Monday, 23 May 2016

Bitcoin To The Rescue?

Baltic Dry Index. 634 -08      Brent Crude 48.53

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

Brexit odds checker.

Brexit Quote of the Day.
All the best stories in the world are but one story in reality - the story of escape. It is the only thing which interests us all and at all times, how to escape from the EUSSR.

With apologies to Walter Bagehot.

We open with the G-7 finance ministers issuing yet another warning on the poor state of the global economy. At the end of the week the G-7 leaders meet for a photo op in Japan, and to largely repeat the performance of the finance ministers. Central banking isn’t working like it used to, as the increasingly dysfunctional  Great Nixonian Error of fiat money, communist money, gets deeper and deeper into voodoo economics.  Stay long fully paid up physical gold and silver. The next Lehman is out there and gets closer by the day.
Our banksters seem to think it lies somewhere in the 4 trillion a year trade finance industry. They’re turning to bitcoin technology for the solution. Thanks to the Great Nixonian Error of fiat money, our “money” has become a mere gambling chip in the financialised casinos, and has lost its store of value quality.
To this old dinosaur commodity trader, switching to digital-ledger technology and blockchain accounting, seems likely to be highly destabilising to the Chinese shadow banking system, and would probably crash the false over invoicing system that underpins Chinese capital flight. If this ever looks likely to succeed, I suspect that we will see a tsunami of capital flight from China before it gets implemented. Something not on the agenda for this week’s G-7 photo op.
In central banking as in diplomacy, style, conservative tailoring, and an easy association with the affluent count greatly and results far much less.

John Kenneth Galbraith

G-7 Warns on Weak Global Growth as Japan Bristles Over Yen

May 21, 2016 — 8:13 AM BST Updated on May 21, 2016 — 10:21 AM BST
Finance chiefs from the world’s biggest developed economies meeting in Japan underscored concerns that global growth is flagging and reaffirmed a pledge not to deliberately weaken their currencies, even as Japan again warned on the yen’s surge.
At the end of two days of talks, Group of Seven central bank governors and finance ministers highlighted risks from terrorism, refugee flows, political conflicts and the potential for a U.K. exit from the European Union.
While officials agreed not to target currencies to stoke growth and warned of the negative consequences from disorderly moves in exchanges rates, host Japan repeated a stance that recent trading in the yen has been one sided and speculative.
Comments on the yen’s moves by Finance Minister Taro Aso hint at a growing frustration inside Japan’s government about the impact on exporters after the currency surged 9 percent this year, spurring speculation that the government may intervene. Aso raised the issued in a meeting with U.S. Treasury Secretary Jacob J. Lew on Saturday.
"I told him that one-sided, abrupt, and speculative moves were seen in the FX market recently, and abrupt moves in the currency market are undesirable and the stability of currencies is important,” Aso said to reporters.
Tensions over the yen were evident over the course of the meetings, which were held at a hot springs resort in the country’s north. As Japan warned about the impact of disorderly trading, Lew repeated his view that the yen’s movement hasn’t been overly volatile.
"It’s a pretty high bar to have disorderly conditions," Lew told reporters.
----Aso also made it clear that the difference of opinion with the U.S. is manageable. "They have an election and we have an election and we both have TPP talks," Aso said. "There are various things on our plates and we of course have to say various things as that’s our jobs."

Still, by choosing to be so vocal on the yen, Aso is both attempting to jawbone the currency lower and put a marker down in the event the currency again starts to appreciate rapidly.

"There’s no sign that Japan and the U.S. will move closer together," said Hiroaki Muto, chief economist at Tokai Tokyo Research Center.

Beyond currencies, the G-7 didn’t agree on details of how best to revive the world’s economy. The group said central banks, governments and structural reforms should be involved but stopped short of any coordinated push or an agreed to-do list.

Japan April exports suffer biggest drop in three months, bode ill for growth

Sun May 22, 2016 11:09pm EDT

Japan's exports fell in April at the fastest pace in three months as a stronger yen and weakness in China and other emerging markets take their toll on the country's shipments, boding ill for growth prospects for the current quarter.

Exports declined 10.1 percent year-on-year in April, Ministry of Finance data showed on Monday, in line with a 10.0 percent annual drop expected by economists in a Reuters poll but worse than a 6.8 percent drop in March.

It was the seventh straight month of declines and the biggest since 12.9 percent in January, when Japanese shipments to Asia slowed sharply ahead of the Lunar New Year holidays.

The decline was likely exaggerated by a drop in U.S.-bound car exports due to supply-chain disruptions caused by last month's earthquakes in southern Japan, but a rising yen and weak global demand are clouding the outlook for the year.

