China: Here We Go Again.

Baltic Dry Index. 1732 +12

LIR Gold Target by 2019: $3,000.

"The nine most terrifying words in the English language are: 'I'm from the government and I'm here to help.'"

President Ronald Reagan.

Today we contrast American and China. For more on President Reagan’s words and modern America, scroll down to the Crooks and Scoundrels section. We open today with more on the unstoppable rise of China. According to the Paris based International Energy Agency, China has already passed the USA as the world’s largest user of energy. Americans still retain the dubious honour of being the world’s largest consumer per capita. With only 300 million consumers, most of them legal, Americans easily surpass China’s 1.3 billion energy consumers when it comes to showing the world how to consume a scarce vital natural resource, that as BP has just shown us, is getting ever harder to find replacement reserves.

We are not creatures of circumstance; we are creators of circumstance.

Benjamin Disraeli.

JULY 19, 2010, 11:17 A.M. ET

China Passes U.S. as World's Biggest Energy Consumer

China is now the world's biggest energy consumer, knocking the U.S. off a perch it held for more than a century, according to new data from the International Energy Agency.

The Paris-based agency, whose forecasts are generally regarded as bellwether indicators for the energy industry, said China devoured 2,252 million tons of oil equivalent last year, or about 4% more than the U.S., which burned through 2,170 million tons of oil equivalent. The oil-equivalent metric represents all forms of energy consumed, including crude oil, nuclear, coal, natural gas and renewable sources such as hydropower.

The figures reflect, in part, how the global recession hit the U.S. more severely than China and hurt American industrial activity and energy use. Still, China's total energy consumption has clocked annual double-digit growth rates for many years, driven by the country's big industrial base. Highlighting how quickly its energy demand has increased, China's total energy consumption was just half the size of the U.S. 10 years ago.

"The fact that China overtook the U.S. as the world's largest energy consumer symbolizes the start of a new age in the history of energy," IEA chief economist Fatih Birol said in an interview. The U.S. had been the biggest overall energy consumer since the early 1900s, he said. The IEA is an energy adviser to most of the world's biggest economies.

China's voracious energy demand helps explain why the country—which gets most of its electricity from coal, the dirtiest of fossil-fuel resources—passed the U.S. in 2007 as the world's largest emitter of carbon dioxide emissions and other greenhouse gases.

The U.S. is still by far the biggest energy consumer per capita, with the average American burning five times as much energy annually as the average Chinese citizen, said Mr. Birol, who has been in his current role for six years.

The U.S. also is the biggest oil consumer by a wide margin, going through on average roughly 19 million barrels a day—with China at a distant second at about 9.2 million barrels a day. But many oil analysts believe U.S. crude demand has peaked or is unlikely to grow very much in coming years because of improved energy efficiency and more-stringent vehicle fuel-efficiency regulations.

Prior to the recession, China had been expected to become the biggest energy consumer in about five years, but the economic malaise and energy-efficiency programs in the U.S. brought forward the date of that superlative, Mr. Birol said.

The decreased energy "intensity" of the U.S. economy is a key reason investors, such as General Electric Co., have increasingly looked to China as a driver of future growth. Mr. Birol said China requires total energy investments of some $4 trillion over the next 20 years to keep feeding its economy and to avoid power blackouts and fuel shortages.

http://online.wsj.com/article/SB10001424052748703720504575376712353150310.html?mod=WSJ_hps_MIDDLETopStories

Staying with China, China’s 3G cell phone users now total over 25 million and are increasing at a rate of about 7 million a quarter, British Telecom and others can only look on in envy. It doesn’t take a genius to see where all this quickly leads by the end of the current decade. Stay long precious metals. The age of the fiat currency dollar reserve standard, is passing. With each new Chinese milestone it’s harder and harder to pretend that the dollar reserve standard still fulfills the same role as in 1945.

Quality means doing it right when no one is looking.

Henry Ford.

China 3G phone-user total up sharply to 25 million

July 19, 2010, 10:20 p.m. EDT

BEIJING (MarketWatch) -- China's Ministry of Industry and Information Technology said Tuesday the country had 25.2 million users of third-generation mobile wireless technology at the end of June, up from 18.08 million at the end of March.

China's three telecommunications giants are in a race to recruit users of their 3G services, which allow faster data downloads and attract higher fees. Each of the three companies uses its own 3G standard, with China Mobile Ltd., the country's largest mobile company by subscribers, promoting a locally developed standard.

Earlier Tuesday, China Mobile said it had 10.46 million 3G users at the end of June. On Monday, China Unicom (Hong Kong) Ltd. said it had 7.56 million 3G users.

The data imply that China Telecom Corp, which doesn't publicly disclose the figure, had 7.18 million 3G users at the end of June. But government data can vary slightly from the figures provided by the carriers

http://www.marketwatch.com/story/china-3g-phone-user-total-up-sharply-to-25-million-2010-07-19

In US news, the aftermath of the end of real estate subsidies still weighs heavily on the market. The green shoots died once the state supplied fertilizer was turned off.

Homebuilder Confidence in U.S. Falls to One-Year Low

July 19 (Bloomberg) -- Builders in the U.S. turned more pessimistic in July than forecast, a sign the expiration of a government tax credit will depress home construction.

The National Association of Home Builders/Wells Fargo confidence index dropped to 14 this month, the lowest level since April 2009, from 16 in June, data from the Washington- based group showed today. Readings lower than 50 mean more respondents said conditions were poor.

The retreat in sales following the April 30 expiration of a deadline to sign purchase agreements and qualify for a tax credit worth as much as $8,000 is lasting longer than projected, the report said. With mounting foreclosures adding to housing inventory and unemployment forecast to end the year at 9.5 percent according to economists surveyed by Bloomberg News, a housing recovery will take time to develop.

“The housing sector is going to be in a hangover for a few months and it looks like it will be quite a nasty one,” said David Sloan, a senior economist at 4Cast Ltd. in New York, who correctly forecast the decline. “This will weigh on growth in the third quarter and well into the fourth quarter as well.”

http://noir.bloomberg.com/apps/news?pid=20601087&sid=aJRZjdQZLP0w

We close for today with rickety central Europe, Germany and Ireland. In the David v Goliath fight between Hungary and the EU/IMF austerity tag team, will little David like Sampson, bring the whole building crashing down. Voters are a funny lot, “vote for me, I’m going to make your life hell,” doesn’t get many votes whether spun from the right or the left. “Vote for me, I’m going to give the rich hell, tell the IMF to pack its bags and get the hell out of our country, and tell Brussels to take a long walk of a short pier,” works wonders. Little Hungary is already 4 years in to austerity packages, while in Greece they’ve barely started, and in the UK we’re still only at the planning stage. Hungary is very likely the future all austerity regimes face, the more so in Britain where no party fought the recent general election telling the truth to the UK’s long deceived voters. Stay long precious metals. 2011 is already looking ugly, with a high possibility, in my opinion, of a large part of the G-7 entering a double-dip recession.

Below Hungary, the latest from austerity struck Ireland still trapped in the Germanic Euro. How Ireland must envy tiny Iceland whose problems, though similar, still has the freedom of allowing competitive devaluation to up part of the adjustment. Below Ireland, Germany’s already state supported Hypo Real Estate bank, managed to fail the EU bank stress test. A test many don’t think hard enough for what likely lies ahead in a double-dip world.

A man is about as big as the things that make him angry.

Winston Churchill.

Hungary's IMF revolt augurs ill for Greece

The collapse of Hungary's talks with the International Monetary Fund and the EU is a chilly reminder that sovereign debt crises do not end with a rescue package and a click of the fingers. As austerity drags on for year after year, democracies react.

By Ambrose Evans-Pritchard, International Business Editor
Published: 8:32PM BST 19 Jul 2010

"We told the IMF/EU that further austerity was out of the question," said Hungary's economic minister Gyorgy Matolcsy, offering no hint that the Fidesz government is willing to back down despite yesterday's surge in Hungarian default costs by 51 basis points.

The Fidesz movement – an amalgam of libertarians and nationalists with a Left-populist tilt – won a crushing victory in April on a campaign of defiance against both Brussels and the IMF. It has been spoiling for a fight ever since.

Lars Christensen, of Danske Bank, said events in Budapest are a warning of what may happen in the Baltics later this year, and then in Greece and other parts of EMU-periphery forced to undergo wage cuts and harsh fiscal tightening.

"It is incredible how long Hungary has been struggling to get over its imbalances. It first began austerity measures in 2006, but four years later is still not out of the crisis and there is massive discontent. The Greek problem is even bigger by any measure, whether budget deficit, current account or public debt," he said.

"Austerity is extremely hard to sell to electorates. The risk is that this moves from a wider financial and economic crisis to a European political crisis as governments are punished by voters. The approval rating for Lithuanian's prime minister has fallen to 7pc."

Greece is at an early stage of this political sequel. It has won praise from the IMF so far but spending cuts have only just started over recent months, and will grind much deeper over the next three years. Two MPs from the ruling Pasok party have been expelled for refusing to toe the line, and some Greek analysts say the party may ultimately splinter.

"The issue is whether they can carry the Greek people when have to make the next round of cuts in 2011," said Chris Pryce, of Fitch Ratings.

----- The country cannot easily devalue to claw its way out of its debt-trap because 63pc of loans from mortgages, households, and companies are in foreign currencies, much of it in the ever-soaring Swiss franc. "A weaker currency will crush households. Countries like Hungary with a debt-sustainability problem need to grow but there is no growth, and they can't reflate," he said.

Most investors thought Hungary's woes were over long ago with the approval of the €20bn rescue in 2008 – now mostly exhausted. It was assumed that the rest of Central and Eastern Europe were well on the way to recovery, underpinned by the G20 agreement in April 2009 to triple the IMF's fire-fighting fund to $750bn.

