Friday, 19 August 2016

When Fiat Fails.

Baltic Dry Index. 682  -03    Brent Crude 51.09

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

Lenin is said to have declared that the best way to destroy the Capitalistic System was to debauch the currency. . . Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million can diagnose.

J. M. Keynes.
We open today with another unintended consequence of the Great Nixonian Error of fiat money, the death of rational market pricing. QE forever and ZIRP and NIRP, turn speculative gambling into the only game around, exactly as forecast by 19th century economists. High Frequency Algo trading, and close access to the free money from the central banksters by hedge funds, has turned commodity futures markets into the USA version of the Shanghai stock market. Sadly as fiat money dysfunction only gets worse over time, the death of the capitalism price discovery mechanism will have a major impact in the supply of the commodities on which we rely, from foodstuffs, to metals, to energy.
Below, irrational exuberance  comes to live cattle market pricing, although it also seems to have returned in the oil market. The tail now wags the dog, from oil, to gold and silver, and now cattle. Only one week to go for the Fed’s talking chair to pontificate on her solution to the growing dysfunction of fiat money, communist money. My guess is that the talking chair will give the whole subject a pass.

Welcome to the ‘Meat Casino’! Cattle futures market descends into chaos

Published: Aug 18, 2016 6:45 a.m. ET

Trading of physical cattle has become so scant that the futures market can’t get the signals it needs to set prices

CHICAGO—Wild swings in the cattle futures market have prompted some traders to call it “the meat casino.”

In response, the world’s largest futures exchange has refused to list new contracts, leaving ranchers with fewer tools to hedge the $10.9 billion market. CME Group Inc. said that is because trading of physical cattle has become so scant that the futures market can’t get the signals it needs to set prices.

“It’s madness. The market makes major moves for no reason,” said Blake Albers, a cattle feeder in Wisner, Neb.

The decision to delay new contract listings is the culmination of alarms raised by the exchange and industry groups this year that problems in the physical marketplace have affected futures—a highly unusual meltdown in a market that has attracted more speculators.

Few producers complained as cattle prices surged to record highs in 2014 and early 2015. But as prices this summer sank to five-year lows, financial strain on the industry has highlighted the extent of the problem. Revenue from cattle sales is forecast to drop 3.9% this year to $73.6 billion, after falling 5.7% in 2015, according to U.S. Department of Agriculture data.

Live-cattle futures climbed as high as $1.4155 a pound before free-falling to $1.1580 over seven weeks this spring. That represents a more than $10,000 drop in income for a single contract. Many producers have lost money as prices tumbled to a five-year low of $1.07525 a pound this summer.

“Guys like me who have been around a long time aren’t putting as many positions on,” said Dan Norcini, an independent livestock-futures trader in Coeur d’Alene, Idaho. “It’s just not worth the risk anymore, when there’s no rhyme or reason to these price swings.”

Through July, futures volume fell 1.9% compared with the same period in 2015, and was down 9.7% from 2014, according to CME data.

The CME has formed a working group with cattlemen to discuss fixes, including ways to increase the number of cash traders. The exchange shortened trading hours for the livestock futures contracts in February to confine market activity to the daytime, when liquidity is higher, after ranchers complained that speculators had too great an impact on prices in the evening trading.

The failure to list contracts after October 2017 is a problem for ranchers buying calves this summer. They typically need around 18 months to grow to slaughter weight, meaning ranchers are exposed to possible price swings in the 2017 winter.

Steve Sunderman, a partner at a feedlot in Norfolk, Neb., recalls watching cattle futures prices earlier this year rise and fall by more than one cent in just 15 minutes, unprecedented leaps in a market more accustomed to daily moves of fractions of a penny. The swings made him uneasy about locking in a hedge for his cattle on a Friday, when prices had climbed over $1.15 a pound only to settle at $1.12975, thinking the market would likely climb further.

