Flash - G-20 Agrees To Go Home.

Baltic Dry Index. 2366 -88

LIR Gold Target by 2019: $30,000. Revised.

“Let me put it simply: in this regard there may be a contradiction between the interests of the financial world and the interests of the political world. We cannot keep constantly explaining to our voters and our citizens why the taxpayer should bear the cost of certain risks and not those people who have earned a lot of money from taking those risks.”

Chancellor Merkel. 11 November 2010.

The leaders of the G-20 today, after 36 hours trapped in Seoul, South Korea, dining on Gaegogi which rhymes with doggy, grilled pork large intestines and Kimchi, locked in interminable discussions on what to discuss and whose fault it is that America’s gone broke again, plus why Irish bondholders should swap their bonds for Lehman CDOs, achieved a spectacular breakthrough late in the day, when crazed mediators from Britain, France, and Germany, persuaded the G-2 to call the whole thing off and go home. In an unexpected outbreak of comity, brotherly love and comedy, Presidents Obama and Hu quickly agreed to go home and blamed the whole impasse on the Irish and Greek governments for not living within their means and surrendering to German and French demands to slaughter their bondholders. No Irish or Greek representatives being present, this was deemed a good idea. While everyone bolted for the airport, President Obama remembered just how bad things are at home and headed off to visit Japan instead, one of the few industrialized G-20 nations with an outlook even worse than America’s. Cutoff from imports of Chinese rare earths and elements, the world may soon have to give up driving Toyota Priuses. Below, the Journal covers this small step for humanity, and giant leap for the G-20 leaders.

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

Nicholas L. Deak

NOVEMBER 12, 2010, 12:42 A.M. ET

G-20 to Fudge Differences

SEOUL—Leaders of the Group of 20 big countries were set Friday to gloss over key differences on curbing economic imbalances, highlighting how political squabbles have weighed on attempts to foster more stable global growth.

Issues such as external imbalances have dominated the two-day summit by the G-20, who are seeking to avert what has been dubbed a global "currency war," in which countries seek competitive advantage by weakening their currencies.

It appears that leaders were to some extent struggling to agree on how to define and quantify "indicative guidelines" meant to gauge progress, portending further tough political battles over reining in global imbalances.

"We don't want to tie imbalances to one indicator; there are a lot of factors that need to be included," German Chancellor Angela Merkel told reporters. "These factors need to be discussed, and finance ministers will do this exhaustively over the next year."

The G-20 leaders, in a communique ending the summit in Seoul, won't agree on targets or even a timetable for limiting external imbalances because they still haven't agreed on what is driving global imbalances and the role issues like currencies play, a U.K. official said.

----Political disagreement means the G-20's "Mutual Assessment Process" report will omit specific recommendations such as how fast China should let the yuan rise and how fast the U.S should cut its budget deficit, the people said.

The U.S. has pushed China to let the yuan rise more and for nonbinding targets to limit imbalances. China, in turn, has won adherents to its position that the Federal Reserve's lax U.S. monetary policy is weakening the dollar and pushing a wall of destabilizing speculative capital into emerging markets.

The summit aimed to build on a late-October meeting of G-20 finance ministers that produced an agreement to avoid "competitive devaluation" of currencies and to seek "sustainable" levels of imbalances, measured by a set of "indicative guidelines." The ministers rejected an informal U.S.-Korean proposal to target curbing imbalances to 4% of gross domestic product by 2015.

Friday's G-20 may fail to add much to the finance ministers' agreement because of disagreement between the likes of China and the U.S. over the basic facts of what is driving the imbalances, the U.K. official said. Instead, the leaders are likely to pledge to agree next year on an objective analysis behind the problem of global imbalances.

"Until you agree the problems, you won't be able to find solutions," the official said.

http://online.wsj.com/article/SB10001424052748703848204575609551819168026.html?mod=WSJEUROPE_hpp_MIDDLETopStories

In theory, all get to do it all again at the next G-20 meeting next year. In the meantime, the IMF is supposed to study the currency wars and suggest a solution. Stay long precious metals. After this G-20 meeting, nothing has changed. America is still living far beyond its means and setting out to trash its currency in the expectation this will somehow reduce unemployment. Europe is still heading towards a Club Med vs the rest, Euro split. China is still racking up a massive dollar surplus and still has a domestic property bubble that could burst at any time. Japan is aging its way towards a domestic crisis.

In other Asian news, China’s latest 5 year plan is intended to convert China from manufacturer to the world into consumer of the world. Were it to happen and 1.3 billion people start consuming like Americans all on credit, we are heading for the boom of all booms, and then a , massive credit bust. Happily it’s unlikely to happen. The world would quickly price scarce limited basic resources too high for the transition to occur. Even so, China has served notice that we are in for a decade of change ahead, starting in the next 5 years. Another reason to stay with precious metals.

One message is clear: The Chinese government wants to foster a national transformation from "world's factory" to "world's market."

11.09.2010 17:14

Get Ready for China's Big Development Switch

The latest five-year plan exposes tension between old and new growth models, but change cannot be stopped

China's recently released a draft plan for the next five years is nothing short of full-blown strategy for transforming the nation's development model. In a first for the government's planning process, the 12th Five-Year Plan for the 2011-2015 period outlines specific steps designed to raise consumption levels and make China a leading consumer market.

One message is clear: The Chinese government wants to foster a national transformation from "world's factory" to "world's market."

Can China effectively change its development model? The answer will determine whether the nation can indeed rise to the top among global consumer markets and, indeed, whether the next five-year plan works.

China cannot afford to delay the scheduled change from an "extensive" resource- and export-driven growth model to an "intensive" model that's driven by technological advancement and efficiency.

----Export-oriented trades have created tens of millions of jobs and earned China the title "world's factory." But the country has paid a heavy price for this fame in the form of worsening "hidden" inflation, labor disputes, environmental degradation and international trade conflicts. And although this model of development is clearly unsustainable and on its last legs, some argue that it should continue contributing to the economy.

In fact, conflict between old and new models has led to problematic tension in the economy and society.

To move forward, the latest five-year plan stresses the strategic importance of economic transformation. Economic observers at home and abroad say the government is serious this time about taking action. Decision-makers are said to have finally reached a consensus on the need for strategic change. They've been influenced by the global financial crisis, which irrevocably changed the external environment's role in the mainland economy, forcing China to turn inward in search of alternative product demand.

In other words, the real challenge since the crisis has been to find new ways to drive economic growth. The financial meltdown drove this search for new growth models, and now conditions in China are ripe for the change already under way.

More

http://english.caing.com/2010-11-09/100197196.html

"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

At the Comex silver depositories Thursday, final figures were: Registered 50.54 Moz, Eligible 57.25 Moz, Total 107.79 Moz.

+++++

Crooks and Scoundrels Corner.

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

Today, more on the unfolding Euro crisis. Will Ireland cave in at the weekend and ask for a bailout? Will this weekend bring another Bear Stearns or Lehman moment?

The Irish Times has established, however, that informal contacts are under way between Brussels, Berlin and other capitals to assess their readiness to activate the €750 billion rescue fund in the event of an application from Dublin.

Germany blamed for Irish debt soar

Ireland pointed the finger at Germany for stoking fears that holders of government bonds could be forced to suffer losses as the cost of Ireland's borrowing hit fresh highs.

9:14PM GMT 11 Nov 2010

Concerns Ireland will require an International Monetary Fund-EU bail-out helped push yields on 10-year Irish Government bonds up to around 9pc, a record, as investors demanded higher returns to shoulder the risk.

Markets worry whether Ireland will be able to pay its debts, given its costly bank bail-out, weak growth and a huge budget deficit of 14.4pc of GDP, the eurozone's highest.

British taxpayers took a hit as shares in Royal Bank of Scotland fell 2.7pc to 41.02p on fears over the state-backed bank's exposure to the Irish market through an estimated £50bn of loans. One source said some traders were using the bank as a proxy to short Ireland.

Brian Lenihan, Ireland's finance minister said the spike in borrowing costs was partly driven by "unintended" German comments proposing bondholders be forced to take losses or "haircuts" if sovereign debt is restructured.

The market nerves pushed the spread between Irish 10-year bond yields and German yields to well over 6 percentage points, a new record. The cost of insuring Irish debt against default also hit a fresh high.

"The bond spreads are very serious and there is international concern throughout the eurozone about that," said Mr Lenihan, adding he would look for clarification of the German plans. He also tried to reassure that comments from Ireland's central bank governor – that IMF austerity plans for Ireland would not differ greatly from Dublin's – were not laying the ground for aid.

Germany has indicated the proposals would not apply to existing debt, but fears over potential losses are high after France said on Wednesday that investors must share in the cost of safeguarding debt.

German Chancellor Angela Merkel argued on Thursday that taxpayers could not keep being told they "have to be on the hook for certain risks, rather than those who make a lot of money taking those risks."

