Tuesday, 26 July 2016

Banking Crisis Hits Mains Stream Media.

Baltic Dry Index. 709 -09      Brent Crude 44.89

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

"Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium."

Murray N. Rothbard
Better late than never, I suppose. Today a subject we’ve covered for weeks is at last hitting main stream media. Shame no one thought to bring it up at the weekend’s just past G-20 finance ministers meeting. The photo-op looked nice though. Stay long fully paid up physical gold and silver, held outside of the insolvent banking and financial system. MF Global style, the financial system has form when it comes to hypothecating your physical gold and silver away.

How the pieces are falling into place for another global financial crisis

Published: July 25, 2016 7:41 a.m. ET  Satyajit Das

Efforts to fix banks’ debt woes suffer bad breaks

Banks worldwide are highly leveraged, leaving them vulnerable to even a small loss, which can wipe out a significant amount of capital and increase the risk of insolvency. Now a new global banking crisis may be beginning; the pieces are falling into place.

Exacerbating the danger is that in many advanced economies, banking systems are large relative to the real economy. They are vital in facilitating payments and supplying the essential credit that drives consumption, investment and government spending. Any disruption quickly results in a slowdown in the economic activity.

Today, several areas of banking stress are clear. Consider European banks, which hold around 1.2 trillion euro worth of problem loans. Italian banks alone have an estimated €360 billion of non-performing loans (“NPLs”), reflecting around 20% of Italy’s GDP. Italian NPLs represent around 15% of all its banking system’s loans, compared to around 5% in the U.S. during in the 2008-09 banking crisis. The problem is not a real estate bubble, but low growth, disinflation or deflation, and lack of competitiveness — exacerbated by an overvalued exchange rate.
Italian banks’ access to new equity is now limited. Atlante, the government established vehicle, was inadequately funded (at €4-6 billion) for the task of recapitalizing problem banks. It was also conceptually flawed, raising money from stronger banks, insurers, and institutions to support weaker entities — in effect spreading contagion.
----Other European nations are not immune. Germany’s fragmented banking sector is vulnerable, not having fully reformed after the 2008 crisis. Deutsche Bank’s share price has fallen sharply. Landesbanks, central institutions for savings banks and house banks for the German Laender (states), face rising bad debts and persistent low profitability. European banks also have varying level of exposures to Italian banks and Italian sovereign debt, as well as to other weaker European issuers.

Non-performing loan problems are also apparent in emerging markets.

China’s official bad debts are under 2% of total credit, or around 6% including “special mention” loans. That is far below independent calculations that put problem debt at around 15%-16% of total credit. The IMF estimates that China sits on $1.3 trillion of risky loans, with potential losses equivalent to 7% of GDP. Private forecasts are two- to three times this level.
----India, meanwhile, confronts stressed loans totaling more than $150 billion, around 10% of its GDP. NPLs are the result of over-leveraged borrowers, primarily SOEs, family owned conglomerates, and infrastructure firms. Governance also is a problem, with state-owned banks under pressure to lend to government-sponsored trophy projects with dubious economics. NPLs are difficult to resolve, due to historically inefficient bankruptcy procedures that have only recently been altered. Meanwhile, politically connected borrowers frequently force weak loans to be restructured rather than recognized as unrecoverable.
----Any new banking crisis likely will be significant. Banks are networked both domestically and internationally through inter-bank lending and derivative transactions. Problems at one bank can quickly infect others and spread across the financial system. Public finance problems follow as governments and central banks are forced to support banks to ensure continuance of essential payment and credit flows. The only guarantee at this point is that banking problems will remain a continued source of economic instability.
In other news, capital flight from China to Vancouver real estate is now so bad that Vancouver is hitting back. Anyone know the name of the next province east and its capital city? On the Great Nixonian Error of fiat money, communist money, the Great Bubble Era we’ve all lived through is nearing its end. Everyone wants out of the Great Chinese Malinvestment Ponzi Bubble before it collapses.

Vancouver slaps 15% tax on foreign home buyers

Published: July 25, 2016 10:10 p.m. ET
Foreign home buyers in the Canadian city of Vancouver will face an additional 15% property transfer tax beginning next week, the provincial government of British Columbia said Monday.

The new tax legislation comes amid growing concerns about skyrocketing prices in housing markets in Vancouver and Toronto, and the role that foreign buyers may be playing. Some real estate officials say Chinese buyers, in particular, have helped fuel price increases for high-end Vancouver homes.

The benchmark price for a detached Vancouver home increased 38.7% to nearly 1.6 million Canadian dollars ($1.2 million) in June from a year earlier, according to the Real Estate Board of Greater Vancouver. Based on homes of that value, a foreign buyer would have to pay an extra C$240,000 under the new tax law.

The new tax, which is to take effect on Aug. 2, will apply to foreign corporations and individuals buying residential properties in Vancouver. It is in addition to the province's general property transfer tax, the B.C. government said in a statement on Monday. The general transfer tax equates to 1% on the first C$200,000 of a home's value and 2% on the remaining value up to C$2 million.

The province will also allow the City of Vancouver to impose an annual vacancy tax on some residential properties that are left uninhabited.