But CME said that opening up markets to a diverse group of investors, including hedge funds and algorithmic traders, adds liquidity to products like cattle futures, which tend to be more thinly traded than gold or oil. Just 10% of the total volume in live-cattle futures came from high-frequency trading in 2015 for which the latest data is available, the exchange said.

In other under reported news.

Chaos Looms in South Africa Local Councils as Malema Wields Veto

August 18, 2016
Sporting a slimmed-down physique and a newly earned university degree, South Africa’s political provocateur Julius Malema has emerged as the kingmaker in several key cities where the ruling party has lost outright control. The result may be chaotic.

With neither the ruling African National Congress nor the main opposition Democratic Alliance winning a majority in 27 towns in Aug. 3 elections, Malema, 35, and his Economic Freedom Fighters may wield a veto over municipal budgets and appointments in centers like Johannesburg, the economic hub, and Pretoria, the capital.
“Whenever they have a budget, we will want to see it,” Malema, who formed the EFF three years ago after being expelled from the ruling party for insubordination, said with a chuckle at a Johannesburg press conference on Wednesday. “Show us specifics. Not good enough to say 500 million rand ($36 million) for housing. Show us where it will go.”
While the EFF decided to back DA mayoral candidates in hung councils to shut out the ANC, it plans to vote on other decisions on an ad hoc basis. Its past record doesn’t bode well for the new minority city administrations. Party lawmakers in parliament wear red miners’ helmets and overalls and routinely heckle President Jacob Zuma and his cabinet members, ignoring calls to order before being dragged out by security officials.

----The municipalities oversee electricity and water distribution, some roads, parks, libraries and sanitation. Johannesburg, headquarters to the stock exchange and most of South Africa’s largest companies, and Pretoria, where dozens of diplomatic missions are based, have a combined budget of about 81 billion rand.

Italy Wants the EU to Change Tack on Growth and Security

August 18, 2016 — 11:00 PM BST
Italy is seeking an expansionary push for growth in the European Union as the bloc forges a new course after the U.K. voted to leave, Prime Minister Matteo Renzi’s junior minister for European affairs said.

Undersecretary Sandro Gozi, speaking ahead of an Aug. 22 informal meeting of Renzi, German Chancellor Angela Merkel and French President Francois Hollande, called for a wide-ranging agreement to boost cooperation on security and defense as well as an expansionary economic policy to boost European growth.

“We need to increase and reinforce EU action on security and defense, including rapidly launching the European policing of its external borders,” Gozi said in a telephone interview. “Also as a reply to the terrorist threat, some EU countries should be able to work on joint initiatives in the security, policing or military fields if they wish to do so.”

In the wake of the Brexit referendum, and with the Italian economy unexpectedly stalling in the second quarter, Renzi has stepped up calls for a departure from what his government sees as German-inspired austerity policies. Renzi is preparing for a referendum on constitutional reform, expected to take place in November, on which he has staked his political future.

 “We seek a different, more expansionary economic policy at the European level,” Gozi said. “On this there is agreement with the French. There is work to be done with the Germans.”

Gozi said the investment plan of European Commission President Jean-Claude Juncker, which runs to the end of 2017, should be extended to 2019 and should include more cross-border projects possibly involving the digital sector and infrastructure. Gozi also called for measures to tackle youth unemployment, and for the EU to do more to ensure the repatriation of migrants.

Japan sinking deeper into de-facto helicopter money

Fri Aug 19, 2016 1:17am EDT
The Bank of Japan says there is no possibility of helicopter money, and by a strict definition they are correct. But as the government plans to issue more 40-year bonds, it is looking more and more like some monetization of debt is underway.

The BOJ says as long as it buys Japanese government bonds (JGB) from the market, it is not directly underwriting bonds to fund government spending.

However, that distinction has become blurred as investors buy bonds only to take profits by selling them immediately to the bank - a transaction coined the "BOJ trade."

