Baltic Dry Index. 1136 +46
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
“May you live in interesting times"
Chinese
Greeting to Tai Pans.
We open today by offering our condolences and
support to the citizens of Canada. Yet another Moslem atrocity.
It is almost November and continental Europe is
desperate to get a Russia-Ukraine gas payment agreement at all costs. The first
cold snap could be just days away, yet there is still great uncertainty that if
Russia attempts to supply gas to continental Europe this winter via the
pipelines across the Ukraine, the Ukraine’s corrupt billionaires won’t simply
syphon off much of the gas to heat the Ukraine. While the article below puts
misplaced emphasis on what might happen to the Gazprom stock price, the real
story is what happens to the central European economies if too little gas flows
at all. In an EUSSR already dropping into a winter recession, accelerated by
lunatic sanctions on Russia, my guess is that it will break up the EUSSR.
If
economists could manage to get themselves thought of as humble, competent
people on a level with dentists, that would be splendid.
John
Maynard Keynes
Gazprom Declines as Gas Supply Deal With Ukraine Delayed
Oct 22, 2014 11:31 PM GMT
OAO
Gazprom (OGZPY) slid to the lowest price since March 2009 in New York after
the gas producer, which sends about half of its exports to Europe via Ukraine, failed to
resolve a pricing dispute with the war-torn country. American depositary receipts of Gazprom, Russia’s biggest company, dropped 2.6 percent to $6.44 in New York, extending this year’s decline to 26 percent. Citigroup Inc. reduced Gazprom to sell on Oct. 21, citing the prospect of lower volumes sent to Ukraine. Moody’s Investors Service, which last week cut Russia’s credit grade to the second-lowest investment grade, gave the state-controlled company a negative outlook due to its “sensitivity” to the sovereign rating change.
Russia and Ukraine failed to agree on future payments in talks brokered by the European Union Oct. 21 and will discuss a temporary deal next week. Gazprom in June halted deliveries to Europe, which represents more than half of its revenue, as a separatist conflict flared in Ukraine’s eastern regions while international measures punished Russia for its role in the crisis. Price disputes between Gazprom and Ukraine led to European supply disruptions in 2006 and 2009.
“People are afraid of gas wars,” Ivan Manaenko, the head of research at Veles Capital LLC in Moscow, said by phone. “The talks continue but the outlook is unclear. In the worst-case scenario, if there is no agreement, it will be bad for Gazprom’s revenue.”
Russia and Ukraine will seek a temporary deal during the next round of talks on Oct. 29 to resolve the dispute, according to Energy Commissioner Guenther Oettinger.
Ukraine would pay $3.1 billion by year-end for previously delivered supplies and Russia, which has denied any involvement in the conflict, would cut its price by $100 per thousand cubic meters to $385 through March, according to a draft deal. The EU has said it will offer financial aid to Ukraine to help make the gas payments
More
With new currency wars the new order of battle just about everywhere, scroll down to Crooks Corner for more detail, Russia’s Cenral Bank wants in on that action too. In Russia’s case it’s not entirely voluntary, but a weaker Rouble is yet another drag on the central European and Baltic economies. I’ll have to check the bookies odds of a Eurozone breakup before March.
Ruble Weakens as Russian Central Bank Signals Less Interventions
Oct 22, 2014 5:30 PM GMT
The ruble weakened toward its lower trading band as central bank Deputy
Governor Sergei Shvetsov signaled Russia
won’t use reserves aggressively to slow the depreciation. The currency fell 0.4 percent to 46.1565 against the central bank’s target basket of dollars and euros by 6 p.m. in Moscow when the bank stops market operations. That’s within 14 kopeks of the threshold of 46.30 that would lead the central bank to sell foreign currency to support the ruble. The yield on 10-year ruble bonds climbed two basis points to 9.75 percent.
Russia’s central bank isn’t planning to use foreign-exchange reserves as much as it did in 2008 and 2009 to help companies and banks, Shvetsov said at a conference in London, leading the ruble to extend declines. The central bank spent $13 billion this month to slow the ruble’s depreciation, which is nearing 18 percent versus the dollar since June amid an oil-price slump. The currency weakened 16 percent in 2008.
If central bankers “are suggesting they are not going to intervene as much, it would imply they are prepared to allow the ruble to move more,” William Jackson, a senior economist at Capital Economics in London, said by phone. “It means they are prepared to allow a bit more flexibility in the currency and relying more on interest rates rather than intervening to stop capital outflows.”