Although the Irish government is fully funded into the middle of next year, analysts warned politicians' talk of haircuts risked creating a self-fulfilling prophecy that Ireland and other debt-laden nations will have to restructure.

-----"The most likely outcome now is that Ireland will need to receive assistance from the EU/IMF," said Gary Jenkins at Evolution, who estimated a funding requirement of around €43bn over two years.

Attempts from the European Commission to reassure for a second day running that Ireland has not requested any assistance from Europe did little to placate investors, after Commission president Jose Manuel Barroso said it was ready to "act if necessary".

There were warnings solvency fears were spreading as Portugal and Spain also saw the cost of insuring their debt against default soar, which kept the euro under continued pressure, hitting a five-week low under $1.37.

http://www.telegraph.co.uk/finance/economics/8127612/Germany-blamed-for-Irish-debt-soar.html

NOVEMBER 12, 2010

Europe Running out of Yellow Cards on the Debt Crisis

If history marks this week as the start of Europe's Debt Crisis II, next week has promise for still more nerve-testing action along Europe's crumbling outer rim.

Fiscally frail Ireland and Portugal will stay caught in the spotlight of unforgiving bond investors. Joining them on Monday will be Greece, no stranger to that script.

Officials from the European Union and the International Monetary Fund descend on Athens next week for their newest look into the Greek treasury's books and will decide whether Greece has earned its next payment tranche. On Thursday, Greece is expected to present its final 2011 budget to parliament and with it its latest budget estimates.

The rough picture already emerges that the Greek government underestimated the severity of its crackdown on spending to comply with EU and IMF rules. Stiff austerity cuts, overestimated tax receipts and recurrent strikes by alternating segments of the work force have taken their toll on the economy and now numbers are off course.

If history marks this week as the start of Europe's Debt Crisis II, next week has promise for still more nerve-testing action along Europe's crumbling outer rim.

Fiscally frail Ireland and Portugal will stay caught in the spotlight of unforgiving bond investors. Joining them on Monday will be Greece, no stranger to that script.

Officials from the European Union and the International Monetary Fund descend on Athens next week for their newest look into the Greek treasury's books and will decide whether Greece has earned its next payment tranche. On Thursday, Greece is expected to present its final 2011 budget to parliament and with it its latest budget estimates.

The rough picture already emerges that the Greek government underestimated the severity of its crackdown on spending to comply with EU and IMF rules. Stiff austerity cuts, overestimated tax receipts and recurrent strikes by alternating segments of the work force have taken their toll on the economy and now numbers are off course.

More.

http://online.wsj.com/article/SB10001424052748703848204575608530509855118.html?mod=WSJEUROPE_hpp_MIDDLETopStories

Friday, November 12, 2010

Merkel refuses to back down over debt burden

------Amid a loss of market confidence in Ireland, political anxiety in Europe centres on the fragility of the Government’s position as it prepares to extract €6 billion in cutbacks and tax increases in the budget and a total of €15 billion in the four-year recovery plan. Further concern surrounds the position of Ireland’s banks, whose shares have fallen steadily in recent days amid fears the €45 billion bailout bill might rise.

Although some diplomats say it is to Ireland’s advantage that the Government is not at present borrowing from the investors, fear of contagion emerged again yesterday as the premium on Spanish and Italian debt jumped to record levels.

With the single currency falling to a one-month low against the dollar, euro-zone finance ministers will discuss Ireland’s position at their monthly meeting next Tuesday in Brussels. As 10-year borrowing costs reached 9.26 per cent yesterday, Ireland is seen to be at the centre of renewed market turbulence. “What is important to know is that we have all the essential instruments in place in the EU and euro zone to act if necessary,” Mr Barroso said.

In Brussels, a commission spokesman said the European authorities are following the situation very closely. “There is no request for the moment. There is no need to activate any mechanism, Mr Barroso just confirmed that, in case of need, the mechanisms are in place,” he said.

http://www.irishtimes.com/newspaper/frontpage/2010/1112/1224283151994.html

“The fate of the nation and the fate of the currency are one and the same."

Dr. Franz Pick

Another weekend, and our season of gales and storms has arrived, and not just in the weather either. The past week brought the first austerity riot to Great Britain, and hardly anyone has been hit with austerity yet. Stay long precious metals. There a whole lot more storms coming, I think, and not just on the right side of the Atlantic. The Baltic Dry Index implies global trade is dipping again, even as the great commodity super cycle has started another leg up. Time to preserve cash and reduce risk, I think. Time to prepare for God’s northern hemisphere winter wonderland, even as austerity bites. Next week, the Eurozone will be forced to confront its inconvenient truth. Next week, even a travelling US President gets to go home. Have a great weekend everyone.

"When paper money systems begin to crack at the seams, the run to gold could be explosive."

Harry Browne

The monthly Coppock Indicators finished October:

DJIA: +204 Down. NASDAQ: +289 Down. SP500: +196 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. October is the fifth down month in a row.

Technorati Tags: G-20 incompetence,China's 5 year plan,Ireland,Greece,PIIGS,bond defaults,gold and silver.

A Black Swan Flies In.

Baltic Dry Index. 2478 +26

LIR Gold Target by 2019: $3,000.

"Every normal man must be tempted, at times, to spit on his hands, hoist the black flag, and start slitting throats."

H.L Mencken

For more on the black swan scroll down to Crooks and Scoundrel’s Corner. Today we open with the IMF hinting that Club Med needs to devalue if it’s going to avoid the death spiral. But Club Med can’t devalue since they’re trapped in the Germanic Euro, having entered the currency union at the wrong exchange rate. Want to bet that this all goes disastrously wrong in the year ahead. I’ll stick with gold and silver. It’s looking more and more like the fiat Euro experiment is doomed.

Money has no country.

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

IMF admits that the West is stuck in near depression

If you strip away the political correctness, Chapter Three of the IMF's World Economic Outlook more or less condemns Southern Europe to death by slow suffocation and leaves little doubt that fiscal tightening will trap North Europe, Britain and America in slump for a long time.

By Ambrose Evans-Pritchard Published: 8:00PM BST 03 Oct 2010

The IMF report – "Will It Hurt? Macroeconomic Effects of Fiscal Consolidation" – implicitly argues that austerity will do more damage than so far admitted.

Normally, tightening of 1pc of GDP in one country leads to a 0.5pc loss of growth after two years. It is another story when half the globe is in trouble and tightening in lockstep. Lost growth would be double if interest rates are already zero, and if everybody cuts spending at once.

"Not all countries can reduce the value of their currency and increase net exports at the same time," it said. Nobel economist Joe Stiglitz goes further, warning that damn may break altogether in parts of Europe, setting off a "death spiral".

The Fund said damage also doubles for states that cannot cut rates or devalue – think Spain, Portugal, Ireland, Greece, and Italy, all trapped in EMU at overvalued exchange rates.

"A fall in the value of the currency plays a key role in softening the impact. The result is consistent with standard Mundell-Fleming theory that fiscal multipliers are larger in economies with fixed exchange rate regimes." Exactly.

Let us avoid the crude claim that spending cuts in a slump are wicked or self-defeating. Britain did exactly that after leaving the Gold Standard in 1931, and the ERM in 1992, both times with success. A liberated Bank of England was able to cut interest rates. Sterling fell. The key point is whether you can offset the budget cuts.

But by the same token, it is fallacious to cite the austerity cures of Canada, and Scandinavia in the 1990s – as the European Central Bank does – as evidence that budget cuts pave the way for recovery. These countries were able export to a booming world. They could lower interest rates, and were small enough to carry out `beggar-thy-neighbour' devaluations without attracting much notice. We were not then in our New World Order of "currency wars".

Be that as it may, it is clear that Southern Europe will not recover for a long time. Portuguese premier Jose Socrates has just unveiled his latest austerity package. He has capitulated on wage cuts. There will be a rise in VAT from 21pc to 23pc, and a freeze in pensions and projects. The trade unions have called a general strike for next month.

Mr Socrates has already lost his socialist majority, leaking part of his base to the hard-Left Bloco. He must rely on conservative acquiescence – not yet forthcoming. Citigroup said the fiscal squeeze will be 3pc of GDP next year. So under the IMF's schema, this implies a 3pc loss in growth. Since there wasn't any growth to speak off, this means contraction.

More.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8039789/IMF-admits-that-the-West-is-stuck-in-near-depression.html

In a sign of total desperation at the ineffectiveness of current policy, Japan has gone from virtual zero interest rates to actual zero interest rates. Somehow I doubt it’s going to make any difference. Nor will monetizing another 5 trillion yen make much of a difference, other than to weaken the yen in a competitive devaluation against China and America. As the great Nixonian error of fiat money starts to collapse, ever more desperate schemes will now get tried.

"Consistency is the last refuge of the unimaginative."

