Borrowed Time.

Baltic Dry Index. 2876 +41

LIR Gold Target by 2019: $3,000.

"A man who has not been in Italy, is always conscious of an inferiority, from his not having seen what it is expected a man should see."

Samuel Johnson

It’s over says, Professor Roubini, “the US has run out of bullets.” Germany’s Dr. Sinn and Harvard’s Professor Ferguson both agree. For now the US is living on borrowed time. Why not, just about everything else in the US economy is borrowed, either from foreigners now realizing that they have been duped for years by US politicians, or borrowed sales from the future via home and auto subsidies. My guess is that the borrowed time runs out sometime after the US mid-term elections in November. 2011 is shaping up to be a very ugly economic year.

Below, the doomsters gathering on the shores of Lake Como. Not even the natural beauty of the setting could raise their gloom.

"The Creator made Italy from designs by Michelangelo."

Mark Twain

No defence left against double-dip recession, says Nouriel Roubini

The United States, Japan and large parts of Europe have exhausted their policy arsenal, leaving them defenceless against a double-dip recession as recovery slows to ‘stall speed’.

By Ambrose Evans-Pritchard, International Business Editor in Cernobbio, Italy
Published: 9:49AM BST 05 Sep 2010

“The US has run out of bullets,” said Nouriel Roubini, professor at New York University, and one of a caste of luminaries with grim forecasts at the annual Ambrosetti conference on Lake Como.

“More quantitative easing (bond purchases) by the Federal Reserve is not going to make any difference. Treasury yields are already down to 2.5pc yet credit spreads are widening again. Monetary policy can boost liquidity but it can’t deal with solvency problems,” he told Europe’s policy elite.

Dr Roubini said the US growth rate was likely to fall below 1pc in the second half of the year, despite the biggest stimulus in history: a cut in interest rates from 5pc to zero, a budget deficit of 10pc of GDP, and $3 trillion to shore up the financial system.

The anaemic pace compares with rates of 4pc-6pc at this stage of recovery in normal post-war recoveries.

“We have reached stall speed. Any shock at this point can tip you back into recession. With interbank spreads rising, you can get a vicious circle like 2008-2009,” he said, describing a self-feeding process as the real economy and the credit system hurt each other.

“There is a 40pc chance of double-dip recession in the US, and worse in Japan. Even if it is not technically a recession it will feel like it,” he added.

Hans-Werner Sinn, head of Germany’s IFO Institute, said the US would have to purge its debt excesses the hard way.

“The bitter truth is that there is no way out of this with monetary and fiscal policy. They will just have to see their living standards go down. I see a decade of difficulties for the US,” he said.

Dr Sinn said the US the market for mortgage securities (CDOs) had collapsed from $1.9 trillion in 2006 to just $50bn last year, leaving the US property market reliant on federal agencies.

“The world is simply not willing to buy these dubious financial products again. Germany is leaving, China is no longer there, and Japan is pulling away. The US system of mortgage finance is on government life support and that cannot drive a sustainable upswing,” he said.

Harvard Professor Niall Ferguson said the US has exhausted fiscal stimulus given warnings from the Congressional Budget Office that interest payments as a share of tax revenues will reach 20pc by 2020 and 36pc by 2030 without drastic retrenchment.

“The fiscal crisis seems to be out of control. The 'big crossover’ is approaching when the US spends more on debt service costs than on security, and historically that is the tipping point for any global power,” he said.

Mr Ferguson said the “Chimerica” marriage of recent years is on the rocks. China is no longer willing to fund the US Treasury bond market, cutting its share of holdings from 13pc to 10pc of the total debt stock.

While China must find ways to recycle its trade surplus and hold down the yuan, it is doing this by stockpiling commodities, buying hard assets around the world, or rotating into Asian bonds.

Dr Roubini said US companies have plenty of cash but are boosting profits by a policy of “slash and burn” on labour costs. “We’ve lost 8.4m jobs and if you include the loss of hours worked it is equivalent to another 3m. We need to generate an extra 450,000 jobs every month for three years to get it back,” he said.

http://www.telegraph.co.uk/finance/economics/7981334/No-defence-left-against-double-dip-recession-says-Nouriel-Roubini.html

After all that doom, we end today’s shorter edition with something to uplift the spirit. Follow the links for why the doomsters went to “heaven” in northern Italy. Normal service resumes tomorrow.

"You may have the universe if I may have Italy."

Giuseppe Verdi

THE ITALIAN’ HEAVEN – LAKE COMO

http://www.wayfaring.info/2008/11/01/the-italian-heaven-lake-como/

Cernobbio

http://www.comoeilsuolago.it/eng/cernobbioE.htm

Detailed Facts about Lake Como, Italy

http://www.comoguide.com/about-lake-como.html

“Consult not your fears but your hopes and your dreams. Think not about your frustrations, but about your unfulfilled potential. Concern yourself not with what you tried and failed in, but with what it is still possible for you to do.”

Pope John XXIII 1958-1963.

At the Comex silver depositories Friday, final figures were: Registered 51.83 Moz, Eligible 58.88 Moz, Total 110.71 Moz.

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Crooks and Scoundrels Corner.

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

Next, why do I get the sense America has an important election coming up?

A government that robs Peter to pay Paul can always depend on the support of Paul.

George Bernard Shaw. Socialist.

SEPTEMBER 4, 2010

Government to Deploy Broader Mortgage Aid

The Obama administration on Tuesday will launch its most ambitious effort at reducing mortgage balances for homeowners who owe more than their homes are worth.

Officials say between 500,000 and 1.5 million so-called underwater loans could be modified through the program, the first initiative to target homeowners who are current on their mortgage payments but are at risk of default because they have no equity in their homes. Some experts are warning, however, that the same knots that tied up prior initiatives could do so again.

