Norway Rolls the Dice.

Baltic Dry Index. 2975 +57

LIR Gold Target by 2019: $3,000.

Fresh food only began appearing on dinner tables in the 1700s, with the advent of the cooking stove - and stoves were not for everyone until the beginning of this century.

Norway’s Foods.

We open this morning with Norway’s sovereign wealth fund rolling the dice with purchases of the EU’s increasingly dodgy Club Med debt. Below, Bloomberg covers Norway’s audacious purchase of Greek government debt. Depending on how much of the iffy paper they bought, Norway might now have more to lose in Greece than the tax and work shy Greeks themselves. In this iteration of Euro madness, Greeks dodge taxes and bury their money in Switzerland and Cyprus and just about any other place but Greece. Norwegian’s work hard and pile up dollars in the country’s sovereign wealth fund, where the gamblers, sorry managers, set off to chase yield in what looks to me like a game of Russian roulette with the European Central Bank. Dare the ECB now allow Greece to default and restructure its debt, after brave Norway has just stepped in to help the ECB prop up the Greeks? To me in far away London, it looks like the Greeks were just dealt a get out of austerity jail card by Norway. Does Norway’s SWF have any back door guarantee from the ECB?

"Economics is an entire scientific discipline of not knowing what you're talking about."

P. J. O Rourke.

Norway Buys Greek Debt as Sovereign Wealth Fund Sees No Default

Sept. 9 (Bloomberg) -- Norway, which has amassed the world’s second-biggest sovereign wealth fund, says Greece won’t default on its debts.

The Nordic nation’s $450 billion Government Pension Fund Global has stocked up on Greek debt, as well as bonds of Spain, Italy and Portugal. Finance Minister Sigbjoern Johnsen says he backs the strategy, which contributed to a 3.4 percent loss on European fixed income in the second quarter, compared with gains on bonds in Asia and the Americas.

“The point is, do you expect these guys to default?” said Harvinder Sian, senior fixed-income strategist at Royal Bank of Scotland Group Plc, in an interview. “Norway has taken the view that they will not. The Greek holdings are particularly interesting because the consensus in the market is that they will at some point restructure or default.”

Norway says its long-term perspective will protect it from losses. “One could say we are investing for infinity,” Johnsen said in an Aug. 27 interview.

http://noir.bloomberg.com/apps/news?pid=20601087&sid=aKkAnJYH0Ey4&pos=1

Cod tongues are a popular dish in the northern Norwegian kitchen. They are prepared in many ways - poached, sautéed and fried.

Staying with Europe, if Great Britain can be described as being in Europe, The BOE’s King is getting ready to embark on QE2. Another sneaky stealth devaluation is coming up, as the Pound heads to eventual parity with the dodgy dollar. Look for the UK’s exports and tourism to boom next year. Below, for now the Old bag Lady of Threadneedle Street, seems to be attempting to talk the fiat Pound lower.

Industrialization came to England but has since left.

P. J. O Rourke.

BOE Mulls ‘Second Wave’ of Bond Buying as Rebound Momentum Ebbs

Sept. 9 (Bloomberg) -- Bank of England Governor Mervyn King may have to embark on a new round of bond purchases as Britain’s rebound from the worst recession since World War II fades.

Manufacturing, services and construction all faltered in August and the housing market weakened, surveys showed last week. That suggests 200 billion pounds ($309 billion) in bond purchases by the central bank since March 2009 and record-low interest rates may not be enough to keep up the economy’s momentum in the deepest budget squeeze in more than six decades.

“They are more likely to loosen policy further before they tighten it,” Alan Clarke, an economist at BNP Paribas in London, said in a telephone interview. “The danger is acting too late and not soon enough.”

Bank of England policy makers have discussed expanding the bond-purchase policy over the past two months. While officials say it has aided growth by shaving 1 percentage point off government bond yields, it has so far failed to ramp up the flow of credit in the economy.

Clarke predicts the bank’s nine-member Monetary Policy Committee will agree to a “second wave” of stimulus in February. Ross Walker at Royal Bank of Scotland Group Plc says the chances of it happening in early 2011 are as high as 40 percent. None of the 31 economists surveyed by Bloomberg News forecast an expansion of stimulus after the bank’s policy decision at noon today in London.

http://noir.bloomberg.com/apps/news?pid=20601087&sid=aPKmcBFClPTQ

Below, what the fraud of bailing out banksters by zero interest rates really mean. In the Great Nixonian Error of fiat currencies, sanity gets turned upside down, gamblers and banksters thrive, and if you’re close enough to the central bank your gambling losses get picked up by the state. Is deficits don’t matter great, or what?

Falling Rates Aid Debtors, but Hamper Savers

By GRAHAM BOWLEY Published: September 8, 2010

Households and corporations alike are refinancing their loans in droves to take advantage of interest rates that seem impossibly cheap. But those same low rates come with a flip side, driving down the income of retirees and others who live off their savings.

It is a side effect of a government policy meant to push down interest rates to a point that businesses and consumers are compelled to borrow and spend again, and yet it is hurting anyone with a savings account.

With the regulated rate that financial institutions can borrow from one another at almost zero, banks are paying savers next to nothing. The average returns on interest-bearing deposit accounts slipped to 0.99 percent in July, according to Market Rates Insight, which tracks bank rates. It is the first time its measure has dipped below 1 percent since the 1950s, when its data begins.

As a result, the amount of money on deposit at United States bank branches fell during the first half of 2010, Market Rates Insight reported this week. It was the first time that had happened in nearly two decades, indicating that people are dissatisfied with how little interest they are earning from their bank accounts.

Perversely, coming after a devastating financial crisis caused by companies and households that feasted on borrowing, ultralow interest rates are penalizing people who have paid down their debt and are now trying to save. It is also punishing those who rely on the proceeds of their nest eggs to pay the bills.

“It’s the whole point of low rates, to entice borrowing and discourage saving, but it means a massive wealth transfer from savers to borrowers,” said Greg McBride, a senior financial analyst at Bankrate.com. “It is a trend on steroids now because interest rates have been cut to the bone.”

http://www.nytimes.com/2010/09/09/business/economy/09rates.html

Norwegian Sheephead (smalahove)

Singe the head. Do not flay. Split lengthwise and soak in cold water at least 24 hours, changing the water several times. Make the brine by combining the ingredients and bringing to a boil. Dry the head well, then soak in brine up to 72 hours.

Smoke, the dry head. Simmer the head in water until tender, about 50 minutes. Serve ½ head per person.

At the Comex silver depositories Wednesday, final figures were: Registered 54.12 Moz, Eligible 57.12 Moz, Total 111.24 Moz.

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Crooks and Scoundrels Corner.

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

Today, BP says yes we did it, we blew up the Deepwater Horizon, but we had some of the finest most incompetent help money could buy in the oil industry. Below, The Telegraph covers the report and the likely long term results. As soon as the G-6 recover and join Germany and Asia booming, get ready for $200 oil.

I like to do my principal research in bars, where people are more likely to tell the truth or, at least, lie less convincingly than they do in briefings and books.

P. J. O Rourke.

BP oil spill: after the human cost will come the cost of safer oil production

First the nine minutes of terror. The dry technical language and presentation of BP's accident report cannot be allowed to obscure the horror and tragedy of what happened on the Deepwater Horizon drilling rig on the evening of April 20.

By Damian Reece, Head of Business Published: 6:00AM BST 09 Sep 2010

-------But exactly how did a relatively routine procedure for mothballing a well turn into a fatal disaster?

It's clear from BP's version of events, published yesterday, that what could have gone wrong did go wrong. It includes a faulty cement plug, a failed mechanical barrier, misinterpreted pressure tests by workers and unnoticed flows of oil and gas into the pipe. But once a problem had been spotted the response on the rig failed to regain control. Crucial mistakes were made when diverting the lethal fluids into an entirely inadequate mud and gas separating unit on board the rig, instead of overboard, escalating the dangers and allowing gas to envelop the platform. Once escaped onboard, the rig's fire prevention system failed to stop the gas reaching the engines making ignition inevitable.

Finally the blow out preventer, the piece of kit designed to seal the well on the sea floor, failed leading to those weeks of underwater spillage and environmental damage.

But who's to blame?

BP seems to put a tentative hand up in the 200 pages or more of its report but at the same time points a sharp finger very much in the direction of Halliburton and Transocean which operated elements of the rig alongside BP.

If we take the blow out preventer, arguably the most controversial failure allowing such dramatic amounts of oil to gush unfetterred into the Gulf, then it's Transocean which is to blame, according to BP. This report, while significant in improving our understanding of what happened that day, is really BP saying one thing to Haliburton and Transocean, its partners. "If we're going down, you're going down with us."

It is just the first salvo in what will be a long and tortuous legal process as the companies involved argue about how the bill for this disaster will be split.

---- It makes a series of recommendations which BP says it will be adopting. However, it's hard to see how any exploration and production company operating not just in US territory, but across the world, will avoid following suit. The recommendations may be about improving procedures, safety and competence but will be burdensome all the same.

----- While the price of oil will remain determined by many factors, the implementation of new drilling procedures, post Deepwater Horizon, will play a much greater part in applying upward pressure to oil prices.