"Drops in U.S.-bound car exports were noise," said Takeshi Minami, chief economist at Norinchukin Research Institute.

"Asia and the global economy remain weak. On top of that, yen gains squeeze profits at exporters, causing wages and capital spending to weaken, which would hamper 'Abenomics' aim of creating virtuous growth," Minami said.

Imports fell 23.3 percent in April, worse than a 19.0 percent annual decline expected by economists and pointing not only to weak commodity prices but sluggish domestic demand.

A private business survey on Monday suggested more pain ahead for Japanese manufacturers. The Markit/Nikkei preliminary survey for May showed total new orders declined at the sharpest pace in 41 months.


Saudi financial crisis 'could leave oil at $25’ as contractors face being paid in IOUs

22 May 2016 • 8:40pm
Saudi Arabia faces a vicious liquidity squeeze as capital continues to leak out the country, with a sharp contraction of the money supply and mounting stress in the banking system.

Three-month interbank offered rates in Riyadh have suddenly begun to spiral upwards, reaching the highest since the Lehman crisis in 2008.

Reports that the Saudi government is to pay contractors with tradable IOUs show how acute the situation is becoming. The debt-crippled bin Laden group is laying off 50,000 construction workers as austerity bites in earnest.

Societe Generale’s currency team has advised clients to short the Saudi riyal, betting that the country will be forced to ditch its long-standing dollar peg, a move that could set off a cut-throat battle for global share in the oil markets.

Francisco Blanch, from Bank of America, said a rupture of the peg is this year’s number one “black swan event” and would cause oil prices to collapse to $25 a barrel. Saudi Arabia’s foreign reserves are still falling by $10bn (£6.9bn) a month, despite a switch to bond sales and syndicated loans to help plug the huge budget deficit.

The country’s remaining reserves of $582bn are in theory ample – if they are really liquid – but that is not the immediate issue. The problem for the Saudi central bank (SAMA) is that reserve  depletion automatically tightens  monetary policy.

Bank deposits are contracting. So is the M2 money supply. Domestic bond sales do not help because they crowd out Saudi Arabia’s wafer-thin capital markets and squeeze liquidity. Riyadh now plans a global bond issue.

While crude prices have rallied 80pc to almost $50 a barrel since mid-February, this has not yet been enough to ease Saudi Arabia’s financial crunch.

The rebound in crude is increasingly fragile in any case as tough talk from the US Federal Reserve sends the dollar soaring, and Canada prepares to restore 1.2m barrels a day (b/d) of lost output. “We feel that markets have moved too high, too far, too soon. We still face a large inventory overhang and supply outages are reversible,” said BNP Paribas.

Total chief Patrick Pouyanne told the French senate last week that prices could deflate as fast as they rose. “The market won’t come back into balance until the end of the year,” he said.

Mr Pouyanne said the collapse in annual oil and gas investment to $400bn – from $700bn in 2014 – would lead to a global shortage of 5m barrels by 2020 and another wild spike in prices, but first the glut has to be cleared.

The oil rally is now at a make-or-break juncture. A growing number of oil traders warn that speculative purchases of “paper barrels” by hedge funds have decoupled from fundamentals. There is usually a seasonal slide in demand over the late summer.

Fraud in $4 Trillion Trade Finance Turns Banks to Digital Ledger

May 22, 2016 — 5:00 PM BST
The risk posed by fraud in the $4 trillion trade-financing industry has prompted banks to start exploring distributed-ledger technology like the one that underpins bitcoin.

Standard Chartered Plc, which lost almost $200 million from a fraud at China’s Qingdao port two years ago, has teamed up with DBS Group Holdings Ltd. to develop an electronic ledger of invoices that uses a parallel platform to the blockchain employed in bitcoin transactions. Lenders such as Bank of America Corp. and HSBC Holdings Plc say they’re looking at blockchain for trade finance and other banking applications.

Blockchain proponents argue that the technology will change the face of banking, helping lenders cut billions of dollars in costs. Trade financing, a centuries-old banking mainstay, may become ground zero for blockchain adoption because it promises to do away with paper invoices and the fraud that accompanies them -- if banks can come together around a joint platform.

For blockchain applications, “invoices should be considered a leading candidate here, given the high potential for fraud,” said Henry Balani, global head of strategic affairs at Accuity, which provides technology to monitor trade-based money laundering.

Lenders typically don’t publish their losses from trade fraud, though almost 20 percent of banks in a 2015 survey by the International Chamber of Commerce reported an increase in fraud allegations.


We end for the day with another Brexit update. The Brexit vote is now just a month away. Project Fear has gone into panic mode.

