposition the Ukrainian military has faced since the conflict began five months ago -- a far cry from the untrained local separatists, assorted war re-enactment enthusiasts and nationalist fanatics they've dealt with so far.

By rotating a few thousand elite troops in and out of Ukraine, the Kremlin can keep up the fighting indefinitely. Now that Russia's direct involvement is getting impossible to deny, a broader invasion becomes a possibility. Ukraine's understaffed, undertrained forces would be no match for the Russian army, in which Russian President Vladimir Putin has been making a major investment. In 2013, Russia was the third biggest defense spender globally, after the U.S. and China.

----If Putin ever cared about Western reactions, he no longer does. His continuing denials of Russian involvement are a mocking ritual, a sign of unwillingness to negotiate rather than a nod to international pressure.

"All these sanctions were like poultices for a dead man," a distraught Yatsenyuk said today. "They did not help." He called for the West to freeze Russia's assets and financial transactions to force it to withdraw. The West, however, is unlikely to go that far. The sanctions have already contributed to economic contraction in Germany, and Europe cannot afford much more pain. Military aid is not an option: There is no country in the world where voters would back a war with Russia.

Finland Puts Fighter Planes on Alert as Russia Violates Airspace

Aug 29, 2014 6:12 AM GMT
Finland’s government said its fighter jets were ready to intercept foreign aircraft after Russian planes repeatedly violated the northernmost euro member’s airspace.

A Russian Antonov AN 72 transport plane crossed the Finnish border yesterday at about 12:08 p.m. local time near Porvoo on the Gulf of Finland, the government in Helsinki said. Russian state aircraft are also suspected of two other airspace violations on Finland’s south coast since Aug. 23.

“It shouldn’t be a surprise to anyone that they don’t respect borders,” Charly Salonius-Pasternak, senior researcher at the Finnish Institute of International Affairs, said by phone. “At a minimum, the Russian air force is acting carelessly and that they do so is more and more serious, taking into account the general international and European security situation.”

Russian Recession Risk Seen at Record High Amid Sanctions

Aug 28, 2014 2:00 PM GMT
The chance of Russia’s economy tipping into a recession is rising as the escalating crisis in Ukraine raises the risk of the government in Moscow retaliating with further import bans, according to a survey of analysts.

The probability of a recession in the next 12 months rose to 65 percent from 50 percent, the highest since the first such Bloomberg survey in June 2012, according to the median estimate of 26 economists in the poll. Russia will enact additional restrictions in retribution for sanctions imposed by the U.S. and the European Union, according to 15 of 25 economists. Of those, 12 expect Russia to target cars and consumer goods.

We end for the week with how British voters were tricked into staying in what went on to become the EUSSR. Think we are getting the truth now about the Ukraine.

"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

How Harold Wilson was warned Europe threatened British democracy

Harold Wilson was urged to warn the British people that European membership would be a "gross infringement of sovereignty", Cabinet minutes from 1975 show

Britain's membership of the European Community presented a “gross infringement of sovereignty” and a “serious attack on Parliamentary democracy,” Cabinet ministers warned ahead of the only referendum on Brussels given to the public, newly uncovered papers reveal.

Harold Wilson, then the Labour Prime Minister, was told choosing to stay in Europe would represent a “dismemberment of the authority of the House of Commons”, minutes of a Cabinet meeting show.

In a meeting three months before the 1975 referendum, Mr Wilson was urged by his ministers to inform the British people that membership would seriously compromise Britain’s ability to govern itself.

In the event, the Government’s official pamphlet explaining the referendum gave no such warning – and instead assured voters that the “essence of sovereignty” would be protected by staying in.

Business for Britain, the campaigning group which uncovered the minutes, said the episode was a warning that the public could be misled again as David Cameron embarks on a renegotiation of Britain’s EU membership, ahead of an in-out vote in 2017

"War, which used to be cruel and magnificent has now become cruel and squalid."

