Baltic Dry Index. 753 +02
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
“But it (the boom) could not last forever
even if inflation and credit expansion were to go on endlessly. It would then
encounter the barriers which prevent the boundless expansion of circulation
credit. It would lead to the crack-up boom and the breakdown of the whole
monetary system.”
Ludwig Von Mises
Up first, yet more red flags raised over Asia. Will
the “next Lehman” arrive out of the blue from the east? Has Fed “tapering” already
lit the fuse? In our Great Disconnect between reality and the final bubble in
stock markets and bonds, tomorrow will not be like today, which was like
yesterday. Tomorrow, to me, is looking more like an arriving debt default crash.
"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
Asia's Next Crisis Is a Flood of Debt
Aug 4, 2014 6:03 PM EDT By William
Pesek
Asia is still traumatized by the great financial crisis of 1997, when
Thailand's devaluation of the baht set off a region-wide collapse in markets.
Could it happen here again?The mere question will strike many as odd, given Asia's rapid growth and progress in strengthening financial systems, improving transparency and amassing trillions of dollars of currency reserves. But Asia now faces three risks that could quickly undo those gains: Federal Reserve tapering, a Chinese crash and an explosion of household debt.
The danger of the Fed pulling too much liquidity out of markets has been well documented. So have China's rising vulnerabilities. Debt, though, deserves far more scrutiny. As economists survey the scene, Thailand once again tops the worry list. Debt there has risen rapidly, underwriting standards appear loose and nonperforming loans are rising.
Thailand has plenty of company in Asia, Oxford Economics warns in a new report. Financially conservative Singapore has seen credit growth in the last six years exceed that of the U.S. in the run-up to its 2008 subprime meltdown. Several nations now have private-debt ratios of between 150 percent and 200 percent of gross domestic product. They include the higher-income set -- Australia, Hong Kong, South Korea and Taiwan -- as well as China, Malaysia, Thailand and Vietnam. Even where debt levels are lower, Indonesia and the Philippines, the trajectory is troublesome.
"Debt surges of this kind often end badly," says Oxford economist Adam Slater.
Even
more worrisome than the absolute levels of debt, says Frederic Neumann, Hong
Kong-based co-head of Asian economic research at HSBC Holdings Plc, is the pace
of increase. For all its rapid growth and buoyant markets, Asia isn't as
healthy as it appears on the surface, and might take on even more debt to
support growth. As leverage exceeds the peak before the 1997 crash, is a sharp
correction on the way?
More
China Services Index Falls to Record Low
Aug 5, 2014 5:54 AM GMT
China’s service industries
stagnated in July as a private index (MXAP) fell to a record low,
suggesting the government’s stimulus measures are failing to gain traction
outside of manufacturing. The services Purchasing Managers’ Index declined to 50.0, the dividing line between expansion and contraction, from June’s 53.1, HSBC Holdings Plc and Markit Economics said today. A similar official gauge released Aug. 3 dropped to a six-month low of 54.2.
Asian
stocks extended losses as the HSBC-Markit index’s lowest reading since it began
in 2005 signaled that falling home prices and new construction are dragging on
services, which account for almost half of gross domestic product. The International Monetary Fund’s
China mission chief warned last week real estate is the biggest near-term risk
to the economy.
More
With Abenomics failing to deliver for Japan as
promised, Japan’s Abe is stirring up the waters with China again. A foreign
escapade is a time honoured, much favoured policy of rallying the voters round
a failing government. Of course it only works out if you win.
"Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood. For these few gold has been the asset of last resort."
Antony C. Sutton
Japan Criticizes China’s Maritime Actions as Abe Seeks Summit
Aug 5,
2014 2:22 AM GMT
Japan renewed its criticism of China’s “assertive” maritime activities in a
report published days after Prime Minister Shinzo Abe said he wanted a summit meeting with Chinese
President Xi Jinping. Japan is strongly concerned about China’s actions at sea and the “lack of transparency in the military and security,” the Ministry of Defense said today in an annual white paper. Japan must continue to pay close attention to the issue, the ministry said.