"In economics, hope and faith coexist with great scientific pretension."

John Kenneth Galbraith.

Finance Chiefs Unanimous in Denouncing Brexit as Wrong Choice

May 21, 2016 — 7:21 AM BST
Global finance chiefs agreed that Britons should not vote to leave the European Union next month as they warned that Brexit may have negative economic consequences.
German Finance Minister Wolfgang Schaeuble said in a briefing at the conclusion of the Group of Seven finance ministers’ meeting in Sendai, northern Japan, on Saturday that all G-7 members agreed on the consequences of Brexit, and shared the hope that Britain would vote to remain in the bloc on June 23.
“We were all of the opinion that it would be the wrong decision for the U.K.," Schaeuble said. "But it’s a decision to be taken by the British voters. We’re concerned that it could have negative consequences for the European and the world economy.”
The Japanese presidency of the group released a summary of the meeting, which said the "shock of a potential U.K. exit from the European Union” would complicate the global economic environment.
With only a month to go before the referendum, the G-7’s caution will provide further ammunition for U.K. Chancellor of the Exchequer George Osborne, who is one of the main strategists behind Prime Minister David Cameron’s campaign to keep Britain in the bloc.

David Cameron's disgraceful dishonesty over the EU is turning Britain into a banana republic

Simon Heffer21 May 2016 • 3:00pm
One of the Tory party’s more distinguished parliamentarians told me last week, in deadly seriousness rather than satire, that he thought we lived in a banana republic. He believed there was some truth in a story, going around Westminster, that the Prime Minister would create 25 peerages for those “supportive” in the referendum campaign. Certainly some of the recent ennoblements have seemed like barrel scrapings, pitching into the Upper House for reasons of tokenism people who, a generation ago, would have been lucky to get a job cleaning the place.
Doling out peerages to nonentities because they agree with you is bad enough. But what about the perception that Mr Cameron is doing favours to captains of industry in return for vocally supporting his cry to remain in the EU – even by urging shareholders to vote “remain” in company annual reports? And what are we to make of the outrageous imposition of employers telling employees how to vote on June 23? Gladstone had the secret ballot introduced in 1872 precisely to allow working men enfranchised after the 1867 Reform Act to vote without being bullied into supporting a certain side by their employers: a fat lot of good that did.

People say they want “facts” before deciding how to vote next month, so here’s one to mull over. The EU is a profoundly anti-democratic institution. The European Commission, whom no-one elects, initiates policy in the EU. The European parliament, or indeed you or I, can ask it to do certain things: it can tell the parliament, or you and me, to get lost, and that’s that. Charles I tried something similar, and it started a civil war.
If all else fails, immortality can always be assured by spectacular error.

John Kenneth Galbraith.
At the Comex silver depositories Friday final figures were: Registered 30.03 Moz, Eligible 124.53 Moz, Total 154.56 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, Chancellor Merkel is in panic mode with Turkey. When the EUSSR grants visa-free travel status to Turkey, continental Europe, Schengen Europe, starts playing Russian roulette with Islamic terrorism.

Merkel on Mission to Rescue Turkey Deal as Erdogan Tightens Grip

May 22, 2016 — 11:00 PM BST
German Chancellor Angela Merkel made yet another trip to Turkey as she strives to shore up a fragile refugee accord in the face of increasingly rancorous relations with President Recep Tayyip Erdogan.
Merkel arrived in Istanbul Sunday evening for her fifth visit to Turkey in eight months amid German criticism of Erdogan’s moves to tighten his grip on power with the installation of a close ally as prime minister and head of the ruling party. For his part, Erdogan has hammered the European Union’s terms for granting visa-free travel for Turkish citizens and the slow delivery of 6 billion euros ($6.7 billion) in EU funds in return for halting the influx of refugees making their way to Europe.
----The chancellor is in Istanbul for Monday’s United Nations-sponsored World Humanitarian Summit. As part of the delicate balancing act she’s facing, she was due to meet with members of Turkey’s civil society Sunday evening to hear their criticisms of the government. Turkey on Friday moved closer to putting many of its leading Kurdish politicians on trial, as parliament passed a constitutional amendment depriving almost all elected lawmakers from the main pro-Kurdish party of their legal immunity.
----The visit comes as Erdogan shores up his power. One of his closest lieutenants, Binali Yildirim, was on Sunday anointed chairman of the ruling Justice and Development Party, or AKP, and is premier-designate. Davutoglu, who was Merkel’s main interlocutor on migration, abruptly announced his resignation this month after losing a power struggle with Erdogan. The presence of a loyalist as premier helps pave the way for Erdogan to transform Turkey from a parliamentary to a presidential system, with much greater power resting with him.
"We are in a world of irredeemable paper money - a state of affairs unprecedented in history."