Winston S. Churchill.

At the Comex silver depositories Thursday final figures were: Registered 60.58 Moz, Eligible 118.71 Moz, Total 179.29 Moz.  

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.

We have reached the end of the British summer, and my countrymen and women get to vote next month on whether to remain in the Union of Great Britain and Northern Ireland, or whether to exit and go independent. Exiting, daringly or irresponsibly, takes them out of the European Union also, as there’s no automatic entry provision to the EU. While I think that Scotland can prosper whichever way it votes, I also think that Scotland will prosper more inside both Unions, rather than outside wishfully looking in. As a very small offshore part of Europe, Scotland’s voice in the EU, if they were eventually readmitted, would carry about the same weight as Estonia, but without the need for help in keeping the Russian bear away.

As for rUK (rumpUK,) I think it would prosper too, saving on the need to subsidise Scotland, and largely pay for its civil service, railways, pensions and defence. With Scotland gone and out of the EU, rUK’s EU contribution would diminish too, another plus. Hopefully, the sick BBC New Labour Licence Fee tax would be reduced as the Scots get to pick up the cost of BBC Scotland in all of its forms, including the almost unwatched BBC Alba TV in Gaelic.  Most of the few viewers have to turn on the English sub titles if they watch anyway. Watching the great exodus back north of all those BBC Scottish loony lefties from London, is another added bonus well worth urging them to vote YES.

For your weekend amusement and idle pastime, the history of Clan Irvine and their ilk, to which I suppose I must be one of the more obscure, undistinguished, and poorer members. Not being a Laird of any description, I have not so far been summoned to fight the English or anyone else. Nearing 65, I think I would follow the lead of my brave, ferociously voiced Border Collie Rosie, when danger looms, and follow her in flight. It is after all, how Clan Irvine survived the Scottish rout to the Germans at Culloden in 1746.

Clan Irvine

Clan Irvine is a Lowland Scottish clan.
Sometime between 1124 and 1125 Gilchrist, son of Erwini, witnessed a charter of the Lords of Galloway.[5] The first lands by the name of Irvine were in Dumfriesshire.[5] According to family tradition the origin of the clan chief's family is connected with the early Celtic monarchs of Scotland.[5] Duncan Irvine settled at Bonshaw.[5] Duncan was the brother of Crinan, who claimed descent from the High Kings of Ireland, through the Abbots of Dunkeld.[5] Crinan married a daughter of Malcolm II of Scotland and their son was Duncan I of Scotland.[5]

William de Irwin was a neighbour of the Clan Bruce.[5] The Irvines supported their powerful neighbors, the Bruces, and William de Irwin became the armour bearer and secretary to king Robert the Bruce.[5] For twenty years of faithful service William de Irwin was granted the royal forest of Drum, in Aberdeenshire, as a reward.[5] This then became the seat of the chief of Clan Irvine.[5] There was already a tower at Drum which was built before the end of the 13th century as a royal hunting lodge.[5] From this grew Drum Castle, seat of the chief.[5]

Origin of the crest badge - "Robert Bruce, who, when a fugitive from the court of Edward I., concealed himself in the house of William De Irwin (William Irvine), his secretary and sword-bearer. William De Irwin followed the changing fortunes of his royal master; was with him when he was routed at Methven ; shared his subsequent dangers ; and was one of the seven who were hidden with him in a copse of holly when his pursuers passed by. When Bruce came to his own again he made him Master of the Rolls, and ten years after the battle of Bannockburn, gave him in free barony the forest of Drum, near Aberdeen. He also permitted him to use his private badge of three holly leaves, with the motto. Sub sole sub umbra virens, which are still the arms of the Irving family." - Ref: The Kaaterskill edition of Washington Irving.[6]

15th century and clan conflicts

Clan Irvine was often at feud with the neighbouring Clan Keith. Both clans invaded each other's lands. In 1402, Clan Irvine is said to have slaughtered an invading war party of Clan Keith at the Battle of Drumoak.[7]

