Friday, 26 August 2016

The Fed’s Big Day!

Baltic Dry Index. 718 +12        Brent Crude 49.53

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

'When I use a word,' the Fed’s talking chair said in rather a scornful tone, 'it means just what I choose it to mean — neither more nor less.

With apologies to Lewis Carroll and Alice.
The Fedster’s talking chair is in a hole, Jackson Hole Wyoming to be precise, and her spin meisters have dug her into a real hole by raising expectations about her speech later today. I have a low expectation regarding any policy change coming later today, simply because Wall Street has the Fed over a barrel and everyone knows it. How likely is the US central bank to crash the US bond and stock markets two months out from a US Presidential election? I expect more pie in the sky meaningless gibberish, with everything’s still on track for some off in the future interest rate normalisation. I also don’t expect the talking chair to cause a pre-Labor Day panic by adopting negative interest rates. If everything is good and still on track for some future normalisation, why in the world would there be a need for entering the insane minefield of negative interest rates.
Of course, delivering a meaningless speech after earlier hyping the speech to the rafters will do little for the Fedster’s credibility, but at this point global central banksters have all of the credibility of Bernie Madoff. We are eight years into emergency measures to try to recover from a systemic fiat money, leveraged derivatives gambling crash, that none of them saw coming. Eight years on and we are still mired in QE forever, ZIRP, and for much of the world, negative interest rates. Nothing works as the central banksters say it will. Commodity deflation continues to hammer the global economy. China, Europe and the USA, despite all of the emergency measures, all seem to be on the cusp of a new recession. After today’s big let down, the less than impressive dog and pony show, heads off to China for September 4 and 5’s G-20 Circus.
While we await this afternoon’s main act, we open with the latest news from the wealth and jobs destroying EUSSR.
“But I don’t want to go among mad people," John Bull remarked.
"Oh, you can’t help that," said Juncker: "we’re all mad here. I’m mad. You’re mad."
"How do you know I’m mad?" said John Bull.
"You must be," said Juncker, "or you wouldn’t have joined the EUSSR.”
With apologies to Lewis Carroll, Alice in Wonderland

It Was a Union for the Ages, Until Suddenly It Wasn’t. Is Europe Lost?

By showing that European integration can be reversed, Brexit makes the unthinkable thinkable. But that's not the only danger.

August 26, 2016 — 5:01 AM BST

The U.K.’s vote to quit the European Union is the enterprise’s worst setback since it was conceived in the 1950s. Until now, the EU has always grown in scale and ambition. For the first time, Brexit shows that Europe’s manifest destiny—ever closer union—may not be destiny after all.

Merely knowing that European integration can be reversed is a threat: It makes the unthinkable thinkable. But this isn’t the only danger. The union is increasingly unpopular not only in the U.K. but also in other European countries. Its political capital is depleted. Working through the mechanics of Brexit may deepen divisions, severely testing the union’s ability to adapt.

Brexit could conceivably spur support for the union. But this will demand consensus, flexibility, and farsighted calculation, none of which can be taken for granted. If governments can’t rise to this challenge, Brexit may be the beginning of the end of the European dream.