John Exter

Brexit The Animated Movie.

Brexit Quote of the week.

“We hold these truths to be self evident: that all men are created equal; that they are endowed by their Creator with certain inalienable rights; that among these are life, liberty, and the pursuit of happiness outside of the EUSSR.”

With grateful thanks to the writers of the US Declaration of Independence.

Solar  & Related Update.

With events happening fast in the development of solar power and graphene, I’ve added this new section. Updates as they get reported. Is converting sunlight to usable cheap AC or DC energy mankind’s future from the 21st century onwards? DC? A quantum computer next?

Below, Bill and Melinda fix their problem. Good for them. After that, what happens when solar mirrors misalign.

Graphene makes rubber more rubbery

Date: May 20, 2016

Source: University of Manchester

Summary: Adding graphene to thin rubber films can make them stronger and stretchier, researchers have shown.
In an article published in Carbon, Dr Aravind Vijayaraghavan and Dr Maria Iliut from Manchester have shown that adding a very small amount of graphene, the world's thinnest and strongest material, to rubber films can increase both their strength and the elasticity by up to 50%. Thin rubber films are ubiquitous in daily life, used in everything from gloves to condoms.
In their experiments, the scientists tested two kinds of rubbery materials -- natural rubber, composed of a material called polyisoprene, and a human-made rubber called polyurethane. To these, they added graphene of different kinds, amounts and size.
In most cases, it they observed that the resulting composite material could be stretched to a greater degree and with greater force before it broke. Indeed, adding just one tenth of one percent of graphene was all it took to make the rubber 50% stronger.
Dr Vijayaraghavan, who leads the Nano-functional Materials Group, explains "A composite is a material which contains two parts, a matrix which is soft and light and a filler which is strong. Taken together, you get something which is both light and strong. This is the principle behind carbon fibre composites used in sports cars, or Kevlar composites used in body armour.
"In this case, we have made a composite of rubber, which is soft and stretchy but fragile, with graphene and the resulting material is both stronger and stretcher."
Dr Maria Iliut, a research associate in Dr Vijayaraghavan's group, describes how this material is produced: "We use a form of graphene called graphene oxide, which unlike graphene is stable as a dispersion in water. 
The rubber materials are also in a form that is stable in water, allowing us to combine them before forming thin films with a process called dip moulding."
"The important thing here is that because these films are so thin, we need a strengthening filler which is also very thin. Fortunately, graphene is both the thinnest and strongest material we know of."
The project emerged from a call by the Bill & Melinda Gates Foundation, to develop a more desirable condom. According to Dr Vijayaraghavan, this composite material has tremendous implications in daily life.

Mirrors blamed for fire at world’s largest solar plant

May 19, 2016 The Associated Press
PRIMM, Nev. – A small fire shut down a generating tower Thursday at the world’s largest solar power plant, leaving the sprawling facility on the California-Nevada border operating at only a third of its capacity, authorities said.
Firefighters had to climb some 300 feet up a boiler tower at the Ivanpah Solar Electric Generating System in California after fire was reported on an upper level around 9:30 a.m., fire officials said.
The plant works by using mirrors to focus sunlight on boilers at the top of three 459-foot towers, creating steam that drive turbines to produce electricity.
But some misaligned mirrors instead focused sunbeams on a different level of Unit 3, causing electrical cables to catch fire, San Bernardino County, California fire Capt. Mike McClintock said.
David Knox, spokesman for plant operator NRG Energy, said it was too early to comment on the cause, which was under investigation.
The fire was located about two-thirds of the way up the tower, said Jeff Buchanan of Nevada’s Clark County Fire Department, which also responded to the blaze.
Plant personnel had the fire out by the time firefighters reached the spot, and it was officially declared out in about 20 minutes.
Photos showed melted and scorched steam ducts and water pipes.
Knox said the tower was offline while crews assess the damage. He could not immediately say when it would restart.
The plant can produce enough power for 140,000 California homes, but a second tower is shut down for maintenance, leaving only one running.
It was not immediately clear what impact that would have on California’s electricity supply.
It was the first fire at the plant, which opened two years ago on federal land in the Mojave Desert about 45 miles southwest of Las Vegas.
The $2.2 billion complex has nearly 350,000 computer controlled mirrors — each roughly the size of a garage door — that sprawl over roughly five square miles of desert.

The monthly Coppock Indicators finished April

DJIA: 17773.64-19 Down. NASDAQ:  4775.36 +11 Down. SP500: 2065.30 -21 Down. 

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