Chinese and Japanese ships have
been tailing one another in waters around disputed East China Sea islands since
Japan bought three of them from a private owner in 2012. While the report shows
Chinese incursions into what Japan regards as its territorial waters have
fallen this year, the row over the islets has contributed to preventing a
summit taking place.
The report also reflects Abe’s
switch to a more active defense policy and comes after the cabinet on July 1
passed a resolution to reinterpret Japan’s pacifist constitution to allow the
military to defend other nations,
----Abe reiterated at a press conference in Sao Paolo on Aug. 2 that it would be good to hold a summit with China at the Asia-Pacific Economic Cooperation meeting in Beijing in November. The Nikkei newspaper reported yesterday that Japan and China would begin talks about a summit in that month.
Japan last week sparked fresh
criticism from China when it gave names to five islets that form part of the
group known as Senkaku in Japanese and Diaoyu in Chinese.
Incursions by Chinese vessels
into waters around the islands have fallen, according to the report, with
two-to-three a month since the beginning of the year, compared with eight in
December 2012 when Abe took office.
More
We end for the day with a new war threatening to
breakout in Russia’s backyard. Actually it’s the return of an old war dating
back to the breakup of the old USSR and Stalin’s earlier fiddling with borders.
One upside for Russia though, if Mr. Putin wants to play America/EUSSR at their
own game, a fast track escalation will quickly cut off Azeri oil from reaching
western markets. Is Russia about to trade the Ukraine’s Donbas coal for Azeri
oil? (The borders in this region have been unstable ever since the UK and
Imperial Russia fought the Turkish Empire here in a long forgotten theatre of
World War One. Stalin was the eventual winner in the 20s.)
"The great merit of gold is precisely that it is scarce; that its quantity is limited by nature; that it is costly to discover, to mine, and to process; and that it cannot be created by political fiat or caprice."
Henry Hazlitt
New War Risk on Russian Fringe Amid Armenia-Azeri Clashes
Aug 4,
2014 8:25 PM GMT
The leaders of Armenia and Azerbaijan may meet this week in a bid to defuse
escalating tensions between the two countries after at least 18 soldiers were
killed in the worst clashes in two decades. Armenian President Serzh Sargsyan will hold talks with his Azeri counterpart, Ilham Aliyev, in Russia’s Black Sea resort of Sochi on Aug. 8-9, Armenian Prime Minister Hovik Abrahamyan said on the government’s website. Azerbaijan has yet to agree to the negotiations, ANS TV reported, citing Novruz Mammadov, deputy head of Aliyev’s office. President Vladimir Putin plans separate meetings with the two leaders at the end of the week, Russian Foreign Minister Sergei Lavrov told Itar-Tass.
The skirmishes between the South Caucasus countries, which border Turkey and Iran, flared amid the worst geopolitical standoff since the Cold War between Russia and the U.S. over the conflict in Ukraine. The fighting in the past week in the disputed region of Nagorno-Karabakh has been the deadliest since the two former Soviet states signed a cease-fire in 1994.
“We hope that serious arrangements will be reached during the meeting,” Abrahamyan said. “We are not afraid of war, I just think it is not clever to solve problems with wars in the 21st century.”
A renewed war between Azerbaijan, an ally of the U.S. and Turkey, and Russian-backed Armenia has the potential to put NATO directly at odds with the government in Moscow, according to Timothy Ash, a London-based economist for emerging markets at Standard Bank Group Plc.
“Militarily, Armenia is still thought to have superiority, given Russian backing, but with its rising oil wealth, Azerbaijan has been re-arming rapidly,” Ash said yesterday by e-mail.
With Azerbaijan’s forces restrained by the fear of Russian retaliation, the message is that “Russia is important in the region, and its views need to be taken account of everywhere in the post-Soviet space,” Ash said.