But it's also entirely plausible that as a result of Deepwater Horizon companies, such as BP, will take a long hard look at the rationale for exploiting such technologically challenging deep water finds as the Gulf of Mexico.

http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7990476/BP-oil-spill-after-the-human-cost-will-come-the-cost-of-safer-oil-production.html

"If you imagine the 4,500-bilion-odd years of Earth's history compressed into a normal earthly day, then life begins very early, about 4 A.M., with the rise of the first simple, single-celled organisms, but then advances no further for the next sixteen hours.

----- Humans emerge one minute and seventeen seconds before midnight. The whole of our recorded history, on this scale, would be no more than a few seconds, a single human lifetime barely an instant. Throughout this greatly speeded-up day continents slide about and bang together at a clip that seems positively reckless. Mountains rise and melt away, ocean basins come and go, ice sheets advance and withdraw. And throughout the whole, about three times every minute, somewhere on the planet there is a flash-bulb pop of light marking the impact of a Mansion-sized meteor or one even larger. It's a wonder that anything at all can survive in such a pummeled and unsettled environment. In fact, not many things do for long."

Bill Bryson. A Short History of Nearly Everything

The monthly Coppock Indicators finished August:

DJIA: +243 Down. NASDAQ: +366 Down. SP500: +243 Down.

The bull market (or bear market rally) that commenced on Nasdaq on 30/4/09 at 1717 has ended. (30/5/09 SP 500 at 919, 30/5/09 DJIA 8500.) While the indicators can flip flop at market turns, this action is rare on the slow monthly indicators. August is the third down month in a row and “crash season” approaches.

Technorati Tags: Norway,Greek debt,BOE QE2,ZIRP,BP,gold and silver.,global cooling,sunspots,REEs,HREs

This Time It Will Be Different.

Baltic Dry Index. 2488 +20

LIR Gold Target by 2019: $3,000.

“The report also showed China’s holdings of long-term [US] Treasuries fell for the first time in 15 months to $839.7 billion, a 2.5 percent drop. Its overall Treasury position declined for a second month to $843.7 billion, the lowest since May 2009. The decline represents the first year-over-year decline in China’s Treasury holdings since 2001. The holdings peaked in July 2009 at $939.9 billion.”

After two lost decades, a gazillion of different stimulus packages, and even wheezes as desperate as buying up Japanese stocks, MarketWatch reports this morning that the latest hapless incumbent of the Prime Minister’s office in Tokyo is about to launch another stimulus package. “This time it will be different lads, honest it will. This time it will work, just like in America. Trust me, I’m a Japanese Prime Minister! What could possibly go wrong?”

“I think there is a world market for maybe five computers.”

Thomas Watson, chairman of IBM

Japan PM reportedly mulling another stimulus

Aug. 16, 2010, 7:28 p.m. EDT

SAN FRANCISCO (MarketWatch) -- Japanese Prime Minister Naoto Kan said his government may launch another set of stimulus measures to bolster the economy, according to a report published Monday. The Nikkei business daily reported that the stimulus steps could include extending consumer-spending incentives, programs to support job-seeking graduates and measures to help small businesses. Japan reported "tepid" 0.4% real gross domestic product growth for the quarter ended in June, while the strong yen and poor stock market performance "threaten to derail the economic turnaround."

http://www.marketwatch.com/story/japan-pm-reportedly-mulling-another-stimulus-2010-08-16

Below, follow up to yesterday’s focus on the deteriorating relationship between America and China. The delayed reports timing is purely coincidental, if unfortunate. China seems to be developing its own East Asian version of America’s Monroe Doctrine.

AUGUST 16, 2010

U.S. Sounds Alarm at China's Military Buildup

WASHINGTON—The Pentagon voiced alarm over China's military buildup, saying it was expanding its advantage over Taiwan and investing heavily in ballistic and cruise missile capabilities that could one day pose a challenge to U.S. dominance in the western Pacific.

In its annual report to Congress on Chinese military capabilities, the Pentagon also cited China's advances in electronic warfare. The U.S. government has been the target of cyber intrusions the report says appear to have originated in China and aimed to steal military secrets. "These intrusions focused on exfiltrating information, some of which could be of strategic or military utility," the report said.

Though their two countries are increasingly interlinked economically, ties between the U.S. military and the People's Liberation Army of China have deteriorated since January, when the Obama administration notified Congress of a plan to sell Taiwan up to $6.4 billion in arms.

Defense Secretary Robert Gates has appealed to the Chinese to re-engage to reduce the risk of any military miscommunications. But U.S. officials say they have seen few signs of a thaw.

Washington has long voiced alarm over China's military buildup opposite Taiwan. In this year's report, which was delivered months behind schedule, the Pentagon said China's military edge over Taiwan was continuing to "shift in the mainland's favor," the main argument used by the Obama administration in approving the arms deal.

A particular concern for the U.S. is China's development of an antiship ballistic missile with a projected range of nearly 1,000 miles. The missile is meant to give the PLA the capability of attacking ships, including aircraft carriers, in the western Pacific, the report said.

Some experts say the missile could herald the end of U.S. naval domination. Others say the PLA has yet to conduct any realistic tests of the conventionally armed ballistic missile and has no reliable way of targeting U.S. carrier task forces when they are at sea because China doesn't have enough low-earth-orbit reconnaissance satellites.

----The report referenced cyber intrusions it says appear to have originated within China. It is unclear whether these were conducted by or at the behest of the Chinese military.

The Wall Street Journal reported last year, and U.S. officials recently acknowledged publicly, that the Pentagon's largest weapons program, the Joint Strike Fighter, had been infiltrated. Investigators believe attackers in China were behind the effort to siphon off engineering designs and other information.

http://online.wsj.com/article/SB10001424052748703908704575433933444265178.html?mod=WSJ_hps_MIDDLEThirdNews

We end on China with the UK’s right wing Telegraph kowtowing a little too much to Beijing. The idea was right but the execution horrible. The writer must have missed associate editor Mr. Heffer’s recent missive on the need to maintain standards.

“640k ought to be enough for anybody.”

Bill Gates, Co–Founder and CEO of Microsoft, 1981

China surges ahead

Telegraph View An economic miracle has transformed the country's global standing

Published: 7:31PM BST 16 Aug 2010

The market liberalisation launched by Deng Xiaoping in December 1978, has delivered a remarkable prize. Growth figures published yesterday showed that China has overtaken Japan to become the world's second largest economy. At this rate, it is set to supersede the United States just 20 years from now, to become the world's economic superpower. This prodigious feat has come at a high price. Social tensions have grown as the rural poor have migrated in their tens of millions to the manufacturing megalopolises that flood the West with cheap consumer goods. The dash for growth has also created immense environmental problems, while official corruption is endemic. In short, China is paying the same price for its economic lift-off (magnified many times) as did Western countries during the Industrial Revolution. Intrinsic to its success has been the size of its population and the low-cost labour it offers.

This is beginning to change. The "one child" policy means China has one of the fastest-ageing populations in the world; from next year, the number of 15- to 29-year olds – the core of the workforce – will start to fall. This will not only impose new social costs, but is already emboldening workers to fight for better wages. Last year, the average wage increased by 17 per cent. This may make Chinese products a little more costly in the West but can only be beneficial to its economy because it will help to stimulate domestic demand.

With a population of 1.3 billion, the next phase of China's economic miracle must be the creation of a vibrant internal market, and this will doubtless be achieved every bit as single-mindedly as the trade-led growth that has transformed the country's global standing. What an export opportunity a newly-prosperous Chinese middle class will then present to economies like ours.

http://www.telegraph.co.uk/travel/destinations/asia/china/7948954/China-surges-ahead.html

Dear Colleagues - Simon Heffer
http://londonirvinereport.blogspot.com/p/intraday-news.html

We end today with BP and the now forgotten capped Macondo oil well. Like a bad penny it’s about to return, according to the blogosphere. Both articles are troubling and worth reading. BP’s long suffering shareholders are about to get a white knuckle ride if BP has to remove the cap, the blowout preventer and/or complete the relief well, say the outside experts.

“Airplanes are interesting toys, but are of no military value.”

Marechal Ferdinand Foch, Professor of strategy, Ecole Superieure de Guerre

BP's Deepwater Oil Spill - The Two Options - and Open Thread

Posted by Heading Out on August 16, 2010 - 10:33am

http://www.theoildrum.com/node/6860#more

Relief Wells Delayed ... New Tests Show "Gap" in Oil "Well Column" Causing Loss of Pressure ... Does the Government Have ANY IDEA What It's Doing?

An oil and gas industry veteran with 30 years experience who goes by the alias Fishgrease gave a pretty good recap of BP and the government's record of failure in capping the oil well:

http://www.zerohedge.com/article/relief-wells-delayed-new-tests-show-gap-oil-well-column-causing-loss-pressure-does-governmen

“Everything that can be invented has been invented.”

Charles H. Duell, Commissioner, U.S. Patent Office, 1899

At the Comex silver depositories Monday, final figures were: Registered 50.99 Moz, Eligible 59.51 Moz, Total 110.50 Moz.