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7899304/Hungarys-IMF-revolt-augurs-ill-for-Greece.html

Moody’s Cuts Irish Rating on Debt Outlook, Bank Costs

By Louisa Fahy

July 19 (Bloomberg) -- Ireland had its credit rating cut one level at Moody’s Investors Service, which cited a “significant loss of financial strength” and the cost of bank bailouts.

The company lowered Ireland to Aa2 from Aa1 and moved the country to a “stable” from a “negative” outlook, it said today in a statement. Ireland lost its top rating at Moody’s in April 2009. Irish bonds fell after the downgrade.

The euro has fallen 10 percent versus the dollar this year on concern that widening budget deficits in countries including Ireland, Spain and Greece could lead to a default. While Irish Finance Minister Brian Lenihan said last week that the country’s fiscal position is “stabilizing”, the cost of aiding the banking industry is adding to the country’s debt even as the economy emerges from recession.

“It’s a gradual, significant deterioration, but not a sudden, dramatic shift,” Dietmar Hornung, Moody’s lead analyst for Ireland, said in a telephone interview. Overall, “we have a constructive view. We agree Ireland has turned the corner.”

The premium investors charge to hold Irish 10-year debt over the German bund, Europe’s benchmark, widened to 286 basis points today. The yield reached 306 points in May, the widest since the introduction of the euro in 1999.

----- Moody’s said the downgrade reflected Ireland’s “significant loss of financial strength,” weakened growth prospects and “contingent liabilities from the banking system.” In addition to pumping money into banks to build up their capital buffers, Ireland set up a so-called bad bank to cleanse banks of toxic loans.

Hornung said the possibility of Ireland tapping the European aid mechanism set up in May or defaulting on its debts is “not an issue” for Moody’s. “The risks are balanced” and a stronger-than-expected economic recovery could trigger “upward pressure” on the rating, he said. Ireland’s government sees the economy expanding 1 percent this year.

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

Germany’s Hypo Real Estate Said to Fail Europe-Wide Stress Test

July 20 (Bloomberg) -- Hypo Real Estate Holding AG, the commercial-property and public-finance lender taken over by the German government, failed a Europe-wide banking stress test, two people familiar with the results said.

Hypo Real Estate didn’t pass a stress scenario on its capital that assumes an economic slowdown and sovereign-debt losses, said the people, who declined to be identified before an announcement on July 23. The Munich-based lender is probably the only German bank to fail the test, one person said.

European Union regulators are examining the strength of banks as they seek to reassure investors about the firms’ resilience to potential losses amid the region’s sovereign-debt crisis. The tests are being applied to 91 of Europe’s biggest banks, including 14 German lenders.

“The government won’t let Hypo Real Estate collapse,” said Andreas Plaesier, a banking analyst at M.M. Warburg in Hamburg. An official at Hypo Real Estate declined to comment.

Banks may be required to have a Tier 1 capital ratio, a key measure of financial strength, of at least 6 percent under the EU stress tests, the same threshold U.S. lenders faced last year, said two people briefed on the talks.

Hypo Real Estate’s Tier 1 capital ratio was 7.7 percent at the end of March, according to a presentation on its website dated June 2010. The lender holds 72.1 billion euros ($93.4 billion) of debt in Greece, Italy and Spain, it said in May.

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

Today, the unintended consequence of fiat money. On fiat money, money supply increases so fast and gets super concentrated in gambling hands, grubby money grabbing hands focused purely on casino gambling, that speculation fast becomes the only game in town. A great vampire squid can collect $500,000 just for passing go. A farmer or rancher, might make $50,000 in a good year after spending months of backbreaking old fashioned hard work. A lesser peon might make $8.50 an hour flipping burgers or stacking shelves. Being too big to fail, the squids bets get ever larger and more depraved. Below two articles that neatly sum up all that’s wrong with modern banksterism and why it’s doomed to fail in an almighty misallocation of global resources.

http://londonirvinereport.blogspot.com/p/intraday-news.html

At the Comex silver depositories Monday, final figures were: Registered 52.42 Moz, Eligible 58.65 Moz, Total 111.07 Moz.

+++++

Crooks and Scoundrels Corner.

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

Today, the Washington Post on America’s best growth industry, domestic spying. Below “Top Secret America: A Washington Post Investigation. Who spies on who, and what does it all get? Below, what borrowing trillions from China can accomplish in less than a decade. Somehow, I don’t think that they are going to get paid back. From the sound of it, this couldn’t be scaled back even if anyone wanted to try.

I believe there is something out there watching over us – unfortunately it's the government.

Woody Allen.

A hidden world, growing beyond control

By Dana Priest and William M. Arkin

The top-secret world the government created in response to the terrorist attacks of Sept. 11, 2001, has become so large, so unwieldy and so secretive that no one knows how much money it costs, how many people it employs, how many programs exist within it or exactly how many agencies do the same work.

These are some of the findings of a two-year investigation by The Washington Post that discovered what amounts to an alternative geography of the United States, a Top Secret America hidden from public view and lacking in thorough oversight. After nine years of unprecedented spending and growth, the result is that the system put in place to keep the United States safe is so massive that its effectiveness is impossible to determine.

The investigation's other findings include:

* Some 1,271 government organizations and 1,931 private companies work on programs related to counterterrorism, homeland security and intelligence in about 10,000 locations across the United States.

* An estimated 854,000 people, nearly 1.5 times as many people as live in Washington, D.C., hold top-secret security clearances.

* In Washington and the surrounding area, 33 building complexes for top-secret intelligence work are under construction or have been built since September 2001. Together they occupy the equivalent of almost three Pentagons or 22 U.S. Capitol buildings - about 17 million square feet of space.

* Many security and intelligence agencies do the same work, creating redundancy and waste. For example, 51 federal organizations and military commands, operating in 15 U.S. cities, track the flow of money to and from terrorist networks.

* Analysts who make sense of documents and conversations obtained by foreign and domestic spying share their judgment by publishing 50,000 intelligence reports each year - a volume so large that many are routinely ignored.

These are not academic issues; lack of focus, not lack of resources, was at the heart of the Fort Hood shooting that left 13 dead, as well as the Christmas Day bomb attempt thwarted not by the thousands of analysts employed to find lone terrorists but by an alert airline passenger who saw smoke coming from his seatmate.

They are also issues that greatly concern some of the people in charge of the nation's security.

"There has been so much growth since 9/11 that getting your arms around that - not just for the DNI [Director of National Intelligence], but for any individual, for the director of the CIA, for the secretary of defense - is a challenge," Defense Secretary Robert M. Gates said in an interview with The Post last week.

In the Department of Defense, where more than two-thirds of the intelligence programs reside, only a handful of senior officials - called Super Users - have the ability to even know about all the department's activities. But as two of the Super Users indicated in interviews, there is simply no way they can keep up with the nation's most sensitive work.

"I'm not going to live long enough to be briefed on everything" was how one Super User put it. The other recounted that for his initial briefing, he was escorted into a tiny, dark room, seated at a small table and told he couldn't take notes. Program after program began flashing on a screen, he said, until he yelled ''Stop!" in frustration.

"I wasn't remembering any of it," he said.

Underscoring the seriousness of these issues are the conclusions of retired Army Lt. Gen. John R. Vines, who was asked last year to review the method for tracking the Defense Department's most sensitive programs. Vines, who once commanded 145,000 troops in Iraq and is familiar with complex problems, was stunned by what he discovered.

"I'm not aware of any agency with the authority, responsibility or a process in place to coordinate all these interagency and commercial activities," he said in an interview. "The complexity of this system defies description."

The result, he added, is that it's impossible to tell whether the country is safer because of all this spending and all these activities. "Because it lacks a synchronizing process, it inevitably results in message dissonance, reduced effectiveness and waste," Vines said. "We consequently can't effectively assess whether it is making us more safe."

----- Liberty Crossing tries hard to hide from view. But in the winter, leafless trees can't conceal a mountain of cement and windows the size of five Wal-Mart stores stacked on top of one another rising behind a grassy berm. One step too close without the right badge, and men in black jump out of nowhere, guns at the ready.

Past the armed guards and the hydraulic steel barriers, at least 1,700 federal employees and 1,200 private contractors work at Liberty Crossing, the nickname for the two headquarters of the Office of the Director of National Intelligence and its National Counterterrorism Center. The two share a police force, a canine unit and thousands of parking spaces.

Liberty Crossing is at the center of the collection of U.S. government agencies and corporate contractors that mushroomed after the 2001 attacks. But it is not nearly the biggest, the most costly or even the most secretive part of the 9/11 enterprise.

In an Arlington County office building, the lobby directory doesn't include the Air Force's mysteriously named XOIWS unit, but there's a big "Welcome!" sign in the hallway greeting visitors who know to step off the elevator on the third floor. In Elkridge, Md., a clandestine program hides in a tall concrete structure fitted with false windows to look like a normal office building. In Arnold, Mo., the location is across the street from a Target and a Home Depot. In St. Petersburg, Fla., it's in a modest brick bungalow in a run-down business park.

More.

http://projects.washingtonpost.com/top-secret-america/articles/a-hidden-world-growing-beyond-control/

Just because you’re paranoid, doesn’t mean they aren’t after you.

Joseph Heller.

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.

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

Spotless Days July 19
Current Stretch:0 days

2010 total: 35 days (17%)
2009 total: 260 days (71%)
Since 2004: 803 days
Typical Solar Min: 485 days

http://www.spaceweather.com/

The long minimum seems to have ended, or has it? I’m beginning to think our new Dalton Minimum of arriving global cooling, might turn out in fact to be a much longer more severe Maunder Minimum.

Technorati Tags: China,3G,Hungary default,Ireland,German banks,US spies,missing sunspots,global cooling,REEs,HREs.,mining stocks.

The Nixonian Error.

Baltic Dry Index. 1902 -38

LIR Gold Target by 2019: $3,000.