Facing off are 20,000 Armenian and Azeri troops, dug into World War I-style trenches sometimes only 100 meters (330 feet) apart, according to the Carnegie Endowment for International Peace.
The escalating death toll since July 31 has inflamed tensions between landlocked Armenia and its eastern neighbor Azerbaijan, the former Soviet Union’s third-largest oil producer and the only route for Caspian energy to western markets that bypasses Russia.
More
Yes, gold doesn’t bear interest. Many,
including Warren Buffett, belittle its investment value. But, paintings or
antiques don’t bear interest either. When money supply is rising, anything
scarce tends to rise in value. Gold is the best scarce commodity in the world.
Andy Xie.
At the Comex silver depositories Monday final figures were: Registered 60.30 Moz,
Eligible 115.50 Moz, Total 175.80 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Banks are an almost irresistible attraction for that element of our society which seeks unearned money.
J. Edgar Hoover
Credit Agricole Net Falls 98% on Banco Espirito Santo
Aug 5,
2014 6:00 AM GMT
Credit Agricole
SA, France’s third-largest bank by market value, said profit fell 98 percent in
the second quarter on charges tied to its stake in Portugal’s bailed-out Banco
Espirito Santo SA. Net income dropped to 17 million euros ($22.8 million) from 696 million euros a year earlier, the bank, based near Paris, said in a statement today. That compares with the 387.4 million-euro average estimate of five analysts surveyed by Bloomberg. Credit Agricole booked 708 million euros in costs related to its 14.6 percent holding in Banco Espirito Santo.
“Credit Agricole has been reducing a myriad of equity financial holdings, from Emporiki in Greece to Spain’s Bankinter,” Omar Fall, a London-based analyst at Jefferies International, said in a phone interview before the earnings release. “One of the last that they held was Banco Espirito Santo, and it has not ended well.”
The Bank of Portugal on Aug. 3 unveiled a 4.9 billion-euro bailout that will leave Banco Espirito Santo’s shareholders and junior bondholders with losses, while sparing senior creditors and unsecured depositors. The rescue is a test for the European Union’s new framework of bank failures, agreed on after a wave of sovereign bailouts threatened to break apart the euro area.
Banco Espirito Santo, once Portugal’s largest lender, will be split in two, with depositors and healthy assets joining the newly formed Novo Bank while bad loans and junior creditors stay with the old bank until it can be shut down. Credit Agricole was Banco Espirito Santo’s second-largest shareholder.
The French bank recorded a 502 million-euro charge to reflect its share of Banco Espirito Santo’s losses in the quarter, and a 206 million-euro writedown to cut the value of the holding to zero in its accounts, the company said.
More
Francois Hollande's cuts leave France trailing behind the UK, says Moody's
David Cameron's government expected to get to grips with its debt burden much quicker than Francois Hollande, ratings agency says
Francois Hollande's efforts to
tackle France's ballooning deficit and kickstart its flagging economy have left
the country trailing behind rivals such as the UK, Moody's
has warned.
Pointing to many unanswered
questions as to how the President plans to cut public spending by €50bn
(£39.5bn) by 2017, the ratings agency slashed the country's growth forecasts
and said it is "likely" to miss fiscal targets for 2014 and 2015.
Moody's now expects France to
grow by 0.6pc in 2014 and 1.3pc in 2015, down from previous estimates of 1pc
and 1.5pc respectively.
The UK economy is expected to
grow 3.2pc this year and 2.7pc in 2015, according
to the International Monetary Fund (IMF).
Moody's - which rates France at
Aa1, the same as the UK but behind Aaa-rated economic rivals such as Germany -
added that "France's fiscal performance remains weaker than that of other
Aa1 countries, hence its negative outlook, and is significantly weaker than
Aaa-rated countries".
More
"When it becomes serious, you have to lie"
Jean-Claude Juncker. Ex-Luxembourg Prime Minister and ex-president of the Euro Group of Finance Ministers. Confessed liar. EC President.
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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