Note: I have now added several more rare earths and metals companies to my list of mining companies listed on the page at the top.

http://londonirvinereport.blogspot.com/p/mining-stocks-of-interest.html

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Crooks and Scoundrels Corner.

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

Today, another great vampire squid, goes over the top in his do or die effort to thwart President Obama’s tax plans. In the process he manages to “do a Hayward”, and inadvertently I hope, slight the victims of Hitler, by trivializing the true monstrosity of Hitler. Mr. Schwarzman needs to take time out from counting up his billions and buy a book on Hitler to see that however misguided President Obama may be likening Mr. Obama to Adolf Hitler is grossly offensive and untrue. President Obama is probably too wise to seek damages by suing Mr. Schwarzman in the UK High Court, where such actions are easy to win.

Blackstone chief Schwarzman likens Obama to Hitler over tax rises

The billionaire head of the private equity giant which owns Center Parcs and the London Eye has likened US President Barack Obama’s plans to raise taxes on the private equity industry as being akin to Adolf Hitler’s invasion of Poland.

By James Quinn Published: 9:27PM BST 16 Aug 2010

The comments, made by Blackstone chairman and co-founder Steve Schwarzman in what he thought was a private meeting, reflect the strength of feeling among Wall Street’s private equity chiefs who are being threatened with paying the same levels of tax on their income as ordinary Americans.

In an appearance before the board of an unnamed charity, Newsweek reported that Mr Schwarzman, who is estimated by Forbes to be worth $4.7bn (£3bn), said: “It’s war. It’s like when Hitler invaded Poland in 1939.” The Daily Telegraph has verified that the comments were made and are accurate.

It follows the Obama administration’s consideration of raising the tax on “carried interest” – the share of profits private equity managers receive from the portfolio companies they manage – from 15pc to 35pc.

His remarks are even more noteworthy given that Mr Schwarzman is a practising member of the Jewish faith.

It is not the first time Mr Schwarzman has attacked the Obama administration, and what he appears to increasingly believe are its anti-Wall Street policies.

In a comment piece in The Washington Post in February, he wrote that bank-bashing could destroy the US economy’s fledgling recovery, as banks may become too scared - “under siege”, as he put it - to start lending again.

His new comments caused consternation among the American media, with The New York Times referring to it as his “unfortunate war analogy”, while Salon quipped about “Obama’s invasion of Poland”.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7949062/Blackstone-chief-Schwarzman-likens-Obama-to-Hitler-over-tax-rises.html

An accession of wealth is a dangerous predicament for a man. At first he is stunned, if the accession be sudden; he is very humble and very grateful. Then he begins to speak a little louder; people think him more sensible, and soon he thinks himself so.

Richard Cecil.

The monthly Coppock Indicators finished July:

DJIA: +264 Down. NASDAQ: +427 Down. SP500: +275 Down.

The bull market (or bear market rally) that commenced on Nasdaq on 30/4/09 at 1717 has ended. (30/5/09 SP 500 at 919, 30/5/09 DJIA 8500.) While the indicators can flip flop at market turns, this action is rare on the slow monthly indicators. July seems to have confirmed June’s reversal and end of the bull market.

LiveJournal Tags: Japan stimulus,China v USA,BP,Hitler,REEs,HREs,global cooling.

The “S” hits the “PIG”.

Baltic Dry Index. 1709 -81 (Down 59.3% since May 26.)

LIR Gold Target by 2019: $3,000.

'St. Swithin's day if thou dost rain
For forty days it will remain
St. Swithin's day if thou be fair
For forty days 'twill rain nae mair.

July 15^th. That’ll be rain then.

Today we focus on the sorry state of Europe, or more correctly, the sorry states of Europe lead by Club Med’s Spain. But first this latest news from China. Even on the official figures China is clearly slowing. What does the shipping industry know that the Fed and their Wall Street cronies don’t? At last night’s closing value of 1709, the Baltic Dry Index is now just two and a half times its post Lehman Brothers crash lows.

“Poverty is not socialism. To be rich is glorious.”

Deng Qiaopeng

China's economy and inflation cooling, data show

July 14, 2010, 10:56 p.m. EDT

HONG KONG (MarketWatch) -- China reported a slowdown in second-quarter gross domestic product growth, as well as in a number of other economic indicators for June on Thursday, indicating the nation's rapid expansion was beginning to cool as Beijing withdrew some expansionary policies.

The annualized first-half GDP growth came in at 11.1% higher than in the same period a year ago, but slower than the 11.9% annual growth recorded in the first quarter. The size of the nation's economy grew to 17.284 trillion yuan ($2.553 trillion) as a result, according to the National Bureau of Statistics of China.

Second-quarter GDP data wasn't immediately available, though Reuters and Dow Jones Newswires put the figure at 10.3%. That's lower than the 10.5% expansion estimated by economists surveyed by FactSet Research.

The country's consumer price index for June increased 2.9%, while its producer price index expanded 6.4% from the year-earlier month. Both measures fell below economists' expectations for 3.3% and 6.8%, according to a Dow Jones Newswires survey.

In May, China's consumer and producer prices rose 3.1% and 7.1%, respectively.

June retail sales grew 18.3% and monthly industrial production expanded 13.7%, also slowing from May and dropping below estimates. China's May retail sales had expanded 18.7% while the nation's industrial production grew 16.5%.

http://www.marketwatch.com/story/chinas-economy-and-inflation-cooling-data-show-2010-07-14

Now back to the sclerotic bureaucratic states of Europe, home of 3 EU Presidents and Baroness Whatsit, dodgy accounts that the auditors can’t make heads nor tails of and a dodgy fiat currency that everyone knows is going to fail once the Germans tire of paying for Club Med’s lifestyle. Home to more useless Commissioners and flunkies than BP has beach remediation workers. Below, the big “S” of the European PIGS.

Spanish Banks Boost ECB Borrowing to Record in June

July 14 (Bloomberg) -- Spanish banks borrowed a record 126.3 billion euros ($161 billion) from the European Central Bank in June as investors shun the debt-ridden nation’s lenders.

Spanish banks increased borrowing 48 percent from 85.6 billion euros in May, according to daily averages compiled by the Bank of Spain. That compares with a drop of 4 percent to 496.6 billion euros provided to lenders by the ECB in the whole euro area.

The southern European country’s banks haven’t sold any bonds publicly in the past two months amid investor concerns about the country’s ability to cut its deficit without hurting the economy. The yield on 10-year Spanish government debt relative to benchmark German bonds has more than tripled to 200 basis points since the start of the year. A basis point is 0.01 percentage point.

“The pressure for Spanish banks will keep rising as they can’t raise cash in the bond markets at reasonable prices,” said Thomas Nyegaard, a London-based analyst at F&C Investments, where he helps manage 4 billion euros of assets including Spanish bank debt. “The lenders can hardly provide any new lending under these conditions.”

The cost of insuring against losses on Spanish sovereign debt rose five basis points to 213 basis points in the credit- default swap market, according to data provider CMA. The contracts rose as high as 274 basis points in May.

The country’s lenders are increasing their dependence on the ECB as the European Union starts to examine banks’ resilience to losses after the debt crisis pummeled the bonds of Spain, Greece and Portugal. Europe’s deficit woes sparked concern about banks’ losses from sovereign debt holdings on top of the 438 billion euros already written down since the start of the global credit crisis in 2007.

http://noir.bloomberg.com/apps/news?pid=20601085&sid=aUMqxvUBVV8I

Spain 'relying on short-term funding' as councils go bust

A third of Spain's city councils are in dire straits and may be forced to suspend payments by the end of the year, replicating the woes in the US, where many states are bearing the brunt of fiscal tightening.

By Ambrose Evans-Pritchard, International Business Editor

Published: 9:59PM BST 13 Jul 2010

The great majority of councils in Andalucia are already in deep crisis – either insolvent or muddling through from day to day. More than 400 of the 8,000 councils across the country have stopped paying electricity, water and telephone bills, according to Spanish newspaper El Economista.

"I am deeply ashamed to know that I won't be able to pay our staff. They have got mortgages, children. What am I supposed to do?" said Jesus Manuel Ampero, mayor of Cenicientos, near Madrid. "We were not able to cover our payroll in June. Neither I nor our councillors have received anything for two years. I've had two heart attacks. My health is cracking. If we cannot solve this, I'm resigning."

Spain's federation of regional governments said councils were heading for slow "asphyxiation", with many facing a payroll cut-off next month. Pedro Arahuetes, mayor of Segovia and head of the federation's finance committee, told The Daily Telegraph that councils had lost up to 30pc of tax revenues because of the property and construction crash, and a further 20pc in funding cuts by Madrid.

The body has called for a moratorium until 2012 on debts to central government, which is itself slashing wages by 5pc as a quid pro quo for backing from the EU's €750bn (£626bn) rescue.

Council debt is just 3pc of Spanish GDP, so default risk is modest. The greater worry is political as Spain's depression grinds on. The latest Consenso Económico survey forecasts that GDP will contract by 0.8pc this year, with zero growth next year. Unemployment is already 19.9pc. The lesson of the early 1930s is that once slumps last much beyond two years they start to engender serious social tension.

