A New Reality.

Baltic Dry Index. 782 -06   Brent Crude 59.84

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

"When a President does it, that means that it is not illegal."

President Richard Nixon.

In the Great Nixonian Error of fiat money, a new reality has emerged in the 21^st century. China. While the Great Nixonian Error will eventually result in a fiat money disaster and global revulsion from fiat money scams, we are only in the first phase of that end game. Whether the GNE dies from a hard landing in China, the collapse of the unloved dying Euro project, the collapse of Uncle Scam’s American frackers, or the collapse of the Middle East’s tyrannies under the budgetary pressure of living with 50 dollar oil, the Great Nixonian Error will die long before we get global GDP into the quadrillions. Until then though, China has just altered the game. Not for them a US run global scam, that targets all non-compliant lesser nations. “Don’t tread on me, Uncle Scam. We are not Russia, not even close.”

Quadrillion - 1,000,000,000,000,000 in seconds:

Quadrillion - 31,700,000 years

China Steps In as World's New Bank

Dec 25, 2014 6:00 PM EST

By William Pesek

Thanks to China, Christine Lagarde of the International Monetary Fund, Jim Yong Kim of the World Bank and Takehiko Nakao of the Asian Development Bank may no longer have much meaningful work to do.

Beijing's move to bail out Russia, on top of its recent aid for Venezuela and Argentina, signals the death of the post-war Bretton Woods world. It’s also marks the beginning of the end for America's linchpin role in the global economy and Japan's influence in Asia.

What is China's new Asian Infrastructure Investment Bank if not an ADB killer? If Japan, ADB's main benefactor, won't share the presidency with Asian peers, Beijing will just use its deep pockets to overpower it. Lagarde's and Kim’s shops also are looking at a future in which crisis-wracked governments call Beijing before Washington.

China stepping up its role as lender of last resort upends an economic development game that's been decades in the making. The IMF, World Bank and ADB are bloated, change-adverse institutions.  When Ukraine received a $17 billion IMF-led bailout this year it was about shoring up a geopolitically important economy, not geopolitical blackmail.

Chinese President Xi Jinping's government doesn't care about upgrading economies, the health of tax regimes or central bank reserves. It cares about loyalty. The quid pro quo: For our generous assistance we expect your full support on everything from Taiwan to territorial disputes to deadening the West’s pesky focus on human rights.

This may sound hyperbolic; Russia, Argentina and Venezuela are already at odds with the U.S. and its allies. But what about Europe? In 2011 and 2012, it looked to Beijing to save euro bond markets through massive purchases. Expect more of this dynamic in 2015 should fresh turmoil hit the euro zone, at which time Beijing will expect European leaders to pull their diplomatic punches. What happens if the Federal Reserve’s tapering slams economies from India to Indonesia and governments look to China for help? Why would Cambodia, Laos or Vietnam bother with the IMF’s conditions when China writes big checks with few strings attached?

Beijing’s $24 billion currency swap program to help Russia is a sign of things to come. Russia, it's often said, is too nuclear to fail. As Moscow weathers the worst crisis since the 1998 default, it’s tempting to view China as a good global citizen. But Beijing is just enabling President Vladimir Putin, who’s now under zero pressure to diversify his economy away from oil. The same goes for China’s $2.3 billion currency swap with Argentina and its $4 billion loan to Venezuela. In the Chinese century, bad behavior has its rewards.

More

http://www.bloombergview.com/articles/2014-12-25/china-steps-in-as-worlds-new-bank

"It doesn't matter if you're rich or poor, as long as you've got money."

Joe E. Lewis

At the Comex silver depositories Friday final figures were: Registered 64.60 Moz, Eligible 111.88 Moz, Total 176.48 Moz.   

Crooks and Scoundrels Corner

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

If all else fails, immortality can always be assured by spectacular error.

J. K. Galbraith.

The Keynesian End Game Crystalizes In Japan’s Monetary Madness

by David Stockman • December 28, 2014

If the BOJ’s mad money printers were treated as monetary pariahs by the rest of the world, it would at least imply that a modicum of sanity remains on the planet. But just the opposite is the case. Establishment institutions like the IMF, the US treasury and the other major central banks urge them on, while the Keynesian arson squad led by Professor Krugman actually faults Japan for being too tepid with its “stimulus”.

Now comes several new data points that absolutely confirm Japan is a financial mad house—-even as its policy model is embraced by mainstream officials and analysts peering from a distance. Front and center is the newly reported fact from the Cabinet Office that Japan’s household savings rate plunged to minus 1.3% in the most recent fiscal year, thereby entering negative territory for the first time since records were started in 1955.

----Since Japan famously and doggedly refuses to accept immigrants, its long-term demographics are rigidly baked into the cake. Accordingly, anyone who will make a difference over the next several decades has already been born, counted, factored and attrited into the projections.

Japan’s work force of 80 million will thus drop to 40 million by 2060. At the same time, its current 30 million retires will continue to rise, meaning that its retiree rolls will ultimately exceed the number of workers.

Given those daunting facts, it follows that on the eve of its demographic bust Japan needs high savings and generous interest rates to augment retirement nest eggs; a strong exchange rate to attract foreign capital to help absorb its staggering $12 trillion of public debt, which already stands at a world leading 230% of GDP; and rising real incomes in order to shoulder the heavy taxation that is unavoidably necessary to close its fiscal gap and contain its mushrooming public debt.

With its debilitating Keynesian fiscal and monetary policies now re-upped on steroids under Abenomics, however, it goes without saying that nearly the opposite conditions prevail. Most notably, no household or institution anywhere in Japan can earn anything on liquid savings. The money market rate which determines deposit money yields was driven from a “high” of 100 basis points (as ridiculous as that sounds) at the time of the financial crisis to 10 basis points today, which is to say, nothing.

----In fact, however, failing to think more than one step ahead, the BOJ actually wants banks, households and other financial institutions to sell their shirts at a handsome profit. That is to say, the BOJ’s bond purchase program is now so massive that it is buying 100% of the government’s gross debt issuance. In practical terms this means the float of public debt is actually being shrunk, and that the government bond market for all practical purposes has been extinguished by the BOJ.

There is nothing left except one relentless bid by the central bank. Recent data from Japan’s government pension insurance fund (GPIF), for example, show that the GPIF alone has already sold several hundred billions dollars worth of government bonds to the BOJ.

Needless to say, this radical monetization of the entire government bond market is an act of financial suicide. The BOJ now dares not stop the printing presses because absent the central bank’s big fat bid, the market would gap up violently. Yet 40% of Japan’s government revenue is already absorbed by servicing its gargantuan public debt. Even a 180 basis point increase in average yields (meaning that the 10-year JGB would still be under 2%) would absorb the remainder. That’s right, 100% of government revenue would be pre-empted by debt service.

This obviously amounts to a fiscal Looney Tunes scenario, but it is nonetheless embedded in the math. Even after the consumption tax increase from 5% to 8%, Japan’s general government is spending about 100 trillion yen per year while obtaining only 50 trillion yen in tax

More

http://davidstockmanscontracorner.com/the-keynesian-end-game-crystalizes-in-japans-monetary-madness/?utm_source=wysija&utm_medium=email&utm_campaign=Mailing+List+Sunday+10+AM

"The history of paper money is an account of abuse, mismanagement, and financial disaster."

Richard M. Ebeling

The monthly Coppock Indicators finished November.

DJIA: +136 Down. NASDAQ: +262 Down. SP500: +204 Down.