Under the new "short refinance" program, banks and other creditors that write down mortgages to less than the value of the property can essentially hand off the reduced loan to the government. The process involves refinancing borrowers into loans backed by the Federal Housing Administration.

While the program puts taxpayers at risk—officials estimate one in five loans in the program could default—the government has set aside $14 billion previously earmarked for housing aid from the Troubled Asset Relief Program to cover losses.

The new program, which was announced in March, is starting as the housing market shows signs of renewed trouble and as the Obama administration's signature Home Affordable Modification Program, or HAMP, falls short of its goals of helping three million homeowners. Half of the 1.3 million borrowers that enrolled in temporary loan modifications have fallen out of HAMP because they didn't qualify. Only one-third has received permanent modifications.

The initiative also comes as mortgage rates fall to their lowest levels in more than 50 years. Average rates on 30-year fixed-rate loans dropped to 4.43% last week, down from 4.55% during the previous week, according to a survey published Wednesday by the Mortgage Bankers Association.

One of the biggest dangers facing the housing market is the glut of underwater homeowners who could default if their personal finances or home prices worsen. About 11 million borrowers, or 23% households with a mortgage, were underwater as of June 30, according to CoreLogic Inc.

http://online.wsj.com/article/SB10001424052748704323704575461920164400014.html?mod=WSJ_hps_LEFTWhatsNews#articleTabs%3Darticle

“It’s easier to resist at the beginning than at the end.”

Leonardo da Vinci. 1452-1519

The monthly Coppock Indicators finished August:

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

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

Technorati Tags: Dr Roubini,double dip 40%,recession,Lake Como,out of bullets,mortgage stimulus

How China Hides Buying Gold.

Baltic Dry Index. 1967 +25

LIR Gold Target by 2019: $3,000.

Money has no country.

Jules Bertillon. A House of All Nations. 1938. Christina Stead.

The monthly Coppock Indicators finished July:

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

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

Last week the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) came in at -10.7. Negative growth for the eighth straight week and almost certainly signalling a double dip recession ahead. While the index has missed occasionally in the past, it has never missed from a reading as low as -10.7.

Next up China. If China went out and bought up gold bullion, the price of gold would rise and the price of JP Morgan, HSBC and the other gold shorts fall. But China recognizes that it’s hopelessly underweighted in bullion, as compared to the the G-7 countries. Below the Journal covers part of how China deals with swapping “useless pictures of dead white Americans” for real wealth. It seems pretty obvious to me that at some point ahead we re-monitise gold. China seems to see this too.

Confirmation that a major problem has developed between fiat currencies and gold bullion, came with last month’s strange BIS swap of dollars for gold. According to the BIS, they did this for a commercial bank yet their own rules state that the deal only for and with central banks. The suspicion is that one of the EU central banks was desperate for dollars, for some reason and didn’t (or couldn’t) want to conduct a similar transaction with the ECB. Why not do it with China? Probably because under the fantasy rules of the BIS, the gold won’t leave the vault of the originating central bank, but will stay on their books though hypothecated, first to a commercial bank, who will also keep it on their books as if it existed covering their gold obligations to clients, while the BIS will also now list the gold on their books. China would have asked for the gold to be physically transferred across to China, never to be seen in the west again.

Stay long gold and silver. Who knows if the originating central bank really had all the gold in the first place. Nothing good comes from all this deception and lies, except to enrich the great vampire squids and their cronies at the expense of everyone else. We won’t end the teens on the same system

"The London Banker Henry Fauntleroy forged to keep his bank solvent. He was executed for it in 1824."

Charles P. Kindleberger. Manias, Panics and Crashes.

JULY 31, 2010

China's Ore Demand Flies Under the Radar

Shipments of Mineral-Rich Matter Obscure Its Higher Needs

A boatload of sandy, gray muck set out from Alaska a week ago, bound for China. Buried inside the detritus were tiny flecks of gold that China National Gold Group Corp. plans to extract.

The shipment is one of many filled with mineral-rich matter that are sailing into Chinese ports and forming a key, but little-noticed, part of efforts to sate the nation's demand for raw materials.

The Alaskan gold won't appear in China's official imports report or in trade data from major commodity exchanges or bullion markets. China's purchases of copper scrap and investments in oil-sands projects in Canada also fly under the radar, publicly disclosed but not widely watched.

Observers say the low-grade ore making its way to China's shores adds to evidence that Chinese demand for raw materials is greater than standard indicators show, and greater than many investors realize.

Investors instead closely track China's consumption of widely sought commodities, like gold bullion, refined copper and crude oil. Signs that its hunger is rising or falling can move those markets, and help define its broader economic growth.

During this year's first half, for instance, China's refined copper imports fell 13.5%, a decline of 239,000 tons from the same period last year—an apparent sign of weaker demand. But China raised imports of copper scrap and concentrate, which needs further processing. The 362,000 tons of added copper was enough to turn China's imports to a net gain, according to Barclays Capital.

In the case of copper, China's purchases of alternative supplies could change the perception of whether demand is weak or strong, said Kevin Norrish, director of commodities research at Barclays.

Investors who only look at refined copper imports "miss the whole picture," Mr. Norrish said.

The purchases also demonstrate Chinese producers' willingness to expend time, energy and money extracting ore from tons of sand, rocks and dirt.

Processing gold concentrates isn't an easy undertaking. In North America, many smelters were closed down, with few new start-ups as a result of high capital expenditures and stringent environmental regulations. At issue is the usage of cyanide, a chemical used to dissolve gold from the crushed ore, which is toxic to humans and the environment.

China is one of the few countries where smelting capacities are growing. The country now has an annual capacity of processing 600 metric tons of gold, exceeding the gold it produces at home.