The third Laird of Drum was Alexander Irvine, who was the first in a line of twelve Irvines who successively bore the name Alexander.[5] He was said to be a knight of legendary prowess and followed the Earl of Mar to the wars in France.[5] He later fought at the Battle of Harlaw in 1411, which was fought only twenty miles away from Drum itself.[5] At Harlaw Alexander Irvine engaged in single combat with the famous Hector Maclean of the Battles, chief of the Clan Maclean.[5] Both are said to have died from wounds that they inflicted on each other.[5] This is commemorated in a ballad about the battle as "Gude Sir Alexander Irvine the much renounit Laird of Drum".[7]

16th Century & Anglo-Scottish Wars

The next Laird of Drum was a prominent figure in the negotiations to ransom James I of Scotland from the English and when the king was released de Irwyne was knighted.[5] When the king was murdered in Perth, Sir Alexander Irvine took control of the city of Aberdeen to restore order.[5]

The sixth Laird of Drum and chief of Clan Irvine was a peacemaker, and was rewarded by King James V of Scotland for his efforts to suppress rebels, thieves, reivers, sourcerers and murderers in 1527.[5][7]
During the Anglo-Scottish Wars the sixth Laird's son was killed when the clan fought against the English at the Battle of Pinkie Cleugh in 1547.[5][8]

17th Century and Civil War 

Drum Castle, seat of the chief of Clan Irvine, that was attacked twice during the Civil War.

During the Civil War, the royalist Irvines supported Charles I.[5] However the Irvines lived in a mainly Covenanter district and Drum Castle was therefore an obvious target.[5] The castle was attacked when the Laird of Drum was absent by a strong force that surrounded it with artillery.[5] Lady Irvine surrendered and the castle was then looted.[5] The Laird of Drum's two sons both fought in the civil war and were both captured.[5] The younger son, Robert, died in the dungeons of Edinburgh Castle, however his brother, Alexander, was freed after James Graham, 1st Marquis of Montrose's victory at the Battle of Kilsyth in 1645.[5] Drum Castle was again attacked, ransacked, the ladies of the house were ejected and the estate was ruined.[5]

18th Century and Jacobite risings

During the Jacobite rising of 1715, the fourteenth Laird of Drum supported the Jacobite cause and fought at the Battle of Sheriffmuir in 1715 where he received a severe head wound.[5] He never recovered from the wound and after years of illness died leaving no direct heir.[7] The estate then passed to his uncle, John Irvine and then onto another kinsman, John Irvine of Crimond.[5]

During the Jacobite rising of 1745 the Clan Irvine continued their support for the Jacobite Stuarts and fought at the Battle of Culloden in 1746.[5] The Laird of Drum escaped capture by hiding in a secret room at Drum Castle.[5] He then lived for a few years in exile in France until he was allowed to return to his estates.[5]

From the Orwellian thoughts of Chairman Salmond:

“No one believes more firmly than Comrade Salmond that all Scots are equal. He would be only too happy to let you make your decisions for yourselves after independence. But sometimes you might make the wrong decisions, comrades, and then where should we be?

Have a great weekend everyone.

The monthly Coppock Indicators finished July.

DJIA: +157 Down. NASDAQ: +318 Down. SP500: +232 Down.  The Fed’s final bubble has taken on a very scary wobble, but this is nothing compared to the return of real interest rates at some point ahead.

Thursday 28 August 2014

How Bubbles Used To Be.

Baltic Dry Index. 1063  -07  

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

Since I can’t do an update this morning due to other commitments, today a look back at how it used to be when bubbles burst. In 1825 the Government repealed the Bubble Act created after the South Sea Bubble of 1720. Joint stock companies became legal again. Then came the “internet bubble” of its era, the arrival of railways. Today, step forward George Hudson, “The [UK] Railway King.”

But first this.