French support for the EU project is crumbling on the Left and Right

Ambrose Evans-Pritchard24 August 2016 • 8:07pm
The drama of Brexit may soon be matched or eclipsed by crystallizing events in France, where the Long Slump is at last taking its political toll.
A democracy can endure deflation policies for only so long. The attrition has wasted the French centre-right and the centre-left by turns, and now threatens the Fifth Republic itself.
The maturing crisis has echoes of 1936, when the French people tired of 'deflation decrees' and turned to the once unthinkable Front Populaire, smashing what remained of the Gold Standard.
Former Gaulliste president Nicolas Sarkozy has caught the headlines this week, launching a come-back bid with a package of hard-Right policies unseen in a western European democracy in modern times.
But the uproar on the Left is just as revealing. Arnaud Montebourg, the enfant terrible of the Socialist movement, has launched his own bid for the Socialist Party with a critique of such ferocity that it bears examination.
The former economy minister says France voted for a left-wing French manifesto four years ago and ended up with a "right-wing German policy regime". This is objectively true. The vote was meaningless.
"I believe that we have reached the end of road for the European Union, and that France no longer has any interest in it. The EU has left us mired in crisis long after the rest of the world has moved on," he said.
Mr Montebourg stops short of 'Frexit' but calls for the unilateral suspension of EU labour laws. "As far as I am concerned, the current treaties have elapsed.
I will be inspired by the General de Gaulle's policy of the 'empty chair', a strike against the EU. I am not in favour of a French Brexit, but we can longer accept a Europe like that," he said.
In other words, he wishes to leave from within - as Poland, and Hungary are doing - without actually triggering any legal or technical clause.
Mr Montebourg is unlikely to progress far but his indictment of president François Hollande is devastating.
The party leadership was warned repeatedly and emphatically that contractionary policies would inevitably lead to another million jobless but the economic was swept aside.
"They never budged from their Catechism and their false certitudes," he said.
The Socialists have paid a high price for this blind arrogance. They won just 15pc of voters classified as workers in the most recent local elections. Marine Le Pen's Front National won 55pc, and is now indisputably the voice of 'France d'en bas'.
---- The only practical way France can claw back competitiveness is through deeper deflation than in the rest of the eurozone, but this would prolong the slump and play havoc with nominal GDP and debt dynamics. It would be self-defeating.
There is no realistic possibility of genuine fiscal reflation in the eurozone, let alone a Keynesian New Deal. Mr Montebourg is right is concluding that France will remain paralyzed until it takes back its sovereign instruments.
Mr Sarkozy skirts this elemental issue. His shock manifesto demands the end of EU legal primacy over French law and a repeal of the Lisbon Treaty, the same treaty that he rammed through the French parliament by party whip after it had it had already been rejected by French voters in a referendum - in its earlier guise as the European Constitution.
But his ardour is reserved for culture wars and a "drastic reduction" in the numbers of foreigners. He vows to place Islam under state control in France, with imams reporting to the interior ministry. "We are at war against an enemy that knows no limits," he said.
His open appeal to "French identity" is aimed directly at the Front National, and that in itself tells us much about the bombed-out political landscape left by years of depression.

Deeper Slowdown Signaled in Sweden Amid Upbeat Budget Forecasts

August 25, 2016 — 11:26 AM BST
The Swedish government’s upbeat take on the economy was given a beating on Thursday.
Less than 24 hours after Finance Minister Magdalena Andersson predicted growth would top 3 percent this year, economic data is flashing that a more marked slowdown is on its way.

Here’s the bad news:
  • The economic tendency survey, which measures confidence of companies and households, fell to its lowest level in almost three years;
  • Household borrowing slowed for a second month in a row;
  • Seasonally-adjusted unemployment unexpectedly rose, to 7 percent;
  • Producer prices fell for the 13th month in a row
“What’s come out today highlights that there are downside risks to the government’s forecasts,” said Torbjoern Isaksson, chief analyst at Nordea Bank AB. “Exports are struggling and there are also signs that domestic demand is entering a calmer growth phase.”
Andersson on Wednesday emphasized the economy’s strength as the government raised its growth forecasts for 2017 and 2018 and predicted that public finances would improve at a faster pace than previously thought. The government now sees a budget surplus of 0.7 percent of GDP in 2019, while public debt is now seen falling to below 40 percent by 2018. 
According to Nordea, the latest indicators suggest the government may be too optimistic.

Polish Economic Slowdown Seen Deepening in Challenge for Budget

August 25, 2016 — 1:27 PM BST
Poland’s economy is on track to languish for three years as analysts cut their growth forecasts for 2016 and 2017, in a sign the government’s plans to hold the deficit within European Union limits are becoming increasingly unrealistic.

Gross domestic product will expand 3.3 percent this year and next, from earlier predictions of 3.4 percent and 3.5 percent, and remain at the same level in 2018, according to the median estimates in a Bloomberg survey conducted Aug. 19-24. Next year’s budget deficit will increase more than previously projected and widen to 3.1 percent of GDP from 2.9 percent in 2016, reaching 3 percent the following year, it showed.