And, with many empty boats making their way back to China after dropping off exports to the West, shipping costs are cheap. They are currently hovering around the lowest level in more than a year.

"All the good assets are locked up. They're trying to get around that," said Derek Scissors, who tracks China's commodities purchases for the Heritage Foundation. "What they're doing is picking the available fruit, and it has a mar on it. Other people don't want to eat it, and the Chinese say, 'fine.' "

In the case of gold, China National Gold is expected to extract more than 25 tons of gold over the course of the 12-year pact with Coeur d'Alene Mines Corp., which operates the Alaska mine.

"The Chinese government has a very strategic plan, looking toward its future natural-resource needs," said Dennis Wheeler, Coeur d'Alene's chief executive. "They are going about the execution of the plan."

Mr. Wheeler declined to disclose what China National paid, but called it the best offer "in overall commercial terms." China National said it did the deal "to earn profits from processing."

While China National's anticipated imports are the equivalent of just 2.4% of China's official gold reserves, other firms are chasing similar deals.

Last week, Australian miner Conquest Mining Ltd. said 14 China-based smelters showed interest in buying concentrate that it is producing in North Queensland, expected to yield about 105,000 ounces of gold annually.

http://online.wsj.com/article_email/SB10001424052748703314904575399562576908060-lMyQjAxMTAwMDMwMTEzNDEyWj.html

We end for today with the sun, sunspots, and solar flares. Yesterday morning just before 9 a.m. GMT the sun put on an impressive solar display, one headed in the earth’s direction. Below, SpaceWeather covers the event. Are we heading towards another “Carrington Event” shortly ahead? The experts say probably not, but the experts are relatively still in the dark, when it comes to predicting the sun, to use a bad pun.

COMPLEX ERUPTION ON THE SUN:

On August 1st around 0855 UT, Earth orbiting satellites detected a C3-class solar flare. The origin of the blast was sunspot 1092. At about the same time, an enormous magnetic filament stretching across the sun's northern hemisphere erupted. NASA's Solar Dynamics Observatory recorded the action:

The timing of these events suggest they are connected, and a review of SDO movies strengthens that conclusion. Despite the ~400,000 km distance between them, the sunspot and filament seem to erupt together; they are probably connected by long-range magnetic fields. In this movie (171 Å), a shadowy shock wave (a "solar tsunami") can be seen emerging from the flare site and rippling across the northern hemisphere into the filament's eruption zone. That may have helped propel the filament into space.

In short, we have just witnessed a complex global eruption involving almost the entire Earth-facing side of the sun.

A coronal mass ejection (CME) produced by the event is heading directly for Earth: SOHO movie. High-latitude sky watchers should be alert for auroras when it arrives on or about August 3rd.

http://www.spaceweather.com/

The “Carrington Event,” September 1, 1859.

http://science.nasa.gov/headlines/y2008/06may_carringtonflare.htm

At the Comex silver depositories Friday, final figures were: Registered 51.97 Moz, Eligible 58.12 Moz, Total 110.09 Moz.

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Crooks and Scoundrels Corner.

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

Today it’s the crooks and enablers falling out, over the spoils from what should

be illegal front running trading in US stock markets. The illegal making of bogus bids and offers too, not that anyone is willing to police US stock markets anymore. The great vampire squids aren’t willing to let the hired brains get more than a bone and crumbs from enormous loot siphoned off those money managers foolish enough to get involved with trading US stocks. Below, Forbes takes up the avarice that is undoing the west.

"No one ever made enough money."

Jules Bertillon. A House for All Nations. 1938. Christina Stead.

High-Frequency Programmers Revolt Over Pay

Emily Lambert, 07.28.10, 02:36 PM EDT

Computer jockeys setting up own shops in bids to make millions.

Pity the programmers toiling away at Wall Street's secretive high-frequency trading shops--places like Goldman Sachs ( GS - news - people ), Citadel and Getco. They wrote algorithms that take advantage of fleeting trading opportunities and bring in up to $100,000 a day. In return, they received a fraction of the pay doled out to their bosses.

Now some programmers feel used and are instigating a revolt.

They are doing so by striking out on their own or forming profit-sharing arrangements. Jeffrey Gomberg, 32, worked for a trading firm that paid him a low-six-figure income after four years on the job. His trader colleagues, by contrast, made millions manipulating the algorithms he'd written.

Last year Gomberg and a fellow programmer quit their jobs and cut a deal with HTG Capital Partners of Chicago, whose programmers typically trade on regulated futures exchanges. HTG supplies office space, technology and access to exchanges. Gomberg keeps 40% to 80% of net profits, with the percentage rising as his profits do. More importantly, says Gomberg, the programmers retain ownership of the code they write.

“We designed this deal so we wouldn't lose intellectual property,” he says. “If it doesn't work out, we can go somewhere else and take all the software [that we developed]. That's really the key.”

HTG's owner, Christopher Hehmeyer, says he gets three to five inquiries a week from high-frequency programmers looking for better gigs. Many callers are immigrants or were hired out of college for $80,000 to $150,000 a year. If a programmer brings money with him, and puts up at least $250,000 to become an HTG partner, Hehmeyer hikes his percentage of the take.

Another high-frequency programmer, who spoke on condition that his name not be used, quit two firms that he believed were underpaying him. He says one group was generating $100,000 a day from his high-frequency trading software and paying him $150,000 a year.

The programmer's bosses offered him an office and a $45,000 raise, but he left instead. He found a partner, and together they began trading on their own. The programmer now pockets more than half of any profits his software generates. The programmer says he's making about the same money he did at the job he left. But at his old job he'd topped out in pay while now he says the sky's the limit.