Oscar Wilde

Bank of Japan Cuts Rates to as Low as Zero Percent

By HIROKO TABUCHI Published: October 5, 2010

TOKYO — In a surprise move, Japan’s central bank lowered its benchmark interest rate to a range of 0 percent to 0.1 percent Tuesday, a tiny change from its previous target of 0.1 percent but a symbolic slide into an age of zero interest rates.

The Bank of Japan also said it would set up a temporary 5 trillion yen, or $60 billion, fund to buy Japanese government bonds, commercial paper and other asset-backed securities amid concerns over weakening growth in the world’s third-largest economy.

With the interest rate cut, the central bank effectively reintroduces a zero-interest rate policy for the first time since July 2006. The decision underscores concerns that a strong yen and persistent deflation threaten the country’s fragile economic recovery.

The dollar rose against the yen on the announcement, climbing 0.7 percent on the day to 83.90 yen from about 83.55 yen before the decision.

The unanimous vote to lower the key interest rate came after a two-day meeting of the central bank’s nine-member policy board. The Bank of Japan had been under increasing pressure from the government to take drastic steps to shore up the economy.

More.

http://www.nytimes.com/2010/10/06/business/global/06yen.html?hp

In Greece it’s more of the same for next year, too. In a daring move for the tax and work shy Greeks, since China is going to buy up all of their new debt, wages won’t be cut any more, while taxes will be raised on the people wh never pay them! If China does in fact buy up Greek debt, at some point ahead China is going to take a loss when Greece wises up and leaves the Germanic Euro.

People who don't like scandals shouldn't be in finance.

Mouradzian. A House of All Nations. 1938. Christina Stead.

Greece Presents Austerity Budget for 2011

By NIKI KITSANTONIS and DAVID JOLLY Published: October 4, 2010

ATHENS — The Greek government, which this year has come under the tutelage of its euro-zone partners and the International Monetary Fund after it reached the brink of default, on Monday presented a draft austerity budget for 2011 that promised to raise more tax revenue while ending public-sector salary cuts.

According to the draft submitted to Parliament by Finance Minister George Papaconstantinou, the state aims to raise €5 billion, or $6.8 billion, from new tax measures, while it will cut spending by €1.5 billion.

Greece’s borrowing costs soared and the foundations of the euro were shaken after the revelation last October that the country had for years greatly understated the degree of its indebtedness. The Greek crisis in May led the I.M.F. and European officials to create a rescue fund valued at around €750 billion to help euro-zone members restructure their finances.

---- His 2011 plan includes a one-time tax on companies and an increase in the midrange value-added tax to 13 percent from 11 percent. It also includes the tax amnesty announced last month by Prime Minister George Papandreou that is meant to raise hundreds of millions of euros by encouraging citizens and businesses to settle 2.5 million unaudited tax filings stretching back over a decade. Debts would be paid off in installments in exchange for exemption from prosecution.

Officials have instituted a wave of tax increases over the past few months — including a four percentage point increase in the top value-added tax, to 23 percent — and a 20 percent cut to public-sector wages.

Mr. Papaconstantinou told the daily newspaper To Vima in an interview published Sunday that there would be no cuts to wages next year. Instead, he is focusing on raising revenue, an area in which Greece, with a reputation for tax evasion, has traditionally struggled.

http://www.nytimes.com/2010/10/05/business/global/05drachma.html?ref=business

Next, the gloves come off in Ireland. We can expect to a whole lot more of this as Ireland struggles to stave of sovereign default. Imagine, bondholders being asked to share in the austerity! God will fall out of heaven first!!

"For money, people fight and devour one another like spiders in a pot."

Honore de Balzac.

Roman Abramovich's Millhouse warns Ireland of legal action over Irish Nationwide bail-out

Millhouse, Roman Abramovich's asset management company, has lashed out at the Irish government and given warning of “huge reputation loss” and possible legal action if it continues to push it to foot part of the bill to bail out Irish Nationwide Building Society

By Simon Shuster in Moscow Published: 6:00AM BST 05 Oct 2010

The warning comes after Brian Lenihan, the Irish finance minister, said that subordinated bondholders of two state-controlled Irish lenders – Irish Nationwide Building Society, or INBS, and Anglo Irish Bank – should make a “significant contribution toward meeting the costs” of a planned government bailout.

Mr Abramovich’s asset management company, Millhouse LLC, would be among the first in line to shoulder INBS’s burden if Mr Lenihan gets his way.

In August 2009, Millhouse bought an unspecified amount of the £126m in subordinated bonds issued by INBS. The government guarantee on those bonds ran out October 1.

In a statement emailed to The Daily Telegraph, a spokesman for Mr Abramovich, the billionaire owner of Chelsea football club, said in Moscow that Millhouse was “extremely concerned” by the recent collapse in the value of these bonds, adding that Mr Lenihan’s statement “did not help the situation”.

“We bought [the bonds] because the Irish Government …promised to guarantee these bonds and promised to have a strategy for the bank. A year later, there is no guarantee and no strategy. We now believe that we have been misled and deceived,” the statement said.

Millhouse also complained of discrimination, claiming that other investors in INBS received regular updates on the bank’s performance, while Millhouse did not hear anything from management.

Although Millhouse has denied reports that it was planning to take its complaints to court, the statement concluded that it was “fully prepared to vigorously defend our position using all possible legal avenues”.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8042534/Roman-Abramovichs-Millhouse-warns-Ireland-of-legal-action-over-Irish-Nationwide-bail-out.html

"Everything has been thought of before, but the problem is to think of it again."

Goethe

At the Comex silver depositories Monday, final figures were: Registered 52.26 Moz, Eligible 58.82 Moz, Total 111.08 Moz.

+++++

Crooks and Scoundrels Corner.

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

Today, the NY Time’s best reporter on the growing chaos in US real estate. Chaos, that just might be the black swan arriving that crashes the mortgage backed securities sector and sets off the “next Lehman”. With title insurance companies now refusing to insure property transferring under foreclosure sales due to clouded ownership, foreclosure sales have come to a sudden halt. But the issue is far bigger than just foreclosures. With ownership clouded at best, lost or missing at worst, who is left to sign off transfer of ownership when a performing mortgage gets paid off? By slicing and dicing and pooling mortgages, for more than a decade, a decade’s worth of US properties is now clouded. A decade’s worth of US properties looks like becoming unsalable, or at best only salable with a big discount or an indemnity to the purchaser.

“You can observe a lot by just watching".

Yogi Berra

Flawed Paperwork Aggravates a Foreclosure Crisis

By GRETCHEN MORGENSON Published: October 3, 2010

As some of the nation’s largest lenders have conceded that their foreclosure procedures might have been improperly handled, lawsuits have revealed myriad missteps in crucial documents.

The flawed practices that GMAC Mortgage, JPMorgan Chase and Bank of America have recently begun investigating are so prevalent, lawyers and legal experts say, that additional lenders and loan servicers are likely to halt foreclosure proceedings and may have to reconsider past evictions.

Problems emerging in courts across the nation are varied but all involve documents that must be submitted before foreclosures can proceed legally. Homeowners, lawyers and analysts have been citing such problems for the last few years, but it appears to have reached such intensity recently that banks are beginning to re-examine whether all of the foreclosure papers were prepared properly.

In some cases, documents have been signed by employees who say they have not verified crucial information like amounts owed by borrowers. Other problems involve questionable legal notarization of documents, in which, for example, the notarizations predate the actual preparation of documents — suggesting that signatures were never actually reviewed by a notary.

Other problems occurred when notarizations took place so far from where the documents were signed that it was highly unlikely that the notaries witnessed the signings, as the law requires.

On still other important documents, a single official’s name is signed in such radically different ways that some appear to be forgeries. Additional problems have emerged when multiple banks have all argued that they have the right to foreclose on the same property, a result of a murky trail of documentation and ownership.

---- Attorneys general in at least six states, including Massachusetts, Iowa, Florida and Illinois, are investigating improper foreclosure practices. Last week, Jennifer Brunner, the secretary of state of Ohio, referred examples of what her office considers possible notary abuse by Chase Home Mortgage to federal prosecutors for investigation.

The implications are not yet clear for borrowers who have been evicted from their homes as a result of improper filings. But legal experts say that courts may impose sanctions on lenders or their representatives or may force banks to pay borrowers’ legal costs in these cases.

Judges may dismiss the foreclosures altogether, barring lenders from refiling and awarding the home to the borrower. That would create a loss for the lender or investor holding the note underlying the property. Almost certainly, lawyers say, lawsuits on behalf of borrowers will multiply.

In Florida, problems with foreclosure cases are especially acute. A recent sample of foreclosure cases in the 12th Judicial Circuit of Florida showed that 20 percent of those set for summary judgment involved deficient documents, according to chief judge Lee E. Haworth.