"Deficit spending is simply a scheme for the 'hidden' confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."

Alan Greenspan 1966.

After a week where the US stock market was visited by Wall Street’s resurrection men staging a 5% rally, AP and the New York Times reported on a new development that’s likely to leave the resurrection men at the New York Fed with a large hangover. Below, the latest Chinese development that threatens to be a game changer if China really does let its new ratings agency be independent. It’s all too likely to be successful. Suddenly the Old Emperor’s new clothes are likely to be seen for what they are. If they develop a good track record for honesty and success, Wall Street’s sham rating agencies, will go the way of the horse and buggy. Nothing stands still in the competitive space of the marketplace. The death throes of the dodgy fiat dollar reserve standard aren’t pretty. The Washington and Paul Krugman response to the dead end of the Nixonian error of universal fiat money, is more of the same. Simply continue doing what got us into the financial mess in the first place. Issue more and more fiat and keep bailing out failed banksters, and sooner or later it will all somehow or other work out. Universal employment will magically reappear, interest rates will stay zero bound forever, and we will all magically repay all our debts when the tooth fairy shows up. Presumably, change we can believe in. If wishes made reality, we would all live like Kings and Presidents in palaces, with unlimited money and credit, married to a never aging rescued happy Cinderella, driving the latest Ferrari and surrounded by a fawning population of Homer Simpson’s proclaiming “good idea boss!”

Reality is that we mostly live in mortgaged over priced hovels, with Cinderella’s third ugly sister of the bad disposition, too ugly to be mentioned in the Grimm tale, money ceased to exist when she moved in and credit is limited to a slate at the Wa-Wa store, the Ferrari long ago became a rusting fiat with a built-in indisposition to start in the rain, and we’re surrounded by far from fawning central bankster criminals forever spouting “it was like that when I got here!”

Below, the Chinese realists just put some sand in Helicopter Ben’s fuel supply, Quite when it shows up in the engine no one yet knows, but the ride gets a lot more interesting for all from here.

The sources of deflation are not a mystery. Deflation is in almost all cases a side effect of a collapse of aggregate demand--a drop in spending so severe that producers must cut prices on an ongoing basis in order to find buyers.¹ Likewise, the economic effects of a deflationary episode, for the most part, are similar to those of any other sharp decline in aggregate spending--namely, recession, rising unemployment, and financial stress.

However, a deflationary recession may differ in one respect from "normal" recessions in which the inflation rate is at least modestly positive: Deflation of sufficient magnitude may result in the nominal interest rate declining to zero or very close to zero.² Once the nominal interest rate is at zero, no further downward adjustment in the rate can occur, since lenders generally will not accept a negative nominal interest rate when it is possible instead to hold cash.

Dr. Ben Bernanke.

Chinese Credit Firm Says US Worse Risk Than China

By THE ASSOCIATED PRESS Published: July 11, 2010

BEIJING (AP) -- A Chinese firm that aims to compete with Western rating agencies declared Washington a worse credit risk than Beijing in its first report on government debt Sunday amid efforts by China to boost its influence in global markets.

Dagong International Credit Rating Co.'s verdict was a break with Moody's, Standard & Poors and Fitch, which say U.S. government debt is the world's safest. Dagong said it rated Washington below China and 11 other countries such as Switzerland and Australia due to high debt and slow growth. It warned the U.S. is among countries that might face rising borrowing costs and risks of default.

The report comes amid complaints by Beijing that Western rating agencies fail to give China full credit for its economic strength, boosting borrowing costs -- a criticism echoed by some foreign analysts. At June's G-20 summit in Toronto, President Hu Jintao called for the creation of a more accurate system.

Dagong, founded in 1994 to rate Chinese corporate debt, says it is privately owned and pledges to make its judgments impartially. But in a sign of official support, its announcement Sunday took place at the headquarters of the Xinhua News Agency, the ruling Communist Party's main propaganda outlet.

Dagong's chairman, Guan Jianzhong, said the current Western-led rating system is to blame for the global crisis and Europe's debt woes. He said it ''provides the wrong credit-rating information'' and fails to reflect changing conditions.

''Dagong wants to make realistic and fair ratings,'' he said.

Beijing has more than $900 billion invested in U.S. Treasury debt and has appealed to Washington to avoid hurting the value of the dollar or China's holdings as it spends heavily on its stimulus.

Dagong's report covered 50 governments and gave emerging economies such as Indonesia and Brazil better marks than those given by Western agencies, citing high growth. Along with the United States, some other developed nations such as Britain and France also received lower ratings than those of other agencies.

Dagong rated U.S. government debt AA with a negative outlook, below the firm's top AAA rating. It warned that Washington, along with Britain, France and some other countries, might have trouble raising more money if they allow fiscal risks to get out of control.

''The interest rate on debt instruments will run up rapidly and the default risk of these countries will grow even larger,'' its report said.

Dagong said it hopes to ''break the monopoly'' of Moody's Investors Service, Standard & Poors and Fitch Ratings. Their reputation suffered after they gave high ratings to mortgage-linked investments that soured when the U.S. housing market collapsed in 2007.

Manoj Kulkarni, head of credit research for SJS Markets in Hong Kong, said that despite the possibility China's government might try to influence Dagong's decisions, there is room in the market for a Chinese agency because Western firms' credibility is badly tarnished.

http://www.nytimes.com/aponline/2010/07/11/business/AP-AS-China-Debt-Ratings.html?_r=2&hp

Below, what worries the hard working Chinese, who are also trapped in a fiat currency system. America, at some point ahead is deliberately going to cheat them.

Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

Dr. Ben Bernanke.

Sadly in a fiat currency system, someone is always going to get cheated. It goes without saying that the vast majority of the population will get cheated, for they have no friends near the top. Not for them the sound of the Fed’s helicopters overhead ready to whisk them off to their estates in the Hampton’s and Greenwich Connecticut. For them only the sound of downwardly mobile gurgling. Cheated too, the foreign holders of the fiat currency dollar reserve standard. Quite simply they don’t have a vote, so don’t get to play in the game of musical chairs aboard the salon of the USS Titanic. Stay long gold and silver. That it all ends badly is a given. If nothing else demographics bring the whole fraud crashing down, but avarice and greed will probably do it far faster. An interest rate jump even faster still.

Below, more news from China that’s a red rag to US politicians and contenders running for office this coming November. Though the Baltic Dry Index seems to be indicating that a fall in global trade has arrived, no one in Washington wants to say that to the voters. Protectionist anti-China tariffs are the currency of election in 2010, backed up by putting more states, corporations and people on the public dole. It doesn’t take a genius to see that at best this all goes wrong in 2011, when the ever expanding public dole abruptly stops and the banksters get it all wrong once again.

China’s Trade Surplus Widens, Adding Pressure on Yuan

July 10 (Bloomberg) -- China’s trade surplus widened to the highest this year and exports climbed more than estimated to a record in June, adding pressure on the government to let the yuan gain after the U.S. said the currency “remains undervalued.”

The gap increased 140 percent to $20.02 billion from a year earlier, the nation’s customs bureau said on its website today. That compares with the $15.6 billion median estimate of 24 economists surveyed by Bloomberg News. Exports surged 43.9 percent and import growth moderated for the third month, rising 34.1 percent.

U.S. Treasury Secretary Timothy F. Geithner said July 8 he will “closely” monitor the yuan’s appreciation after China scrapped a two-year peg to the dollar and allowed a 0.8 percent advance in the past three weeks. Policy makers in the world’s biggest exporting nation may be reluctant to step up gains as Europe’s debt woes threaten demand even as the bureau said trade has “recovered” to levels before the global financial crisis.

The surplus “points to the need for Chinese authorities to allow continued appreciation of the yuan against the U.S. dollar, given their pledge to allow market forces to determine the exchange rate,” Wang Qing, a Hong Kong-based economist at Morgan Stanley, said. He estimates the yuan will gain 4 percent by the end of this year and 6 percent next year.

-----Trade “has recovered to pre-crisis levels,” Zheng Yuesheng, head of the customs bureau’s statistics department said in an interview on state television today after the release of the data, echoing the views of some economists that the European sovereign-debt crisis has yet to impact overseas sales.

Exports to the U.S. and European Union jumped by more than 40 percent for the second month, and exports to Russia climbed 84 percent in June, according to today’s statement. Shipments to Brazil, which more than doubled in April and May, surged by 125 percent last month.

http://noir.bloomberg.com/apps/news?pid=20601087&sid=ac44vXxEWzC8&pos=1

Backing up the implied trade slowdown from the BDI, last week’s news out of Japan wasn’t good. Japan is the poster child of the never ending slump, the way the US is for the never ending war. Neither is good for the wealth and happiness of society.

Japan Machine Orders Slump Most Since 2008 as Recovery Slows

July 08, 2010, 3:08 AM EDT

July 8 (Bloomberg) -- Japanese machinery orders fell the most since August 2008, a sign that any rebound in business investment may be too weak to drive an economic recovery that is showing signs of losing momentum.

The report prompted Cabinet Office spokesman Keisuke Tsumura to say the outlook is becoming less certain, while Bank of Japan Governor Masaaki Shirakawa said the economy will keep expanding. The remarks echo a divergence between government officials and the central bank earlier this year before Shirakawa and his board expanded a credit program in March.

“Pressure on the BOJ to ease monetary policy further will continue to increase,” said Kenro Kawano, a debt strategist in Tokyo at Credit Suisse Group AG. “The central bank’s policy is heading toward an easing bias.”

Separate figures showed a cooling of exports, which have been the main driver of the nation’s rebound from its worst postwar recession. Slower growth in shipments abroad caused the current-account surplus to narrow for the first time in 10 months, falling 8.1 percent to 1.205 trillion yen ($14 billion) in May from a year earlier, the Finance Ministry said.