Canada's federal government said earlier this year that it would help fund an effort to collect data on the role of foreign buyers in the country's housing markets, which officials have acknowledged isn't well understood. Separately, Ottawa has taken steps in recent years to limit risky borrowing, including a move to increase the minimum down payment required for more expensive homes.

The province of British Columbia released preliminary data earlier this month suggesting that foreigners were involved in 5% of real-estate transactions in metro Vancouver, accounting for 6.5% of the overall value. The data was collected over a period of 19 days in June.
In other more ominous news, northern hemisphere driving season or not, the price of oil is falling again. The oil bubble seems to be bursting.

Japan shares slip, yen gains as uncertainty grips

Mon Jul 25, 2016 11:06pm EDT
Caution gripped Asian markets on Tuesday, sending the safe-haven yen scampering higher ahead of central bank meetings in the United States and Japan, while a fresh skid in oil dampened energy stocks.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was 0.2 percent firmer, still consolidating after recently topping out at nine-month highs.

Japan's Nikkei .N225 shed 1.5 percent, with investors seemingly unimpressed by a Nikkei report the government planned a direct fiscal stimulus of around 6 trillion yen ($56 billion) over the next few years.

Not helping was a broad rally in the yen, which saw the dollar and euro both lose 1 percent to 104.67 JPY= and 115.06 yen EURJPY= respectively.

Dealers cited doubts the Bank of Japan would offer any meaningful new stimulus at its policy meeting on Friday.

"We think they'll deliver a bit of everything, but not quite the bazooka some may be hoping for," said Frederic Neumann, co-head of economics at HSBC in a note.

Expanded asset purchases or a further rate cut into negative territory were possible, but the extent of actual stimulus provided would depend on how they were implemented.

In all, it's a recipe for volatility.

"Our recent conversations with investors suggest that expectations are all over the place," he added. "The BoJ could simply do nothing. In the age of shock and awe, that would certainly deliver plenty of that."

Markets see almost no chance of a hike by the Fed after its meeting on Wednesday, but are wary in case it acknowledges a recent improvement in U.S. economic data in a way that adds to the risk of a move later in the year.

WTI Drops Below Key Technical Level as Oil Loses Appeal

July 25, 2016 — 7:36 PM BST
Expanding gasoline inventory and increased drilling in the U.S. are bad news for the oil market. West Texas Intermediate crude extended declines to slump to a three-month low and close below the 100-day moving average for the first time since April.
We close for today with a warning for PC do-gooders everywhere. The road to hell is paved with good intentions, even in racist Scottish Nationalist run, the do-gooder paradise of Argyll and Bute.

Syrian refugees resettled on remote Scottish island of Bute complain their new home is 'full of old people waiting to die'

25 July 2016 • 3:30pm
A scheme designed to offer Syrian refugees a fresh start away from their war-torn homeland has backfired after two families said the Scottish island they were sent to is "full of old people waiting to die" and they would rather be in Glasgow or Manchester.

The refugees praised the people of Scotland and said they had been made welcome on the Isle of Bute, but also complained that they were unable to find work and said they felt ashamed that they had to rely on charity.

Abd, a 42-year-old father of four, said: “I feel like I have one option now, to die here. Only die here, nothing else.”

The families said they felt isolated, were struggling to learn English and there was nothing to do on the island in the Firth of Clyde.

Some of the refugees said that they spent most of their time indoors, or took short walks on the seafront in the main town of Rothesay.

Abd added:  "At first, of course, I was really happy to come to the UK. It is the mother of freedom. People treated me really well, really nice. Scotland is beautiful.

“I love the weather. There are some people who like this weather and I like it. I like the winter. But for six, seven months now there has been nowhere to go.

"There is no movement, there is nothing. I’m not bored any more. I am depressed now.”

He also revealed that after feeling “humiliated” by council staff, he drank a whole bottle of whisky as part of a failed suicide attempt.

The families arrived in Scotland eight months ago as part of the Home Office’s Syrian Vulnerable Person Resettlement scheme, which aims to house 20,000 people in the UK by 2020 and prioritises the most vulnerable.

The refugees have been given five years’ Humanitarian Protection status, permission to work and access to public funds, with their costs met for a year by the overseas aid budget.

Argyll and Bute council was among 16 Scottish local authorities to sign up for the initiative, and has welcomed several families after the first Syrian refugees arrived in Scotland in November.

Abd told the Daily Mail he had been making trips to Glasgow in an attempt to find work, and said he had not expected to end up on a small island.

He added: “We thought we were going to London or Manchester. But whenever we say anything about moving off the island, we are told, ‘we had to pay a lot of money to bring you here’.

Modern money is inherently worthless, but everybody accepts it as real. Paul Seabright, a professor of economics, identified two traits that underpin systems of trust including money: the capacity to weigh up the costs and benefits of trusting others and the instinct to return favors in kind or seek revenge when trust is betrayed. When it is working well, the system enables strangers to deal with each other safely. When the fragile trust fails, people withdraw their money from banks, and they seek the refuge of cash. Ironically, in times of crisis, people seek paper money that has no intrinsic worth, illustrating the power of the monetary illusion.