------Analysts are split on the country's prospects. Goldman Sachs and Morgan Stanley say the economy is starting to turn the corner. Spain's €6bn bond auction last week drew large bids from Asian investors, including China's foreign exchange fund SAFE – a powerful stamp of approval.

However, RBS warned in a new report – Stress Testing Spain – that the country is caught in an "unstable equilibrium", relying on short-term funding from the European Central Bank to keep rolling over debts.

RBS said Spanish banks need to raise €50bn in fresh capital to weather the crisis under its soft test and €90bn under a severe test.

This is regardless of the EU stress tests, which may limit "haircut" simulations on Club Med debt to the trading buckets of banks rather than their much larger investment portfolios – rendering the exercise pointless.

Jacques Cailloux, the report's lead author, said a severe haircut of 30pc on all such bonds would lead to losses of €400bn for Spain (40pc of GDP) and €1.3 trillion for the rest of the eurozone (15pc of GDP). It may require "overwhelming policy intervention" by the EU in good time to prevent such a catastrophic chain of events.

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7888637/Spain-relying-on-short-term-funding-as-councils-go-bust.html

In Euroland’s top economy, a lame duck government just got lamer. Below, Chancellor Merkel life just got a whole lot more complicated when it comes to defying the voters and bailing out Club Med. For the foreseeable future, Europe lacks a strong government anywhere.

Who do I call when I want to call Europe?

Van Rompuy, Sir.

Who?

With apologies to Henry K.

Blow for Merkel as Key State Elects Center-Left Government

07/14/2010

In a further setback for Chancellor Angela Merkel's center-right coalition, power in Germany's most populous state, North Rhine-Westphalia, shifted to the center-left on Wednesday. The state assembly elected Social Democrat Hannelore Kraft as regional governor at the head of minority government.

The center-left Social Democrats (SPD) and Greens took control of Germany's most populous state on Wednesday with the election of a minority government in North Rhine-Wesphalia that spells further trouble for Chancellor Angela Merkel.

The state -- Germany's most-populous, with some 18 million people -- had been ruled since 2005 by a center-right coalition of Merkel's conservative Christian Democrats and the pro-business Free Democrats headed by former Governor Jürgen Rüttgers, but it lost its majority in a regional election on May 9 and failed to build a workable coalition after weeks of negotiations with other parties.

------Wednesday's vote has deprived Merkel's center-right alliance in Berlin of a majority in the Bundesrat, the upper legislative chamber in which Germany's 16 states are represented, and will make it harder for her to get some legislation through.

The defeat of the CDU in the North Rhine-Westphalia election was a sign of growing public disenchantment with Merkel's government, which has been riven by in-fighting and suffered a series of setbacks since she won re-election last September.

Wednesday's parliamentary vote in North Rhine-Westphalia, home to the industrial Ruhr region and the cities of Cologne and Düsseldorf, has fuelled speculation that the center-left may try to form a minority government at the national level, tolerated by the Left Party, after the next general election in 2013.

SPD leader Sigmar Gabriel declined to rule out the option. In an interview published in Bild am Sonntag newspaper on Sunday, he said: "Such minority governments which work well together are better than governments that have a numerical majority but can't agree on anything. The best example of that is the current government."

However, Gabriel's statements drew fire from all other parties including the Greens. Renate Künast, the co-leader of the Greens in the Bundestag , Germany's federal parliament, dismissed the idea. "The heat must have gotten to him," she said. No federal government has ever started without a majority and Germans are fearful of such unstable governments.

http://www.spiegel.de/international/germany/0,1518,706532,00.html#ref=nlint

Up next, the 4 “Bs”. Blair and Brown’s bankrupt Britain. Pounds anyone? Stay long precious metals. Perfidious Albion is going to do everything in its power to devalue and inflate away as much of its unrepayable debt as possible. For the record, of course, Britain’s politicians, corrupt central banksters, and any civil servant wanting to hold on to their over generous pension pot, will swear black is white that they won’t.

But if, as we now read, the then prime minister, Tony Blair, declared that his chancellor, Gordon Brown, was "mad, bad and dangerous," might he not have considered it his duty to ensure that such an individual did not remain as chancellor, let alone get hold of the keys to Number Ten?

WSJ. 15/7/2010

Part-time workforce at record levels

The part-time workforce has reached record levels in the three months to May as people struggled to find permanent jobs in the recession, official figures showed.

Published: 10:13AM BST 14 Jul 2010

At the same time, long-term unemployment - those out of work for more than a year - grew nearly 50pc to a 13-year high of 787,000, Office for National Statistics data shows.

Part-timers rose by 148,000 over the quarterly rise to 7.82 million, the highest level since records began in 1992. The number of full-time employees is now 18.2m.

The ONS said that a record 27pc of the total workforce was now in part-time employment, with the category accounting for the vast majority of the 160,000 rise in total employment - the biggest quarterly jump since August 2006.

Long-term unemployed rose by 61,000 over the quarter and is now up 47.5pc compared with the same quarter last year.

The figures overshadowed a 34,000 fall in unemployment to 2.47 million in the three months to May and a fifth successive fall in the claimant count, which was down by 20,800 to 1.46 million in June.

The number of economically inactive workers - which hit record levels in the quarter to April - edged down by 0.2pc to 8.1 million. This is the first fall in this category since March last year.

But those classing themselves as "long-term sick" reached 2.04 million, the highest level since March

http://www.telegraph.co.uk/finance/economics/7889389/Part-time-workforce-at-record-levels.html

Britain’s debt: The untold story

By Sean O'Grady, Economics Editor Wednesday, 14 July 2010

The true scale of Britain's national indebtedness was laid bare by the Office for National Statistics yesterday: almost £4 trillion, or £4,000bn, about four times higher than previously acknowledged.

It quantifies the burden that will be placed on future generations, and it is the ONS's first attempt to draw together the "off-balance-sheet" liabilities that have been accumulated by the state. The figures imply a huge "intergenerational transfer" – broadly in favour of today's "baby boomer" generation at the expense of younger people and future generations.

The debt primarily consists of the cost of public sector and state pensions, and of payments promised to private contractors under private finance initiatives. It far exceeds any of the figures so far published for the national debt, the largest current estimate for which is £903bn. That is projected to rise to £1.3trn by 2015.

------The ONS itemised the public sector's main liabilities as:

* Future payments for the state old age pension: £1.1trn to £1.4trn

* Unfunded public sector pensions for teachers, NHS staff and civil servants: £770bn to £1.2trn

* Payments under private finance initiative contracts: £200bn

* Contingent liabilities (eg bank deposit guarantees): £500bn

* Nuclear power plant decommissioning: £45bn

* Impact of financial sector interventions: £1trn to £1.5trn

Leaving aside the possibility of another financial meltdown that would leave the taxpayer with the liabilities of a substantial part of the banking system, the figures suggest that the realistic total liabilities of the public sector could be as much as £3.8trn (£3,800,000,000,000).

-----In research published alongside the ONS data, the National Institute of Economic and Social Research (NIESR) said that current taxpayers ought to be paying around 30 per cent more in tax to relieve future generations of that "unfair" burden. That also takes account of the additional health needs of the baby boomers as they reach their autumn years.

Failure to cut back now or raise taxes – and there is little sign of the population clamouring to make life easier for the as-yet-unborn – will leave future taxpayers with an additional burden of £200,000 each over their lifetimes to pay for the public services enjoyed by this and previous generations. Even with current plans to reduce the deficit, the tax bill would still be as high as £150,000 over the life of someone born in 2011.

http://www.independent.co.uk/news/uk/politics/britainrsquos-debt-the-untold-story-2025979.html

Over on the other side of Europe, it’s Poland joining the micro states in economic distress. Below Bloomberg covers yesterdays bad news from the Bug.

Polish Bond Draws Fewest Bids in 10 Months on Faster Inflation

July 14 (Bloomberg) -- Poland’s sale of five-year bonds attracted the lowest investor demand in 10 months after an unexpected acceleration of inflation fueled speculation the central bank will increase borrowing costs.

The government sold 2.03 billion zloty ($635 million) of the fixed-coupon security due in April 2015, according to the Finance Ministry’s Bloomberg page. Bids totaled 2.81 billion zloty, compared with 1.5 billion to 3 billion zloty offered by the ministry. That was the lowest auction demand for Polish five-year debt since the Sept. 9 offering of April 2014 paper.

The consumer price index rose 2.3 percent in June from the same month a year earlier, compared with a 2.2 percent inflation rate in May, the statistics office in Warsaw said yesterday. The median forecast of economists and a July 1 estimate by the Finance Ministry were both for inflation to slow to 2.1 percent.

“The higher-than-expected June CPI released yesterday is likely to intensify rate-hike speculations, which could dampen interest in Polish bonds for now,” Societe Generale SA analyst Esther Law in London wrote in a report before today’s auction.

The average yield at today’s auction rose to 5.37 percent from 5.14 percent on May 12, according to the ministry. The five-year bonds dropped after the auction, sending the yield up five basis points to 5.41 percent as of 1:42 p.m. in Warsaw.

http://noir.bloomberg.com/apps/news?pid=20601095&sid=a4hyitm63nR0

Below, the European “government” at its bungling bureaucratic best. Long suffering German and British taxpayers will just have to work harder for longer to keep paying for the Brussels way of life. Three EU Presidents and counting, how unlucky can a European taxpayer get?

