Baltic Dry Index. 871 +35
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
There can be few
fields of human endeavour in which history counts for so little as in the world
of finance. Past experience, to the extent that it is part of memory at all, is
dismissed as the primitive refuge of those who do not have the insight to
appreciate the incredible wonders of the present.
J. K. Galbraith.
The only really important news this month is will
Russia invade east and southern Ukraine. Developments yesterday suggest that
Russia has little to lose now from invading. If the Ukraine blocks Russia’s
humanitarian convoy from bringing relief to the Russians of east Ukraine, it is only Kiev doing Washington’s
bidding. With sanctions now going nuclear, and an all-out beggar thy neighbour
trade war getting underway, why not invade splitting the Ukraine into two, setting
off a regional war and bankrupting much of eastern Europe in the process.
With yesterday’s actions, the rest of the world not
in the G-7, is now fully incentivised to exit the faltering fiat dollar reserve
standard ASAP. It may be madness, but its madness made in Washington, in their
scramble to break up Belarus and Russia, for EurAsia’s mineral wealth, to
isolate and surround China, for a similar process next decade. It is all too likely
to turn out as well as the disastrous Bush-Cheney-Rumsfeld-Blair invasion of
Iraq. Just don’t tell the markets flying to the moon on ZIRP and the Yellen
put.
“It is difficult not to marvel at the imagination which was implicit in this gargantuan insanity. If there must be madness something may be said for having it on a heroic scale."
J. K.
Galbraith.
U.S. Tightens Sanctions, Putting More Russian Companies at Risk
Aug 14, 2014 5:00 AM GMT
The U.S.
Treasury broadened the scope of sanctions programs by revising a rule on
the ownership of entities by targeted individuals that may extend the measures
to at least one Russian company. Yesterday’s change means that a firm can be sanctioned if any combination of sanctioned individuals collectively owns at least 50 percent of it, according to a notice on the department’s website. Previously, the Office of Foreign Assets Control’s so-called 50 percent rule required a single sanctioned person to own 50 percent or more of an entity for it also to be subject to sanctions.
“The change in OFAC’s interpretation will be quite significant for those companies with joint ownership by multiple sanctioned persons,” Michael Burton, a sanctions lawyer at Jacobson Burton PLLC in Washington, said in an e-mail.
The move is likely to extend the reach of sanctions against Russia, as the Obama administration presses President Vladimir Putin to stop supporting pro-Russian separatists in Ukraine. The revised rule would appear to ensnare Russian insurer OAO Sogaz Insurance Group, which is more than 50 percent owned by the combination of OAO Bank Rossiya and Volga Group.
The U.S. added Bank Rossiya and its billionaire shareholder Yury Kovalchuk to a sanctions list on March 20 following Russia’s annexation of Crimea. It also put billionaire Gennady Timchenko on the list of blocked individuals at that time, and in April added Timchenko’s Volga Group.
More
Putin’s Pipeline Bypassing Ukraine at Risk Amid Conflict
Aug 14, 2014 12:01 AM GMT
Vladimir Putin’s
dream of a new pipeline to deliver Russian natural gas to the European Union
without passing through Ukraine is fading amid escalating tit-for-tat economic
sanctions. The $46 billion South Stream project, spearheaded by OAO Gazprom, is on hold and will probably remain in limbo for years as Russia continues to foment armed conflict in eastern Ukraine and the EU retaliates with bans, Eurasia Group said.
That means the war-torn country will remain a key transit point for about half of Gazprom’s shipments to Europe, according to the New York-based risk research group. The EU previously had mixed positions on South Stream. With Russian troops massing near the Ukraine border, the bloc now has little choice but to stand united in opposition.
“There’s no way Europe is going to put South Stream negotiations back on the table now, given the larger geopolitical context of the Ukraine crisis,” Emily Stromquist, a Eurasia analyst in London, said in an interview. “That, combined with a number of regulatory disputes about the pipeline and gas deliveries will push back the timeline a number of years.”
The proposed 2,446-kilometer (1,520-mile) pipeline would run under the Black Sea and enter the EU in Bulgaria. That would end Gazprom’s dependence on the Ukrainian gas-transit system.
While
the European Commission had previously voiced concerns that the project was
violating the bloc’s open-access laws, some EU members, particularly in the
south, had openly supported it. That’s shifting as Putin’s support for armed
separatists in eastern Ukraine and retaliatory bans on European goods
strengthens the 28-nation bloc’s resolve to halt the project.
