Then The Roof Fell In.

Baltic Dry Index. 2378 +166

LIR Gold Target by 2019: $3,000.

"We will not have any more crashes in our time."

John Maynard Keynes. 1927

First the good news, the Baltic Dry Index is advancing again, having rallied some 600 points and is back to the level of the start of July. World trade starting to recover? A rush for available wheat and rice supply, given production problems in Eur-Asia and Canada? Ship chartering for a relief effort for Pakistan? A seasonal bounce? While I would like it to be the first, that seems improbable.

Yesterday the Bank of England’s King, added to the week’s earlier gloom from the gurus at America’s Fed. In the markets Goldilocks woke up and said this foods terrible and while I’ve been sleeping someone has stolen the roof! Thanks to the magic of the High Frequency Trading Programs of the great vampire squids, the US market was at the risk of a rout turning into another “flash crash” all day long. Up first, the Journal gives its take on yesterday’s action. Bear season has opened two weeks early this year it seems. Another 1987 style program trading event looms. Can the US market hold on till the traditional crash season arrives?

“Did you ever think that making a speech on economics is a lot like pissing down your leg? It seems hot to you, but it never does to anyone else."

Lyndon B. Johnson.

AUGUST 12, 2010

Markets Swoon on Fears

Stocks Pummeled on Signs of Global Slowdown; Money Flees to Dollar and Yen

Investors around the world scrambled for safe havens as fears of a global economic slowdown grew.

The yen briefly touched a 15-year high against the U.S. dollar, the euro suffered its worst selloff in nearly two years, and global stock markets tumbled.

A day after briefly cheering the Federal Reserve's announcement it would buy Treasury debt to bolster the U.S. economy, investors Wednesday began fretting about the negative implications of the move: The world's biggest economy still needs extraordinary government help.

Data on Wednesday showed the U.S. trade deficit widened, and there were worrying economic signals out of China and Japan. All that fed investor angst. "It's pretty clear that economic gravity is setting in," said Talley Leger, portfolio strategist at Barclays Capital.

---- Market sentiment has soured quickly. It underscores just how jittery investors remain nearly two years after the collapse of Lehman Brothers Holdings Inc. sent markets world-wide crashing.

Just last month, stocks and other risky investments were rallying in response to solid corporate profits. There were also hopes that, with European sovereign-debt woes temporarily abated, the global economy could avoid a second dip into recession.

But the Fed's downbeat assessment on Tuesday seemed to bring the risks to the global economy into sharper focus. It followed a string of disappointing U.S. economic data, particularly in the labor market.

----- To the extent that there has been encouraging economic news lately, it has generally stemmed from international trade. The U.S., the euro zone and Japan could all benefit from growing trade. But with China showing increasing signs of slower economic growth, hopes of robust export-driven growth seem to be fading.

Underscoring that risk, the U.S. trade deficit in June was the widest since October 2008, the Commerce Department said. That implies slower growth in the U.S.

http://online.wsj.com/article/SB10001424052748704901104575423422838391134.html?mod=WSJ_hps_LEFTWhatsNews

Next, the Bank of England boldly goes where few private economists are willing to tread. There won’t be a double dip recession in the UK, says the BOE’s Governor King. But he would say that, wouldn’t he, to misquote Mandy Rice-Davies. Besides, the BOE like all central bankers has form, when it comes to misleading the public and missing signs of trouble in the UK and global economy. I’ll bet he’s just flat out wrong and that the UK double dips at some point next year.

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.

Bank of England lowers UK growth forecast

The Bank of England has lowered its growth forecast for next year but said austerity measures announced in the Coalition’s emergency Budget would not derail the recovery

By Angela Monaghan Published: 2:11PM BST 11 Aug 2010

The economy will be growing by about 3pc year-on-year in the second half of 2011, according to the .Bank's August Inflation Report. This compares with the 3.5pc it was forecasting in the May report.

Mervyn King, the Bank’s governor, said Britain was facing a “choppy recovery”.

“The UK recovery is likely to continue, but the overall outlook is weaker than that presented in the May Report, reflecting the softening in confidence, the persistence of tight credit conditions and the faster fiscal consolidation,” he said

However, despite the downgrade, the Bank remained more optimistic on growth than City economists and the Office for Budget Responsibility, which was created by the Government to produce forecasts free from ministerial interference.

In the in the Coalition government's austerity Budget the OBR predicted 2.3pc growth in 2011 and 2.8pc growth in 2012.

The Bank is not predicting a double-dip recession in the UK, instead giving clear backing to the scale of tax rises and spending cuts announced by the Government as it attempts to reduce the nation’s £155bn deficit.

http://www.telegraph.co.uk/finance/economics/7938951/Bank-of-England-lowers-UK-growth-forecast.html

Next, look out below. The US economy’s green shoots recovery is looking more and more like a mirage.