“The recovery’s no longer adding momentum and we’re beginning to see more downside risks,” said Yoshiki Shinke, senior economist at Dai-Ichi Life Research Institute in Tokyo. He said the degree of any political pressure on the BOJ depends on the direction of the economy as well as stocks and the yen.

The International Monetary Fund today cut its forecast for Japan’s 2011 economic growth to 1.8 percent from 1.6 percent.

http://www.businessweek.com/news/2010-07-08/japan-machine-orders-slump-most-since-2008-as-recovery-slows.html

Below, Japan’s weekend election takes the fiat Yen lower. A new round of competitive devaluation seems to be in store.

Yen Declines on Kan Election Loss; Euro Drops on Debt Concerns

July 12 (Bloomberg) -- The yen reached a two-week low against the dollar after Prime Minister Naoto Kan’s party lost control of Japan’s upper house of parliament, undermining efforts to rein in the world’s largest public debt.

The yen fell as Standard & Poor’s said Kan’s defeat is "potentially negative" for Japan’s debt rating because of legislative gridlock. The euro dropped after Der Spiegel said a German plan to allow the "orderly insolvency" of countries would force bondholders to give up part of their claims.

“If the loss rattles Japan’s political situation, foreign investors, who loathe political instability, may sell the yen,” said Toshiya Yamauchi, a senior foreign-exchange analyst in Tokyo at Ueda Harlow Ltd.

http://noir.bloomberg.com/apps/news?pid=20601101&sid=aGnxHba7_oA8

Below, more on an item we touched on last week. Far from being bearish as is mildly spun in the media, I think it makes the case for gold being the ultimate reserve asset in times of financial uncertainty and financial distress. If China could swap some dodgy fiat dollars or Euros for all the BIS’s new gleaming 382 tonnes of newly pledged gold in a way that they could do it without sending the price of gold soaring, my guess is that they would do it before Helicopter Ben could say “get me Geithner!” My guess is that one way or another, willingly and planned or unwillingly and unplanned, the great Nixonian error of fiat money will come to its end, and a return to metallic monetary stability comes next.

Secret gold swap has spooked the market

It takes a lot to spook the solid old gold market. But when it emerged last week that one or more banks had lent 380 tonnes of gold to the Bank of International Settlements in return for foreign currencies, there was widespread surprise and confusion

By Garry White and Rowena Mason Published: 6:10PM BST 11 Jul 2010

The news that a mystery bank has just pawned the family jewels gave traders a jolt – nervous about the sudden transfer of almost 20pc of the world's annual gold production and the possibility of a sell-off.

In a tiny footnote in its annual report, the bank disclosed its unusually large holding of gold, compared with nothing the year before. The disclosure was a large factor in the correction of the gold price this week, which fell below $1,200 for the first time in more than a month.

----- At first it looked like the BIS was swapping gold with a troubled central bank. After all, the institution is the central bankers' bank and its purpose to conduct transactions with national monetary authorities.

Central banks in the troubled southern zone of Europe were considered the most likely perpetrators.

According to the World Gold Council, central banks in Greece, Spain and Portugal held 112.2, 281.6 and 382.5 tons of gold respectively in June – leading analysts to point fingers at Portugal, or a combination of the three.

But Edel Tully, an analyst from UBS, noted that eurozone central banks would be severely limited with what they could do with the influx of extra cash – unable to transfer it straight to governments or make use of the primary bond markets.

She then listed the only other potential monetary authorities with enough gold as the US, China, Switzerland, Japan, Russia, India and Taiwan – and the International Monetary Fund.

This led to musings that the counterparty was the IMF, making sense because the lender of last resort is historically prone to cash shortages and has been quietly selling off gold in the first half of the year.

----- However, the day after original reports about the swaps, BIS emailed a statement saying that the swaps had not been conducted with monetary authorities but purely with commercial banks.

This did nothing to quell the sense of mystery surrounding the deal or deals. It is almost inconceivable that a single commercial bank could have accumulated so much gold alone. And cynics have suggested that the whole affair still looks like a secretive European bailout that a single country wants to keep quiet.

In this case, one or more of the so-called bullion banks – which act as wholesale market-makers and include Goldman Sachs, Deutsche Bank, JP Morgan, HSBC, Barclays, UBS, Societe Generale, Mitsui and the Bank of Nova Scotia – would have agreed to act on behalf of a monetary authority.

This would add an extra layer of anonymity. "So the BIS swaps look like a tripartite transaction," writes Adrian Douglas of the Gold Anti-Trust Association. "The commercial bank or banks made a swap with a central bank or banks and then the commercial bank or banks made a swap with the BIS."

http://www.telegraph.co.uk/finance/markets/7884272/Secret-gold-swap-has-spooked-the-market.html

We end with BP news, at the weekend the NY Times thought the unthinkable. Might BP opt for bankruptcy after all? Perhaps bankruptcy is the last best way to salvage some fair value for the hapless, duped dummies, aka owners, who thought that they were investing in a well run major international, well geographically diversified oil company with a virtual license to steal. In better news, BP now says that a new cap on the leaking well will soon be functioning this week, and that the first relief well may have solved the problem by month end. Well maybe, and we all want to believe, we really do. It’s just there’s no credibility left with any of the BP players or many in the US federal government’s regulatory team. Below, the NY Times on a BP bankruptcy, part of BP’s fix may have made the consequences of the oil spill very much worse.

Weighing the Possibility of Bankruptcy for BP

By JOHN SCHWARTZ Published: July 9, 2010

With pockets as deep as BP’s — its assets are worth more than $260 billion — the possibility that it might be forced to seek bankruptcy protection because of the Gulf of Mexico oil spill is considered remote by many industry experts.

But what if the company’s plan to contain the spill in the next several days does not work, and other efforts to stop the gushing oil also fail? If that were to occur, the worst-case projections of some experts, if they came to pass, would strain the ability of any company to pay, said Robin K. Craig, associate dean for environmental programs at the Florida State University College of Law.

Professor Craig said that if the oil hit the Gulf Stream and was carried by currents to East Coast states, Cuba and other Caribbean nations, and possibly even Britain, lawsuits could quickly mount to levels even BP could not handle.

“My bet is that BP will finally go bankrupt from the tort liability and the environmental liability,” she said. “Hypothetically, a bluefin tuna farmer in the Mediterranean could end up with a claim against BP.”

Even those who find it unlikely that BP will seek bankruptcy protection believe it is likely that the company has to at least consider it as a possibility, in light of spiraling environmental costs, economic claims and the unpredictability of American juries.

“They’ve got a duty to their shareholders and others to consider every possibility,” said Samuel J. Gerdano, the executive director of the American Bankruptcy Institute. “It’s not a matter of panic, it’s not a matter of irrationality. It’s a coldhearted and clearheaded consideration of options.”

More.

http://www.nytimes.com/2010/07/10/us/10bp.html?hp

Toxicologists: Corexit “Ruptures Red Blood Cells, Causes Internal Bleeding”, "Allows Crude Oil To Penetrate “Into The Cells” and “Every Organ System"

Submitted by George Washington on 07/09/2010 18:35 -0500

As I have previously noted, Corexit is toxic, is less effective than other dispersants, and is actually worsening the damage caused by the oil spill.
Now, two toxicologists are saying that Corexit is much more harmful to human health and marine life than we've been told……

http://www.zerohedge.com/article/toxicologists-corexit-%E2%80%9Cruptures-red-blood-cells-causes-internal-bleeding%E2%80%9D-allows-crude-oil-p

"Until government administrators can so identify the interests of government with those of the people and refrain from defrauding the masses through the device of currency depreciation for the sake of remaining in office, the wiser ones will prefer to keep as much of their wealth in the most stable and marketable forms possible - forms which only the precious metals provide."

Elgin Groseclose

At the Comex silver depositories Friday, final figures were: Registered 53.38 Moz, Eligible 60.72 Moz, Total 114.10 Moz.

+++++

Crooks and Scoundrels Corner.

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

Today we open the week with the words of serial dissembler “Helicopter” Ben Bernanke. For most in America the helicopter never showed up, there wasn’t even the distant sound of a remote helicopter, let alone a seat on board for a rescue flight. On Wall Street the great vampire squids were practically deafened and bowled over by the sound and downwash of helicopters, just about every team of vampire squids got their very own government bailout helicopter, except of course for Bear Stearns and Lehman Bros., who were both “rescued” in very strange circumstances by being hammered and knocked down to the Fed’s favourite cronies. Little wonder that China has set up its own alternative ratings agency, and in the decades ahead will likely rely on that rather than Wall Street’s raters who never saw a CDO or CDS that they didn’t rate “triple-A.”

“As an economist and policymaker, I have plenty of experience in trying to foretell the future, because policy decisions inevitably involve projections of how alternative policy choices will influence the future course of the economy. The Federal Reserve, therefore, devotes substantial resources to economic forecasting. Likewise, individual investors and businesses have strong financial incentives to try to anticipate how the economy will evolve. With so much at stake, you will not be surprised to know that, over the years, many very smart people have applied the most sophisticated statistical and modeling tools available to try to better divine the economic future. But the results, unfortunately, have more often than not been underwhelming. Like weather forecasters, economic forecasters must deal with a system that is extraordinarily complex, that is subject to random shocks, and about which our data and understanding will always be imperfect. In some ways, predicting the economy is even more difficult than forecasting the weather, because an economy is not made up of molecules whose behavior is subject to the laws of physics, but rather of human beings who are themselves thinking about the future and whose behavior may be influenced by the forecasts that they or others make.”

Dr. Ben Bernanke. May 22, 2009.