Christine Lagarde under investigation in fraud case; German consumer confidence hit by geopolitical fears - business live

Wednesday 27 August 2014 14.02 BST
There are new concerns over the strength of the eurozone economy, after a stream of disappointing economic news.

German consumer confidence has been hit by the escalating tensions with Russia, the unrest in Iraq, and the conflict between Israel and Gaza.

Economic expectations have tumbled at their fastest rate in at least 30 years, with pollsters warning that the economy has shifted down by a couple of gears.

Italian consumer confidence has also fallen, with citizens more gloomy about its prospects. Matteo Renzi’s government is expected to cut its growth forecasts soon, according to its economy minister.

And industrial confidence in France has dipped, a reminder of the challenges facing Francois Hollande’s new government.

"There is no reason whatever to fear a crash".

Charles Mackay. 2 October 1845, Glasgow Argus, on Railway Mania.

Railway Mania

Railway Mania was an instance of speculative frenzy in Britain in the 1840s. It followed a common pattern: as the price of railway shares increased, more and more money was poured in by speculators, until the inevitable collapse. It reached its zenith in 1846, when no fewer than 272 Acts of Parliament were passed, setting up new railway companies, and the proposed routes totalled 9,500 miles (15,300 km) of new railway. Around a third of the railways authorised were never built – the company either collapsed due to poor financial planning, was bought out by a larger competitor before it could build its line, or turned out to be a fraudulent enterprise to channel investors' money into another business.

George Hudson

George Hudson (probably 10 March 1800 – 14 December 1871) was an English railway financier who, because he controlled a significant part of the railway network in the 1840s, became known as "The Railway King" - a title conferred on him by Sydney Smith in 1844. Hudson played a significant role in linking London to Edinburgh by rail, carrying out the first major merging of railway companies (the Midland Railway) and represented Sunderland in the House of Commons. Hudson’s success was built on dubious financial practices and he frequently paid shareholders out of capital rather than money the company had earned.

Eventually in 1849 a series of enquiries launched by the railways he was chairman of exposed his methods, although many leading the enquiries had benefitted and approved of Hudson’s methods when it suited them. Hudson fell a long way becoming bankrupt and after losing his Sunderland seat he was forced to live abroad to avoid arrest for debt. His name is associated with financial wrongdoing although a lot of others were at least partially guilty of similar practices. In his defence he never named any of his co-conspirators although many of them turned their backs on him when the bubble burst. However there is no doubt that under British Law in 2014 Hudson would have been imprisoned for these financial misdemeanors.

George Hudson was born to parents John and Elizabeth Hudson on 10 March 1800. His mother died at the age of 38 when George was six and his father two years later. He was brought up by older brothers William and John and after a cursory education he left Howsham at age 15.Beaumont (2003) suggests that this may have been the result of the slump affecting agriculture in 1815, but there was also a payment of 12 shillings and 6 pence recorded in the Howsham poor book as being “received of George Hudson for bastardry”.[1]

Hudson was apprenticed to Bell and Nicholson, a firm of drapers in College Street, York. He finished his apprenticeship in 1820, was taken on as a tradesman, and given a share in the business early in 1821. On 17 July that year he married Nicholson's daughter Elizabeth. When Bell retired, the firm became Nicholson and Hudson.[2] By 1827 the company was the largest drapery, indeed the largest business, in York.[3]

In 1827, his great-uncle Matthew Botrill fell ill and Hudson attended at his bedside. In thanks for this, the old man made a will leaving him his fortune of £30,000.[3] In later years when exiled in France, Hudson acknowledged "it was the very worst thing that could have happened to me. It let me into the railways and all my misfortunes since".[4] Hudson became a prominent member of the York Board of health and when cholera visited the city in 1832 Hudson distinguished himself as a spirited public servant visiting the sick and reporting on their welfare.”[5]

From being a Methodist and a Dissenter,[Note 1] Hudson changed his allegiance to become a High Church Tory and became treasurer of the York Conservative Party in 1832. He supported the unsuccessful candidature of John Henry Lowther in the general election of 1832 and again in an 1833 bye-election. Although York was primarily a Whig city the influence Hudson had on the campaigns was being noticed.[6]

In 1833 it became possible for joint stock country banks to conduct their business in the City of London and he took a leading part in the establishment of the York Union Banking Company with its agent in the city being George Carr Glyn.