More.

http://www.nytimes.com/2010/10/04/business/04mortgage.html?ref=gretchen_morgenson

If all the rich men in the world divided up their money amongst themselves, there wouldn't be enough to go round.

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

The monthly Coppock Indicators finished September:

DJIA: +227 Down. NASDAQ: +321 Down. SP500: +221 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. September is the fourth down month in a row.

Technorati Tags: Black swan,IMF warning,depression,Japan ZIRP,Ireland bondholders,US real estate chaos,global cooling,REEs,HREs

Weekend Update – September 4, 2010

Baltic Dry Index. 2876 +164 on the week

LIR Gold Target by 2019: $3,000.

Sometimes too much to drink is barely enough.

Mark Twain.

It is the last holiday weekend of the summer in America. The traditional stock market crash season there kicks off on their return next Tuesday. But will 2010 be different? We open the weekend edition with Harvard’s Professor Rogoff calling for the Fed to raise its inflation target, to try to get the US economy moving again. A least worst option he thinks.

Once you've put one of his books down, you simply can't pick it up again.

Mark Twain.

Why America Isn’t Working

Professor Kenneth Rogoff.

-----Given the massive deleveraging of public- and private-sector debt that lies ahead, and my continuing cynicism about the US political and legal system’s capacity to facilitate workouts, two or three years of slightly elevated inflation strikes me as the best of many very bad options, and far preferable to deflation. While the Fed is still reluctant to compromise its long-term independence, I suspect that before this is over it will use most, if not all, of the tools outlined by Bernanke.

The bottom line is that Americans will have to be patient for many years as the financial sector regains its health and the economy climbs slowly out of its hole. The government can certainly help, but beware of pied pipers touting quick fixes.

http://www.project-syndicate.org/commentary/rogoff72/English

The Fed can state its inflation target as often as it likes, simply stating their new target is now 3%, 30% or 300%, doesn’t make it happen, they actually have to do something to make inflation happen. At this point, all the Fed can do to make inflation an arriving reality, is to flood America with dollars, even then there’s no guarantee they will get to the right people who will spend them. Worse, even if they did, chances are that Americans would spend them on imports, and vacations and paying off debt, none very likely to stimulate inflation or the economy very much. However, if the Fed overdoes flooding America with free cash, inflation arrives with a bang, as everyone buys up anything of value in an effort to escape from a collapsing currency. Exactly how the Chinese will feel about Dr. Bernocchio suddenly announcing the death of the fiat reserve standard, Professor Rogoff didn’t cover, but I’d bet that they’d have something to say.

Back across the Atlantic in the continent made for tanks, Germany’s Dr. Sinn expects civil war soon, in work and tax shy Greece. Anything’s possible I suppose, but the work and tax shy aren’t the first group that comes to mind when it comes to starting civil wars. If your whole way of life has been to avoid showing up for work or working and hiding your income, not showing up for the civil war or hiding entirely if one starts, seems a much more probable outcome to me. Sooner or later, even the dumbest Greek is going to figure out leaving the euro and restructuring all the debts is the only sane policy for correcting the problem they are coming from.

Wagner's music is better than it sounds.

Mark Twain.

EU austerity policies risk civil war in Greece, warns top German economist Dr Sinn

Greece’s austerity measures cannot prevent default and will lead to a breakdown of the political order if continued for long, a leading German economist has warned.

By Ambrose Evans-Pritchard in Cernobbio, Italy Published: 9:30PM BST 03 Sep 2010

“This tragedy does not have a solution,” said Hans-Werner Sinn, head of the prestigious IFO Institute in Munich.

“The policy of forced 'internal devaluation', deflation, and depression could risk driving Greece to the edge of a civil war. It is impossible to cut wages and prices by 30pc without major riots,” he said, speaking at the elite European House Ambrosetti forum at Lake Como.

“Greece would have been bankrupt without the rescue measures. All the alternatives are terrible but the least terrible is for the country to get out of the eurozone, even if this kills the Greek banks,” he said.

Dr Sinn said Greece is an entirely different case from Spain and Portugal, which still have manageable public debts and can bring their public finances back into line with higher taxes.

“Greece would have defaulted in the period between April 28 and May 7, had the money not been promised by the European Union,” he said, describing the failure of the EU’s bail-out strategy to include a haircut for the banks as an invitation to moral hazard.

“There should be a quasi-insolvency procedure for countries. Creditors have to accept a haircut before any money flows for rescue plans, otherwise we’ll never have debt discipline in the eurozone,” he said.

Greek society has so far held together well, despite a wave of strikes and street violence in the early months of the crisis. However, unemployment is rising fast and political fatigue with such austerity policies typically sets in the second year.

-----“We are in the second Greek crisis right now, today,” said Dr Sinn.

Greece is undergoing what amounts to an IMF austerity package but without the IMF cure of debt restructuring or devaluation that usual for a country with a spiralling public debt and a chronic loss of competitiveness.

The IMF says Greece’s debt will rise to 150pc by 2013-2014 even if Athens complies fully, a strategy viewed as self-defeating by several ex-IMF officials. There is a strong suspicion that the real objective is to bail-out North European banks with heavy exposure to Southern Europe, rather help Greece.

Dr Sinn said the Germany is now was super-competitive after clawing back 18pc in competitiveness during its long slump. “We’re in a new phase of history. The toggle switch has turned and we are going to see a mirror image of the last 15 years. This time it is Germany that will have an internal boom,” he said.

Germans will not recycle their savings in the Club Med region. They will invest at home.

http://www.telegraph.co.uk/finance/economics/7980291/EU-austerity-policies-risk-civil-war-in-Greece-warns-top-German-economist-Dr-Sinn.html

Next, how are we all going to eat? Actually, even with this year’s poor northern hemisphere wheat, barley and rice crops, there is still no real shortage of foodstuffs, but the same won’t be true if either of next year’s northern and southern hemisphere crops take a hit. Below the FT covers the world on edge for next year.

Fears grow over global food supply

By Javier Blas, Courtney Weaver and Simon Mundy, FT.com September 3, 2010 -- Updated 0331 GMT

(FT) -- Russia announced a 12-month extension of its grain export ban on Thursday, raising fears about a return to the food shortages and riots of 2007-08 which spread through developing countries dependent on imports.

The announcement by Vladimir Putin came as the UN's Food and Agriculture Organisation called an emergency meeting to discuss the wheat shortage, and riots in Mozambique left seven dead.

-----Although agricultural officials and traders insist that wheat and other crop supplies are more abundant than in 2007-08, officials fear the deadly Mozambique riots could be replicated.

The 2007-08 food shortages, the most severe in 30 years, set off riots in countries from Bangladesh to Mexico, and helped to trigger the collapse of governments in Haiti and Madagascar.

The Russian announcement extended an export ban first announced last month until late December 2011, sending wheat and other cereals prices to near a two-year high.

----Russia is traditionally the world's fourth-largest wheat exporter, and the export ban has already forced importers in the Middle East and North Africa, the biggest buyers, to seek supplies in Europe and the US.

Food prices surgeMr Putin said Moscow could "only consider lifting the export ban after next year's crop has been harvested and we have clarity on the grain balances". He added that the decision to extend the ban was intended to "end unnecessary anxiety and to ensure a stable and predict-able business environment for market participants".

http://edition.cnn.com/2010/BUSINESS/09/02/global.food.supply.ft/index.html?hpt=T2#fbid=0ZR_3t_KNP9&wom=false

Enough of the bad news, we end with the good news, free blackberry season is here. With the school summer holidays now ended, only the birds will get to harvest nature’s free bounty of late August and September.

Go picking blackberries in hedgerows in August and September

Blackberries grow on brambles - typically found in woodland, hedges, waste ground, and shrub ground. Brambles are seen by many as weeds, and they can rapidly tangle around other plants and suffocate them. However, in the late summer, they make up for their negatives with a delicious crop of blackberries.

When you go out to pick blackberries there are some useful tips to remember. Blackberry juice will stain hands and clothing, and the brambles are covered in many sharp thorns. Therefore wear something old and sturdy (trousers not shorts, and a long sleeved shirt), and give small children gloves.

The most flavoursome blackberries are those which have grown on plants in direct sunlight. Often the best blackberries will be found in difficult to reach positions where they have had the chance to fully ripen without being eaten by birds.

If picking berries on verges, only pick berries above knee height which will not have been splashed by rain hitting the ground, or urinated on by dogs and other animals. Pick only the fully black blackberries (not red or purple) as under-ripe berries will not ripen further once picked. Good blackberries will come of the plant with just a light tug.

http://www.google.co.uk/imgres?imgurl=http://www.self-sufficient.co.uk/OtherImages/delicious-wild-blackberries.jpg&imgrefurl=http://www.self-sufficient.co.uk/Picking-Wild-Blackberries.htm&h=283&w=320&sz=24&tbnid=AjgvZMWsRHitiM:&tbnh=104&tbnw=118&prev=/images%3Fq%3Dwild%2Bblackberries&zoom=1&q=wild+blackberries&hl=en&usg=__6SK1m5qUwtdpIWJD70-UwJ3kS10=&sa=X&ei=AM1_TOO9JYz84Aa20qzTCw&ved=0CDQQ9QEwBg

"It isn't pollution that's harming the environment. It's the impurities in our air and water that are doing it."