No one, not any one, has undermined the US currency system quite like the US government and the Federal Reserve. The US government in 1913 gave the Fed power to create money out of thin air and to force the public to receive it as legal tender. The US government in 1934 called in gold coinage contrary to law, and devalued the paper dollar by 41%. In 1964 the government stopped minting silver coin and began uttering worthless cupro-nickel sandwiches. In 1968 the government defrauded silver certificate holders by reneging on its promise to redeem them for silver. Finally, in 1971 it reneged on gold convertibility even for international claimants.

http://www.321gold.com/editorials/sanders/sanders072809.html

“If measured according to the methodology used when I was Assistant Secretary of the Treasury, the unemployment rate today in the US is above 20%. Moreover, there is no obvious way of reducing it. There are no factories, with work forces temporarily laid off by high interest rates, waiting for a lower interest rate policy to call their workforces back into production. The work has been moved abroad.”

Paul Craig Roberts. “The Father of Reaganomics.”

"All of the government's monetary, economic and political power, as well as its extensive propaganda machinery, will be enlisted in a constant battle to drive down the price of gold - but in the absence of any fundamental change in the nation's monetary, fiscal, and economic direction, simply regard any major retreat in the price of gold as an unexpected buying opportunity."

Irwin A. Schiff

“It is legal because I wish it.”

King Louis XIV. The Sun King.

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. Given the weakening BDI, and the ECRI leading indicators signaling recession ahead, it is probably safer to assume that the great stock market bounce has ended and that we are entering a new bear market, or alternately, resuming the old one after a bear market rally.

Technorati Tags: Gold,BIS,China warning,ratings agencies,Japan stalls,dissembing central banksters,missing sunspots,global cooling,mining stocks.

“We’re All Working For The Government Now.”

Baltic Dry Index. 2694 -90

LIR Gold Target by 2019: $3,000.

The only function of economic forecasting is to make astrology look respectable.

J. K. Galbraith.

It is that time of the year again, we have reached the longest day in the northern hemisphere, longest night in the southern hemisphere. It’s a long day season too, at America’s nationalized former mortgage GSEs, Fannie and Freddie, now busy racking up unprecedented losses for the long suffering hapless US taxpayers, their children and grand children. Another unintended, but foreseeable consequence, of fallen guru Greenspan’s insane policy of serial bubbles culminating in the ultimate real estate bubble from hell. Actually the ultimate bubble is Frankenstein Bernanke sovereign debt bubble that we are in now, as the US government and governments everywhere, frantically socialize all the losses and bankster excess onto government balance sheets, and desperately seek to get a new inflation bubble underway again. Stay long precious metals. Our fiat currency, dollar reserve standard, and all the other petty fiats dependent upon it, is in the process of terminal decline. What replaces it isn’t immediately apparent, but the USA now borrows a billion dollars a year simply to maintain the pools and cut the grass at the empty foreclosed homes on Fannie and Freddie’s books. Does this sound like a sane system to anyone but a central bankster?

It is a far, far better thing to have a firm anchor in nonsense than to put out on the troubled seas of thought.

J. K. Galbraith.

Cost of Seizing Fannie and Freddie Surges for Taxpayers

By BINYAMIN APPELBAUM Published: June 19, 2010

CASA GRANDE, Ariz. — Fannie Mae and Freddie Mac took over a foreclosed home roughly every 90 seconds during the first three months of the year. They owned 163,828 houses at the end of March, a virtual city with more houses than Seattle. The mortgage finance companies, created by Congress to help Americans buy homes, have become two of the nation’s largest landlords.

Bill Bridwell, a real estate agent in the desert south of Phoenix, is among the thousands of agents hired nationwide by the companies to sell those foreclosures, recouping some of the money that borrowers failed to repay. In a good week, he sells 20 homes and Fannie sends another 20 listings his way.

“We’re all working for the government now,” said Mr. Bridwell on a recent sun-baked morning, steering a Hummer through subdivisions laid out like circuit boards on the desert floor.

For all the focus on the historic federal rescue of the banking industry, it is the government’s decision to seize Fannie Mae and Freddie Mac in September 2008 that is likely to cost taxpayers the most money. So far the tab stands at $145.9 billion, and it grows with every foreclosure of a three-bedroom home with a two-car garage one hour from Phoenix. The Congressional Budget Office predicts that the final bill could reach $389 billion.

Fannie and Freddie increased American home ownership over the last half-century by persuading investors to provide money for mortgage loans. The sales pitch amounted to a money-back guarantee: If borrowers defaulted, the companies promised to repay the investors.

Rather than actually making loans, the two companies — Fannie older and larger, Freddie created to provide competition — bought loans from banks and other originators, providing money for more lending and helping to hold down interest rates.

----- As it turns out, Fannie and Freddie increasingly were channeling money into loans that borrowers could not afford. As defaults mounted, the companies quickly ran low on money to honor their guarantees. The federal government, fearing that investors would stop providing money for new loans, placed the companies in conservatorship and took a 79.9 percent ownership stake, adding its own guarantee that investors would be repaid.

The huge and continually rising cost of that decision has spurred national debate about federal subsidies for mortgage lending. Republicans want to sever ties with Fannie and Freddie once the crisis abates. The Obama administration and Congressional Democrats have insisted on postponing the argument until after the midterm elections.

In the meantime, Fannie and Freddie are, at public expense, removing owners who cannot afford their homes, reselling the houses at much lower prices and financing mortgage loans for the new owners.

The two companies together accounted for 17 percent of real estate sales in Arizona during the first four months of the year, almost three times their share of the market during the same period last year, according to an analysis by MDA DataQuick.

----- Mr. Bridwell sold plenty of those houses during the boom, then cut workers as prices crashed. Now his firm, Golden Touch Realty, again employs as many people as at the height of the boom, all working exclusively for Fannie Mae. The payroll now includes a locksmith to secure foreclosed homes and two clerks devoted to federal paperwork.

Golden Touch gets more listings from Fannie Mae than any other firm in Pinal County. Mr. Bridwell said he was ready to jump because he remembered the last time the government ended up owning thousands of Arizona houses, after the late-1980s collapse of the savings and loan industry.

“The way I see it,” said Mr. Bridwell, whose glass-top desk displays membership cards from the Republican National Committee, “is that we’re getting these homes back into private hands.”

Selling a house generally costs the government about $10,000. The outsides are weeded and the insides are scrubbed. Stolen appliances are replaced, brackish pools are refilled. And until the properties are sold, they must be maintained. Fannie asks contractors to mow lawns twice a month during the summer, and pays them $80 each time. That’s a monthly grass bill of more than $10 million.

All told, the companies spent more than $1 billion on upkeep last year.

http://www.nytimes.com/2010/06/20/business/20foreclose.html?hp

Unsurprisingly, faced with rising recognition that the game is about up for the political fiat money so loved by telephone number bonus fuelled banksters, gold and precious metals have resumed functioning as real money again. Central banksters demonetized it in the late 70s, and tried to write it out of the central banks universe. Central banksters would run their currencies to be “as good as gold.” It only took them less than a generation to be seen for the dissemblers that they are.

"Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state."

William F. Rickenbacker

Gold reclaims its currency status as the global system unravels

We already know that the eurozone money markets seized up violently in early May as incipient bank runs spread from Greece to Portugal and Spain, threatening the first big sovereign default of our era. Jean-ClaudeTrichet, the president of the European Central Bank (ECB), talked days later of "the most difficult situation since the Second World War, and perhaps the First".

By Ambrose Evans-Pritchard Published: 5:43PM BST 20 Jun 2010

A further 323,000 US families were hit with foreclosure notices last month Photo: Bloomberg News

Recent protests in Greece over austerity measures. The country's public debt will rise from 120pc to 150pc of GDP under the IMF-EU plan Photo: AFP

The ECB’s latest monthly bulletin gives us some startling details. It reveals that the bank’s "systemic risk indicator" surged suddenly to an all-time high on May 7 as measured by EURIBOR derivatives and stress in the EONIA swaps market, exceeding the strains at the height of the Lehman Brothers crisis in September 2008. "The probability of a simultaneous default of two or more euro-area large and complex banking groups rose sharply," it said.

This is a unsettling admission. Which two "large and complex banking groups" were on the brink of collapse? We may find out in late July when the stress test results are published, a move described by Deutsche Bank chief Josef Ackermann as "very, very dangerous".

And are we any safer now that the EU has failed to restore full confidence with its €750bn (£505bn) "shock and awe" shield, that is to say after throwing everything it can credibly muster under the political constraints of monetary union? This is the deep angst that lies behind last week's surge in gold to an all-time high of $1,258 an ounce.

The World Gold Council said on Friday that the central banks of Russia, the Philippines, Kazakhstan and Venezuela have been buying gold, and Saudi Arabia’s monetary authority has "restated" its reserves upwards from 143m to 323m tonnes. If there is any theme to the bullion rush, it is fear that the global currency system is unravelling. Or, put another way, gold itself is reclaiming its historic role as the ultimate safe haven and benchmark currency.

It is certainly not inflation as such that is worrying big investors, though inflation may be the default response before this is all over. Core CPI in the US has fallen to the lowest level since the mid-1960s. Unlike the blow-off gold spike of the Nixon-Carter era, this rally has echoes of the 1930s. It is a harbinger of deflation stress.

Capital Economics calculates that the M3 money supply in the US has been contracting over the past three months at an annual rate of 7.6pc. The yield on two-year Treasury notes is 0.71pc. This is an economy in the grip of debt destruction.

Albert Edwards from Societe Generale says the Atlantic region is one accident away from outright deflation - that 9th Circle of Hell, "abandon all hope, ye who enter" . Such an accident may be coming. The ECRI leading indicator for the US economy has fallen at the most precipitous rate for half a century, dropping to a 45-week low. The latest reading is -5.70, the level it reached in late-2007 just as Wall Street began to roll over and then crash. Neither the Fed nor the US Treasury were then aware that the US economy was already in recession. The official growth models were wildly wrong.

David Rosenberg from Gluskin Sheff said analysts are once again "asleep at the wheel" as the Baltic Dry Index measuring freight rate for bulk goods breaks down after a classic triple top. The recovery in US railroad car loadings appears to have stalled, with volume still down 10.5pc from June 2008.