"The most puzzling development in politics during the last decade is the apparent determination of Western European leaders to re-create the Soviet Union in Western Europe."

Mikhail Gorbachev

JULY 14, 2010, 11:15 P.M. ET

EU's Rocky Regulatory Road

Just a week ago, the European Parliament was clear: the three new European supervisory authorities it plans to establish to oversee the financial markets should all be based in Frankfurt. It was important, claimed the parliament, that the three should be in the same place "to ease interaction between the ESAs."

Never mind that this is an age when internet communication across continents is constant; when video-conferencing has reached a level of sophistication that can make thousands of miles vanish into inches, physical proximity was what the parliament demanded. Perhaps this attitude should not be surprising, since this is an institution which makes a monthly trek, at huge expense, from Brussels to Strasbourg.

The MEPs, however, are being overruled. At this week's Ecofin meeting of European finance ministers, U.K. Chancellor George Osborne won support for his argument that one of the three, the European Banking Authority, should be located in London. He had logic on his side, since London is Europe's largest financial centre and the Committee of Banking Supervisors, for which the EBA is a beefed up replacement, is currently based there.

Logic, however, is not the force that always prevails in the horse trading that goes on as legislation winds its way through the myriad corridors of Brussels. The last faint hopes of getting an agreement over the final shape of the three institutions—the other two will cover securities and markets and the insurance sector —before the summer break were finally dashed Wednesday. The parliament and EU finance ministers could not agree on the extent of the powers to be given to the new bodies. Not surprisingly, the parliament wants them to have more, the finance ministers less.

That financial supervision failed in most of Europe is unarguably the case. The parliament's position is that "the only option for effective financial supervision is one based on a thorough reform of the current system, with the establishment of European authorities capable of taking effective action to avert crises and avoid taxpayer bailouts."

Yet national authorities are being strengthened to give them the power and duty to do just that. To what extent should the new EU bodies be able to interfere with their efforts? That is the area of contention it will be hard to thrash out, even after a summer break to allow tempers to cool. In the U.K., for instance, the government is clear that the new EU regulators should not be able to overrule the current Financial Services Authority or the new regulatory regime being established under the auspices of the Bank of England.

The EU Parliament, though, wants the new bodies to be able to dictate directly to individual financial institutions where it deems a national regulator to be failing. It also wants them to have direct powers concerning important cross-border financial institutions.

National regulators warm to neither proposition. However, they do recognize that there is a potentially major problem with cross-border institutions. Banks have varying structures, inspired by various considerations, not least taxation. If their operations in a particular jurisdiction are merely deemed branches, then the national regulator's powers are limited. And as has been seen in instances such as the collapse of the Bank of Credit & Commerce, a bank that has a prime regulator elsewhere can inflict significant damage in a market place. So where there is an operation of any significance, as many "branches" in the City are, then the regulator wants their status to be changed to that of subsidiary. There are already negotiations under way as to how far and how fast such changes can be affected.

Back in Brussels, once the MEPs return from their summer break, the negotiations will resume. Behind the scenes, these are likely to take the line of "If you want the European regulator and all those jobs in your country, then how much power are you prepared to give it?"

http://online.wsj.com/article/SB10001424052748704220704575367081355994238.html?mod=WSJEUROPE_hps_MIDDLETopStories

Below, Portugal shows the future for Club Med, suggests the Journal. Portugal like Greece, will eventually figure out that they are far better off outside the Germanic Euro than in it. Unfortunately for the hapless Ports, everything else will be tried first before events make the inevitable obvious.

JULY 14, 2010

Portugal Feels Austerity's Bite

After Years of Budget Cuts, Its Economy Isn't Healed; Scenario for Others in Europe

BRAGA, Portugal—Indebted European countries from Greece and Italy to Spain have in recent weeks set off down a common path toward fiscal recovery, promising to slash spending and raise taxes.

One sobering scenario of what they may be up against comes from Europe's southwestern edge: Portugal, which embarked a decade ago on a similar journey of austerity, higher taxes and intermittent spending cuts, is still cutting—and still struggling.

On Tuesday, Moody's Investors Service cut Portugal's sovereign debt rating by two notches, to A1, citing the country's sluggish growth prospects and concerns that economic reforms in areas like labor markets won't bear fruit.

Moody's "remains concerned about the economy's medium-term growth potential," said Anthony Thomas, senior analyst at the rating agency, adding that Portugal's government debt, as a percentage of gross domestic product, has risen rapidly in the past two years.

The experience of Portugal—an early beneficiary of the euro zone's economic benefits and one of the earliest to experience the problems of being tied to a common currency—offers what some economists call a blueprint for what could be a long road to recovery for Spain, Greece and others.

"You have to be prepared that you are in for stagnant times," says Antonio de Sousa, who was Portugal's central banker in the late 1990s when the euro was created.

---- Meanwhile, after Portugal adopted the euro in 1999, its dominant textiles industry wasn't able to use cheaper loans and a large common market to build a foundation for longer-term growth. Portugal's textiles were too expensive to compete with cheaper goods from China or Eastern Europe, but also lacked the high-fashion credentials of those from France or Italy.

Portugal's deficit soon exceeded the zone's limit. In 2002 it became the first euro-zone member to be slapped with an excessive-deficit warning.

At a time when Spain, Ireland and Greece were sailing through the early years of the euro on housing bubbles and debt-fueled spending, Portugal began to retrench.

Lisbon went through modest austerity drives every few years beginning in the early 2000s. These included civil-service wage freezes and increases in value-added taxes that further weighed on the economy. When that wasn't sufficient, Lisbon also pushed through pension changes, including greater penalties for early retirement.

Portuguese voters tired of the measures, leading to political upheaval. The country had four prime ministers from 2001 to 2005.

Many economists say the cuts haven't gone far enough.

Government spending still accounts for more than half of Portugal's GDP. Portugal's budget deficit last year, at 9.4% of GDP, is lower than those of Greece, Ireland or Spain, but still more than three times as high as euro-zone rules permit.

---- Portugal's central bank on Tuesday raised its growth forecast for 2010 but cut its 2011 forecast to 0.2% from 0.8%, citing deficit-reduction efforts and an ailing labor market.

"If Portugal is a blueprint, we have to look for several years of underperformance in Spain," says Ralph Solveen, economist at Commerzbank.

http://online.wsj.com/article/SB10001424052748704111704575355072331978794.html?mod=WSJ_hp_us_mostpop_read

We end for the day with Europe sleepwalking its way to reinventing the old Soviet Union. Below, “are you now or have you ever been a member of a Swizz Bank?”

They seek him here. They seek him there. They seek that tax cheat everywhere. Is he in heaven? Is he in hell? Is he in a Zurich tax hotel?

With apologies to Charles Dickens and The Scarlet Pimpernel. (???)

Credit Suisse’s German Offices Raided in Tax Probe

July 14 (Bloomberg) -- Credit Suisse Group AG’s offices in Germany were searched today in a probe into allegations that its employees may have helped clients evade taxes.

Thirteen Credit Suisse (Deutschland) AG locations were raided as part of the investigation, Johannes Mocken, spokesman for the Dusseldorf prosecutors’ office, said in a phone interview. Investigators seized substantial amounts of data during the day, Mocken said.

“There is a lot of material to go through, so we won’t be able to finish all searches today,” said Mocken. “At least in the Frankfurt Credit Suisse offices, we will have to continue to work tomorrow.”

Germany has been rattled by probes that showed people hid assets in accounts in Switzerland and Liechtenstein to avoid paying taxes. Former Deutsche Post AG Chief Executive Officer Klaus Zumwinkel in January received a two-year suspended sentence and must pay a 1 million-euro ($1.27 million) penalty for avoiding about 970,000 euros in taxes.

German government officials bought disks containing bank data that have helped them locate possible tax evaders. The purchases stirred debate over whether it is legitimate to acquire data that must have been stolen from the banks and use it for law enforcement.

Data Disk

The case that prompted today’s raids began after German authorities obtained a disk with data that prompted probes against some 1,100 customers of Zurich-based Credit Suisse, Switzerland’s second-biggest bank. Dusseldorf prosecutors are investigating 175 cases, including some against Credit Suisse employees. The rest of the cases were referred to other prosecutors based on where the suspects live.

The bank is cooperating with the authorities, Credit Suisse spokesman Bjoern Korschinowski said by telephone.

http://noir.bloomberg.com/apps/news?pid=20601090&sid=a4kz9KrVbY8Y

"There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

Ludwig von Mises

At the Comex silver depositories Wednesday, final figures were: Registered 52.47 Moz, Eligible 60.11 Moz, Total 112.58 Moz.

+++++

Crooks and Scoundrels Corner.