Vice-President Dan Quayle.

Have a great weekend everyone. Be sure to check the rare earths and metals page at the top.

GI.

Technorati Tags: Rogoff,inflation,Greece,Dr Sinn,civil war,food crisis,blackberry season in England.

Better Greek than German.

Baltic Dry Index. 1977 +10

LIR Gold Target by 2019: $3,000.

Greece as Mary to Germany’s Martha.

Luke 10:38-42

For more on the Greek way of life, scroll down to the Crooks and scoundrels corner. We open today with bad news as good news for US stock markets. Things are now so “good” in the US economy that Nomura is calling for the Fed to start expanding its balance sheet again. I suspect we will not have to wait long before the Fed starts quantitative easing again. After yesterday’s stock market action, has the Fed already started by buying up US stocks.

"Considerable uncertainty is attached to all economic estimates"

Alan Greenspan.

Factory sector slows again in July

Manufacturing sector at 55.5% is lowest in 2010

Aug. 2, 2010, 12:31 p.m. EDT

WASHINGTON (MarketWatch) -- Activity among the nation's manufacturing firms in July slowed to the worst level since December, according to a closely followed survey of top executives released Monday.

The Institute for Supply Management's manufacturing index fell to 55.5% in July from 56.2% in June. This was above the 55.0% expected by economists surveyed by MarketWatch but the third decline in succession

Stocks added to their climb after the report was released because the headline was better than expected.

---- Readings over 50% in the ISM diffusion index indicate that more firms are growing than contracting.

The ISM tracks the breadth of growth across firms, asking purchasing managers if business is better this month than last.

At the current level, the ISM's consistent with growth of about 5% at an annualized clip. Manufacturing has been much stronger than the rest of the economy.

The nation's economy, as measured by gross domestic product, grew at a 2.4% pace in the second quarter.

http://www.marketwatch.com/story/us-ism-factory-sector-slows-again-in-july-2010-08-02

Federal Reserve to start the deflation fight next week, expert claims

The Federal Reserve is set to kick-start a new phase of monetary easing, a leading Wall Street economist claims.

By James Quinn, US Business Editor Published: 11:19PM BST 02 Aug 2010

Paul Sheard, Nomura's chief global economist, argues that the current conditions are ripe for the American central bank to take affirmative action to put the US recovery back on track.

In the first call of its kind from a Wall Street economist, Mr Sheard says that given subdued growth and concern about inflation, the Federal Open Markets Committee will act when it meets a week today.

His comments follow those of James Bullard, president of the St Louis Fed, who last week said the central bank needs to equip itself with a plan for further quantitative easing should it be required, and after the latest US growth figures showed the American economy deteriorated somewhat in the second quarter.

------"We now believe that current conditions have moved policymakers into action and that the FOMC will adopt a more accommodative stance at its 10 August meeting," Mr Sheard wrote in a research note. "We expect the Fed to at least stop the passive contraction of its balance sheet."

Such a step is one of three possible options the Fed has in its arsenal, as outlined by Ben Bernanke, chairman of the Federal Reserve, before the US Congress last month.

The other two are restarting the asset purchase programme that ended in March, and changing the language in the FOMC's statements to make it clear deflation will not be tolerated.

However Mr Sheard argues that stopping the Fed's balance sheet from contracting further seems a sensible move.

"To the extent that the size of the Fed's balance sheet matters, this, in effect, amounts to a gradual tightening of monetary policy. Further shrinkage of its asset holdings now seems inappropriate in light of downside risks to growth," he continued.

Concerns about the health of the US economy shone through in the fate of the dollar yesterday, with the dollar index – which values it against a basket of currencies – hitting a three-month low on fears that US recovery is stalling.

http://www.telegraph.co.uk/finance/economics/7923054/Federal-Reserve-to-start-the-deflation-fight-next-week-expert-claims.html

Back across the Atlantic, in the lands where the world owes everyone a living, it is only fiat money after all and all allocation is political which is presumably why we start by giving it free to banksters, Italy has become the old Italy again, as the clock slowly turns back to the 1970s. Below, Italy on its way to joining Greece. Pretty much as predicted, all the cash for clunker programs achieved was to expedite future auto sales.

Italy trapped in slow lane as political crisis deepens

July car sales have plummeted in Italy, compounding the country’s woes as political crisis threatens months of wrangling and fresh concerns about the safety of Italian debt.

By Ambrose Evans-Pritchard Published: 9:13PM BST 02 Aug 2010

Rome said new registrations dropped 26pc from a year earlier, led by a 36pc fall for Fiat. "It is a complete disaster for everybody. The prime minister needs to take charge," said Filippo Pavan Bernacchi, head of the trade lobby Federauto.

Fiat’s chief executive Sergio Marchionne said Italy is the only part of the world where the resurgent company has not made a profit over the last eighteen months. "Italy’s industrial network cannot compete as it is," he said.

Mr Marchionne is embroiled in a showdown with Italy’s trade unions, demanding a radical overhaul of working practices before agreeing to fresh investment. "We want to run the plants. There is nothing obscene about that, but here in Italy it seems like we are asking for the moon," he said.

Italy has weathered the crisis of the last three years in good shape, thanks to modest private debt and the firm hand of finance minister Giulio Tremonti.

However, political risk is rising as the ruling party of premier Silvio Berlusconi breaks apart over claims of corruption, masonic conspiracies, wire-tap abuses, and attempts to interfere with the courts and free speech. Mr Berlusconi’s attempts to silence his erstwhile ally and chief critic Ginafranco Fini have back-fired badly, leading to revolt that has stripped the government of its parliamentary majority.

----Car sales fell 24pc in Spain and 13pc in France as scrappage schemes are phased out and consumers brace for austerity. The contours of a two-speed recovery in the eurozone are becoming clearer, with Club Med lagging far behind a turbo-charged Germany.

Germany’s KfW-IFO confidence index for Mittelstand firms has surged to 21.1, the highest since reunification in 1991. "There is now a property mini-boom in cities such as Dusseldorf, Munich, and Berlin: people are buying like mad," said Hans Redeker, currency chief at BNP Paribas.

As widely predicted, Europe’s scrappage schemes "cannibalised" future sales, leading to a cliff-edge effect that now weighs on economic recovery.

"We think Europe’s economy will start rolling over again as we move into September and October, and may even contract in the fourth quarter," said David Owen from Jefferies Fixed Income.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7923246/Italy-trapped-in-slow-lane-as-political-crisis-deepens.html

Since it’s only fiat money, nothing to do with the Italian cars, and all fiat money decisions are purely political, I have a solution for Italy, and it’s far cheaper than forever bailing out banksters. Give each of the 2 million unemployed one million on condition that they all have to buy an Italian car and house within six months, followed by taking at least one holiday in Italy, and eating out at least twice a week. For the purist, make the gift a 10 year loan at 0.5% interest, and make the loan via a government deposit in an Italian bank. Offset any unpaid taxes or fines and impose a 100% transfer tax on any attempt at sending any of the money to money heaven in Switzerland. By now you get the idea. Unemployment solved and an Italian boom, just like you get when you take a country to war, but without the war. And all on a loan that may or may not get paid back, but at least half will be able to cover the interest. In 10 years time who knows, roll it or write part of it off, or simply put a lien on the property they bought......

"We pay the debts of the last generation, by issuing bonds payable by the next generation."

Dr. Laurence J. Peter, author, The Peter Principle

We end for the day awaiting the “solar tsunami.” Is it all hype, or will we notice an effect later today and tomorrow?

Nasa scientists braced for 'solar tsunami' to hit earth

The earth could be hit by a wave of violent space weather as early as Tuesday after a massive explosion on the sun, scientists have warned

By Andrew Hough Published: 9:00PM BST 02 Aug 2010

The solar fireworks at the weekend were recorded by several satellites, including Nasa’s new Solar Dynamics Observatory which watched its shock wave rippling outwards.

Astronomers from all over the world witnessed the huge flare above a giant sunspot the size of the Earth, which they linked to an even larger eruption across the surface of Sun.

The explosion, called a coronal mass ejection, was aimed directly towards Earth, which then sent a “solar tsunami” racing 93 million miles across space.

Images from the SDO hint at a shock wave travelling from the flare into space, the New Scientist reported.

Experts said the wave of supercharged gas will likely reach the Earth on Tuesday, when it will buffet the natural magnetic shield protecting Earth.

It is likely to spark spectacular displays of the aurora or northern and southern lights.