------It is an academic question whether the US slips into a double-dip recession, or merely grinds along for the next 12 months in a "growth slump". For Europe, nothing short of a sustained global boom can lift the eurozone out of the deflationary quicksand already swallowing up the South.

Spain had to pay a near-record spread of 220 basis points over German Bunds last week to clear away an auction of 10-year bonds, roughly what Greece was paying in March. Leaked transcripts of a closed-door briefing to the Cortes by a central bank official revealed that Spanish companies have been shut out of the capital markets since Easter. Given that the Spanish state, juntas, banks and firms have together built up foreign debts of €1.5 trillion, or 147pc of GDP, and must roll over €600bn of these debts this year, this is a crisis unlikely to cure itself.

More.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7841961/Gold-reclaims-its-currency-status-as-the-global-system-unravels.html

In G-20 news, in response to President Obama’s letter to the G-20 released Friday, China has grabbed the high ground going into this week’s meetings. China has moved to pre-empt a US “Chicago shakedown” BP style. Two can play at hardball if it come to it, is China’s sub text.

"It is the greenback which is unstable, and not the bullion."

Dr. Franz Pick

Global markets fear US Tresuries sell-off as China ends currency freeze

Global markets are braced for a possible sell-off in US Treasury bonds after China said over the weekend that it will allow the yuan exchange rate to adjust against the dollar, ending a two-year currency freeze that has led to trade clashes with Washington and Brussels.

By Ambrose Evans-Pritchard Published: 11:34PM BST 20 Jun 2010

China's Central Bank said the economic recovery had opened the way for a return to "flexibility" but ruled out an immediate one-off rise in the yuan. The currency will be allowed to fluctuate within a widened band of 0.5pc each day against a basket of currencies.

The yuan is now expected to rise slowly against the dollar, although it may fall if the euro weakens further. "There is at present no basis for major fluctuation or change in the exchange rate," said the bank.

The policy shift is a goodwill gesture towards the US and Europe before next week's G20 meeting in Canada as a rising yuan helps Western industries compete against Chinese imports. US Treasury Secretary Tim Geithner welcomed the step but said "the test will be how far and how fast they let the currency appreciate."

Senator Charles Schumer, a leading critic of China on Capitol Hill and author of legislation calling for sanctions, dismissed the announcement as meaningless. "This is China's typical response to pressure. Until there is more specific information about how quickly it will let its currency appreciate and by how much, we can have no good feeling that the Chinese will start playing by the rules," he said.

When China allowed the yuan to rise in July 2005 the move triggered a slide in US Treasury bonds, with knock-on effects on US mortgage and corporate debt. Investors will be watching closely to gauge response to sales of $108bn of US notes this week.

China has become the biggest force in global bond markets with holdings of $900bn (£600bn) of US government debt. Yuan revaluation is likely to dampen China's export growth and slow the pace of reserve accumulation, reducing the need to recycle money into foreign bonds. Hans Redeker of BNP Paribas said a rising yuan may have the effect of draining liquidity from global asset markets.

-----A number of Chinese economists say it is in the country's interest to let the yuan rise before overheating gets out of hand. Reserves have reached $2.4 trillion, causing inflationary "blow back" into China.

Beijing is determined to avoid Japan's fate when it let the yen rise too fast, tipping the country into slump. But the policy of holding down the currency is leading to acute price pressures. Factory gate inflation reached 7.1pc last month. Food costs are rising fast, raising the risk of civic unrest among migrant workers.

Rising wages are inflicting similar pain on exporters to a currency rise but with more pernicious effects for the country. As a result, analysts say it no longer makes sense for Beijing to maintain the peg.

http://www.telegraph.co.uk/finance/economics/7842263/Global-markets-fear-US-Tresuries-sell-off-as-China-ends-currency-freeze.html

China forex move could thwart U.S. hopes - Roubini

Sat Jun 19, 2010 4:49pm EDT By Walden Siew

June 19 (Reuters) - China's decision to move away from its currency peg might mean the yuan weakens against the dollar instead of strengthens as Washington wants, Nouriel Roubini, one of Wall Street's most closely followed economists, said on Saturday.

China said on Saturday it would gradually make the yuan more flexible after pegging it to the dollar for nearly two years, a move that the U.S. government and others around the world have long been calling for.

"This is the first significant signal in years of a change in Chinese currency policy," Roubini, best known for having predicted the U.S. housing meltdown, told Reuters.

But it remains to be seen how China would put the new system into practice including the composition of a basket of currencies that Beijing will use as a reference point for the yuan -- also known as the renminbi -- and the base date for that basket, he said in an e-mail.

"Since they have not changed the previous range for the band -- plus or minus 0.5 percent -- most likely on Monday China will allow the renminbi vs U.S. dollar to move," said Roubini.

The yuan has risen sharply in recent months against the euro, which sank over Europe's debt problems, so a stronger yuan could not be taken for granted, he said.

If the euro were to continue to depreciate, "the renminbi would have to be allowed to depreciate relative to the dollar, a paradoxical outcome," Roubini said.

His comments echoed those of an adviser to China's central bank on Saturday.

Li Daokui, an academic adviser to the monetary policy committee of the People's Bank of China, told Reuters in Beijing that the yuan could depreciate against the dollar if the euro falls sharply against the U.S. currency.

Roubini, like other analysts, said a major strengthening of the yuan looked unlikely.

http://www.reuters.com/article/idUSN1915926720100619

Tomorrow, Britain’s new coalition government gets to deliver its first austerity package. A package of benefits cuts and tax increases far beyond anything all 3 major British political parties suggested was necessary before last month’s election. All 3 said they would cut less and barely raise taxes at all, as it mostly wasn’t necessary, they pretended. Union unrest and social discontent, most now likely lie directly ahead. I have my doubts that this coalition government isn’t for rolling once the pain and social unrest starts to hit. Stay long precious metals. An already stealth competitive devaluation of Sterling is likely to be accelerated. Front or back door quantitative easing will likely be used to stem H2 10 social discontent, possibly in Q4 10, more likely in Q1 11, in my opinion. 2011 has all the makings of rolling currency crisis year.

"In the long run, the gold price has to go up in relation to paper money. There is no other way.”

Nicholas Deak.

In BP news, it’s just universally bad. BP’s Macondo blow out oil well continues pouring an unknown massive quantity of oil into the Gulf of Mexico. BP themselves don’t seem to have a PR clue. What is coming out now is that the whole regime of GOM deep water drilling was lax to the point of ineffectiveness. Reckless compared to the requirements of deep sea drilling in the North Sea UK and Norwegian sectors. BP will likely drag down all the others in the deep water sector of the GOM. None seem to have prepared any better disaster plans than deeply troubled BP. None seem to have advanced the disaster technology since the Ixtoc GOM blowout in June 1979. On this side of the Atlantic there is still deep denial in the stock market that this calamity may well be the end of the road for BP as we know it. A rump BP international might nominally survive, but it won’t be recognizable to the BP that existed prior to May 2010. Most pension fund managers are still likely far too overweight in BP and similar oil majors. Not for too much longer I suspect.

It is a commonplace of modern technology that problems have solutions before there is knowledge of how they are to be solved.

J. K. Galbraith.

We end with another country adopting resource nationalism. The great golden age of fiat 1945 – 2000 has passed.

Kazakhstan Plans to Start Taxing Oil Exports: Finance Ministry

June 21 (Bloomberg) -- Kazakhstan plans to start taxing crude oil exports, Finance Ministry spokeswoman Anna Zhekenova said by telephone today.

Exports of metals including copper, zinc and gold will also be taxed, she said, without specifying when they will start and at what rates.

http://noir.bloomberg.com/apps/news?pid=20601095&sid=aXLiAz8YwZzY

At the Comex silver depositories Friday, final figures were: Registered 52.08 Moz, Eligible 65.61 Moz, Total 117.69 Moz.

+++++

Crooks and Scoundrels Corner.

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

Below, sadly the first of many similar precious metals alleged frauds to surface in America and, I suspect, all around the world. From the report in the Fort Lauderdale Sun Sentinel suggests that this was a relatively crude precious metals deception. The great silver and gold short fraud on Comex involves billions, yet US authorities never close it down as it’s believed orchestrated by the Fed and US Treasury, while the open running scandal of “unallocated bullion accounts” in London and other financial centres, is I believe, a trillion dollar global scandal involving thousands of people who believe that their banks are holding precious metals for them, when in reality they have paid over good hard earned money for no more than a bankster promise to try to find some bullion for them should they decide to take actual physical delivery.

“The paper standard is self-destructive."

Hans F. Sennholz

Metals company owner sued for $29.5 million in missing funds

Investors out millions when Global Bullion Exchange shut down

By Jon Burstein, Staff Writer 5:11 p.m. EDT, June 19, 2010

The founder of a South Florida precious metals company systematically defrauded clients who are out at least $29.5 million, according to a lawsuit from the attorney in charge of recouping the funds.

The case against Jamie Campany, the former owner of Global Bullion Exchange, is part of a flurry of lawsuits filed this month as the search for customers' missing millions intensifies. The business shuttered its Lake Worth headquarters overnight in December, offering many clients no explanation as to what happened to their money.

Customers of Global Bullion Exchange, which had five South Florida offices, believed they were buying gold and silver that would be stored at a secure location until they wanted to sell the metals. Such transactions are not regulated by the federal government, leaving companies like Global Bullion Exchange free to operate with little, if any, regulatory oversight.