----In the summer of 1834 Hudson met George Stephenson by chance in Whitby and they became friends and business associates. He learnt of Stephenson's dream of a railway from London, using a junction of the London and Birmingham Railway at Rugby, through Derby and Leeds to Newcastle – but bypassing York.[8]

In fact, since 1833, plans had been advanced for three lines – the Midland Counties Railway from Rugby to Derby, the Birmingham and Derby Junction Railway from Henley in Arden just outside Birmingham to Derby, and the North Midland Railway from there to Leeds.

In 1835 the York railway committee became the York and North Midland Railway (YNMR)[9] and at Hudson’s suggestion the new line would join the North Midland at Normanton a few miles east of Leeds. The YNMR received its Act of Parliament on 21 June 1836.[2][10] and at its first official meeting Hudson was elected Chairman with other officers including James Meek, James Richardson and Richard Nicholson (Hudson’s brother-in-law).[11]

At this time there was also another railway being planned which would link York to Darlington called the Great North of England Railway. Its promoters hoped that it would be part of an East Coast route to Scotland and whilst initially favouring Leeds and York they eventually chose York as their southernmost destination although Hudson had little to do with this decision.[12]

Work started on the YNMR line in April 1837 with a new station being built in York. Opening to a junction on the Leeds to Selby line took place on 29 May 1839 and to Normanton on 1 July 1840 meaning London was now linked by rail to York.[11] On 9 November 1840 the YNMR leased the Leeds and Selby Railway for £17,000 per year and Hudson propmptly closed the line so passengers had to use his route via Castleford.[13][Note 2]

----In 1848 a pamphlet called “The bubble of the age” or “The fallacy of railway investment, Railway Accounts and Railway dividends” alleged that the dividend paid by Hudson’s companies were paid out of capital rather than revenue. Hudson was attacked by Midland shareholder and Liverpool shipowner J H Brankner in February 1849, over his fight with the GNR. This was then exacerbated by Hudson’s agreement with the Great Northern to allow then to use the Burton Salmon route (see above) which many felt effectively sold them out. [33]

Hudson had been borrowing money at a high interest rate to keep some of his companies afloat. A payment of £400,000 had to be made in 1849 many of these companies were left in a difficult position with falling revenues, an economic depression and little scope for future shareholder dividends. In York the City Council led by George Leeman were demanding money for the Lendal Bridge project and many of Hudson’s allies were unseated at local elections that year.

The shareholders that had so fulsomely praised Hudson for the large dividends paid now lined up against him. In the Midland Railway meeting of 15 February 1849 there were calls for a committee of inquiry to be set up which Hudson managed to quash by threatening to resign. Five days later at the meeting of the York, Newcastle and Berwick Railway two shareholders Horatio Love and Robert Prance revealed a number of shares had been sold to the company at a value far in excess of what they were actually worth and the beneficiary was Hudson. This time the call for a committee of inquiry to be set up was successful. [34]

The Eastern Counties Railway Annual General Meeting was on the 28 February and Hudson decided not to attend. Vice chair David Waddington faced the wrath of the shareholders (who had received a very small dividend) and promptly blamed at absent Hudson. Another committee of inquiry was set up under William Cash and within a month the Midland Railway shareholders had set one up and Hudson had resigned. [35]