More
We end for the day on Russia with a new French
assessment, as winter approaches, of the state of play in the Ukraine. Looks a
lot to me like France will use the Russian sanctions as cover for their failing
economy. Things are turning ugly in Paris too.
“It
is better to be roughly right than precisely wrong.”
John Maynard Keynes
‘Poker Player’ Putin Bluffed and Won, French Envoy Says
Oct 23, 2014 5:00 AM GMT
Vladimir Putin has
outmaneuvered his opponents and humiliated Ukraine by continuing to back
pro-Russian separatists and flouting a cease-fire, making it crucial that
sanctions on Russia remain firm, France’s ambassador to the U.S. said. The Russian president “has won because we were not ready to die for Ukraine, while apparently he was,” Ambassador Gerard Araud said yesterday at a Bloomberg Government breakfast in Washington, in remarks he said represented his personal opinion. Echoing the view of other European envoys in Washington, Araud expressed concern that the Ukraine conflict has hit an impasse, leaving Putin the winner by default.
While many observers have called Putin a geopolitical chess player, he said, the Russian leader is more a “poker player really, putting all the money on the table, saying, ‘Do the same,’ and of course we blink. We don’t do the same.”
The economic sanctions against Russia must stay in place to prevent Putin from going further, said Araud, who moved to Washington in September after serving as the French ambassador to the United Nations.
“The question is there on the table: When is Putin going to stop?” Araud said. “That’s the reason that we need to keep the sanctions” because, “let’s be frank, it’s more or less the only weapon that we have. We are not going to send our soldiers in Ukraine. It does not make sense to send weapons to the Ukrainians, because the Ukrainians would be defeated real easily, so it will only prolong the war” and lead to a “still bigger Russian victory.”
Araud said that while it was natural to expect Putin to be “more open and reasonable” after the cease-fire agreement was reached Sept. 5, the opposite proved true. Ukrainian President Petro Poroshenko was reduced to thanking Putin at joint remarks in Milan. Poroshenko is “kneeling in front of Putin with the cord around his neck and saying, ‘You know, you have won,’” and Putin is still not backing down, Araud said.
More
Gloves Off in France as Valls, Hollande Open Leadership Battle
Oct 22, 2014 11:01 PM GMT
The daggers are out between French President Francois Hollande and his prime
minister, Manuel Valls. At a traditional ceremony yesterday at the Elysee President, during which French presidents honor their prime ministers after six months in the job, Hollande took the opportunity to slap down Valls’s presidential ambitions.
“One can succeed in life without becoming president,” Hollande said. In a salvo aimed at asking Valls not to get ahead of himself, he said the prime minister can entertain “great hopes” for a “long career.”
Coming after Hollande earlier this month swiftly rejected Valls’s proposal to take on a sacred cow -- unemployment benefits --, his comments yesterday were immediately seen in the French media as an intensifying battle at the top level of French power. Le Parisien newspaper called it a “jab at Valls,” while television channel La Chaine Parlementaire called it “a missile.”
The tensions between the two men is a distraction for France, which is struggling with an economy that has barely grown in the past two years, joblessness at a record high and a president, whose popularity is the lowest for a French head of state in at least half a century.
More
In other EUSSR news, it’s later than you think,
thinks the UK’s Telegraph, even before the folly of sanctions on Russia fully
hit the German economy. Is there anyone left on planet Earth that thinks
Germany will bailout France or Italy without real reform. Is there anyone left
on planet Earth that thinks any French government could deliver on reform.
Winter 2014-2015 in the EUSSR looks “interesting.”
“The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.”
“Adam Smith” aka George Goodman.
Why it’s now too late for Germany to rescue the eurozone alone
A German stimulus package may now be too late, and too small, to revive the euro area economy, according to a report by ratings agency Standard & Poor's.
The eurozone is yet again in a
nasty state.
As it suffers from low growth and
low inflation, the two combine to make a nasty cocktail. Without much of
either, unemployment remains stuck at an eye wateringly high 11.5pc, and
government debt burdens are likely to feel increasingly heavy.
The European Central Bank (ECB)
has announced a variety of acronyms - CBPP3, TLTROs, and an ABS purchase scheme
- all stimulus measures designed to combat the euro area’s low inflation
crisis.
Yet so far, they’ve been insufficient to
raise expectations of future inflation, implying that the firepower just isn’t strong
enough. Economists are hoping that the ECB will deploy outright quantitative
easing, and start buying up the sovereign bonds of eurozone governments.