----The outlook calls into question the government’s ability to hold the budget shortfall below the EU’s 3 percent threshold and ensure the flow of 82.5 billion euros ($93 billion) in the bloc’s development funds earmarked for Poland through 2020. “A higher deficit is a possible threat in light of further deterioration in investment, leading to slower economic growth,” said Jacek Adamski, an analyst at Poland’s Lewiatan Employers’ Association. “It’s not about a continuation of this year’s fiscal stimulus. Next year’s budget in fact reinforces it, raising the question of whether the economy will withstand it.”

German Firms Wake Up to Brexit as Ifo Confidence Declines: Chart

August 25, 2016 — 10:43 AM BST
German business sentiment posted its biggest monthly drop in more than four years in August, suggesting that companies are increasingly concerned that Britain’s decision to quit the European Union will damp future orders. The U.K. is Germany’s third-largest export market, and firms including HeidelbergCement AG have already encountered setbacks. The Munich-based Ifo institute’s business climate index fell to 106.2 from 108.3 in July.

Survey: German business confidence drops unexpectedly

August 25, 2016.
BERLIN (AP) — Business confidence in Germany, Europe's biggest economy, has dropped unexpectedly as managers' assessment of both their current and future situations darkened following Britain's decision to leave the European Union, a survey showed Thursday.
The Ifo institute's confidence index fell to 106.2 points for August from 108.3 in July. Economists had predicted a slight increase to 108.5.
The sharpest monthly decline in more than four years took the index to its lowest level since December 2014. It follows a much smaller decline in July immediately following Britain's vote to leave the EU.
The Ifo measured a drop in confidence in most sectors it surveyed, though not in construction and services.
----Economist Carsten Brzeski at ING-DiBa said the decline "suggests that German businesses have suddenly woken up to Brexit reality."
----The Ifo's monthly survey is based on responses from around 7,000 companies in Germany. They are asked to assess their current situation and their outlook for the next six months.

Real World Shows Economics Has a Deflation Problem

Aug 25, 2016 2:00 AM EDT By Mark Gilbert
Jacob Rothschild, the billionaire scion of arguably Europe's greatest banking dynasty says we're living through "the greatest experiment in monetary policy in the history of the world." There's a major flaw in the experiment, though: the real world isn't responding to policy in the way that the textbooks say it should.
Moreover, it seems increasingly evident that the fears that led to zero interest rates and quantitative easing were at best overblown, if not entirely unjustified.

The economic quandary is easy to parse. Central banks almost everywhere have sanctioned a 2 percent inflation target as signifying financial Nirvana. But, as the table below shows, consumer prices in the world's major economies are rising much slower than that arbitrary ideal:
Spain has emerged as the poster child for deflation. Prices fell by 0.6 percent in July, the country's 12th consecutive month with no increase in inflation. The textbooks suggest that when there's a prolonged period of falling prices -- the definition of deflation -- the economy can quickly find itself in a tailspin. Businesses and consumers will defer purchases in the expectation that goods and services will be even cheaper in the future.
So if Spain has had an average inflation rate of -0.4 percent since the end of 2013, and has seen lower prices in 23 of the past 30 months, consumers will have responded by shunning the shops and curtailing their spending, right? Wrong:
The average annual gain in Spanish retail sales in the past three years is 1.7 percent. Spending climbed by 5.8 percent in June, even as prices were dropping by 0.8 percent. So the prospect of cheaper goods in the future doesn't seem to be inhibiting Spaniards from indulging in a little (or quite a lot of) retail therapy.
So is there something else going on in the Spanish economy that might explain this cavalier attitude to falling prices? (Apart, I mean, from what might seem to be an obvious truth -- well, obvious to non-economists -- that most people welcome lower prices as an opportunity to buy more stuff.)
Well, one big success has been a drop in the unemployment rate. While June's 19.9 percent jobless figure is still horrendously high, it's dropped steadily from a peak of more than 26 percent at the start of 2013:

“Why, sometimes I've believed as many as six impossible things before breakfast.”