In April 1849 the Prance report (YNMR) revealed the wrongful valuation of the shares and Hudson had to pay back £30,000. Later that month he faced a hostile ECR inquiry (formed of men who had approved everything he did in previous years) after which he resigned. On 7 May MP Francis Charteris alleged possible bribery of MPs and another inquiry was started. Hudson addressed parliament on 17 May but the damage was done. However although Hudson was being scapegoated others did not always escape. William Cash who had called for and chaired the ECR enquiry was revealed by that enquiry to be chair of a committee designed to frustrate one of their competitors. .[36][37]

On 17 May Hudson resigned from the YNMR to avoid sacking and a committee was set up to look at the allegation that Hudson had used their money to build a private station at Londesborough Park on the Market Weighton line.[38] As 1849 progressed more was unearthed and by the autumn Hudson was being asked to repay £750,000. He sold Londesborough Park and then paid £200,000 off to the YNBR (chairman George Leeman) rather than face being taken to court.[39]

Despite this in 1849 the railway bridge across the Tyne was opened and the following year Monkwearmouth Dock (Hudson was chairman of the dock company) opened in 1850. In 1852 the YNMR offered to let Hudson settle his outstanding liabilities to them for £50,000 which he rejected. The YNMR directors promptly went to law with three separate cases which proved a fatal blow to Hudson.[40]

These were heard in 1853 and Hudson lost all three and by winter of that year he had negotiated a settlement of £72,670 to clear all his debts. He had to sell his property at Newby Park and the purchaser Viscount Downe used Hudson’s enemy George Leeman to complete his purchase.[41] By 1856 the YNMR debt was £16,000 and this was taken over by the North Eastern Railway upon merger in 1864.

----In the run up to the 1852 general election Hudson - who by this time was in severe financial difficulty - spoke on several issues including a repeal of a timber tax and on a corrupt practices bill. He was re-elected by 54 votes in the election but with his railway career in decline and drinking heavily he presented rather a forlorn figure.

After a period in Spain where he tried and failed to get a new railway project off the ground and suffering badly from gout, Hudson returned to Sunderland for the 1857 general election and was elected again albeit with a reduced majority. Between 1857 and 1859 the fortunes of the Sunderland Dock company foundered and the town became increasingly disenchanted with Hudson.[50]Hudson held onto his the seat until his defeat at the 1859 general election[51] where he polled 790 out of 4,000 votes. This defeat removed the protection Hudson had as an MP from imprisonment and he subsequently went into exile

 “Those who don't know history are destined to repeat it.”

Edmund Burke

At the Comex silver depositories Wednesday final figures were: Registered 59.99 Moz, Eligible 118.70 Moz, Total 178.69 Moz.  

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.

Back to the banksters again. Trying to double dip, have their cake and eating it too.  In a landmark decision of the Northern Ireland High Court, Lloyds Banking Groups Bank of Scotland’s position  was found to be both illegal and unconscionable.” Is anyone surprised in our new lawless age.

Bank of Scotland held to account

18 August 2014
Chris McGrath LLB, Solicitor with Housing Rights Service, discusses a recent Housing Rights Service High Court Case where Bank of Scotland was found to be double billing customers in mortgage arrears.

The Northern Ireland High Court has very recently handed down judgement in test cases concerning the mortgage arrear practices of Bank of Scotland plc. The judgement is critical of Bank of Scotland plc and the lender is held to account over poor practice in dealing with borrowers’ mortgage arrears.

Curious rise in monthly instalments

The cases all involved claims for possession by Bank of Scotland plc of the family home following the accrual of mortgage arrears. Housing Rights Service provides representation to borrowers facing possession proceedings and in 2013 a pattern was identified of unexplained increases to the contractual monthly instalments of Bank of Scotland plc customers. In some cases the contractual monthly instalments had increased by hundreds of pounds, despite there being no rise in the banks interest rates.

Following further investigation it appeared that the Bank of Scotland had been capitalising the borrowers’ mortgage arrears by adding the arrears to the outstanding mortgage balance, without the borrowers’ consent. This resulted in an increased mortgage instalment, so that, in effect, the customers were paying off the arrears but were not aware of this, nor aware of how much was being paid to address the arrears. Significantly, the bank continued to proceed with legal action to seek possession of the properties and sought additional payments towards the arrears in order to prevent possession.

