Baltic Dry Index. 1029 -08
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
"The paper standard is self-destructive."
Hans F. Sennholz
For more on caveat emptor, “God’s work,” and the
Goldman Muppets, scroll down to Crooks Corner.
We open today with dying continental Europe, and
France reading the Riot Act to suicidal Germany. Send us your money or else, seems to have
been yesterday’s message. Not that Germany, hit by Russian sanctions blowback,
was in much of a mood to listen. If the German defence minister can find a
military transport plane that still works, Germany is proposing to send it’s storm
troopers back to east Ukraine to police the Russian-Ukraine border. That should be interesting to say the least.
Opening up affronts in the east and the west.
Below, the EUSSR sleepwalks towards disintegration.
The euro isn’t working for most Europeans, but no one is willing to face up to
reality.
"When paper money systems begin to crack at the seams, the run to gold could be explosive."
Harry Browne
France cautions Germany not to push Europe too far on austerity
France's Manuel Valls also warned David Cameron that Europe is "not ready for an upheaval of its institutions", offering no concessions on EU treaty terms
France has denounced the
eurozone’s austerity regime as deeply misguided and issued a blunt warning to
Germany and the EU institutions that demands for further belt-tightening may
set off a political backlash, endangering European stability.
“Be careful how you talk to the
countries in the South, and be careful how you to talk to France,” said the
French premier, Manuel Valls. “The adjustment has been brutal and it has turned
millions people against Europe. It is putting the European project itself at
risk.”
Mr Valls said Europe’s fiscal
rules have been overtaken by deflationary forces and a protracted slump. “You
cannot enforce the Treaty rigidly in these circumstances. The austerity
policies are becoming absurd, and we have to examine the situation,” he told
journalists in London.
The reformist French premier said
the eurozone’s failure to recover risked leaving the region on the margins of
the world economy, stuck in a Japanese-style trap. France had pushed through
€30bn of fiscal cuts from 2010 to 2012, and another €30bn since then in an
effort to comply with EU deficit rules, only to see the gains overwhelmed by
the economic downturn. The deficit will remain stuck at 4.3pc of GDP in 2015. A
further €50bn of cuts are coming over the next three years. “If they make us
reach a 3pc deficit, the country will be totally on its knees. It’s not
possible,” he said
The warnings
came amid reports the European Commission may strike down France’s draft budget
for 2015, refusing to give Paris two extra years until 2017 to meet the 3pc
limit. Brussels is also threatening “infringement proceedings”, a process that
could ultimately lead to fines. This would put the new Juncker Commission on a
dangerous collision course with both France and Italy, two of the eurozone’s
big three, now closely aligned in a joint push for EMU-wide reflation and New
Deal policie
More
France's stagnation is tragic to watch
For all its reformist talk, France’s government will merely rearrange the deckchairs
---- But it is not France’s protectionism – at least not directly – that caused Disneyland Paris’s latest woes and the need for a £783m injection of cash from its shareholders.
The problem this time is simply
the downturn: visitor numbers are declining on the back of economic growth
expected by the OECD to come in at just 0.4pc this year. The unfortunate
reality is that Disney would have been far better off building its European
resort elsewhere – Germany has hardly boomed either in recent years but it
would probably have made for a better base.
The French economy is stagnating,
with a horrifying 3.4m people out of work and millions more in unviable,
state-subsidised jobs. Valls tried to reassure his audience in London that
reforms were on the way, highlighting that the destructive 75pc top rate of tax
was always intended to be temporary and would be expiring at the end of the
year. But France’s problems are far deeper that just one tax, and for all its
reformist talk France’s government will merely rearrange the deckchairs. This
is a tragedy for those of us who love the country but despair of its economic
policymaking.
More
German Factory Orders Slump Most Since 2009: Economy
Oct 6, 2014 1:05 PM GMT
German factory orders (GRIORTMM) plunged the most since 2009,
underlining the risk of a slowdown in Europe’s largest economy. Orders, adjusted for seasonal swings and inflation, fell 5.7 percent in August, the Economy Ministry in Berlin said today. Economists predicted a 2.5 percent decline, according to the median estimate in a Bloomberg News survey. The data are volatile, and the drop followed a 4.9 percent increase in July that was the most in more than a year. Orders fell 1.3 percent from a year earlier.
Deteriorating confidence is undermining a rebound in Germany’s economy from a second-quarter slump. The 18-nation euro region is struggling to sustain its recovery amid rising political tension with Russia over its support of separatists in Ukraine and inflation that’s running at a fraction of the European Central Bank’s definition of price stability.
More
Germany factories hammered by Russia as orders drop at swiftest pace since 2009
Ongoing tensions over Ukraine and tit-for-tat sanctions between Russia and the eurozone saw foreign orders for German goods drop by 8.5pc in August
A further sign that the eurozone
is struggling, as fresh data reveal that German factory production plunged in
August.