GDP much weaker in second quarter, economists say

Aug. 11, 2010, 1:49 p.m. EDT

WASHINGTON (MarketWatch) -- Growth in the U.S. economy from April through June was probably much softer than first estimated by the government, private economists said Wednesday after updated trade figures for June were published showing higher imports.

"The markets might face their biggest downside economic surprise of this recent growth slowdown yet in the form of a downward second quarter gross domestic product revision, which today's U.S. trade deficit figures suggest will be a whopper," wrote analysts at Action Economics.

Instead of growing at a 2.4% annualized pace in the second quarter, real gross domestic product will likely be cut almost in half to a 1.3% annual rate, according to economists surveyed by MarketWatch.

----- Government economists had expected the deficit to widen but the June data surprised everyone.

The report was "spectacularly terrible," said Ian Shepherdson, chief U.S. economist at High Frequency Economics. See full story.

The June trade deficit rose to $49.9 billion from $42 billion, well above the consensus of $42.5 billion.

http://www.marketwatch.com/story/whopping-downward-revision-for-q2-gdp-seen-2010-08-11

Back on the wrong side of the Atlantic, bad signals were flashing again for Europe’s good PIG. Is it all over for the EU’s Greece and Hungary? Below, the Governor of Ireland’s central bank joins Governor King in “he would say that wouldn’t he”.

Irish debt under fire on fresh bank jitters

Ireland’s borrowing costs have begun flashing warning signs again on fears the full damage from the country’s banking crisis has yet to surface.

By Ambrose Evans-Pritchard, in Dublin Published: 11:24PM BST 11 Aug 2010

Spreads on Irish 10-year bonds reached 297 basis points over German Bunds on Wednesday amid reports the European Central Bank (ECB) is intervening to shore up Irish debt, a reversal of the bank’s plans to withdraw emergency support. The euro fell almost three cents against the dollar from $1.32 to $1.29.

Patrick Honohan, governor of Ireland’s central bank and a member of the ECB’s council, dismissed the bond jitters as yet another spasm by jumpy and emotional markets.

“The spreads are a setback for our hopes of a narrowing to reflect the fiscal credibility of the country. I don’t look at them every day but at this level they are ridiculous,” he told The Daily Telegraph, speaking at his office in the heart of Dublin.

----- The latest jitters stem from the escalating costs of Ireland’s rescue of Anglo Irish Bank (AIB). The European Commission revealed this

week that it had approved government support worth €24.3bn (£20bn) for the bank, significantly higher than estimates by Dublin earlier this spring.

Dr Honohan fumed at the mere mention of AIB, which brought the country to its knees two years ago in much the same way the Icelandic banks crippled their host state.

“They were egregious, in a league of their own,” he said. “If it hadn’t been for them the losses would have been manageable. The net cost to the Irish state of recapitalising the banks is €25bn, or 15pc to 16pc of Irish GDP. It is nearly all the result of AIB.”

----- Under Ireland’s rescue programme the viable core of AIB’s business will be cut from the wreckage and relaunched as a new entity. Bad debts are already parked at Ireland’s National Asset Management Agency (NAMA) at an average “haircut” of 50pc.

Antonio Garcia Pascual, at Barclays Capital, said the NAMA strategy initially won plaudits but is increasingly viewed by markets as “a very costly approach”. There are growing doubts over the exposure of Irish banks to British property.

Fergal O’Brien, chief economist for the Irish Business and Employers Federation, said another threat is creeping up on the banks. They issued tracker mortgages during the boom at rates that are now underwater. “This has become a big problem. The banks are locked into loss-making contracts,” he said.

----- The budget deficit seems stuck at 14pc of GDP, and unemployment has risen to 13.7pc. The severity of the slump is eating away at the tax base. Critics say the country is chasing its tail.

Under the deflation, nominal GDP has contracted by almost 20pc. Yet the debt stock has risen. Ireland is uncomfortably close to a debt-deflation trap along the classic lines described by Irving Fisher in the 1930s.

Dr Honohan said the tax take is a lagging indicator. Revenues are “undershooting a little” but there is nothing yet to worry about. Asked about the risk of a Fisherite deflation spiral, he waved his hands in protest and said the country was at no risk of being pushed “head over tail downwards” by the discipline of EMU membership.

http://www.telegraph.co.uk/finance/economics/7940078/Irish-debt-under-fire-on-fresh-bank-jitters.html

We must protect the position of the American dollar as a pillar of monetary stability around the world.