Following identification of this issue the Chancery Court regularly refused to grant Orders in such cases, and three test cases were agreed upon to address the issues raised.

Practice questioned by Chancery Master

Master Ellison noted that all three cases raised a point of some importance.
  • Whether the lender may consolidate (capitalise) arrears with the effect of increasing the contractual monthly instalment to spread those arrears over the remaining term of the mortgage, and also; rely on the arrears so consolidated as outstanding arrears for the purpose of possession proceedings.
As Bank of Scotland PLC did not accept that the manner in which the mortgage accounts were restructured amounted to capitalisation, it was necessary for the court to also address the issue as to whether the practice was in fact capitalisation.

Difficulties faced by affected borrowers

The defendants argued that the practice adopted by Bank of Scotland plc was unfair because it prevented them from making a payment proposal to the court to repay the arrears. Ultimately this prevented the court from exercising its discretion to defer possession.

The Administration of Justice Act 1970 section 36 and Administration of Justice 1973 section 8, provides the court with discretion to adjourn proceedings or make a suspended order for possession on terms that the defendants pay the arrears within a defined period of time that the court regards as reasonable. The practice of Bank of Scotland plc and lack of clarity in respect of the account figures appeared to compromise this discretion.

The practice further compromised the affordability of payments to arrears, as the bank was seeking a much higher payment than was necessary to address the arrears.  As noted by Master Ellison;
“The position of the defendants is that they do not understand how these provisions could have allowed the plaintiff on the one hand to revise their monthly instalments to include contributions towards outstanding arrears and on the other hand to claim in proceedings for possession that those arrears remain overdue, given that the plaintiff itself has arranged for them to be repaid by way of monthly instalments over the remainder of the mortgage term.” (para 19)

Good capitalisation or bad capitalisation?

The Plaintiff stated that their practice of adding the arrears to the monthly instalment was in fact a duty under their mortgage contract, and that as the arrears had not been extinguished on their accounting system then this did not equate to capitalisation.

However, within his judgement Master Ellison refers at length to previous case law and the regulatory framework derived from the Financial Conduct Authority and is unequivocal in his assessment that the lenders practice of restructuring mortgage accounts so that arrears are included within a revised monthly instalment is capitalisation.

Furthermore, the court states:
“Where, as in the present cases, the plaintiff consolidates unilaterally, without any attempt to secure the borrowers agreement and without any assessment of affordability, that is extremely “poor” capitalisation according to the definition and criteria of the Financial Conduct Authority.” (para 54)

Court criticises practice of “double billing”

Following the finding of the court that the practice adopted by Bank of Scotland plc was indeed capitalisation, it was subsequently necessary to consider whether the lender was in a position to continue to rely on these arrears for the purpose of possession proceedings.

On dealing with this point, the court observed that the lender was acting inconsistently with the legislation; namely the Administration of Justice Act 1970 section 36 and Administration of Justice Act 1973 section 8. The court highlighted the fact that lenders cannot evade or contract out of the exercise of the court's discretion to defer possession under the legislation.

The court has stated that the capitalisation of the arrears in essence resulted in these arrears being extinguished, and as such it should not be permissible to rely on such arrears to ground possession proceedings.

The court was critical of the lender's actions in this regard:
“The plaintiffs reliance on extinguished arrears may fairly be described as double –billing. Unilateral consolidation with double billing creates very real problems for borrowers, their advisers and the court. To the extent at least of the double billing, it is unconscionable.” (para 57)

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

J. Edgar Hoover

The monthly Coppock Indicators finished July.

DJIA: +157 Down. NASDAQ: +318 Down. SP500: +232 Down.  The Fed’s final bubble has taken on a very scary wobble, but this is nothing compared to the return of real interest rates at some point ahead.