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

No crooks today just scoundrels, but what scoundrels! Today, US Senators get all worked up over BP’s dealings with Libya. While they are investigating BP’s actions regarding the release of convicted Lockerbie bomber Megrahi, they might want to look a little closer at home into what the CIA knows of the dodgy fabricated forensic evidence that was used to convict him, and at the eye witness testimony that was used that changed over time, groomed until it eventually matched Mr. Megrahi. But why stop there. What about the CIA’s Cyprus connection to Hezbollah in the Bekka Valley, that allegedly caused the Agency to alter its agents travel plans to avoid Pan Am planes at Frankfurt airport. And just why was Megrahi forced to irrevocably drop his appeal in the Scottish courts that was nearing hearing and would have brought up the many other inconsistencies that point to Iran? As time has gone by, the whole case against Libya has weakened and that against Iran has strengthened. Someone has a whole lot to hide but it doesn’t look from London that it’s BP playing fast and loose with the American public’s emotions. Libya paid out, but never admitted responsibility, exactly as the US paid out for the Vincennes shooting down Iran Air flight 655. In our new-world-order age of fiat money, it’s now cheaper just to pay off the victims and move on. Another unintended consequence of fiat money.

The US government issued notes of regret for the loss of human lives and in 1996 paid reparations to settle a suit brought in the International Court of Justice regarding the incident. The United States government never admitted wrongdoing, nor apologized for the incident. In August 1988 Newsweek quoted the vice president George Bush as saying "I'll never apologize for the United States of America. Ever, I don't care what the facts are."

http://en.wikipedia.org/wiki/Iran_Air_Flight_655

BP to Start Drilling Off Libya as Senators Seek Lockerbie Probe

July 14 (Bloomberg) -- BP Plc plans to start drilling off Libya’s coast in the next few weeks as its links with the North African country come under scrutiny from U.S. lawmakers.

The London-based company has a rig in place to start a well in the Gulf of Sirt after completing a seismic survey last year. BP also plans to drill onshore in the 13,000 square kilometer Ghadames basin by the end of the year, Robert Wine, a spokesman for BP, said today.

BP, under political pressure to stop and clean up the worst oil spill in U.S. history, signed an exploration agreement with Libya’s National Oil Corp. in May 2007 during a visit by then U.K. Prime Minister Tony Blair. Four U.S. senators yesterday asked Secretary of State Hillary Clinton to investigate whether BP helped secure the release of Lockerbie bomber Abdelbaset al- Megrahi from a Scottish jail to facilitate the drilling deal.

“Evidence in the Deepwater Horizon disaster seems to suggest that BP would put profit ahead of people,” Senators Frank Lautenberg and Robert Menendez of New Jersey and Charles Schumer and Kirsten Gillibrand of New York wrote in the letter. “The question we now have to answer is, was this corporation willing to trade justice in the murder of 270 innocent people for oil profits?”

Libya has proved oil reserves of 44.3 billion barrels, the most in Africa, according to the BP Statistical Review of World Energy. BP’s worldwide operations have come under examination after an unstable well caused an explosion on the Deepwater Horizon rig in the Gulf of Mexico on April 20, killing 11 and starting an oil spill.

‘Checks Underway’

“Libya due to start in a matter of weeks,” Wine said today in an e-mail. “Rig is being made ready, final preparations and checks are underway.”

In August 2009, the Scottish government freed al-Megrahi on compassionate grounds. He was the only person found guilty of the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland, that killed 270 people.

“It is a matter of public record that in late 2007 BP discussed with the U.K. government our concern at the slow progress in concluding a Prisoner Transfer Agreement,” the company said today.

“We were aware that a delay might have negative consequences for U.K. commercial interests, including ratification of BP’s exploration agreement. However, we did not express a view about the specific form of the agreement, which was a matter for the U.K. and Libyan governments,” it said in statement e-mailed to Bloomberg News.

http://noir.bloomberg.com/apps/news?pid=20601087&sid=ap8M5AS3HAVo&pos=6

“Those who don't know history are destined to repeat it.”

Edmund Burke.

The monthly Coppock Indicators finished June:

DJIA: +269 Down. NASDAQ: +460 Down. SP500: +290 Down.

The bull market (or bear market rally) that commenced on Nasdaq on 30/4/09 at 1717 has ended. (30/5/09 SP 500 at 919, 30/5/09 DJIA 8500.) While the indicators can flip flop at market turns, this action is rare on the slow monthly indicators.

Technorati Tags: EU,PIGS,Blair & Brown,mad bad and dangerous,Spain debt,Portugal,Germany,BP,Libya or Iran,USS Vicennes,Edmund Burke

More Than a Wobble.

Baltic Dry Index. 2447 -35

LIR Gold Target by 2019: $3,000.

---the US now confronts a dilemma first identified in 1961 by the Belgian economist Robert Triffin.* To supply the world’s risk-free asset, the country at the heart of the international monetary system has to run a current account deficit. In doing so, it becomes more indebted to foreigners until the risk-free asset ceases to be risk-free.

Financial Times. June 29, 2010.

Global stock markets were hammered yesterday, from China to America and all across Europe. Even the Fed’s preferred method of US market manipulation, the high frequency trading programs of the crony great vampire squids, were overwhelmed. A good case can be made that they are they problem now, having become the only game in town on the far side of the Atlantic. Divorced from the reality of underlying cause in the valuation of US stocks, all they do is try to front run the order flow in the supply of liquidation orders or new entry orders, pulling their orders in the opposite direction. Result, a normal liquidation in response to changing economic fundamentals becomes a runaway rout or buying feeding panic of greed, with 90% up or down days by volume, now become the norm in the once great investment markets of America. Until fundamental change comes to the stock casinos of America and universal price discovery and reporting are restored, the US stock markets are no place for the public to be involved, though US stocks in particular, and most stocks in general, are no place to be putting money with the BDI the ECRI Weekly Leading Indicators, and Us consumer confidence numbers all suggesting a US and/or global recession right ahead. Below, Rupert Murdoch’s WSJ does its best to make a silk purse out of a pig’s ear.

“What me worry?”

Mad Magazine.

JUNE 30, 2010

Fear of a Stall Hits Market

Stocks, Bond Yields Dive on Bad News From Consumers, China, European Banks

American stocks and bond yields fell sharply as concerns mounted that the economy might be in for a slowdown.

The Dow Jones Industrial Average fell 2.6% back below 10000 on slumping U.S. consumer confidence, the downward revision of a Chinese economic indicator and worries about the health of Europe's banks. Yields on 10-year Treasury notes fell below 3% to their lowest level since April 2009, a sign investors were seeking out safe investments.

The Conference Board, a non-profit research group, reported Tuesday that consumer confidence dropped in June, wiping out gains from the previous two months. The index fell to 52.9, down sharply from a downwardly revised 62.7 the month before, with an increasing number of households saying jobs were "hard to get."

Earlier in the day, the Conference Board downwardly revised a leading indicator of Chinese economic growth. Investors were also jittery about the expiration of a European Central Bank program to extend 12-month financing to European lenders.

A double-dip recession is still widely viewed as unlikely. But the drop in confidence is just the latest sign suggesting the economy could lose steam in the second half of 2010 and perhaps grow more slowly than in the first half.

----But gathering signs of economic headwinds suggest future job growth could be slim.

Among these headwinds: signs that the housing sector is heading into a new downturn, and financial conditions that have turned less supportive of growth as stock prices decline, the dollar strengthens and credit markets struggle. The global backdrop has grown more uncertain as European governments such as the U.K. and Germany turn their attention to closing budget deficits.

------President Barack Obama expressed optimism about the outlook after a morning meeting with Federal Reserve Chairman Ben Bernanke. Mr. Obama said he and Mr. Bernanke "share the view that the economy is strengthening," noting that the U.S. has gone from losing 750,000 jobs per month last year to five months of job growth.

One thing weighing on the economy is the housing market, which, after stabilizing, is weakening again as government support disappears.

------Fed officials believe the positives are likely to outweigh the worries and keep the recovery on track, putting the Fed in a position to begin raising short-term interest rates some time far down the road. A stumble would pose a dilemma for Fed officials. Interest rates are near zero, so they lack the traditional tool of interest-rate cuts to combat a faltering economy.

The Obama administration is still pushing to advance an extension of unemployment benefits for laid-off workers now frozen in the Senate. House Democrats failed Tuesday in a renewed effort to pass an extension of unemployment benefits.

The housing market has served as a reminder of the potential impact of removing federal support in a fragile economy. In May, after home-buyer tax credits expired, the numbers of new homes on which builders broke ground fell a seasonally adjusted 10%, and new home sales plunged 33% to an annualized rate of 300,000—the lowest level on record.

The loss of stimulus funding is also hitting state and local governments, which are facing a combined budget deficit of some $137 billion this year and $144 billion in 2011. Some states have already gone through most of the federal education funds earmarked for the 2009-1010 and 2010-2011 school years. With no more money forthcoming, they've been cutting services and are firing tens of thousands of teachers.

http://online.wsj.com/article/SB10001424052748703374104575337143601301602.html?mod=WSJ_hps_LEFTWhatsNews

Who in their right mind would invest in a NYSE stock and directly contribute to Ebenezer Squid’s next telephone number bonus?

Below, China’s stock market look’s over priced relative to growth prospects too. Who needs the squids HFT programs directly picking an investor’s pocket, when the stocks of Beijing’s largely command economy yo-yo to political decisions in Beijing?