“I'm on my way to making a ton,” he says.

http://www.forbes.com/2010/07/28/high-frequency-trading-personal-finance-programmer-pay.html

A large Bank is exactly the place where a vain and shallow person in authority, if he be a man of gravity and method, as such men often are, may do infinite evil in no long time, and before he is detected. If he is lucky enough to begin at a time of expansion in trade, he is nearly sure not to be found out till the time of contraction has arrived, and then very large figures will be required to reckon the evil he has done.

Walter Bagehot. Lombard Street. 1873.

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

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

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Technorati Tags: Gold,China,BIS,ECRI,WLI,vampire squids v programers,sunspot flares,the Carrington Event,global cooling,mining stocks,rare metals.

Weekend Update – July 3, 2010

The Bear Returns.

Baltic Dry Index. 2280 -71 (Down 45.8% since May 26, 2010.)

LIR Gold Target by 2019: $3,000.

"The great merit of gold is precisely that it is scarce; that its quantity is limited by nature; that it is costly to discover, to mine, and to process; and that it cannot be created by political fiat or caprice."

Henry Hazlitt

We have entered the second half of 2010, with austerity programs being implemented all across Europe, and the US economy starting to stumble. The bear market has returned it seems. This despite 2 to 2.5 trillion of new money, of mostly bankster rescue programs in the last two years, from the Fed and US Treasury, in an ever more desperate Keynesian attempt to try to head off Japanese style deflation visiting the G-7 economies. While the trillions of new money in global stimulation, at least 5 to 6 trillion dollars globally but who’s counting, were great for the banksters and great vampire squid’s bonuses, and gave us a “green shoots” recovery of a very sickly sort, very little trickled down to mainstream USA nor to every Tom, Fritz and Henri across Europe. A very difficult summer lies ahead before we enter the stock market’s traditional crash season of Autumn. Although this year with the emergence in US stock markets of High Frequency Trading programs, aka front running, the only game in town, and Wall Street’s specialist “special liquidity providers” able to pull their special liquidity at will, every single trading day has the risk of turning into another May 6^th “flash crash.” “Abandon hope all ye who enter here,” should now be carved above the NYSE on Broad Street.

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. (Commenced 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 weekly leading indicators signalling 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 protracted bear market rally.

"…it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now."

Cyril Moulle-Berteaux. Managing partner, Traxis Partners LP. May 6, 2008. WSJ.

Biggs Cuts Stock Investments by Half as Risk of Recession Grows

July 3 (Bloomberg) -- Concern governments around the world are curtailing stimulus measures too soon spurred Barton Biggs to sell about half of his stock investments this week.

Biggs, whose Traxis Partners LLC gained 38 percent in 2009 when he bought equities after the Standard & Poor’s 500 Index fell to a 12-year low, sold most of his U.S. technology holdings, he told Bloomberg Television yesterday.

Signs the U.S. economy is weakening convinced Traxis to reverse course as the S&P 500 posted a weekly slump of 5 percent, bringing its loss since April 23 to 16 percent. Biggs, 77, said yesterday he cut bullish bets by about half since June 29, when they made up 70 percent of his fund.

“I can change my mind very quickly,” Biggs, who manages $1.4 billion, said in a telephone interview following the Bloomberg Television appearance. “I’m not wildly bearish, but I don’t want to have a lot of risk at this point. I just want to have less exposure at a time like this.”

The withdrawal of government stimulus, including the U.S. Senate’s vote against extending unemployment benefits on June 30, may turn a “soft patch” into a recession, he said. The second recession in three years isn’t inevitable should “rational politicians” take action to avert it, he said.

http://noir.bloomberg.com/apps/news?pid=20601087&sid=auMV9NaJR.tk&pos=1

Crude hits lowest price in nearly a month

Gasoline loses nearly 8% this week, while natural gas posts slim weekly gains

SAN FRANCISCO (MarketWatch) -- Crude-oil futures on Friday fell to their lowest level in nearly a month, a lackluster end of a week that brought oil down 8.5%.

Oil held on to losses after the government reported that U.S. nonfarm payrolls declined by 125,000 in June, even as the unemployment rate unexpectedly dropped from the previous month. A steeper-than-expected decline for factory orders also did little to tip the price balance the other way.

The negative end of the week snapped oil out of its weekly winning streak, as crude had ended the previous three weeks in the black.

------The oil contract hit an intraday low of $71.54 a barrel, hampered by the mixed jobs report and declining factory orders.

Factory orders declined 1.4% in May, their biggest drop in 14 months.

The unemployment rate dropped to 9.5% in June from 9.7% in May, the lowest level since July 2009.

Also, private-sector payrolls expanded by a modest 83,000 in June, lower than the 115,000 increase expected by economists polled by MarketWatch. Total nonfarm payrolls tumbled 125,000 in June after surging 433,000 in May.

-----Oil futures had posted steep losses on Thursday as various economic data rekindled worries over a slowdown in global growth and its potential impact on energy demand.

"Worse-than-expected U.S. economic data increased the concerns about an economic recovery and led to massive selling pressure on the commodity markets," said analysts at Commerzbank in a note published before the release of the jobs data.

In other energy news, Russia's oil production hit a record high in June and remained above 10 million barrels a day for the 10th month in a row, Reuters reported, citing an unnamed industry source.

This performance means Russia remains the world's top oil producer, ahead of Saudi Arabia, according to the report.

http://www.marketwatch.com/story/oil-futures-trade-flat-ahead-of-us-jobs-data-2010-07-02

Orders to U.S. Factories Declined in May More Than Forecast

July 2 (Bloomberg) -- Orders placed with U.S. factories declined in May more than forecast, a sign that manufacturing may be starting to cool.

The 1.4 percent decrease in bookings was the biggest since March 2009 and followed a revised 1 percent gain in April, the Commerce Department said today in Washington. Economists forecast orders would drop 0.5 percent, according to the median projection in a Bloomberg News survey.