Global Bullion Exchange — which has filed the state court equivalent of a Chapter 7 bankruptcy case — is now under the control of attorney Daniel Stermer. Stermer alleges in a Miami-Dade Circuit Court lawsuit against Campany that the business sought out elderly customers as it "engaged in deceptive, unconscionable and/or unfair business practices and acts."
Campany's attorney, Christopher Bruno, said his client has been cooperating with Stermer in an attempt to recover clients' funds. He declined further comment on the lawsuit.

http://www.sun-sentinel.com/news/palm-beach/fl-global-bullion-exchange-lawsuits-20100619,0,5255530.story

In similar vein, I have little confidence that the trustees and custodians of many of the world’s precious metals ETFs, really have all the bullion they imply in their accounts. Why else are the custodian rules written so complexly and confusingly allowing multiple layers of sub custodians, with in some cases the possibility of the use of hypothecation or bullion lending. As our new decade of the failure of fiat currency really gathers steam we will likely see a decade of paper gold and silver failure. Stay long physical precious metals held only in allocated accounts, preferably outside of the jurisdiction of John Bull and Uncle Sam. Both have past form on lining in the bullion accounts and in Uncle Sam’s case at least, confiscation in peace time without proper compensation.

"The history of paper money is an account of abuse, mismanagement, and financial disaster."

Richard M. Ebeling

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.

At the weekend we ended 1940 day by day with the Fall of France. In a 37 day blitzkrieg, western civilisation was nearly annihilated. Click on the page like above for just how dire 1940 was.

Technorati Tags: GSEs,Freddie and Fannie,Gold and Silver,China and the Yuan,BP,resource nationalism,missing sunspots,global cooling,mining stocks,REEs,HREs

A China Wobble. Derby Day.

Baltic Dry Index. 3933 -108

LIR Gold Target by 2019: $3,000

"A Horse! A Horse! my kingdom for a horse!"

Shakespeare

We open this morning with the Journal on a wobble in China. In China’s still largely centrally controlled command economy, has the government there overdone the crackdown on the real estate market. If it has, will China’s real estate market impact the rest of the global economy. In our world now run on fiat currency, everything is now a command economy as authorities everywhere struggle to keep the fiat currency economy running. With no real economics anymore, and no fiat currency worth more than another, all decisions are now political, as a handful of central banksters keep trying to rig the failing fiat currency system to keep it from collapsing. Stay long precious metals for what comes next. The next Lehman drops us into the next great depression. Unlimited fiat currency creation risks setting off a run into tangible assets that have long term intrinsic value. We are all pawns of crooked banksters now.

"Horse sense is the thing a horse has which keeps it from betting on people."

W. C. Fields

JUNE 3, 2010

China's Property Market Freezes Up

Actions Taken by Economic Planners Worried About a Real-Estate Bubble May Have Gone Too Far

BEIJING—Government policy changes have thrown China's booming property market into a period of paralysis that some industry executives say will last for several months, weighing on global growth prospects already battered by the turmoil in Europe.

A rebound in China's property market has been central to the nation's rapid recovery from the financial crisis, but surging housing prices had led to increasingly open discontent from middle-class families in major cities. After months of indecision, Beijing in mid-April announced a package of policies intended to blow the froth out of the market by restricting speculative purchases.

Officials may have gotten more than they bargained for. Though still too recent for their effect to show up in official economic statistics, early indications are that the new measures have sharply cooled the property market. Arriving around the same time as the debt crisis in Greece, China's new restrictions caused many investors and businesses to question the strength of the global recovery. Domestic steel prices are down 7.4% since the April measures, and as of Thursday China's main stock market index is down 19.4%.

The housing market in many—though not all—Chinese cities seems to have nearly ground to a halt after the government moves. On average, the number of residential property transactions in the four weeks after the restrictions were announced is down 40% compared with the four weeks before the measures, according to figures covering 24 major cities from real-estate consultancy Soufun.com.

China's economic growth was already widely expected to slow in coming months, as the impact of last year's stimulus policies fade. Some forecasters, seeing weaker prospects in a key industry, are now further marking down their numbers for this year. China International Capital Corp. now expects the economy to expand 9.5% in 2010 as a whole, rather than the 10.5% it previously forecast.

But the key variable for how things unfold in coming months is difficult to forecast: What the government will do next. Analysts are divided about whether the government is more likely to take additional measures to push down prices, or start to reverse itself to restore confidence in the market.

Investors are focused on whether the government will impose new taxes on residential property, a move that is being discussed by big cities including Shanghai and Chongqing. On Monday, China's State Council signaled support for such changes, approving a set of economic-reform priorities including "gradually advancing reform of real-estate taxation." Even though no specific plans have been announced, the issue is weighing on markets since higher taxes would push down the value of properties.

http://online.wsj.com/article/SB10001424052748704025304575284442742333032.html

In the Gulf of Mexico, finally some “good news” on BP’s blow out oil well. BP should know later today if their latest cap attempt really will draw off much of the spewing oil and gas to waiting ships at the surface. We open with the latest from the NY Times on latest developments.

If an ass goes travelling, he'll not come back a horse.

Thomas Fuller

Obama Cancels Asia Trip as Concern on Spill Mounts

By PETER BAKER Published: June 4, 2010

WASHINGTON – President Obama canceled his trip to Australia, Indonesia and Guam late Thursday night as oil continued to stream into the Gulf of Mexico in what he has called the worst environmental disaster in American history.

His decision came as officials reported progress containing the oil leak at the bottom of the Gulf of Mexico.

Mr. Obama is to visit the Gulf Friday to assess the situation and meet with officials responding to the crisis. While the White House statement offered no reason for scratching the Asia trip this time, officials in recent days had grown increasingly convinced that it was untenable for the president to leave the country for a week with the oil spill still unchecked.

----In the Gulf, officials reported making some headway in the latest effort to place a cap over the well that would funnel at least some of the oil and gas to a ship at the surface. Earlier Thursday, 20-foot-long shears were used to snip the damaged riser pipe at the wellhead, and technicians began to lower the cap over it.

Late Thursday, Adm. Thad W. Allen of the Coast Guard, who is commanding the federal response to the disaster, announced that the cap had been put in place, but warned that “it will be some time before we can confirm that this method will work and to what extent it will mitigate the release of oil into the environment.”

Among the concerns was that the cap would not fit tightly and would allow seawater into the oil. That could lead to the formation of icelike hydrates that could block the flow. But the cap was outfitted with pipes for injecting methanol, which acts as a kind of antifreeze to prevent hydrates from forming.

-----Mr. Obama’s decision to cancel his Asia trip underscored the way the oil spill is forcing the White House to recalibrate plans for this summer. BP and the government have given up trying to plug the leak and are focusing now on siphoning or containing it until relief wells can be completed, perhaps by August. As a result, the president faces another two months in crisis management before he can even turn his focus exclusively to cleanup and recovery.

http://www.nytimes.com/2010/06/05/us/politics/05obama.html?hp

Plan for Relief Wells Spurs Hope Amid Caution

By HENRY FOUNTAIN Published: June 3, 2010

As engineers made headway Thursday in containing the oil leak at the bottom of the Gulf of Mexico, crews on two floating rigs flanking the spot where the Deepwater Horizon exploded and sank were doing what rig crews normally do: drilling wells.

The two wells, aimed at the bottom of the runaway well that has spewed millions of gallons of oil into the gulf, represent the most conventional solution to the disaster and the one that experts say is all but certain to succeed. Once either of the relief wells strikes pay dirt, the plan is to pump heavy drilling mud and cement down it to bring the blowout under control and permanently seal the damaged well.

------Doubters have pointed to past problems with relief wells, including one drilled during a blowout off southern Mexico 30 years ago that was unable to stop the gusher for three months after it was completed, and another off Australia last fall that did not hit its target until the fifth try.

BP officials say that the first relief well already extended more than 12,000 feet below sea level, about halfway to the target, but because drilling gets slower as a well gets deeper, it is not expected to be finished before August. The second well was started later and is not yet as deep. President Obama said federal officials ordered BP to drill the second well as a backup shortly after the rig exploded on April 20; the company said it was planning two wells anyway.

------The wells cost about $100 million each and are being drilled from rigs owned by Transocean, the company that owned the Deepwater Horizon.

The work could be delayed by hurricanes or by equipment or drilling problems, and the wells might initially miss the target, causing further delays as the drill bits are backed up and redirected. But BP officials and outside experts say that the relief wells will work. It is a matter of when, they say, not if.

“This is the answer,” said Walt Warchol, a retired drilling engineer in Houston. “It’s just going to take some time.”

http://www.nytimes.com/2010/06/04/science/earth/04relief.html?hp

But BP is living on borrowed time in fixing its Gulf of Mexico problem. It’s the start of the Atlantic and Caribbean hurricane season and there is simply no way to know if this will affect the relief wells timetable. In 2005 two major hurricanes passed almost directly over the site of BP’s oil leak disaster. Below, the latest from Accuweather

BP Running Out of Time in the Gulf of Mexico

Jun 3, 2010; 11:30 AM ET

The arrival of hurricane season and the warmest months of the year translate to rough waters and trouble for containment operations of the massive oil leak in the northern Gulf of Mexico.

Water temperatures have warmed considerably over the Gulf of Mexico in recent months. The warm waters will favor the formation of thunderstorms, rather than lead to their demise like that of the cold water season

The period of calm seas is coming to a close as well. Tropical waves of low pressure roll will soon drift farther north on their westward trip across the Atlantic from Africa. The waves of low pressure, which can breed tropical storms or hurricanes, can also bring intense squalls that kick up seas.

Approximately 1,900 vessels ranging from skimmers to tugs, barges and recovery ships were involved in containment and cleanup operations to date.

Skimming vessels have been circling the oil slick in recent weeks in an attempt to keep the contaminated area as small as possible. However, this operation can only be done in calm or nearly calm seas.

As winds increase from thunderstorms, squalls or tropical storms in the coming weeks, interruptions of containment operations will become more frequent.

If and when capping of the damaged well is successful, the oil is pumped onto a platform. First a temporary platform is brought in, followed by a more permanent platform. Only this heavy duty platform is designed to handle hurricanes.