In the past 7 years, there has been an average of one international monetary crisis every year. Now who gains from these crises? Not the workingman; not the investor; not the real producers of wealth. The gainers are the international money speculators. Because they thrive on crises, they help to create them.

In recent weeks, the speculators have been waging an all-out war on the American dollar. The strength of a nation's currency is based on the strength of that nation's economy--and the American economy is by far the strongest in the world. Accordingly, I have directed the Secretary of the Treasury to take the action necessary to defend the dollar against the speculators.

I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets, except in amounts and conditions determined to be in the interest of monetary stability and in the best interests of the United States.

Richard M. Nixon 1971.

http://www.youtube.com/watch?v=iRzr1QU6K1o

At the Comex silver depositories Wednesday, final figures were: Registered 51.08 Moz, Eligible 59.51 Moz, Total 110.59 Moz.

+++++

Crooks and Scoundrels Corner.

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

No crooks today, just worrying signs from Hungary, that economic decline is accelerating. Another country seems to be about to enter “the death spiral.”

OTP Second-Quarter Net Falls 35% on Record Provisions

Aug. 12 (Bloomberg) -- OTP Bank Nyrt., Hungary’s largest lender, said second-quarter profit fell 35 percent as provisions for bad loans soared to an all-time record.

Net income declined to 27.4 billion forint ($125.4 million) from 42.2 billion forint a year earlier, the bank said in a statement on the website of the Budapest Stock Exchange today. That missed the 38.1 billion forint mean estimate of 11 analysts surveyed by Bloomberg. Provisions for loan losses jumped to 96.1 billion forint from 54.5 billion forint in the previous quarter.

“The single most important challenge for net profit has been stemming from risk cost developments,” the bank said in the statement. “While general conditions showed signs of improvement in many countries across the group, the portfolio quality deterioration accelerated; as a result all-time high provisions had to be made.”

OTP, which has subsidiaries in nine countries in Central and Eastern Europe, increased provisions as recession made it harder for borrowers to repay loans. The company is counting on a recovery to support loan demand this year. Economic recovery has so far showed a clear positive sign only in Russia, where loans rose 7 percent in the first half.

Provisions of 151 billion forint in the first six months of the year provide a “comfortably high” 74 percent coverage for loans that are 90 days overdue, according to the bank. The ratio of these loans rose to 12.4 percent of total loans from 10.7 percent in the first three months.

Goodwill Impairment

Net profit for the period was also hit by goodwill impairment at OTP’s Montenegrin unit as a deteriorating economic environment forced OTP to provide capital for its subsidiary in June.

Net-interest income, the difference between what the bank pays on deposits and charges on loans, was boosted primarily by a 22.6 billion forint increase on fair-value adjustment gain on foreign-exchange swaps.

http://noir.bloomberg.com/apps/news?pid=20601095&sid=a_mqwOF2iipQ

Another weekend, and economic storm clouds are gathered everywhere. The death of the Great Nixonian error of fiat money, seems closer than ever. The next Lehman is lurking out there, hiding behind smoke and mirror accounting, still pretending to the regulators that all is well. For now the Fed says it is going to hold its balance sheet steady. If its deeds live up to its words, US stocks will lead global stock markets into protracted broad based retreat. If that happens, the next Lehman will not be long in becoming apparent. The monthly Coppock indicators suggested that our recent stock rally was an unsustainable error, now correcting. Time to mull things over in yet another high summer weekend. Time to implement a defensive strategy for Bear Season. Have a great weekend everyone. Check with the weekend blog for updates.

“A people that values its privileges above its principles soon loses both."

Dwight D. Eisenhower.

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.

Technorati Tags: BOE,Fed,Stock market crash,bear season,Ireland,Hungary default,global cooling,Bagehot,mining stocks,REEs,HREs.

China: Here We Go Again.

Baltic Dry Index. 1732 +12

LIR Gold Target by 2019: $3,000.

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

President Ronald Reagan.

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

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

Benjamin Disraeli.

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

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

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

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

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

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

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

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

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

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

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

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

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

Quality means doing it right when no one is looking.

Henry Ford.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Winston Churchill.

Hungary's IMF revolt augurs ill for Greece

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

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

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

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

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

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

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

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

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

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

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

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

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

By Louisa Fahy

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Crooks and Scoundrels Corner.

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

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

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

Woody Allen.

A hidden world, growing beyond control

By Dana Priest and William M. Arkin

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

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

The investigation's other findings include:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

More.

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

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

Joseph Heller.

The monthly Coppock Indicators finished June:

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

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

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

Spotless Days July 19
Current Stretch:0 days

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

http://www.spaceweather.com/

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

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