Manufacturers are seeing a pause in demand after the industry helped the world’s largest economy emerge from the worst recession since the 1930s. Today’s figures underscore the Federal Reserve’s concerns that the European debt crisis poses a risk to a self-sustaining U.S. recovery.

“Manufacturing has been the star of the economy this year so any signs that conditions are turning would cause some concern,” Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, said before the report. “The demand for products is slowing.”

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aNCmvpr8vsFA

In “the next Greece” news, surprisingly it might not be on the wrong side of the Atlantic. Below today’s NY Times on Abe Lincoln’s State of Illinois, where the last Governor is on trial for allegedly attempting to sell President Obama’s old Senate seat for personal gain. Far from getting better, in our crazy upside down, inside out world on fiat money, the end is getting nearer by the day. President Obama’s and Nobel Laureate Krugman’s solution to the massive unrepayable debt problem? Print, borrow and massively spend more! Stay long precious metals. Sadly it’s going to get a whole lot weirder yet before the whole fiat currency reserve standard comes crashing down. Why not just give everyone a tax deferment for a year.

“This sucker could go down.”

President George W. Bush. September 2008.

Illinois Stops Paying Its Bills, but Can’t Stop Digging Hole

CHICAGO — Even by the standards of this deficit-ridden state, Illinois’s comptroller, Daniel W. Hynes, faces an ugly balance sheet. Precisely how ugly becomes clear when he beckons you into his office to examine his daily briefing memo.

He picks the papers off his desk and points to a figure in red: $5.01 billion.

“This is what the state owes right now to schools, rehabilitation centers, child care, the state university — and it’s getting worse every single day,” he says in his downtown office.

Mr. Hynes shakes his head. “This is not some esoteric budget issue; we are not paying bills for absolutely essential services,” he says. “That is obscene.”

For the last few years, California stood more or less unchallenged as a symbol of the fiscal collapse of states during the recession. Now Illinois has shouldered to the fore, as its dysfunctional political class refuses to pay the state’s bills and refuses to take the painful steps — cuts and tax increases — to close a deficit of at least $12 billion, equal to nearly half the state’s budget.

Then there is the spectacularly mismanaged pension system, which is at least 50 percent underfunded and, analysts warn, could push Illinois into insolvency if the economy fails to pick up.

States cannot go bankrupt, technically, but signs of fiscal crackup are easy to see. Legislators left the capital this month without deciding how to pay 26 percent of the state budget. The governor proposes to borrow $3.5 billion to cover a year’s worth of pension payments, a step that would cost about $1 billion in interest. And every major rating agency has downgraded the state; Illinois now pays millions of dollars more to insure its debt than any other state in the nation.

“Their pension is the most underfunded in the nation,” said Karen S. Krop, a senior director at Fitch Ratings. “They have not made significant cuts or raised revenues. There’s no state out there like this. They can’t grow their way out of this.”

More.

http://www.nytimes.com/2010/07/03/business/economy/03illinois.html

We end for the weekend with more on all that is wrong with today’s casino capitalism. Somehow, hiring a trader to do a compliance officer’s job “writing training materials for graduate recruits” seems an unlikely use of Mr. Perkin’s talents. Hosting the company golf outing at the Dolder Grand Zurich seems more appropriate for a start.

Swiss broker hires Steve Perkins - who did a 'stupid thing' in trading $520m when drunk

A Swiss commodity broker has confirmed it will take on Steve Perkins, the oil trader banned for illegally trading $520m (£340m) in a drunken blackout, calling him a "good man who did a stupid thing".

By Rowena Mason Published: 6:03PM BST 02 Jul 2010

Starsupply Renewables SA hired Mr Perkins to work in Geneva just two days after the UK regulator said he must not trade for five years. Mr Perkins, a 34-year-old broker from Essex cornered 69pc of the global oil market in the middle of the night in June last year, costing his former employer, PVM Oil Futures, $10m in losses.

He claims to have bought the 7m barrels of oil during an alcohol-induced stupor following a golfing weekend of heavy drinking.

---- The company said yesterday that it would "voluntarily" uphold the FSA's judgment and restrict Mr Perkins from engaging in any regulated market activity for the duration of the ban.

The broker will join the company despite the FSA's warning that "Mr Perkins poses an extreme risk to the market when drunk".

A spokesman for Starsupply said Mr Perkins had attended an alcohol rehabilitation program and has been sober for almost a year, saying "it is important that this continues".

He added that the company has been in negotiations with the broker for some considerable time.

"We believe Steven Perkins is a good man, who did a stupid thing. The sanctions legitimately imposed on him by the FSA will be honoured. The damage caused by Mr Perkins actions over a year ago was substantial and we empathise with those affected.

"However, we believe in rehabilitation. We want to give Mr Perkins an opportunity to rebuild his career in a different direction. Mr Perkins first task will be to assist with the writing of training materials for graduate recruits."

----- Starsupply Renewables, which is the world's biggest biofuels brokerage, has a code of conduct published on its website promising that its staff "reveal and report all information truthfully, without manipulation or misrepresentation".

http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7868872/Swiss-broker-hires-Steve-Perkins-who-did-a-stupid-thing-in-trading-520m-when-drunk.html

“The hottest places in hell are reserved for those who in times of great moral crises maintain their neutrality”

Dante.

Sunspots – Global Cooling.

A 22 year colder world? (From 2004?)
Spotless Days July 02

Current Stretch:0 days
2010 total: 35 days (19%)

2009 total: 260 days (71%)

Since 2004: 803 daysTypical Solar Min: 485 days
http://www.spaceweather.com/

Sunspot cycle 24: Together with sunspot cycle 25, the next two global cooling cycles. The new “Dalton Minimum?” Thirty two months now with low sunspots numbers, and counting. June was the 32nd month of yet another low number of 13.5 http://en.wikipedia.org/wiki/Dalton_Minimum

Smoothed sunspot numbers (SSN). 2007, Oct. 0.9. The end of cycle 23.