Without it, analysts have warned
that both the eurozone as a whole, and even Germany - its former powerhouse
economy - could now enter their third
technical recession since 2008. Yet hopes of a monetary bazooka have so far been
quashed by political concerns.
Some corners are hoping for
Germany to launch its own form of stimulus. But a new report from ratings
agency Standard & Poor’s (S&P) suggests that such a move would be too
little, too late, and “alone would have little effect on the rest of the eurozone”.
“On the fiscal side … the margin
for manoeuvre available to most eurozone members is still very limited”, the
report states. “This is why the focus has unavoidably turned to Germany, the
only large eurozone country with both a current surplus and a balanced budget”.
According to S&P’s analysis,
a stimulus package worth as much as 1pc of German GDP would provide just a
0.3pc boost to eurozone GDP, while creating 210,000 new jobs.
The report states that the
numbers: “put Germany's potential contribution to higher growth in the eurozone
into perspective, with the conclusion being that a stimulus package in that
country alone would have a modest effect on its neighbours”.
More
There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
Ludwig
von Mises.
At the Comex silver depositories Wednesday final figures were: Registered 67.34
Moz, Eligible 112.25 Moz, Total 179.59 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Below, yet another take on our new lawless age of
beggar-thy-neighbour currency wars. We will all get rich by trashing our fiat
currency to steal each other’s dollar. Stay long fully paid up physical gold
and silver. We all know how the Great Nixonian Error of fiat money ends, we have
the collapse of the USSR to show that, just not when and what was the final
trigger.
"In
economics, hope and faith coexist with great scientific pretension."
J. K.
Galbraith.
Currency Wars Evolve With Goal of Avoiding Deflation
Oct 22, 2014 3:23 PM GMT
Currency wars are back, though this time the goal is to steal inflation, not
growth. Brazil Finance Minister Guido Mantega popularized the term “currency war” in 2010 to describe policies employed at the time by major central banks to boost the competitiveness of their economies through weaker currencies. Now, many see lower exchange rates as a way to avoid crippling deflation.
Weak price growth is stifling economies from the euro region to Israel and Japan. Eight of the 10 currencies with the biggest forecasted declines through 2015 are from nations that are either in deflation or pursuing policies that weaken their exchange rates, data compiled by Bloomberg show.
“This beggar-thy-neighbor policy is not about rebalancing, not about growth,” David Bloom, the global head of currency strategy at London-based HSBC Holdings Plc, which does business in 74 countries and territories, said in an Oct. 17 interview. “This is about deflation, exporting your deflationary problems to someone else.”
Bloom puts it in these terms because, when one jurisdiction weakens its exchange rate, another’s gets stronger, making imported goods cheaper. Deflation is a both a consequence of, and contributor to, the global economic slowdown that’s pushing the euro region closer to recession and reducing demand for exports from countries such as China and New Zealand.
Bank of Japan Governor Haruhiko Kuroda said last month he’d welcome a lower exchange rate to help meet his inflation target and may extend the nation’s unprecedented stimulus program to achieve that. Like his Japanese counterpart, European Central Bank President Mario Draghi has acknowledged the need for a weaker euro to avoid deflation and make exports more competitive, though he’s denied targeting the exchange rate specifically.
After the Argentine peso, which is plunging following a debt default and devaluation, the yen will be the biggest loser among major currencies by the end of 2015, according to median strategist forecasts compiled by Bloomberg as of yesterday. A 6 percent decline is predicted, which would build on a 5.5 percent slide since June.
The euro is also expected to be among the 10 biggest losers, with strategists seeing a 4.8 percent drop.
More
Some
years ago, in 1936, I had to write to a very dear and honored friend of mine,
who has since died, Sir Austen Chamberlain, brother of the present Prime
Minister, and I concluded my letter with a rather banal remark, "that we
were living in an interesting age." Evidently he read the whole letter,
because by return mail he wrote to me and concluded as follows: "Many
years ago, I learned from one of our diplomats in China that one of the
principal Chinese curses heaped upon an enemy is, 'May you live in an
interesting age.'" "Surely", he said, "no age has been more
fraught with insecurity than our own present time." That was three years
ago
Frederic René Coudert, Jr. U. S. Congressman.
The monthly Coppock Indicators finished September.
DJIA: +141 Down. NASDAQ: +289 Down. SP500: +216 Down.
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