Janet Yellen, with apologies to Lewis Carroll, Alice in Wonderland

At the Comex silver depositories Thursday final figures were: Registered 27.44 Moz, Eligible 132.86 Moz, Total 160.31 Moz.  ???

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Whichever way the talking chair goes later today, Europe’s increasingly dangerous experiment with negative interest rates has some serious banksters on edge.
“Curiouser and curiouser!”
John Cryan, with apologies to Lewis Carroll, Alice in Wonderland

Deutsche boss: negative interest rates are 'fatal'

Szu Ping Chan24 August 2016 • 4:43pm
Deutsche Bank's chief executive has warned of the "fatal consequences" of the European Central Bank's negative interest rate policy, which he said punished savers and could even undermine the recovery.

John Cryan said the ECB's decision to cut its deposit rate to a record low of -0.4pc and an escalation of its bond buying programme was “working against the goals of strengthening the economy and making the European banking system safer.”

In an article for German newspaper Handelsblatt, he said: “Monetary policy is thwarting goals to strengthen the economy and to make banks safer by now”.

While Mr Cryan praised the central bank for helping to revive the economy following the financial crisis, he said low rates had dire implications for savers and pension plans.

Mr Cryan said the policies also encouraged companies to "refrain from investments due to ongoing uncertainty".

Caution and safety was being punished by the ECB, which effectively charges banks to park cash at the central bank overnight, he said.

The Deutsche boss is the most senior European banker to warn that negative interest rates risk destabilising the bloc's banks.

Larry Fink, the chairman of Blackrock, the world's largest asset manager, has also described the growing trend of negative interest rates as a “worrying”.

He said the policy had "potentially dangerous financial and economic consequences" as investors take bigger risks to generate returns.

Mark Carney, the Governor of the Bank of England, has also said he is "not a fan" of negative interest rates.

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?

Rotterdam’s Largest Solar Panel System Unveiled

August 25, 2016  Energy Matters
One of the world’s largest ports has received a solar boost, with the completion of a 3,100-panel rooftop PV installation on a storage facility in Rotterdam.

The record-breaking solar power installation – the largest in Rotterdam to date – covers roughly 7,200-square metres. The array has been installed on global shipping giant Samskip subsidiary frigoCare’s 14,000 pallet-capacity cold-store building in the port city.

The system is capable of generating 750,000kWh of electricity a year – equivalent to the annual needs of 250 Dutch households. The plant will contribute to the Port of Rotterdam’s Sustainability Strategy, which has already seen 200 MW of wind energy installed at Europe’s largest transit hub.

Rotterdam was once known as the “gateway to the world”, for its strategic location on the nexus of the North Sea, Rhine river and Ruhr industrial region. While it can no longer lay claim to the title of world’s largest port (that now belongs to Shanghai),  it does aim to become the cleanest, with a solar power generation target of 20 GW/h by 2018, increasing to 1,000 GW/h by 2030.

The system was installed and is owned by Dutch renewable energy company Zon Exploitatie Nederland (ZEN).

“Rotterdam has great ambitions to be a green city, but has not so far been that successful, ranking low in terms of solar power generation amongst all Dutch municipalities,” said ZEN Director and founder, Michel Peek.

“With this investment it will rise significantly up that list, and we hope this project will provide confidence for other similar installations in the months and years to come.”

The solar panels are expected to supply 30 percent of the 2.7 gigawatts of electricity the facility uses each year. Any excess power generated will flow back to Rotterdam’s power grid.

Have a great weekend everyone, no matter what the talking chair says later today.
“Who in the world am I? Ah, that's the great puzzle.”

J. C. Juncker, with apologies to Lewis Carroll, Alice in Wonderland

The monthly Coppock Indicators finished July

DJIA: 18432  +03 Up NASDAQ:  5162 +10 Up. SP500: 2173 +01 Up.

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