Sunspot cycle 24: Nov 1.7. Dec 10.1. 2008 Jan 3.4. Feb 2.2. Mar 9.3 April 2.9. May: 2.9. June 3.1. July 0.5. August 0.5. Sep 1.1 Oct. 2.9. Nov. 4.1 Dec 0.8. 2009 Jan 1.5. Feb 1.4. Mar 0.7. Apr 1.2. May 2.9. June 2.6. July 3.5. Aug. 0.0. Sep 4.2. Oct 4.6. Nov 4.2. Dec 10.6 2010 Jan 13.1 Feb 18.6 Mar 15.4. April 7.9, May 8.8, June 13.5.

Sunspots. http://solarscience.msfc.nasa.gov/SunspotCycle.shtml

The count. http://sidc.oma.be/products/ri_hemispheric/

Why a New Minimum. http://sesfoundation.org/dalton_minimum.pdf

The “Carrington Event,” September 1, 1859.
http://science.nasa.gov/headlines/y2008/06may_carringtonflare.htm

Are Sunspots Different During This Solar Minimum?
----The same data were later published [Penn and Livingston, 2006], and the observations showed that the magnetic field strength in sunspots were decreasing with time, independent of the sunspot cycle. A simple linear extrapolation of those data suggested that sunspots might completely vanish by 2015.These observations caused researchers to wonder whether the characteristics of sunspots are different now than in other solar cycles.
http://rs6.net/tn.jsp?et=1102678927575&s=1&e=001UyfO_wN_C81IrqYbA3w8N3hkc9KCTd3b8zGDXYSyIqfs4WqgttvCceErdow7pOYUPq1VjzV52Gys14jzZ86u_Cfl4pUoOrsCLnR6j8T6J0sqSWAceSG0JDfK9x8Cij2iSMIUEfQlhro=

GI.

Technorati Tags: Double dip recessions,BDI,oil,slump,US unemployment,depression,1930 = 2010,missing sunspots,global cooling.

America The Beautiful.

Baltic Dry Index. 2351 -55

LIR Gold Target by 2019: $3,000.

"But the whole history of America is quite different from Europe. People went there to get away from the intolerance and constraints of life in Europe. They sought liberty and opportunity; and their strong sense of purpose has over two centuries, helped create a new unity and pride in being American."

Margaret Thatcher.

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.

We open this morning saluting America. America the Great, for all its flaws, still the standard all other countries strive to attain, much of the world tries to emigrate to, legally and illegally. In fact Russia’s latest “spy ring,” on the prosecution’s presented case so far, seems to have given up spying to enjoy a decade of the American high life. As Maggie Thatcher pointed out in the quote above, when America stumbles it doesn’t stay down for long. I suspect that banksterism, casino capitalism, and creeping Swedish-French style 1970s socialism, won’t be around for long. I look forward to the next great American rebound later this decade.

America the Beautiful.

O beautiful for patriot dream
That sees beyond the years
Thine alabaster cities gleam
Undimmed by human tears!
America! America!
God shed his grace on thee
And crown thy good with brotherhood
From sea to shining sea!

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

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

We open though with yet more sign of the double dip recession arriving. The central banks still can’t admit that the great experiment in fiat currency heresy has ended in failure. For the next few years we will likely live through ever more bizarre attempts at propping up the failed fiat friends of the central banksters. My guess is that the “next Lehman” takes out the existing fiat currency system. Unfortunately it will also probably wipe out all the phony, scammy, bogus systems of owning “paper” gold. Stay long physical precious metals, preferably well away from John Bull and Uncle Sam’s larcenous hands.

Below, news that backs up the 40% retreat in the BDI.

"Communist regimes were not some unfortunate aberration, some historical deviation from a socialist ideal. They were the ultimate expression, unconstrained by democratic and electoral pressures, of what socialism is all about.”

Margaret Thatcher.

Fears mount over slowing global demand

By Alan Beattie and James Politi in Washington, Kevin Brown in Singapore and Geoff Dyer in Beijing

Published: July 1 2010 19:14

Fears grew that the global recovery is faltering on Thursday after a slew of data pointed to weaker global demand led by slower growth in China.

Figures showed manufacturing output slowing across large parts of the world, posing further challenges to leading economies as they attempt to shore up shaky fiscal positions without falling back into recession.

In Asia – the world’s production powerhouse whose economies are still largely dependent on export demand – manufacturing activity indices for China, South Korea, Taiwan, India and Australia all showed weaker activity for June.

The overall level of factory activity still suggested production was expanding but at a more moderate rate than in recent months.

-----Figures for the US also suggested the economy was losing impetus in spite of being well short of its productive capacity and receiving unprecedented support from monetary and fiscal policy. The Institute for Supply Management’s manufacturing index fell from 59.7 in May to 56.2 in June, a much larger drop than most economists had predicted.

-----Unemployment in the US appears stuck at just below 10 per cent, and hopes that it might start falling received a setback yesterday as new claims for unemployment benefits unexpectedly rose. David Semmens, US economist at Standard Chartered Bank, said the jobless claims figures were “a timely reminder that firings in the US remain elevated and appetite from employers for hirings remains anemic”.

In the eurozone, an update to the manufacturers’ purchasing managers’ index showed its ninth month of expansion, but at a moderate rate that is not using up the spare productive capacity.