AccuWeather.com Hurricane Expert Meteorologist Joe Bastardi remains concerned about multiple hurricanes affecting the Gulf of Mexico this season.

Depending on the strength and track of the hurricanes, vast amounts of the existing oil slick and dispersant agents could be captured by the storm and driven well inland by the storm surge.

Similar to the problems facing vessels during stormy conditions, containment and absorbent booms are ineffective during choppy seas. Approximately 4.1 million feet of booms have been deployed to date.

At least on a positive note, while hurricane can be very disruptive at the surface and along the shoreline, there is no wave action 5,000 feet below the surface. As long as the new pipe, which extends to the surface, is detached or secured during a storm, no further damage should be done to the well site and capping devices down below.

A Tropical Storm in the Gulf in mid-June?

While there have been a couple of minor concerns with tropical development over the past few weeks, there now appears the long-range first computer model's rendition of a tropical storm or hurricane in the Gulf of Mexico.

The GFS, or Global Forecast System, weather computer model is developing an area in the western Caribbean Sea during the second week of June. The model then brings that system into the Gulf of Mexico and strengthens it, just past the middle of the month.

http://www.accuweather.com/blogs/news/story/32333/bp-running-out-of-time-in-the-1.asp

In other commodities news, Australia’s proposed 40% mining tax is generating a major reappraisal of future projects. Below, Xstrata puts on hold the first of many projects, I suspect, if the tax actually gets passed and goes into effect.

Xstrata puts £3.8bn of projects on hold as row over Australian mining tax deepens

Swiss mining giant Xstrata has announced that it will suspend projects worth A$6.6bn (£3.8bn) in response to the Australian government's push for a new 40pc tax on mining profits.

By Bonnie Malkin in Sydney Published: 12:17PM BST 03 Jun 2010

Development of the "globally significant" Wandoan thermal coal project and the Ernest Henry copper mine, both in Queensland, have been put on hold indefinitely, putting 3250 jobs at risk. Xstrata said that a review had found that the proposed tax, which would be levied on returns on investment above 6pc, would mean that neither projects would be viable.

Mick Davis, the company's chief executive, said the Resource Super Profits Tax (RSPT) would slash profitability.

Our Australian management teams' analysis demonstrates that the RSPT would significantly impact the value and cashflows of both of these projects.

"The impact of the tax eliminates the net present value of the Wandoan (thermal) coal project almost entirely and substantially reduces the value of the Ernest Henry (copper) underground shaft project," he added.

The news is a blow to the Queensland economy, which relies heavily on the mining industry. Kevin Rudd, who is fighting for public support over the issue, said he was not surprised by the announcement.

Mr Rudd is engaged in a public relations war with the mining companies over the controversial tax. Figureheads of the industry have launched a multi-million dollar campaign to convince the public that the tax would cripple the industry, and the country's economy. In response, Mr Rudd has gone back on an election promise not to use taxpayer funds for government advertising, and launched a campaign of his own.

Responding to the Xstrata announcement, Mr Rudd said the threat was to be expected.

"I said at the very beginning of this debate ... that there would be ... threats of project closures, there would be projects threatened to be frozen, or frozen," he said.

"This is part and parcel of what will be the normal argy-bargy of a very tense debate. No mining company I've met so far has whacked up their hand and said they'd like to pay more tax."

The tax, which was announced in the budget last month but is yet to be passed by parliament, has prompted a savage backlash from the mining sector, the country's most valuable export industry, with global giants Rio Tinto and BHP Billiton both reviewing their Australian operations.

http://www.telegraph.co.uk/finance/newsbysector/industry/mining/7800404/Xstrata-puts-3.8bn-of-projects-on-hold-as-row-over-Australian-mining-tax-deepens.html

Owning a racehorse is probably the most expensive way of getting on to a racecourse for nothing.

Clement Freud

At the Comex silver depositories Thursday, final figures were: Registered 52.45 Moz, Eligible 67489 Moz, Total 117.34 Moz.

Day 24 of Hitler’s attack in the west that almost brought down western civilization. Dunkirk the evacuation ends, day 9.

Dunkirk & the Battle of France – Day by day 70 years on.

http://londonirvinereport.blogspot.com/p/dunkirk-battle-of-france.html

+++++

Crooks and Scoundrels Corner.

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

Today and all weekend, meet the Bilderbergers. The ultra elitist, super secretive Lords of the Universe, who meet at least once each year to exchange secret handshakes, spells, and other quaint rituals, before getting down to the job of rigging the world economy, and I suspect markets. In 2008 they met and dispersed home right before Merrill blew up two Bear Stearns hedge funds as time was called on the Greenspan bubbles, setting in motion the process that lead to the first bank run in the UK in over 150 years, and ended when Lehman Brothers blew up, requiring central banksters everywhere to socialize all the losses on to the taxpayers and penalize and crush the working poor. I wonder what they have in store for this summer, and if they’ll at least wait until the World Cup is out of the way, which starts next Friday.

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.

Adam Smith. The Wealth of Nations.

Bilderberg 2010: Plutocracy with palm trees

The shadowy global elite is meeting in Sitges – and Charlie Skelton is there, hoping for a new spirit of CamCleggian openness

Another year, another Bilderberg. The first "participants" (as the delegates are known) won't be arriving until Thursday, but already the Hotel Dolce in Sitges is buzzing with anticipation. This Catalan seaside town hasn't hosted an event as large and politically sensitive as Bilderberg since the legendary 2008 Foam Party at the Mr Gay Sitges awards night.

Last year, Bilderberg was held in Vouliagmeni, on the coast just south of Athens. The Greek minister of finance attended, the minister of foreign affairs, and the governor of the National Bank of Greece. A few months later, Greece was bankrupt and Athens was in flames. So … good luck, Madrid!

Police are already stretching their red stripy tape around the hotel, and zipping up and around the local roads in their squad cars, sniffing for trouble. I'm really hoping there's none to find. The Spanish are promising a beach party and an "awareness camp", with political discussion forums and meditation zones.

I plan to spend at least part of Friday sitting cross-legged in a campsite, sending beams of white light up the hill and into the hotel. Feel my love, Marcus Agius – Chairman of Barclays and senior non-executive director on the BBC's new executive board. Let it surround you, Queen Sofia of Spain. Don't fight it, president of the World Bank. You can't beat the love

It would be nicer if the interface between Bilderberg and the world could be softer – if it could turn an open face towards us, rather than the barrel of a machine gun. What I'm hoping is that this year, in the all-new CamCleggian spirit of openness and political transparency, any British elected official who attends the meeting – and I'm talking to you, Kenneth Clarke and George Osborne – will tell us they attended, tell us what they spoke about, and tell us what the next 12 months has in store. I don't think that's too much to ask.

-----For a long and luxurious weekend at the Dolce Sitges, relishing its "new and creative buffet concepts" (a table with food on it), prime ministers will mingle with European royalty, with various EU commissioners, with representatives from Goldman Sachs, Microsoft, AIB, Deutsche Bank, Chase Manhattan and Royal Dutch Shell.

They'll clink glasses with President Obama's special envoy to Afghanistan and Pakistan, Richard Holbrooke (he is confirmed for this year). And join the Friday night conga line behind the US treasury secretary (Tim Geithner went last year; he goes a lot). We can reasonably expect the head of the Federal Reserve, the president of the World Bank, the secretary general of Nato … they've all attended in the past and many will attend again. So yes, important it is; to think otherwise is painfully naive (see below for the usual "just a big boys' club" comments …)

The conference hotel may be perched above a golf course, and boast two ping pong tables, but this four-day event isn't about who is better at table tennis, Ken Clarke or David Rockefeller (it's Rockefeller). This is about big business, global financial strategy and the economic future of Europe … if indeed it has one.

And most importantly, this four-day event doesn't start until tomorrow – and continues all the way through the weekend – so if you're a PROPER journalist reading this, or a blogger, or simply a curious citizen of a Europe teetering on the edge, then come along. Please come. I'll buy you a Catalan beer. I recommend the Rosita. It's fruity but ballsy – not unlike the winner of Mr Gay Sitges 2008.

http://www.guardian.co.uk/world/blog/2010/jun/02/charlie-skelton-bilderberg-spain

http://www.dolce-sitges-hotel.com/

“"Today Americans would be outraged if U.N. troops entered Los Angeles to restore order; tomorrow they will be grateful! This is especially true if they were told there was an outside threat from beyond whether real or promulgated, that threatened our very existence. It is then that all peoples of the world will pledge with world leaders to deliver them from this evil. The one thing every man fears is the unknown. When presented with this scenario, individual rights will be willingly relinquished for the guarantee of their well being granted to them by their world government."

Henry Kissinger in an address to the Bilderberger meeting at Evian, France, May 21, 1992.

Another weekend and Derby day at Epsom Downs on Saturday. Time to enjoy England’s glorious summer again. Trying to plan for the future in the era of failing fiat currencies and command economies, is worse than trying to pick the winner in tomorrow’s Derby. Tomorrow is also the close of the G-20 finance ministers meeting in South Korea, as they prepare for the full G-20 summit in Toronto. Next week, the Shanghai Cooperation Organization summit in Tashkent, and the World Cup opening in South Africa. How lucky can the world get. Have a great weekend everyone. More on the weekend blog over the weekend.

"The race is not always to the swift, nor the battle to the strong, but that's the way to bet."

Damon Runyon

Investec Derby Day

http://www.epsomdownsracecourse.co.uk/racing/investec-derby-day

Derby Day 1913.

http://www.historylearningsite.co.uk/derby_of_june_1913.htm

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.

Technorati Tags: China real estate,BP oil disaster,President Obama,Xstrata,the Bilderbergers meet,Derby Day,missing sunspots,global cooling,Dunkirk 1940,the battle of France 1940,mining stocks