"This eruption is directed right at us," said Leon Golub, of the Harvard-Smithsonian Center for Astrophysics (CfA).

"It's the first major Earth-directed eruption in quite some time."

-----Dr Lucie Green, of the Mullard Space Science Laboratory, Surrey, followed the flare-ups using Japan's orbiting Hinode telescope.

"What wonderful fireworks the Sun has been producing,” the UK solar expert said.

“This was a very rare event – not one, but two almost simultaneous eruptions from different locations on the sun were launched toward the Earth.

"These eruptions occur when immense magnetic structures in the solar atmosphere lose their stability and can no longer be held down by the Sun's huge gravitational pull. Just like a coiled spring suddenly being released, they erupt into space.”

She added: "It looks like the first eruption was so large that it changed the magnetic fields throughout half the Sun's visible atmosphere and provided the right conditions for the second eruption.

"Both eruptions could be Earth-directed but may be travelling at different speeds.

http://www.telegraph.co.uk/science/space/7923069/Nasa-scientists-braced-for-solar-tsunami-to-hit-earth.html

At the Comex silver depositories Monday, final figures were: Registered 51.52 Moz, Eligible 58.84 Moz, Total 110.36 Moz.

+++++

Crooks and Scoundrels Corner.

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

Today, more on those Goldman assisted, dead-beat, tax cheat Greeks, from Germany’s Der Spiegel. Hard working, tax paying, hard saving German workers, are tired of paying for the Greek way of life. The suggestion is that Greeks will have to go out and get a job, pay taxes and save for the future just like the rest of the world. The Greeks would rather riot and strike first, confident in the knowledge that if they mess up their economy badly enough, others will step in to with barrels of bailout cash, lest the whole European Monetary Union come crashing down. From faraway London, it’s hard to picture a Greek working and paying taxes, although some in the City still assert great vampire squids are human and have feelings, which if true, makes anything possible I suppose. Below, how 300 Athens swimming pools turned into 17,000. How to own a 100,000 Euro car on an income of 10,000 a year. As for me, I’d rather be Greek than German.

Diogenes wandered around ancient Greece carrying a lantern and searching for an honest man. He never found one.

Finding Swimming Pools with Google Earth

Greek Government Hauls in Billions in Back Taxes

By Daniel Steinvorth in Athens 08/02/2010

In a bid to increase revenues, the Greek authorities are employing all kinds of clever tricks to crack down on tax cheats, including using Google Earth to find undeclared swimming pools. But efforts by the government to liberalize markets could unleash a wave of civil unrest.

---- "Greek statistics" has become something of a running joke in Brussels and Strasbourg. The term stands for tricks, political manipulation and creative accounting. It stands for the entire Greek tragedy, for the numbers-juggling that drove the country to the brink of bankruptcy, and for the statistical pipe dreams of Logothetis' predecessors -- one of whom has already fled abroad.

----There is apparently a sea change underway in Greece these days, the Mediterranean country where, according to one government official, "virtually everyone cheats, and virtually everyone evades taxes." The Greeks, out of necessity, are about to embark on a kind of cultural revolution. The money that has been pledged to save them from collapse comes with stringent conditions.

----- The so-called troika of the European Union (EU), the International Monetary Fund (IMF) and the European Central Bank (ECB) has been in the country again since Monday of last week. The three auditors are to decide again if the efforts made to date by the government of Greek Prime Minister George Papandreou have been sufficient to warrant the transfer of an additional €9 billion ($11.7 billion) out of a total bailout package of €110 billion over three years, which the euro zone countries and the IMF have pledged to provide. The Dane Poul Thomsen, the Belgian Servaas Deroose and the German Klaus Masuch have taken up residence in the luxurious Grande Bretagne hotel in Athens. The three Europeans have the Greeks trembling with fear because, during their two-week inspection tour through the ministries and agencies, all doors and books have to be opened to the men in dark suits. "We Greeks have long since lost all sovereignty," says one hotel manager. "They are the real rulers in this country."

----- Kapeleris, 50, is currently the busiest worker in the Papandreou administration. His workday begins every morning at 7 a.m., in a vast room decorated with Byzantine icons, where three phones continuously ring. This is where he receives his visitors: tired from lack of sleep, smoking, gripping a coffee mug in one hand and wearing a partially unbuttoned shirt.

"Take a look at this," he says, and pulls out a printed Excel table from a pile of documents in front of him. "Here you can see how many cases of tax fraud the Greek state was able to document in the Athens tourist sector in June 2009. Five hundred and six. And do you know how many we found in June 2010? Four thousand, three hundred and forty."

Another table lists the names of doctors, who are considered in Greece to be particularly corrupt. "In May we uncovered 4,357 cases of tax evasion among our doctors," says Kapeleris. "In May of last year it was only 24."

Tracking Down Swimming Pools

His staff have become very creative when it comes to tracking down tax offenders: They use police helicopters to fly over Athens' affluent suburbs and make films of homes owned by doctors, lawyers and businesspeople. They use satellite pictures by Google Earth to locate country villas, swimming pools and properties. And these tactics have revealed that the suburbs didn't have 324 swimming pools, as was reported, but rather 16,974.

Tax fraud investigators spent a number of weeks on nightclub parking lots in Athens and noted down the registration numbers of luxury sedans. Their investigation revealed that approximately 6,000 car owners have vehicles worth €100,000, but only reported to the tax authorities that they have an annual income of €10,000.

More.

http://www.spiegel.de/international/europe/0,1518,709703,00.html#ref=nlint

“We have reason to believe you have committed an offence."

City of London. 1960s parking ticket.

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.

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: Greek swimming pools,US manufacturing,QE,Italy's slumping car sales,solar flares heading to earth,Greek taxes,gold and silver.

The Bottomless Pit.

Baltic Dry Index. 3329 +126

LIR Gold Target by 2019: $3,000.

The promise given was a necessity of the past: the word broken is a necessity of the present.

Niccolo Machiavelli

Another day, and two very different disasters dominate. In Europe, the Greek disaster now threatens to cost Germany 25 billion euro. Is the true scale of tiny Greece’s debts now 120 billion Euro? Who knows, each day brings yet another massive escalation of the size of the problem. I can’t wait until we try to uravel the finance black hole of Spain or Italy. Elsewhere, in the Gulf of Mexico, BP’s rig disaster also escalates by the day. Federal Reserve style, the blowout and oil leak has gone from being contained on Friday, to a modest leak of 1,000 barrels a day on Monday, to a worrying leak of 5,000 barrels a day yesterday. A change in winds today is expected to push the oil towards very sensitive shores.

Below, the Telegraph covers the transformation of Greece into Germany’s bottomless pit. From London it’s quite easy to see that the real solution lies in Greece leaving the Euro and restructuring its debt, perhaps by as much as a 50% haircut. Instead the Germans are trying to enforce a suicidal extreme austerity regime on a nation in no mood to accept additional cuts. This is a nation where the airforce pilots just went on strike after all. I suspect that the Greeks know the answer too. I suspect that they just want as much exit cash and good terms as they can get as they head out the door marked exit. Stay long gold and silver, it’s over for the euro as we knew it. The new Euro will either be a slightly harder version of the old Italian Lira or a slimmed down Teutonic Euro-zone operating on a renamed D-Mark. Right now the French leaders of the ECB and IMF plus President Obama, are trying to force Germany into the Lira solution. If Chancellor Merkel holds her nerve, she may yet get to dominate western Europe with the rise of a new international D-Mark.

Most people still believe in a hard day's work, but they also believe that it should be spread out over the course of a week.

Mad Magazine.

EMU domino fears as Spain downgraded, Germany drags feet on rescue
German leaders have agreed in principle to a rescue package of up to €135bn for Greece in emergency talks with EU and IMF officials, but failed to offer any clarity on the conditions for such aid.
By Ambrose Evans-Pritchard, in Berlin Published: 8:10PM BST 28 Apr 2010

Hopes for a respite for Southern Europe's battered bond markets were quickly dashed as Standard & Poor’s downgraded Spain.

Rainer Brüderle, Germany’s economy minister, said the Greek bail-out would be much larger than first thought, acknowledging that Greece cannot hope to tap the private debt markets for three years.

The heads of the European Central Bank and the International Monetary Fund made a joint pilgrimage to Berlin, pleading with lawmakers in the Bundestag to throw their full weight behind rescue efforts before the chain-reaction spreads to Portugal and the rest of the EMU periphery. Their presence as supplicants in Berlin marks the symbolic moment when Germany appears the undisputed master of Europe.

Dominique Strauss-Kahn, the IMF’s chief, said the stability of the eurozone itself is in danger. "We need to act swiftly and strongly,” he said.

German Chancellor Angela Merkel once again refused to give concrete assurances, leaving the markets as wary as ever over the real intentions of Berlin. "This is about the stability of the euro overall, and we won't avoid this responsibility. But the challenge is for Greece to accept an ambitious program," she said.