Why did I take up stealing? To live better, to own things I couldn't afford, to acquire this good taste that you now enjoy and which I should be very reluctant to give up.

Cary Grant. To Catch A Thief.

No upside to China stocks as credit tightens, strategist says

June 29, 2010, 7:18 p.m. EDT

HONG KONG (MarketWatch) -- Chinese stocks will continue to trend lower in the second half of the year, pressured by tighter lending policies and a gloomy global outlook, according to a leading Hong Kong-based strategist.

Andrew Ferris, senior investment strategist for Asia at BNP Paribas, says the sharp sell-off in Shanghai on Tuesday, which saw China stocks skid to a 14-month low, is in line with the overall weakening trend that's been in place since the start of the year.

He believes asset prices are likely to remain under pressure until Chinese authorities ease up on their current tightening campaign -- something that won't happen for some time.

"They are not going to let go quickly or easily," Ferris said referring to the determination of Chinese authorities to push ahead with recent administrative measures to cool credit growth.

"China will continue to have tight monetary policy until the end of year," he added.

Beijing avoided using interest rates to slow lending and instead lifted the ratio of reserves that banks must set aside as deposits in three separates increases so far this year. Administrative measures to tamp down lending to overheated sectors such as real estate were also enacted.

In Tuesday's action in China, the Shanghai Composite tumbled 4.3% to end 2,427.05, its weakest finish since April 2009. The index had already entered into technical bear-market territory, having already declined 23% year to date before Tuesday's sharp losses.

The Shenzhen Composite Index, tracking China's No. 2 equity market, also sold off Tuesday, dropping 5.4%.

Ferris believes official figures showing China's economy grew at an annualized 11.9% in the first quarter masked an underlying deterioration in the economy -- with the government numbers appearing overly upbeat because of a weaker comparison base in the year-earlier period.

http://www.marketwatch.com/story/no-upside-for-chinese-stocks-as-credit-tightens-2010-06-29

Below, the FT picks up on the BIS report that as good as said many EU banks are toast. In the ever so polite, jargon filled world, in the two handed writings of the BIS, the BIS warns of coming time of unmarketable governmental debt. There goes the EU banking neighborhood in effect. Will the Bundesbank really U-turn and allow the ECB to print and monetise all of Europe’s dodgy banks? The BIS doesn’t think so either, they fret. Stay long precious metals, another Lehman is looming into sight the BIS apparently thinks.

"All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S."

President F.D. Roosevelt, 1933

Bank fragility means recovery remains precarious

By John Plender Published: June 29 2010 18:09 Last updated: June 29 2010 18:09

After the Group of 20 meeting in Toronto and the passage of the US Financial Reform Bill, global economic recovery ought by rights to be in the bag. Yet the reality is otherwise. Like the fabled plane in the second world war, the global economy is limping along on a wing and a prayer, not least because the world’s debtor and creditor countries cannot agree on the way out of the present bind. In the meantime the financial system remains perilously fragile.

The onset of the Greek sovereign debt drama and the renewed funding difficulties of European banks has taken the crisis into new and challenging territory where, to change the metaphor, there is precious little left in the policymakers’ locker. As the newly published annual report from the Bank for International Settlements points out, Greece highlights the possibility that heavily indebted governments may not be able to act as buyers of last resort to save banks in a new crisis. If the debt of the government itself becomes unmarketable, the BIS adds, any future bail-out of the banking system would have to rely on external help. Yet where will the help come from?

-----The picture of the banking system painted by the BIS is also disturbing. While banks have returned to profit and strengthened their capital ratios, new capital injected into banks has not quite matched losses revealed during the crisis. The profits are overly dependent on poor quality revenue from fixed income and currency trading, while in Europe there are doubts whether all crisis-related losses have been recognised. Meanwhile, the default risk on sovereign debt is not confined to Greece.

The European banking system would need more capital even if there were no uplift in the regulatory capital requirements in prospect from the impending Basel III regime. Yet too many investors, from sovereign wealth funds to conventional institutions, have burned their fingers advancing fresh capital to banks to be willing to put up more for such shaky prospects. Nor will fiscally stretched governments rush to pump more money into the political equivalent of a leper colony.

It is an unfortunate fact that the global economy remains hostage to the bankers. A variety of worthy reforms are now in place in the US and Europe, not all of them relevant to the causes of the crisis, not all of them tried and tested. And policymakers have conspicuously failed to take the measure of the big issue that matters: banks that are too important to fail, in a market that has become even more concentrated because of shotgun marriages and bail-outs.

-----So where does this leave us? In the middle of an unprecedented and unnerving global experiment is the short answer.

------The dollar’s role as the pre-eminent reserve currency is not at issue. Yet as Francis Warnock points out in a paper for the Council On Foreign Relations, the US now confronts a dilemma first identified in 1961 by the Belgian economist Robert Triffin.* To supply the world’s risk-free asset, the country at the heart of the international monetary system has to run a current account deficit. In doing so, it becomes more indebted to foreigners until the risk-free asset ceases to be risk-free.

The end-game to Triffin’s paradox is a global wholesale dumping of US Treasuries.

http://www.ft.com/cms/s/0/81ed90da-839d-11df-b6d5-00144feabdc0.html

We end for today with BP news, BP appears to be dodging a bullet from Hurricane Alex and from Anadarko’s attempt to go totally AWOL on their share of damages. The latest revelations would warm the cockles of even the stoniest US tort lawyer’s heart. Who said there was honour among thieves? Thankfully that’s what lawyers are for. Ominously, hurricane Alex is the first Atlantic June hurricane since 1995. 1995 as I recall, was the year when God managed to line up 4 Atlantic hurricanes at the same time, although thankfully not all of them made landfall. The models show hurricane Alex passing into Mexico slightly south of the US border, as a dangerous but modest category 2 storm. BP finds itself trapped in an off-scale category 5.

Exxon or Shell should buy BP for £88bn, says analyst

BP'S share price fell by a further 2pc, after a prominent City expert suggested it should be bought by US rival Exxon Mobil in the wake of the Gulf of Mexico oil spill.

By Rowena Mason, Energy Correspondent. Published: 10:54PM BST 29 Jun 2010

Fred Lucas, an energy analyst at JP Morgan Cazenove, speculated that Exxon or Shell could swoop on the beleagured British oil giant for approximately £88bn. Exxon is the most financially strong oil company, he said, adding that it could make a cash and stock offer while spinning off $50bn (£33bn) of refining and marketing assets.

"We must emphasise," Mr Lucas adds in the note, "that this is our idea and it is only an idea."

The mooted 473p offer price is 30pc less than the £123bn the company was worth before the Deepwater Horizon rig exploded killing 11 men and triggering a catastrophic leak on April 20.

However, it is substantially more than the current £57bn market value of the oil giant, which has slipped from Britain's biggest company to the fifth behind Shell, HSBC, Vodafone and GlaxoSmithKline.

BP has already spent $2.65bn on the clean-up and committed $20bn to environmental compensation. The cost of additional lawsuits, pay-outs to Gulf Coast residents and punitive fines are likely to add many more billions to these bills.

-----The bad weather is already hampering efforts to capture oil coming from the leak and operations to clean up the growing slick off the southern US coast.

Oil skimming ships were sent back to Louisiana amid strong winds and big waves - although the storm itself will not hit the affected region. On Monday, BP said its plan to increase oil being captured has been delayed, but current equipment piping oil to the surface remains in place.

However, operations continued nearer to shore with a plan to remove up to 800 unhatched turtle eggs to protect the sea creatures from the effects of the oil.

Earlier in the day, a Facebook group calling on people to boycott oil from BP service stations was removed from the social networking website but later reinstated. It grew in size to almost 750,000 members after people thought the site was being censored.

http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7862274/Exxon-or-Shell-should-buy-BP-for-88bn-says-analyst.html

Anadarko approved key BP well designs

By Carola Hoyos in London Published: June 29 2010 22:33 Last updated: June 29 2010 22:33

Anadarko, the US partner to BP in its ill-fated Macondo well in the Gulf of Mexico, approved several key aspects of the UK company’s designs for the project that have been sharply criticised by Washington lawmakers.

Anadarko, which owns 25 per cent of Macondo, also knew of significant operational decisions made by BP that some lawmakers believe could have been a factor in causing the explosion at the well, according to senior executives at both companies.

Anadarko attempted this month to distance itself from BP by saying the oil spill at the well had been preventable and was likely because of the UK company’s “reckless decisions and actions”.

However, both Anadarko and BP have confirmed to the FT that the US company was aware of design choices that lawmakers, who have accused the UK company of cutting corners to cut costs, have criticised.

These decisions include the choices for how it lined the well and how many so-called centralisers – devices that stabilise a well before it is cemented – were used.

-----John Christiansen, Anadarko’s spokesman, said: “What we knew was that the design, the long string and the use of centralisers all met industry standards if executed correctly.

“The problems were caused by BP’s execution of each of these.”