More
Ukraine accuses Russia of cynicism over convoy; death toll rises sharply
By Natalia Zinets and Dmitry Madorsky
KIEV/VORONEZH Russia (Reuters) - Ukraine described Russia's dispatch of an aid convoy advancing now towards its border as a cynical act designed to fan a pro-Russian rebellion the UN said on Wednesday had claimed nearly 1,000 lives, fighters and civilians, in two weeks.
Kiev declared that the convoy would not be allowed to pass; but a presidential spokesman later suggested a compromise might be found, bringing it under the control of the International Committee of the Red Cross (ICRC).
"First they send tanks, Grad missiles and bandits who fire on Ukrainians and then they send water and salt," Prime Minister Arseny Yatseniuk said of a conflict that has killed over 2,000 since mid-April.
"The level of Russian cynicism knows no bounds."
----The convoy of heavy trucks rumbled out of Moscow region on Tuesday and traveled some 500 km (300 miles) to the southwestern Russian town of Voronezh. There it stopped at an air base behind high fences, according to a Reuters reporter.
Several people who entered the airbase and spoke to Reuters on condition of anonymity said dozens of trucks were still parked at the airbase. It was not clear whether the Voronezh convoy was the only one traveling towards Ukraine.
"The journey isn't short, of course," one truck driver interviewed on Russian Rossiya-24 television commented.
"How can I put it? It's pretty difficult. But how could we not help our Slavic brothers? We are all for it."
More
In other less warlike news, it’s become open season
on French banks, at least in America’s courts. Given that what’s at stake is a
mere paltry $34 million of mis-sold mortgage gambling contracts, a sum no self-respecting
City or Wall Street bankster would cross the road to stoop to pick up, you’ve
got to wonder why SocGen is contesting this. How much more mis-sold gambling
cotracts did they sell?
UK government can sue French bank over 'mis-selling' to Northern Rock
Societe Generale allegedly mis-sold financial products to Northern Rock that were partly to blame for UK bank's collapse
The Government has been told it
can sue French banking giant Societe Generale for allegedly mis-selling
financial products to Northern Rock that were partly to blame for UK lender's
collapse.
The highest court in New York has
ruled that Northern Rock Asset Management (NRAM), the UK taxpayer-owned institution
salvaged from the ashes of the collapsed bank, should be allowed to take legal
action against SocGen for mis-selling $34m of mortgage products in the run-up
to the financial crisis, in a case which is expected to pave the way for a
flurry of similar lawsuits.
SocGen has tried to have the case
thrown out of court on the grounds that it warned Northern Rock in its small
print that it could not be held accountable for many of the statements in its
marketing material.
However, the New York Supreme
Court has ruled that there was "no precedent for allowing an offerer of
securities to use such a mechanic to amble away from liability for key
misrepresentations".
The products, which included
collateralised debt obligations, were one of the factors which triggered
Northern Rock's implosion in 2007, and the start of the financial crisis in
Britain.
More
Even before America’s regional war breaks out in eastern Europe, it
increasingly looks like it’s over for the EU in its present form. From banksters
to fraudsters, but I repeat myself to mis-quote Mark Twain, Europe isn’t
working anymore. A long cold winter without Russian oil and gas should finish
it off.
Unexpected drop in euro zone output clouds recovery hopes
By Martin Santa BRUSSELS
(Reuters) - Euro
zone industrial production contracted unexpectedly in June, hurting
hopes for a stronger recovery as the region feels the effect of conflict in Ukraine,
Iraq and and Gaza.Factory output fell 0.3 percent on the month in June after a 1.1 percent drop in May, data showed on Wednesday, compared with market expectations of a 0.3 percent rise.
Production was flat compared with a year ago, after rising an upwardly revised 0.6 percent rise in May. Economists polled by Reuters had forecast a 0.1 percent annual increase in June. The annual reading was the lowest since August 2013.
"This is a very disappointing figure after the already strong contraction in May," said Peter Vanden Houte, chief euro zone economist at ING.
The monthly drop was caused mainly by a 1.9 percent drop in production of non-durable consumer goods, down for a second consecutive month, and a 0.7 percent decline in energy production, which was up in the previous three months.
----The latest sign of just how fragile the euro zone's economic rebound remains came from Germany on Tuesday, where investor sentiment dove to its lowest since December 2012 on concern about the impact European sanctions against Russia will have.
Eurostat will publish a flash estimate of second-quarter economic growth on Thursday. Economists had expected expansion of 0.2 percent on the quarter in the three months to June, the same pace as seen in the first quarter.
"A growth figure of 0.2 percent now seems to be out of reach," Vanden Houte said. "With the geopolitical tensions not cooling down for the time being, there is little likelihood that the growth pace will accelerate in the second half of the year."