“Europe risks the biggest coordination failure in modern history,” said David Simmonds, research chief at RBS. The Berlin talks are as vague as ever. “We believe that markets will remain very sceptical.”

-----The Greek debt market came close to disintegration yesterday. Yields on two-year bonds rose briefly to 38pc. “This no longer has anything to do with interest rates: it is a forward contract on the return of the Greek Drachma,” said Charles Dumas, head of Lombard Street Research.

Markets are already looking beyond Greece to Portugal where spreads on 10-year bonds rose to 330 points -- higher than the level that first prompted Athens to invoke aid -- before falling back on pledges of further austerity.

Premier Jose Socrates is to bring welfare cuts planned for 2011 and 2012, accepting that the markets will not give Portugal another year to tackle its deficit of 9.4pc of GDP.
S&P cut Spanish debt one notch to AA with a negative outlook, warning that the fall-out from the housing bust will keep the country trapped in near slump until 2016. It said private sector debt of 178pc of GDP was a major concern.

Daniel Cohn-Bendit, leader of the European Greens, said Europe’s handling of the crisis had been “catastrophic” and rebuked Germany for resorting the “discipline of the whip”.

But Mrs Merkel is treading on eggshells. She faces a crucial election in North Rhine-Westphalia on May 9 that will decide control of the Bundesrat, and risks a court challenge if any rescue breaches the EU’s no `bail-out clause’. David Marsh, author of `The Euro: The Politics of the New Global Currency` said the moment of truth has come when Germany must decide whether to accept the burden of propping up Europe’s southern ring or let Greece fail and endanger its strategic investment in Europe’s post-War order.

“There are some senior figures who would like so see the gangrenous leg of Greece chopped off, to set an example. But they want to avoid leaving any German fingerprints on the blood-stained knife,” he said.

It is far from clear whether Athens will agree to further austerity as strikes hit the country day after day. Andreas Loverdos, Greece’s labour minister, said the EU-IMF team wants further wages cuts. “We cannot accept that.”

Greece knows it can opt for default at any time, setting off an EMU-wide crisis and bringing down Europe’s banks. It also knows that key figures in the Bundestag favour debt restructuring.
“Those who chased high yield by purchasing Greek debt must share the costs,“ said Volker Wissing, chair of Bundestag’s finance committee. Leo Dautzenberg from the Christian Democrats said banks should prepare for a `haircut’ of up to 50pc.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7647645/EMU-domino-fears-as-Spain-downgraded-Germany-drags-feet-on-rescue.html

Next, Bloomberg on the rising reality that the best course is to let Greece exit and restructure.

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

Ludwig von Mises.

Greece Turning Viral Sparks Search for EU Solutions
April 29 (Bloomberg) -- European policy makers may need to stump up as much as 600 billion euros ($794 billion) in aid or buy government bonds if they are to stamp out the region’s spreading fiscal crisis, said economists at JPMorgan Chase & Co. and Royal Bank of Scotland Group Plc.

With Greece’s budget turmoil infecting markets from Rome to Madrid, economists are urging German Chancellor Angela Merkel, European Central Bank President Jean-Claude Trichet and other officials to come up with unprecedented measures. Other steps could see governments guaranteeing bonds and the ECB abandoning collateral rules or reviving unlimited lending to banks, the economists said.

Bonds and stocks plunged across Europe in the past week as Merkel’s government delayed approving a rescue plan for Greece and Standard & Poor’s downgraded Greece, Portugal and Spain. As OECD head Angel Gurria likens the crisis to the Ebola virus, Europe may need to come up with a plan equivalent to the $700 billion Troubled Asset Relief Program deployed by the U.S. after the collapse of Lehman Brothers Holdings Inc.

“It is perhaps time to think of policy options of the last resort in the current sovereign crisis,” said David Mackie, chief European economist at JPMorgan in London. “It may now be time for the euro area to do something much more dramatic in order to prevent the stress from creating another broad-based financial crisis which pushes the region back into recession.”

----Nouriel Roubini, the New York University professor who anticipated the economic collapse of 2008, said yesterday that the national debt crisis that’s spreading out from Greece is a warning sign for countries ranging from the U.S. to Japan and the U.K.

“Greece is just the tip of the iceberg,” Roubini said. “There’s been a massive releveraging of the public sector.”

------A Greek agreement may not be enough to end a crisis that’s ricocheting through all euro-region markets and governments may have to come up with a blanket plan for the bloc as a whole, said Mackie. He calculates that in a worst-case contagion scenario, supporting Spain, Portugal and Ireland and Greece may require aid worth 8 percent of the gross domestic product of the rest of the region. That’s equivalent to about 600 billion euros.

“This is a big number, but the region has the fiscal capacity to backstop both banks and these countries,” said Mackie. Governments also could guarantee each other’s debt for a limited period such as three years, an “attractive form of support because no money is needed up front,” he said.

The ECB may also have a role to play even if the crisis has its roots in fiscal policy. With Greek debt now rated as junk by S&P, the Frankfurt-based central bank may need to dilute its collateral rules again so as it can keep accepting the country’s bonds when making loans, said economists led by Juergen Michels at Citigroup Inc.

Under current rules, Greek bonds will be ineligible at money-market operations if Fitch Ratings and Moody’s Investors Service cut them to junk as well.

-----A default by “rich” Greece on its debt would be the best way to ease the European fiscal crisis and help allay fears of a contagion, said Mark Mobius, who oversees about $34 billion in emerging-market assets as executive chairman of Templeton Asset Management Ltd. Greece should consider restructuring its debt to pay 25 cents to 50 cents for every dollar, helping to cut its debt level to a more sustainable level, he said in an interview with Bloomberg Television in Singapore today.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aCW0uYHW707A&pos=3

Elsewhere in Europe, way off the radar screen, Hungary has a similar problem to Greece.

IMF Trust in Hungary Budget Data ‘Distressing,’ Matolcsy Says
By Zoltan Simon
April 29 (Bloomberg) -- The International Monetary Fund’s trust in the credibility of Hungary’s budget data is “distressing,” said Gyorgy Matolcsy, who is the main candidate to become economy minister, according to Heti Valasz.

“It’s distressing that the IMF is a prisoner of the budget figures of the outgoing government,” Matolcsy told the weekly newspaper. “Besides them, everyone is aware that the 3.8 percent budget deficit is unsustainable. Even if they sense this at the IMF, they can’t say it publicly until the new government is formed.”

Incoming Prime Minister Viktor Orban, whose Fidesz party won this month’s elections, has said the government falsified budget data and that the gap may be double the 2010 target. The IMF and the European Union, which gave the bulk of a $26.4 billion bailout in 2008 that helped Hungary avert a default, say the target is “achievable,” though additional measures may be warranted.

The budget gap for this year “belongs to the past” and the new cabinet’s priority will be to jumpstart growth and create jobs in the recession-hit economy, Orban said on April 26. Generating growth is a precondition of further fiscal consolidation, he said.
http://www.bloomberg.com/apps/news?pid=20601095&sid=a.WyoD8_3Idg

In oil news, the Gulf of Mexico oil spill gets worse. Below the latest updates from the Houston Chronicle and Wall Street Journal. If the oil enters the Gulf wetlands, the resulting reaction is likely to highly populist and very bad for the offshore drilling industry. BP is probably just days away from a trip through hell.

Well springs third leak; officials raise spill estimate
By BRETT CLANTON, MATTHEW TRESAUGUE and MONICA HATCHER HOUSTON CHRONICLE
April 28, 2010, 11:01PM

BP said Wednesday night that a third leak has developed in an undersea oil well and government officials raised their estimate of how much oil is leaking into a growing slick that threatens the Gulf Coast.

Rear Adm. Mary Landry, commander of U.S. Coast Guard District 8, said the government has offered BP access to Defense Department technology that may not be available in the commercial sector in its efforts to address the increasingly serious spill resulting from a deadly drilling rig explosion last week.

Earlier Wednesday, the Coast Guard set fire to portions of the advancing slick, hoping to limit the amount of crude that reaches this particularly vulnerable coastline.

The new leak is near the wellhead 5,000 feet down, and like the other two, is in a now-tangled pipe called a riser that connected the well to the rig on the surface.

Officials have been estimating the well is leaking at least 1,000 barrels, or 42,000 gallons, every day, but on Wednesday night raised the top range to 5,000 barrels.

----A 1,000-member task force with the British oil giant has so far failed to stanch the flow.
The huge slick — estimated to be 600 miles in circumference — began when the Deepwater Horizon drilling rig sank into the Gulf after an apparent blowout sent it up in flames April 20. The rig, owned and operated by Swiss-based Transocean, had been drilling a well at BP's Macondo prospect some 40 miles off the Louisiana coast when the accident occurred. Eleven of 126 workers aboard are presumed dead.