BP, in a statement to the FT, explained that it gave or made available to its co-owners reports and other documents that showed the well design, changes to the well design, and identified major well control events encountered during drilling operations and that personnel from the co-owners engaged in periodic communications with BP personnel about well design and other issues related to the well.

http://www.ft.com/cms/s/0/75cd4c30-83ae-11df-b6d5-00144feabdc0.html

We have reached the end of the second quarter and end of the first half of 2010. Normally we could expect all the “friends of the Fed,” to come in near the close and move the US stock markets sharply higher in accordance with the Fed’s attempt at recreating the Greenspan stock bubble of the 1990s. Unfortunately, barring a dramatic U-turn by the ECB, the ECB is about to pull the plug on the ECB’s largest bank liquidity program ever. Some 442 billion euros, or so they say. Spanish banks are going nuts at the prospect of going quite rapidly bust thereafter. German bankers are looking deathly ill too. In view of the above, the Friends of the Fed might not be quite so willing to do the Fed’s dirty work of rigging US markets higher. Who wants to be long anything except gold, ahead of America’s Independence Day long weekend. If the ECB doesn’t change, Spain will be the new Greece by the end of July.

"We shouldn't pour cold water on everything. We, the eight or nine players in global investment banking, have a very good future."

Deutsche Bank, CEO Josef Ackermann. Davos, January 2007.

At the Comex silver depositories Tuesday, final figures were: Registered 49.58 Moz, Eligible 64.47 Moz, Total 114.05 Moz.

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Crooks and Scoundrels Corner.

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

No crooks today, just alleged Russian spies, although if the court filings are accurate there’s not a lot of doubt that they were Russian agents, even if they seem to have been very loth to actually get on with meaningful spying, rather than just enjoying the American way of life. With very little in the public domain except what the US prosecutors have put there, I expect that this will quickly change in the coming weeks ahead. Below, yet another false British passport was apparently used. Does anyone anymore travel on a real one?

"He alone could have led Russia into the enchanted quagmire; he alone could have found the way back to the causeway. He saw; he turned; he perished. The strong illuminant that guided him was cut off at the moment when he had turned resolutely for home. The Russian people were left floundering in the bog. Their worst misfortune was his birth: their next worst his death."

Winston S. Churchill. On Lenin.

Russian spy 'held fake British passport'

One of the 10 people arrested in the United States for allegedly being a Russian spy held a fake British passport, according to US government papers

Published: 4:14PM BST 29 Jun 2010

The FBI arrested 10 people for allegedly serving for years as secret agents of Russia's intelligence service, the SVR, with the goal of penetrating US government policy-making circles.

It is alleged that they were tasked with gleaning intelligence on nuclear weapons, foreign policy and Congressional politics.

US Department of Justice papers said that Tracey Lee Ann Foley travelled on a "fraudulent British passport prepared for her by the SVR". Foley was arrested in Boston on Monday.

A Foreign Office spokeswoman said: "We have seen the reports and, obviously, we will look into them."

President Barack Obama declined to comment on allegations of Russian spying in the United States.

The 10 arrested are accused of conspiracy to act as unlawful agents of a foreign government. Nine of them also face a charge of conspiracy to launder money.

An 11th suspect named "Christopher R Metsos" was arrested on Tuesday in Cyprus.

It also emerged that one of the 10 was in contact with a subsidiary group of Oxford University.

-----The case echoes revelations earlier this year in which forged British passports were allegedly used by Israeli agents in the killing of Hamas leader Mahmoud al-Mabhouh in Dubai.

Officials in Dublin are also investigating whether a false Irish passport was allegedly to be used by members of the spy ring.

The Irish Government said officials had been warned about a link to the so-called "deep cover" operation.

Court papers claimed one of the defendants, Richard Murphy, was told by his handlers to travel from the US to Rome where he would be given the forged Irish documents.

-----Many of the details of the criminal complains read like an outline of a John LeCarre novel.

A defendant known as "Anna Chapman" allegedly communicated with a Russian official in Manhattan in January as she sat in a coffee shop and he pulled up outside in a van. The FBI alleges that they used a wireless network via paired computers.

Two months later, a similar communication allegedly took place when she was in a bookshop and the Russian official, based at Russia's mission to the United Nations, was outside with a briefcase.

Chapman was later approached by an FBI agent posing as a Russian who told her: "My name is Roman, I work in the consulate."

He told her to give a false passport to another agent and that she was to introduce herself her by saying: "Excuse me but haven't we met in California last summer?" The other agent was to reply: "No, I think it was in the Hamptons."

------Court papers allege that the defendants led ordinary suburban lives, "deepening" their false identities by taking ordinary jobs, living as married couples, having children and even trying to buy homes in the US.

-----Experts have expressed their astonishment at the scale and dedication of the scheme allegedly undertaken by SVR.

Oleg Kalugin, a former KGB general who was a Soviet spy in the United States in the 1960s and 1970s under “legal” cover as a diplomat and Radio Moscow correspondent, said he believed the project was more ambitious than similar attempts by spies during the cold war.

He told the New York Times: “It’s a return to the old days, but even in the worst years of the cold war, I think there were no more than 10 illegals in the U.S., probably fewer.”

Vladimir Kolesnikov, deputy chairman of the security affairs committee in the lower house of Russia's parliament, said the arrests signalled that some quarters of Washington opposed warmer ties with Russia.

"Regrettably, there are people in America burdened by the legacy of the Cold War, the legacy of double standards," he said. "And they react improperly to the warming of relations spearheaded by the presidents. It's a blow to President Obama."

-----He said that US secret agents were active in Russia and suggested that Moscow might respond in kind to Washington's round-up.

"Previously we have quietly evicted some of them," he said. "Now I think we should more actively apply criminal legislation against them."

Russia's foreign minister said Moscow was waiting for a US explanation about the arrests of the 10 alleged Russian spies.

In a statement, Russia’s Foreign Ministry said: “Such actions are baseless and improper.

“It is highly deplorable that all of this is happening against the background of the reset in Russia-US ties announced by the US administration itself.”

http://www.telegraph.co.uk/news/worldnews/northamerica/usa/7861549/Russian-spy-held-fake-British-passport.html

Russian spy ring: Barack Obama knew before meeting Dmitry Medvedev

Barack Obama knew about the FBI operation to arrest an alleged spy ring before meeting his Russian counterpart Dmitry Medvedev last week, but did not raise it at the talks, according to the White House.

Published: 12:01AM BST 30 Jun 2010

Robert Gibbs, the White House spokesman, said the revelations, which were condemned by Russia, would not interfere with the effort by both sides to "reset" their relations, which has been pursued ever since Mr Obama became president last year.

The alleged operation was busted just a few days after a warm summit between Obama and Medvedev at the White House at which both sides made an elaborate effort to bury any lingering Cold War tensions.

"I do not believe this will affect the reset of our relationship with Russia," Mr Gibbs said.

"We have made great progress in the past year and a half. I do not think this will affect those relations."

Mr Gibbs said Mr Obama had been briefed on what he termed a law enforcement issue and had known about it before he met Medvedev, but did not raise it at the talks and a joint trip to a burger joint in suburban Virginia last week.

The State Department meanwhile said the 11 alleged Russian agents arrested this week were "vestiges" of "old attempts to use intelligence," but the relationship between the two Cold War foes was still improving.

"We're moving towards a more trusting relationship. We're beyond the Cold War; our relations absolutely demonstrate that," said Phil Gordon, the assistant secretary of state for European Affairs.

http://www.telegraph.co.uk/news/worldnews/northamerica/usa/7862327/Russian-spy-ring-Barack-Obama-knew-before-meeting-Dmitry-Medvedev.html

That the handling of this roundup is “unusual” is a gross understatement. Since Yeltsin, the “usual” way of handling “spook” cases has been bad publicity, a media expose and immediate expulsion. Does someone have an agenda in undermining Obama-Medvedev détente, or did President Obama really deliberately set out to make President Medvedev look a chump back home ? Did US counter intelligence agents just get tired of a costly, multi-year, multi-agent byzantine operation that appeared to be going nowhere? But if so, why now, why in this manner, and why put so much US counter intelligence tradecraft into the public domain, allowing for all the world’s other intelligence agencies to start to conduct reverse data mining? My guess is that we will soon see a tit for tat response. All the western spooks in Russia must be having a fit. What next, back to termination with ultimate prejudice Berlin and Vienna late 1940s style? Plus, it’s a funny way to go about getting UN cooperation on Iran and North Korea. More, much more to come, I think.

“I believe there is something out there watching us. Unfortunately, it's the government.”

Woody Allen

The monthly Coppock Indicators finished May:

DJIA: +276 UP. NASDAQ: +499 UP. SP500: +304 UP. The great Bull market goes on with the all three continuing higher in positive numbers, but is now under serious pressure.

Help the LIR fight Banksterism, the EU, and for sound money.

If you can, help the LIR stay around and make a difference. Please make a donation at the PayPal link on the website or better still become a sponsor for what looks like an exciting 2010. Capitalism not banksterism. Many thanks to all who have helped.

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Sunspots – A 22 year colder world? (From 2004?)

Spotless Days June 29
Current Stretch:0 days

2010 total: 35 days (20%)
2009 total: 260 days (71%)
Since 2004: 803 days
Typical Solar Min: 485 days

http://www.spaceweather.com

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