Economy watchers had expected to
see factory orders drop in August, following a 4.9pc rise in July, but not by
this much.
Orders dropped by 5.7pc in August
alone, the Bundesbank reports, a fall much greater than the 2.5pc analysts had
predicted.
Falling at the fastest pace since
2009, the figures “were appalling”, said Chris Scicluna of Daiwa Capital
Markets.
Claus Vistesen, chief eurozone
economist at Pantheon Macroeconomics, sums up the data in one line: "grim,
as manufacturing slowdown deepens"
The German economy, and particularly its factories, have
been buffeted by ongoing tensions over Ukraine, and tit-for-tat sanctions
between Russia and the eurozone.
---- Foreign orders dropped by 8.5pc, while domestic orders were down by 2pc in August alone. The data “flags the risks that we will see a further quarter in Germany without any positive GDP growth in the third quarter after the contraction in the second”, Mr Scicluna added.
Other gauges of the eurozone's
economic health have also headed lower. Measures of investor confidence fell in
October, for a third straight month.
Sebastian Wanke, senior analyst
at Sentix, who compile the confidence figures, said that the indices
"point currently to a recession in the euro area".
More
Elsewhere, nothing but more ignored red flags from
Asia. Fiat money is entering the terminal phase. The Great Nixonian Error of
1971 is heading for its long overdue end.
"The gold standard makes the money's purchasing power independent of the changing, ambitions and doctrines of political parties and pressure groups. This is not a defect of the gold standard; it is its main excellence."
Ludwig von Mises
BOJ Keeps Policy Unchanged With Yen Near Six-Year Low
Oct 7,
2014 6:04 AM GMT
The Bank of Japan
maintained its record stimulus as the yen traded near a six-year low and
economists pushed back forecasts for further monetary easing. The central bank kept its pledge to increase the monetary base at an annual pace of 60 trillion yen to 70 trillion yen ($643 billion), it said in a statement today, in line with all 33 economists surveyed by Bloomberg News.
January is the most popular pick for economists forecasting additional easing as the yen’s decline bolsters expectations for price gains even as it fuels debate on the wider impact of the exchange rate. The central bank projects prices to rise in the midterm and some BOJ board members believe it wouldn’t be appropriate to trigger a more rapid weakening of the currency with more stimulus now, according to people familiar with the matter
More
H.K. Retail Chains See 50% Sales Drop, Survey Shows
Oct 7, 2014 5:49 AM GMT
Sales at major Hong Kong retailer chains have fallen as much as 50 percent
during the bulk of the Chinese National Day holidays after pro-democracy
protests disrupted the shopping season, according to a survey. Sales dropped at least 15 percent during the first five days of the holidays known as Golden Week, the Hong Kong Retail Management Association said in a statement yesterday, citing a survey on its members. Retailers selling watches and jewelry were among the most affected, according to the group.
Sales at small- to medium-sized companies plunged as much as 80 percent, according to the association. Those operating in the Mong Kok, Causeway Bay or Tsim Sha Tsui shopping areas occupied by protesters were hurt the most, it said.
The figures are among the earliest indicators of the financial toll caused by the protests that have roiled retailers since late September.
More
China Cuts Thousands of ‘Phantom’ Workers From State Payroll
Oct 7, 2014 6:10 AM GMT
China’s government removed
tens of thousands of “phantom employees” from state payrolls amid a campaign by
President Xi Jinping to crack down on corruption and eliminate waste. A total of 162,629 employees who had continued to draw salaries after leaving their posts were cleared out of central and provincial governments, state-controlled financial companies and universities as of Sept. 25, the official People’s Daily reported yesterday. The country also disposed of 114,418 government vehicles, it said in a separate report.
The moves build on Xi’s broader anti-graft campaign to crack down on the abuse of power by officials after he became head of the Communist Party in November, 2012. Central government agencies cut their fleet by 37 percent last year, according to the Central Commission for Discipline Inspection and Ministry of Supervision. Xi’s government has also cut spending on business travel and entertainment.
More
Waldorf to Be Biggest Chinese Property Purchase in U.S.
Oct 6, 2014 9:45 PM GMT
New York City’s Waldorf
Astoria hotel is set to become the biggest prize yet for buyers from China who have been
pouring money into U.S. real estate as they seek stable investments outside
their country. Beijing’s Anbang Insurance Group Co. agreed to pay $1.95 billion for the 1,232-room tower on Park Avenue, an Art Deco landmark and one of Manhattan’s signature properties. That would be the highest price for a single existing hotel in the country, and the most paid for a standing U.S. building by a Chinese buyer, said Kevin Mallory, global head of the hotels unit of commercial real estate brokerage CBRE Group Inc. (CBG)
More
Finally, the fighting heats up as the Ukraine cools
down. If Brussels and Washington are the answer, Ukrainians better pray for a
very warm winter.