The Mississippi forks in three directions from Venice. Through the river's southern pass, it's about 30 miles to the Gulf — two hours' sail for a large cargo ship.
Teams scrambled to create a buffer zone from the mouth of the Mississippi to Mobile Bay in Alabama, with officials acknowledging in the frankest terms yet that the spill will likely reach shore.

“It's premature to say it's catastrophic. I will say it's very serious,” Landry said earlier Wednesday.

The Coast Guard started a controlled burn of thick, clumpy pockets of crude within the slick late Wednesday afternoon and stopped at nightfall. Weather permitting, burns were to resume this morning.

The process involves boats using 500-foot sections of containment boom to tow oil to remote areas, where the Coast Guard said several thousand gallons of oil would be burned in about an hour.

But a storm system developing in the central U.S. is forecast to bring strong winds from the southeast today, raising concerns that if the burns aren't finished by then, they will send black smoke and a pungent odor of oil toward New Orleans.

-----Walter Chapman, a chemical and biomolecular engineering professor at Rice University, said a controlled burn can help reduce the size of the spill and break up some of the heavier components in the oil.

But sustaining a burn won't be easy with ocean water sapping heat needed to feed the flames. And dense “tar balls,” too heavy to float on the water's surface, will probably not be consumed in the fire and could still wash ashore, Chapman said. “We're still going to see some environmental damage.”

Whatever its size, people in Venice are watching the advancing slick with concern. Steps away from the response staging area are dozens of shrimp boats. Shrimping season opens May 17, but it's possible that the spill could force closures.

-----BP, as owner of the offshore lease where the well was being drilled, is required by a 1990 oil pollution law to cover the costs of regaining control of the well and the cleanup. The company has estimated the effort is costing it $6 million per day.
http://www.chron.com/disp/story.mpl/business/energy/6979467.html

APRIL 29, 2010
Leaking Oil Well Lacked Safeguard Device
The oil well spewing crude into the Gulf of Mexico didn't have a remote-control shut-off switch used in two other major oil-producing nations as last-resort protection against underwater spills.
The lack of the device, called an acoustic switch, could amplify concerns over the environmental impact of offshore drilling after the explosion and sinking of the Deepwater Horizon rig last week.
The accident has led to one of the largest ever oil spills in U.S. water and the loss of 11 lives. On Wednesday federal investigators said the disaster is now releasing 5,000 barrels of oil a day into the Gulf, up from original estimates of 1,000 barrels a day.

U.S. regulators don't mandate use of the remote-control device on offshore rigs, and the Deepwater Horizon, hired by oil giant BP PLC, didn't have one. With the remote control, a crew can attempt to trigger an underwater valve that shuts down the well even if the oil rig itself is damaged or evacuated.

The efficacy of the devices is unclear. Major offshore oil-well blowouts are rare, and it remained unclear Wednesday evening whether acoustic switches have ever been put to the test in a real-world accident. When wells do surge out of control, the primary shut-off systems almost always work. Remote control systems such as the acoustic switch, which have been tested in simulations, are intended as a last resort.

Nevertheless, regulators in two major oil-producing countries, Norway and Brazil, in effect require them. Norway has had acoustic triggers on almost every offshore rig since 1993.
The U.S. considered requiring a remote-controlled shut-off mechanism several years ago, but drilling companies questioned its cost and effectiveness, according to the agency overseeing offshore drilling. The agency, the Interior Department's Minerals Management Service, says it decided the remote device wasn't needed because rigs had other back-up plans to cut off a well.
The U.K., where BP is headquartered, doesn't require the use of acoustic triggers.

----Tony Hayward, BP's CEO, said finding out why the blowout preventer didn't shut down the well is the key question in the investigation. "This is the failsafe mechanism that clearly has failed," Mr. Hayward said in an interview.
http://online.wsj.com/article/SB10001424052748704423504575212031417936798.html?mod=WSJ_hps_LEFTTopStories

“Paper money eventually returns to its intrinsic value - zero.”

Voltaire.

At the Comex silver depositories Wednesday, final figures were: Registered 51.17 Moz, Eligible 63.83 Moz, Total 115.00 Moz.

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Crooks & Scoundrels Corner.

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

"Thus, our national circulating medium is now at the mercy of loan transactions of banks, which lend, not money, but promises to supply money they do not possess.”

Professor Irving Fisher.

Today, has the WSJ found an honest Wall Street firm? Well, New Jersey Wall Street anyway. Can the Journal put away its Diogenes lamp having found a nice great vampire squid? Below, the firm that turned down Goldman’s invite to create synthetic CDOs designed to fail. The “fabulous Fab” got turned down and sent on his way to ACA. Below that, another Brownian blunder for Britain.

The Duke of Dunstable had one-way pockets. He would walk ten miles in the snow to chisel an orphan out of tuppence.

P.G. Wodehouse.

APRIL 29, 2010
SEC Questions 'Not Us' Firm
Executives of Investment Company Had Rejected Goldman Deal as Too Risky
The Securities and Exchange Commission in recent weeks has questioned executives of a little-known firm that played a key role in the business of arranging mortgage investments, as part of the agency's probe into now-controversial deals struck at the height of the housing bubble.

GSC Group Inc. was one of several firms that helped banks including Goldman Sachs Group Inc. put together deals that allowed investors to bet on the housing market.

The New Jersey investment firm turned down Goldman's request to select assets for the debt deal at the center of the agency's fraud lawsuit against Goldman, according to a person familiar with the matter and an email released by a Senate subcommittee this week. The concern: The deal was too risky for investors, according to the person and the email.

GSC received a subpoena from the SEC last summer and held subsequent discussions with the agency, including in recent weeks, according to an executive at the firm.
"GSC's involvement here is strictly as a witness, and we're cooperating with the SEC," said Daniel Ross, a lawyer for the firm.

----In January 2007, Goldman bankers approached GSC to select mortgage-backed securities for a complex deal known as a synthetic collateralized debt obligation that it was creating at the behest of hedge-fund manager John Paulson, At the time, Mr. Paulson was bearish on the mortgage market, according to an email released this week by a Senate subcommittee questioning Goldman executives and according to the SEC complaint. GSC turned away the business.

"As you know, a couple of weeks ago we had approached GSC to ask them to act as portfolio selection agent for that Paulson-sponsored trade, and GSC had declined given their negative views on most of the credits that Paulson had selected," said the email, from Mr. Tourre in late-January 2007.

Goldman eventually tapped ACA Management LLC to select the securities for the deal, which was named Abacus 2007-AC1. The SEC alleges Goldman and Mr. Tourre didn't inform investors that Mr. Paulson's firm, Paulson & Co., played a role in picking the assets and that Goldman and Mr. Tourre misled ACA about Paulson's position.

The deal quickly lost value, leading to investor losses in excess of $1 billion and gains to Paulson of about $1 billion.
http://online.wsj.com/article/SB10001424052748703648304575212641381556412.html?mod=WSJ_hps_MIDDLESecondNews


April 29, 2010
Brown’s ‘bigot’ blunder plunges Labour campaign into crisis
Gordon Brown prostrated himself as a “penitent sinner” yesterday after a brush with a voter triggered a calamitous chain of events that threatened to derail Labour on the eve of tonight’s pivotal TV debate.

The Prime Minister spent an unscheduled 45 minutes inside the terraced house of Gillian Duffy apologising to the Labour-supporting widow for insulting her behind her back.

His muttered description of her as a “bigoted woman”, picked up by a microphone as he drove off from their combative but apparently friendly encounter, plunged Labour’s high command into its most serious crisis of the campaign.

Instead of pressing the party’s record on the economy before tonight’s final trial by television, the election machine was reduced to desperate firefighting as Lord Mandelson led a series of Cabinet ministers on to the airwaves. The Business Secretary said that Mr Brown had been wrong to criticise Mrs Duffy, whose mistake, on her way to buy a loaf of bread, had been to buttonhole the Prime Minister over the deficit, immigration and student debts.

A mortified Mr Brown issued six apologies over the next six hours, including one by e-mail to Labour supporters for letting them down. Despite saying sorry to Mrs Duffy over the telephone, he ignored aides and insisted on driving back to Rochdale from Manchester, abandoning his preparation for tonight’s third and final leaders’ debate, to atone in person for his blunder.

He emerged from her house smiling fixedly, saying that he had misunderstood her earlier words.
http://www.timesonline.co.uk/tol/news/politics/article7111086.ece

It is never difficult to distinguish between a Scotsman with a grievance and a ray of sunshine.

P.G. Wodehouse.

Why A UK Hung Parliament is Likely. Stay long precious Metals.
http://www.ukpollingreport.co.uk/blog/


The monthly Coppock Indicators finished March:

DJIA: +168 UP. NASDAQ: +370 UP. SP500: +196 UP. The great Bull market goes on with the all three continuing higher in positive numbers.

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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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