Satyajit Das. Extreme Money. Masters of the Universe and the Cult of Risk

At the Comex silver depositories Monday final figures were: Registered 28.97 Moz, Eligible 125.87 Moz, Total 154.84 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Presented without need for comment, but the appropriate comment is shutting the stable door after the horses have bolted, or the folly of Mad Mrs. Merkel’s Migrant policy.  Why Brexit was needed.

German Government Boosts Police Presence After Spate of Killings

July 25, 2016 — 1:14 PM BST Updated on July 25, 2016 — 3:46 PM BST
Germany boosted security across the country as Chancellor Angela Merkel’s government sought to reassure a public anxious after a series of deadly attacks.
Interior Minister Thomas de Maiziere said Monday the federal police presence would be intensified at airports, train stations and other public places as he defended Merkel’s refugee policy. As authorities sifted through the varying motives for the four assaults, de Maiziere urged Germans to be vigilant but restrained, saying the vast majority of asylum seekers posed no danger. Three of the attacks were carried out by refugees.
“Every incident is one too many. We will do everything possible to prevent the repeat of such events,” de Maiziere told reporters in Berlin. “We should not change our behavior, though also not be unguarded. We should continue to live out our freedoms.”
Two attacks came on Sunday alone -- including a Syrian refugee who blew himself up at a music festival -- following a shooting spree on Friday in Munich that left 10 dead and an ax attack last Monday. While the man with the ax allegedly was inspired by Islamic State, police have concluded the Munich shooter wasn’t linked to any terror organization.
Opponents of Merkel’s refugee policy in the anti-immigration Alternative for Germany party, or AfD, renewed their criticism that the influx of refugees poses a danger for society, while officials in the chancellor’s Christian Democratic-led bloc echoed the call for calm.

“When the state and the police are confidently accepted as a capable force, as was the case in Munich and the other incidents, then voters tend to gravitate toward the traditional parties,” said Peter Matuschek, chief political analyst for polling company Forsa. He cautioned that it’s too early to determine how the events will play out politically.

Germany has largely avoided large scale terrorist attacks on its soil, in contrast with the assaults that killed hundreds in Paris, Brussels and Nice over the last year. Still, while the spate of violence in Germany is smaller in scale, the incidents could revive pressure on Merkel over migration as she struggles to confront a range of crises buffeting Europe. Reaction domestically has been muted so far with Bild, Germany’s biggest newspaper, urging the country not to rush into policy changes and members of the Christian Social Union in Bavaria, who have been some of the biggest critics of her refugee policies, standing with the chancellor.

The latest incident occurred Sunday night at a music festival in the Bavarian town of Ansbach, near Nuremberg, when a 27-year-old man identified as a Syrian refugee blew himself up near the entrance to the event, injuring 15 others. The man, whose asylum application had been rejected, had come to Germany two years ago. He was set to be deported to Bulgaria and had tried twice to commit suicide. Islamic State claimed responsibility.

Solar  & Related Update.

With events happening fast in the development of solar power and graphene, I’ve added this 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?

China installed 20 GW of solar power in first-half; triple from a year ago

Fri Jul 22, 2016 3:49am EDT
China installed 20 gigawatts (GW) of solar power capacity in the first half of 2016, three times as much as during the same period a year ago, state news agency Xinhua reported late on Thursday citing the country's largest solar industry lobby.
The surge in capacity extended China's lead over Germany as the top solar generator, said Wang Bohua, General Secretary of the China Photovoltaic Industry Association (CPIA), according to Xinhua.
Power developers were also pushed to complete installations ahead of a proposed reduction in the price paid for solar power by grid operators, said Wang.
China' government decreed in late 2015 that only projects that were operational by June 30, 2016, would be eligible for a 'feed-in tariff' of roughly 1.0 yuan (15 U.S. cents) per kilowatt hour (kwh), while projects completed after that date would be eligible for a lower tariff rate.
Production of solar photovoltaic (PV) modules also increased to 27 GW, up by 37.8 percent in the first half of the year, the CPIA said in a report on its website, adding that the profit margins of the major manufacturers improved to an average of 5 percent from 4.85 percent last year.
China surpassed Germany as the largest solar power generator worldwide last year, with installed PV capacity totaling 43 GW as of the end of 2015.
The government has set a national target for new commercial solar power capacity of 18.1 GW for this year, which is below initial market expectations and is a sign that the government is trying to slow capacity expansion in the power generation sector.
Including experimental roof-top projects and charitable installations in impoverished areas, total new solar capacity is expected to be 30 GW by year-end, CPIA said.
The CPIA data showed that the western provinces have the greatest surplus capacity, with the provinces of Xinjiang and Gansu wasting 52 percent and 39 percent of their respective generated solar power in the first quarter.
China's solar power output increased 31.3 percent from a year ago in June to 3,300 gigawatt hours, according to the National Statistics Bureau. That equated to 0.7 percent of total power generation, and was the first time the statistics bureau carried solar output data.

The monthly Coppock Indicators finished June

DJIA: 17930  -14 Up NASDAQ:  4843 -08 Down. SP500: 2099 -10 Up.

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