"The BOJ is now buying the entire 30 trillion yen ($299.1 billion) in bonds newly issued by the government annually. In a sense, it has the same effect of helicopter money," said Etsuro Honda, a former special adviser to the cabinet and a close associate to Prime Minister Shinzo Abe.

The term 'helicopter money', where a central bank directly finances government spending by underwriting bonds, was coined by American economist Milton Friedman and gained prominence when former U.S. Federal Reserve Chairman Ben Bernanke cited it in a 2002 speech as a way to beat deflation.

Some economists, however, fear such moves could trigger hyperinflation and uncontrollable currency devaluation.

The BOJ seems more relaxed than in the past about markets thinking it may resort to quasi-helicopter money, say officials familiar with its thinking, partly on hopes that such market views could help contain the strength of the yen currency.

If, however, a government refrains from regulations and allows matters to take their course, essential commodities soon attain a level of price out of the reach of all but the rich, the worthlessness of the money becomes apparent, and the fraud upon the public can be concealed no longer.
J. M. Keynes.
At the Comex silver depositories Thursday final figures were: Registered 27.04 Moz, Eligible 130.43 Moz, Total 157.46 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, those killer dirty diesel purveyors at Volkswagen had some serious help, it appears. It is amazing how much black smoke pours out of a VW diesel as it pulls away from traffic lights, at least here in the UK.

Bosch worked 'hand-in-glove' with VW in emissions fraud: lawyers

Wed Aug 17, 2016 8:20pm EDT
German auto supplier Robert Bosch GmbH was a "knowing and active participant" in a decade-long scheme by Volkswagen AG to evade U.S. emissions laws, according to lawyers for U.S. owners of polluting VW diesel vehicles.
In a court filing late on Tuesday in U.S. District Court in San Francisco, the lawyers cited confidential documents turned over by the German automaker to plaintiffs attorneys in making the new allegations against the auto supplier.
Volkswagen declined to comment on the filing, except to say that it had no effect on its multibillion-dollar settlement of a civil complaint over the diesel scandal. The filing was made a day after sources briefed on the matter said the automaker has held preliminary talks with the U.S. Justice Department to settle a criminal probe into the emissions cheating case.
Most of the allegations involving Bosch remain under seal because the documents have been designated as confidential by VW, the plaintiffs' lawyers said in the court filing.
A Bosch spokeswoman said the company took the allegations seriously and is cooperating in several investigations, but declined to comment further.
The documents include records and communications between Bosch, VW and U.S. regulators. One 2011 email to the California Air Resources Board, among other communications, demonstrates "Bosch's deep understanding of what regulators allowed and would not allow, and what Bosch did to help VW obtain approval," the filing said.
"Bosch played a crucial role in the fraudulent enterprise and profited handsomely from it," the court papers say.
Bosch has not been charged with any wrongdoing. But German prosecutors said in December that they were investigating whether staff at the Stuttgart-based company were involved in the rigging of emissions tests by VW.
Bosch makes an engine control unit, often referred to as the "brain" of the engine, used by several top automakers including VW. That system controls a vehicle's acceleration and power and is extensively customized to give each car model its own unique feel.
Bosch supplied software and components to VW but has said responsibility for how software is used to regulate exhaust emissions or fuel consumption lies with carmakers.
In the court papers, the attorneys said Bosch had worked "hand-in-glove" with Volkswagen to develop a so-called cheat device to circumvent emissions tests and trick regulators.
The engine control system for VW's clean diesel engine was customized through years of close collaboration between the carmaker and Bosch, the lawyers said.
"It is inconceivable," the attorneys wrote, "that Bosch did not know that the software it was responsible for defining, developing, testing, maintaining and delivering contained an illegal defeat device."

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? 

Today, bad news from Moscow for all holders of Uncle Scam’s cash, which unfortunately includes all American’s. Moscow’s new proposed “sniffer” will pretty soon have the Drug Enforcement Agency confiscating all US cash for contamination with cocaine.