More
"In
economics, hope and faith coexist with great scientific pretension."
J. K.
Galbraith.
At the Comex silver depositories Wednesday final figures were: Registered 59.83
Moz, Eligible 115.31 Moz, Total 175.14 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
With or without a US generated war in the Ukraine,
it increasingly looks like the end cometh for the wealth destroying,
Bilderberger imposed Euro. If France doesn’t wipe out the unloved fiat euro, Italy will. Or Spain, or Portugal,
or even Germany now that Europe’s paymaster has caught a cold, even before
taking on Russia in World War Three.
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.
Italy's Renzi must bring back the lira to end depression
It is an incontrovertible fact that Italy’s 14-year disaster coincides with EMU membership
Italy has been in depression for
almost six years. The slump has been punctuated by false dawns, overwhelmed
each time by the monetary amateurs in charge of EMU policy.
The latest recovery fizzled after
a single quarter. The economy is in technical recession again. Output has
collapsed by 9.1pc from the peak, back to levels last seen 14 years ago. Industrial
production is down to 1980 levels.
It takes spectacular policy
errors to bring about such an outcome in a modern economy. Italy did not suffer
anything like this during the Great Depression, clocking up growth of 16pc
between 1929 and 1939. But not even Mussolini was maniacal enough to pursue his
Gold Standard delusions until the bitter end.
The Italian authorities discern
flickers of recovery, like fortress guards in Dino Buzzati's Desert of the
Tartars, deceived by optical illusions on the lifeless horizon. Bank loans to
business are still falling at a rate of 4.5pc. Moody's says the economy will
contract by 0.1pc this year. Societe Generale is pencilling in -0.2pc.
The property slump has not yet
touched bottom. The Bank of Italy said the number of months needed to sell a
house has risen to 9.4, from 8.8 late last year. The number reporting worsening
market conditions has jumped from 19.6pc to 34.7pc in three months.
"We can't keep going any
longer," said the Taranto branch of Italy's business lobby, Confindustria,
in an open letter to the country's president. The region is becoming an
"industrial desert", it warned, with small companies on the brink of
mass closures and lay-offs.
The lethal mix of economic
contraction and zero inflation is causing Italy’s debt trajectory to spiral
upwards, despite austerity and a primary surplus of 2pc of GDP.
Public debt jumped to 135.6pc in
the first quarter from 130.2pc a year earlier. This is a mechanical effect, the
result of a compound interest burden on a static nominal base. Real interest
rates on Italy's €2.1 trillion stock of debt - with an average maturity of 6.3
years - is actually rising as deflation draws closer.
The debt ratio may test 140pc by
the end of the year, uncharted waters for a country that effectively borrows in
D-Marks. "Nobody knows when the markets will react,” said one Italian
banker.
The recession is eroding tax
revenues so badly that premier Matteo Renzi will have to come up with fresh
cuts of €20bn to €25bn to meet EU deficit targets, perpetuating the vicious
cycle.
The task is hopeless. A study by
the Bruegel think-tank found that Italy must run a primary surplus of 5pc of
GDP to stabilise the debt at 2pc inflation. This rises to 7.8pc at zero
inflation. Any attempt to achieve this would lead to a self-defeating implosion
of the Italian economy.
----Eugenio Scalfari, the doyen of La Repubblica and a leader of Italy’s EMU establishment, says the relapse over recent months has killed off all illusions. He advised Mr Renzi to prepare for a rescue. “I must speak a bitter truth because we can all see the reality before our eyes. Perhaps Italy should put itself under the control of the Troika of the [European] Commission, the ECB and the IMF,” he said.
Mr Scalfari seems to think
Italy's democracy should be suspended to save the euro, that the country should
double down on scorched earth policies, embarking on an even more draconian
effort to regain competitiveness by means of an internal devaluation.
The young Mr Renzi - 17 years old
when the Maastricht Treaty was signed, and therefore free from original sin -
might equally conclude the opposite, that the euro should be jettisoned to save
Italy.
It is an incontrovertible fact
that Italy’s 14-year disaster coincides with EMU membership. This does not
prove causality. It suggests that EMU set off a very destructive dynamic for
Italy's particular circumstances, and is strong evidence that EMU now prevents
the country from breaking out of the trap.
More
"The
international monetary order is more precarious by far today than it was in
1929. Then, gold was international money, incorruptible, unmanageable, and
unchangeable. Today, the U.S. dollar serves as the international medium of
exchange, managed by Washington politicians and Federal Reserve officials,
manipulated from day to day, and serving political goals and ambitions. This
difference alone sounds the alarm to all perceptive observers."
Hans F. Sennholz
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.
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