-----Nick Beecroft, FX Consultant at Saxo Bank, said: “This looks like the day that fears of a double-dip recession in the US, with all its attendant unpleasant consequences for the US budget deficit, finally trumped eurozone bank and debt concerns.”

http://www.ft.com/cms/s/0/fa81dd7c-8536-11df-9c2f-00144feabdc0.html

Spectre of an economic relapse stalks markets as China wobbles

Fears of an economic relapse across the world have begun to stalk markets again after pending homes sales in the US crashed by a third and a slew of weak data from China and Japan sent bourses tumbling across Asia.

By Ambrose Evans-Pritchard Published: 9:23PM BST 01 Jul 2010

The credit system is once again flashing warnings of extreme fragility, with the yield on 10-year US Treasuries plummeting back to crisis-levels of 2.89pc. Japan's 10-year bond dropped to 1.06pc, the lowest since the country's deflation battle seven years ago. Tokyo's Nikkei stock index tumbled to the lowest level since 2005 as safe-haven flight into the yen surged to levels that leave many Japanese exporters underwater.

"Double-dip is back in the lexicon," said David Bloom, currency chief at HSBC. "Everybody hoped that China's huge fiscal package would keep global growth going long enough for the West to recover, but it does not look like that is happening.

"China is now slowing but the US housing market is falling off a cliff. It's cataclysmic. In Japan the data is turning nasty, and fiscal tightening is just starting in Europe and the UK, so everybody is asking where the growth is going to come from," he said.

Goldman Sachs said its gauge of Global Leading Indicators had peaked. "Signs `under the hood' have pointed to some slowing momentum. Industrial growth is set to decelerate," said the bank.

The US National Association of Realtors said the numbers of home buyers signing contracts dropped 30pc in May from a month ealier, confirming fears that the expiry of subidies would lead to a cliff-edge fall in sales. "Tax credits merely cannibalised sales for the coming months, and did not succeed in jump-starting a lasting recovery of the housing market," said Teunis Brosens from ING.

The US property market is haunted by worries that a cluster of "option ARM" mortgages will reset upwards over the coming months, leading to a fresh wave of defaults.

-----The new twist for investors is the sudden slowdown in China. The HSBC/Markit index of Chinese manufacturing has fallen from a high of 57.4 in January to 50.4 in June, the result of monetary tightening and curbs to cool the red-hot property market.

Wensheng Peng from Barclays Capital said the risk of double-dip is small. "We are seeing a policy-led soft landing, a slowdown that is desired and targeted by the government," he said.

However, analysts are deeply divided on China. A report by the European Chamber in China said there was pervasive over-capacity in steel, cement, chemicals, refining, and energy equipment.

"The Chinese government's massive stimulus package is being pumped into building new plants and adding uneccesary capacity. The problem is getting worse in many industries," it said, claiming that usage rates were as low as 35pc in some sectors.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7866896/Spectre-of-an-economic-relapse-stalks-markets-as-China-wobbles.html

We end for the day with good news, well good news if you’re an Australian miner or a shareholder in one. Good news too for future mining investment in Australia, which is good news for the rest of us whose 21^st century lifestyle relies on access to, and replacement of many of the minerals and metals Australia supplies. Good news too for the London Stock Exchange and the FTSE Index, where many Australian miners are jointly listed. Generally speaking, taxation is bad, merely encouraging feckless populist politicians to fritter the taxes away in bribing the voters to secure their re-election. Any time tax levying politicians anywhere lose big, having their head handed back to them on a platter, even if the fight was lead by some of the biggest mining companies on the planet, it’s a small victory for nearly everyone else on the planet.

“The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.”

Vladimir Ilyic Lenin.

Australian PM Gillard strikes a tax deal with the mining giants

Julia Gillard, the Australian prime minister, reached an agreement early on Friday with mining companies on a new tax, striking a compromise to end a simmering dispute that cost her predecessor his job.

By James Hall Published: 12:00AM BST 02 Jul 2010

In order to secure the deal and reach agreement with mining companies, the government has agreed to slash the mining tax rate and cut the types of resources affected. The new resource tax offers concessions to mining companies by taxing iron
ore and coal at a rate of 30pc. The government has also agreed to extend the existing so-called petroleum resource rent tax to coal-seam gas projects which would be taxed at 40pc.

BHP Billiton, one of the biggest companies in the FTSE, said it was encouraged by the deal and described the tax rate as competitive. Shares of all London-listed miners could rise this on the news.

The agreement on the new minerals resources rent tax is due to apply from July 1 2012. It would reduce the government's forward estimate for revenue by A$1.5bn (£836m).

http://www.telegraph.co.uk/finance/newsbysector/industry/mining/7867111/Australian-PM-Gillard-strikes-a-tax-deal-with-the-mining-giants.html

"Socialism's results have ranged between the merely shabby and the truly catastrophic - poverty, strife, oppression and, on the killing fields of communism, the deaths this century of perhaps 100 million people. Against that doctrine was set a contrary, conservative belief in a law-governed liberty. It was this view which triumphed with the crumbling of the Berlin Wall. Since then, the Left has sought rehabilitation by distancing itself from its past."

Margaret Thatcher.

At the Comex silver depositories Thursday, final figures were: Registered 49.86 Moz, Eligible 64.15 Moz, Total 114.01 Moz.

+++++

Crooks and Scoundrels Corner.

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

We end for America’s national Independence Day holiday long weekend with the great vampire squids fighting among themselves to the last US taxpayer. Was Ebenezer Squid doing “God’s work” in trying to take out AIG Financial Products division London, home of some of the dumbest risk takers on the planet, or were they taking advantage of AIG’s FP “mastermind” one Joe Cassano, and playing his team of derivatives lunatics for the clueless suckers they proved to be, as they wrote unlimited CDS without making any provision for loss. God must have liked what he saw at the Great Vampire Squid, because it survived thanks to the US taxpayer paying off all the duff AIG CDS at par. How lucky can a great vampire squid get, or what? Who needs a dog in Washington, when you have friends at the Fed and US Treasury?