'Sniffer plasmons' could detect explosives

Scientists have proposed a graphene-based spaser that can detect even small amounts of various substances, including explosives

Date: August 15, 2016

Source: Moscow Institute of Physics and Technology

Summary: Scientists have proposed a graphene-based spaser that can 'sniff out' a single molecule, which could be used to detect even small amounts of various substances, including explosives.
Physicists from the Moscow Institute of Physics and Technology (MIPT) have found that the two-dimensional form of carbon, known as graphene, might be the ideal material for manufacturing plasmonic devices capable of detecting explosive materials, toxic chemicals, and other organic compounds based on a single molecule, says an article published in Physical Review B.
Plasmons in constructing high-accuracy electronics and optics
Scientists have long been fascinated by the potential applications of a quasiparticle called the plasmon, a quantum of plasma oscillations. In the case of a solid body, plasmons are the oscillations of free electrons. Of special interest are the effects arising from the surface interactions of electromagnetic waves with plasmons -- usually in the context of metals or semimetals, as they have a higher free electron density. Harnessing these effects could bring about a breakthrough in high-accuracy electronics and optics. One possibility opened up by plasmonic effects is the subwavelength light focusing, which increases the sensitivity of plasmonic devices to a point where they can distinguish a single molecule. Such measurements are beyond what any conventional (classical) optical devices can achieve. Unfortunately, plasmons in metals tend to lose energy quickly due to resistance, and for this reason they are not self-sustained, i.e. they need continuous excitation. Scientists are trying to tackle this issue by using composite materials with predefined microstructure, including graphene.
Graphene is an allotrope of carbon in the form of a two-dimensional crystal. It can be visualised as a one-atom-thick honeycomb lattice made of carbon atoms. Two MIPT graduates, Andre Geim and Konstantin Novoselov, were the first to isolate graphene, which won them a Nobel Prize in Physics. Graphene is a semiconductor with extremely high charge carrier mobility. Its electrical conductivity is also exceptionally high, which makes graphene-based transistors possible.
Theoretical physicists give the okay
Although, plasmonic devices have seemed an exciting prospect to pursue from the start, to take advantage of them, it was first necessary to find out whether the technology behind them was feasible. To do this, scientists had to find a numerical solution to the relevant quantum-mechanical equations. This was accomplished by a team of researchers at the Laboratory of Nanostructure Spectroscopy headed by Prof. Yurii Lozovik: they formulated and solved the necessary equation. Their research has led them to develop a quantum model that predicts plasmonic behaviour in graphene. As a result, the scientists described the operation of a surface-plasmon-emitting diode (SPED) and the nanoplasmonic counterpart of the laser -- known as the spaser -- whose construction involves a graphene layer.
A spaser could be described as a device similar to a laser and operating on the same basic principle. However, to produce radiation, it relies on optical transitions in the gain medium, and the particles emitted are surface plasmons, as opposed to photons produced by a laser. An SPED is different from a spaser in that it is an incoherent source of surface plasmons. It also requires considerably lower pump power. Both devices would operate within the infrared region of the spectrum, which is useful for studying biological molecules.
'The graphene spaser could be used to design compact spectral measurement devices capable of detecting even a single molecule of a substance, which is essential for many potential applications. Such sensors could detect organic molecules based on their characteristic vibrational transitions ('fingerprints'), as the light emitted/absorbed falls into the medium infrared region, which is exactly where the graphene-based spaser operates,' says Alexander Dorofeenko, one of the authors of the study.

Another weekend, and an unusual early autumn storm is about to hit the UK and Ireland. What, if anything, does it hold for the coming winter?  Have a great weekend, and try to steer clear of VW diesel fumes.

If the Treasury were to fill old bottles with bank-notes, bury them at suitable depths in disused coal-mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of repercussions, the real income of the community, and its capital wealth, would probably become a good deal greater than it actually is.

J. M. Keynes. The origins of Friedman’s “helicopter money” perhaps.

The monthly Coppock Indicators finished July

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

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