"Were we to be directed from Washington when to sow and when to reap, we should soon want bread."
Thomas Jefferson
U.S. Aids Ukraine on Heat Plan as EU Warns on Winter
Oct 6,
2014 11:00 PM GMT
The U.S. is helping Ukraine (UADPRYOY) plan how to keep
homes and businesses heated during the winter months while the European Union’s
incoming chief diplomat said the government in Kiev may be facing a “nightmare”
as freezing temperatures approach. Fighting continued in several parts of eastern Ukraine amid moves to establish a buffer zone aimed at cementing a wobbly truce that went into effect a little more than a month ago between government forces and pro-Russian separatists.
“We have a team in Ukraine looking at the immediate issues of this winter,” U.S. Energy Secretary Ernest Moniz said at the Council on Foreign Relations in New York yesterday. “The issues are, unfortunately, challenging.” Analysts are looking at ways of shifting away from natural gas to other fuels for home heating, he said.
Ukraine is bracing for the onset of winter, when temperatures at times drop below minus 20 degrees Celsius (minus 4 degrees Fahrenheit), with Russian gas supplies shut off and the energy infrastructure damaged by the fighting that has engulfed the country’s easternmost regions. The fuel shortage has already limited access to hot water.
In
Brussels, Italian Foreign Minister Federica Mogherini said yesterday Ukraine
faces a “winter that is going to be probably a nightmare from the economic
point of view, from the energy point of view.” Mogherini was speaking at a
hearing on her nomination to become the EU’s foreign policy chief
More
"Buy gold and sit on it. That is the key to success."
Dr. Franz Pick
At the Comex silver depositories Monday final figures were: Registered 65.59 Moz,
Eligible 116.90 Moz, Total 182.49 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled
over.
Today Caveat Emptor, how a few nights out on Goldie’s
credit card cost Gaddafi’s Muppets at the Libyan Investment Authority over a
billion. Not to worry, the Goldmanites slaving away doing “God’s work” in
London made a cool 350 million dollars on the deal. Is Anglo-American
capitalism good or what?
“Call
it the Goldman Sachs test. If this is something Goldman would do to its
clients, don't do it."
Felix
Salmon.
'Heavy drinking and girls' on Libyan investors' Goldman-funded trips
Former lawyer at Libya's $60bn sovereign wealth fund says she was "shocked" at the closeness between Goldman Sachs and the Libyan Investment Authority during Gaddafi era
Goldman Sachs took employees at
Libya's sovereign wealth fund on "lavish" excursions to Morocco at
which there was "heavy drinking and girls involved", a lawyer who
worked at the fund has claimed in court documents.
Catherine McDougall, formerly of
City law firm Allen & Overy, said she had been "shocked" by the
closeness between those at the Wall Street bank and employees at the Libyan
Investment Authority (LIA) during the Colonel Gaddafi era, when the LIA lost
around $1bn on a derivatives trade arranged by Goldman.
The LIA, which
is suing Goldman in London, claims the bank cosied up to its employees
and hoodwinked it into making $1.2bn-worth of trades it did not understand, and
is seeking damages.
Goldman, meanwhile, argues that
it had an arms-length relationship with the LIA officials, who understood
completely what they were buying into. In a hearing on Monday, the judge in the
case said the hospitality provided by Goldman should not be regarded as
improper.
In witness statements provided by
the LIA, at the start of a court hearing to manage the case, Ms McDougall and
others claimed the relationship was anything but normal.
"They told me about their
lavish trip to Morocco and that there was heavy drinking and girls involved and
that the trip was paid for by [Goldman's] Youssef Kabbaj mostly on his Goldman
corporate credit card," Ms Dougall's witness statement said.
"They also told me how Mr
Kabbaj would take them out in London for expensive nights out, again paid for
on his Goldman Sachs credit card. I thought that the level of closeness that Mr
Kabbaj had built with the team seemed inappropriate and that the line between
friendship and arm's length commercial dealings had clearly been blurred."
However, Mrs Justice Rose,
overseeing proceedings, said she did not consider the hospitality offered to
LIA officials as evidence of any improper relationship, and "read it
only... as an illustration of the closeness of the relationship".
A $1.2bn investment in
derivatives linked to the share prices of banks and energy companies made by
Goldman on the LIA's behalf in 2008 turned
out to be almost completely worthless when the share prices of the
companies dropped. Goldman, meanwhile, is said to have made a $350m profit on
the deal.
Ms McDougall said that "none
of the equity team understood in any depth what the disputed trades
involved", believing instead that they were simple investments in shares.
More
"The gold standard sooner or later will return with
the force and inevitability of natural law, for it is the money of freedom and
honesty."
Hans F. Sennholz
The monthly Coppock Indicators finished September.
DJIA: +141 Down. NASDAQ: +289 Down. SP500: +216 Down.
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