“If you want a friend in Washington, get a dog”

President Harry S. Truman.

JULY 1, 2010

We Were 'Prudent': AIG Man at Center Of Crisis

Joseph Cassano, who led the division of American International Group Inc. responsible for the mortgage trades that proved the insurer's downfall, on Wednesday staunchly defended his actions, maintaining he made "prudent" decisions and that American taxpayers would have been better off had he stayed on.

In one of the most defiant statements by any Wall Street executive in the thick of the financial crisis, Mr. Cassano told a Congressional panel that he didn't misjudge the risks of subprime mortgage deals his unit entered into when he was its CEO, from 2002 until early 2008.

AIG's problems, he said, were brought on by a liquidity crisis when credit markets seized up— and weren't a result of lax underwriting practices or defaults among mortgage assets his unit had insured. When market values of those assets plunged, the firm was deluged by demands for cash collateral from banks that had bought the insurance from his unit, AIG Financial Products.

"I think I would have negotiated a much better deal for the taxpayer than what the taxpayer got" when the government and AIG in late 2008 paid tens of billions of dollars to banks to cancel the insurance-like contracts AIG wrote on mortgage securities, said Mr. Cassano, speaking publicly for the first time since the giant insurer's near-collapse in the fall of 2008.

Government officials have previously said that billions in payouts to banks were necessary to prevent AIG from filing for bankruptcy. On Wednesday, the Treasury dismissed Mr. Cassano's suggestion that he would have handled the situation better.

"Two years after the financial conflagration began, every amateur firefighter has a theory about how it might have been done differently, but ideas from those who lit the kindling aren't particularly disinterested or useful," a spokesman said.

The near-failure of AIG in 2008 sent shock waves through the global financial system and led to a bailout of up to $182.3 billion by the U.S. government that's nowhere close to being repaid. Because some of the funds were used to settle AIG's contracts with trading partners such as Goldman Sachs Group Inc., the bailout led to accusations that public money was used to rescue investment banks betting on the U.S. housing market.

http://online.wsj.com/article/SB10001424052748703426004575338640175139822.html?mod=WSJ_hps_LEFTTopStories

AIG and Goldman trade blame for crisis

By Justin Baer in Washington Published: July 1 2010 16:03

Goldman Sachs executives responded to allegations that the bank was overly aggressive in seeking collateral from AIG, which was hurtling toward its $180bn government bail-out, noting the insurer had refused to share its valutaions of the debt securities at the heart of the companies’ dispute.

Goldman’s relationship with AIG and its alleged role in the insurer’s spectacular collapse has emerged as a flashpoint for regulators and politicians searching for the causes and the villains of the financial crisis.

In testimony before the Financial Crisis Inquiry Commission, Goldman executives disputed that the bank had consistently marked debt securities insured by AIG at artificially low levels and pressed its counterparty for billions of dollars in collateral.

“AIG continued to dispute our marks, but for almost six months, AIG refused to provide Goldman Sachs with its marks on these same positions,” David Lehman, co-head of Goldman’s structured-products group trading desk, said during testimony before the commission.

Mr Lehman reiterated that Goldman had based its marks on similar transactions in the market. And while AIG had consistently argued that the marks were too low, the insurer was never willing to buy back Goldman’s positions at those lower prices.

“We offered, at various times, to transact with AIG, or other interested market participants that AIG was aware of, at prices consistent with those that we were using to calculate the collateral amounts,” Mr Lehman said. “AIG never took us up on this offer.”

At Thursday’s hearing, AIG’s Andrew Forster dismissed Goldman’s offer as unrealistic given the frozen state of the debt markets at the time.

“Their offer was kind,” Mr Forster quipped, “but not one we were ever going to take up.”

Mr Forster also said AIG had lacked an internal pricing system for much of 2007, and could not provide its own accurate marks until December of that year.

The allegations against Goldman resurfaced during Wednesday’s FCIC hearing, when Joseph Cassano, the former AIG executive who ran the financial-products division that housed its credit default swap portfolio, said his team was stunned by the bank’s collateral calls.

In internal e-mails and in interviews with the commission, AIG executives said they suspected Goldman was intentionally mismarking assets to profit from counterparties’ losses.

http://www.ft.com/cms/s/0/acef9966-8520-11df-9c2f-00144feabdc0.html

"The world urgently needs to create a diversified currency and financial system and fair and just financial order that is not dependent on the United States."

Shi Jianxun. China People’s Daily. September 16, 2008

Another summer weekend, and America takes Monday off to celebrate gaining freedom from the UK’s Hanoverian tyrant, “Mad King George III.” Thankfully it all worked out for the best. Napoleon would have been unlikely to have sold the Louisiana territory to a British North America, similarly Tsarist Russia unlikely to have sold Alaska to it’s great rival in central Asia’s “Great Game.” A class run British North America would have been an unlikely great refuge for Europe’s huddled masses yearning to breathe free. A class run British North American monarchy from Hudson’s Bay to the Gulf of Mexico to San Francisco Bay, would be an unlikely brotherhood from sea to shining sea. Have a great weekend everyone, whether celebrating US Independence day or not. More on the weekend blog.

The New Colossus.

"Keep, ancient lands, your storied pomp!" cries she
With silent lips. "Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tossed to me,
I lift my lamp beside the golden door!"

Emma Lazarus, 1883

http://www.libertystatepark.com/emma.htm

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

Technorati Tags: America the Great,double dip recession,BDI retreat,Australian mining tax climbdown,AIG v Goldman,missing sunspots,global cooling,gold and silver,mining stocks,HREs,REEs,Europe's huddled masses.