Showing posts with label REEs. Show all posts
Showing posts with label REEs. Show all posts

Tuesday, 7 December 2010

D-Day.

Baltic Dry Index. 2179 +11

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

The history of taxation shows that taxes which are inherently excessive are not paid. The high rates inevitably put pressure upon the taxpayer to withdraw his capital from productive business.

Andrew Mellon.

It is D-day, the day Irish politicians get to vote the hapless and mostly innocent Irish population into debt slavery forever, in order to get an EU bailout of French, German and UK banks. A day of infamy on a day of infamy, when 69 years ago today Japan launched its unprovoked attack on Pearl Harbor. By diktat of Brussels and Berlin, the Irish are being told to get on their bikes and emigrate. Sold out into poverty to maintain Europe’s banksters affluent lifestyles. The vote, if it goes the Irish government’s way, must surely be the worst betrayal of a democratic people since the second world war. What part of capitalism does Brussels and Berlin fail to understand. Liquidate the Irish banks bondholders. If that creates problems for the lunatic banksters in France, Germany and Great Britain, let those banks go to their central banks and the ECB for emergency finance. If that means that some are insolvent, liquidate their bondholders and stockholders and reorganize them. Why socialize the debts onto the poor Irish population.

Below, the EU on the edge of the Lehman abyss, says Arabian Money Net. Ireland may be sold out all for naught. Stay long precious metals. The worst is still ahead, says Bloomberg.

"liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people."

Andrew Mellon.

Eurozone on the brink of a Lehman-style meltdown

Posted on 07 December 2010

The crisis now enveloping the eurozone is reminiscent of 2008 and the storm that gathered before the collapse of Lehman and the major financial crisis in the autumn. One lesson from 2008 is that once confidence begins to fall in financial markets it quickly develops a momentum of its own.

The bailout of Greece has been followed by Ireland. That leaves bond vigilantes focusing on Portugal and Spain as their next targets. If the line cannot be drawn at the Iberian peninsula then it will move on to Belgium and France say the bond traders.

It ought to be possible to solve this crisis with a combination of austerity dependent on a tighter control of fiscal policy from the centre that will underpin cross guarantees. But the political will to make this happen is missing in Germany.

Without it defaults by Greece and Ireland are still being priced into bond yields that make the cost of servicing national debt prohibitive, and ultimately self-defeating. The default and bust will come, and markets are pricing it in and by doing so making it certain.

But as the Lehman experience showed no financial entity is an island unto itself these days. Cross border lending in the eurozone is the same. Defaults by Greece and Ireland would set off a catastrophic chain reaction across the global banking system.

---- Why is the eurozone sleep walking into this crisis? Well to be fair the US did not handle the subprime crisis much better. It thought Lehman was not too big to fail but it was, and the same mistake may now be made over the eurozone periphery countries that are only five per cent of euro zone GDP.

In these circumstances the flight to gold and silver by European investors is very understandable as is the strength of the dollar, and both can only grow stronger as this crisis unfolds unless something very unexpected now occurs.

More

http://www.arabianmoney.net/gold-silver/2010/12/07/eurozone-on-the-brink-of-a-lehman-style-meltdown

Euro collapse 'possible' amid deepening divisions over bail-out

It is feasible that the euro will not survive the current sovereign debt crisis sweeping Europe, one of the Treasury's leading independent forecasters has said.

By Philip Aldrick, Economics Editor 9:08PM GMT 06 Dec 2010

Under questioning from MPs on the Treasury Select Committee, Stephen Nickell, a member of the Office for Budget Responsibility (OBR) and a former Bank of England rate-setter, said a collapse of the single currency was "a possibility".

Asked more broadly about the sustainability of currency unions, he added: "The general consensus is that sooner or later they fail for one reason or another – but that doesn't mean to say it always happens."

His comments came as deep divisions in the eurozone threatened to drive Spain, Portugal and Ireland into more difficulty.

Attempting to defy Germany, the eurozone's powerhouse and the nation that will provide the bulk of any rescue fund, Belgian Finance Minister Didier Reynders called for the €440bn bail-out fund to be expanded, while Luxembourg Finance Minister Jean-Claude Juncker and Italian counterpart Giulio Tremonti outlined proposals for a joint European government bond.

However, Germany, the Netherlands and Austria on Monday pitched themselves against weaker member states by insisting the rescue package should not be increased. Finance ministers from the 16 member nations were debating the bail-out plans late into the night.

------Ireland, which faces a crucial vote on its debt reduction plans on Tuesday, offered some rare good news as the government appeared to have won sufficient parliamentary support to push the plans through and qualify for the €85bn bail-out package.

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8185225/Euro-collapse-possible-amid-deepening-divisions-over-bail-out.html

Euro’s Worst Ahead as Analysts See Crisis Spreading

Dec. 6 (Bloomberg) -- The most accurate foreign-exchange strategists say the euro’s worst annual performance since 2005 will extend into next year as the region’s sovereign-debt crisis saps economic growth.

Standard Chartered Plc, the top overall forecaster in the six quarters ended Sept. 30 based on data compiled by Bloomberg, predicted the euro may weaken to less than $1.20 by mid-2011 from about $1.33 today. Westpac Banking Corp., the second most accurate, is “bearish in the short term,” and No. 3 Wells Fargo & Co. cut its outlook at the end of last week.

The 16-nation currency’s first weekly gain against the dollar since Nov. 5 may prove short-lived amid mounting concern that more nations will need rescues. European Central Bank President Jean-Claude Trichet delayed the end of emergency stimulus measures last week and stepped up government-debt purchases as “acute” market tensions drove yields on Spanish and Italian bonds to the highest levels relative to German bunds since the euro started in 1999.

“We’re going to get a continuation of the problems that Ireland, Portugal, Spain and others are suffering,” said Callum Henderson, Standard Chartered’s global head of foreign-exchange research in Singapore. “The fundamental issue is these are countries that have relatively large debts, large budget deficits, large current-account deficits, they don’t have their own currency and they can’t cut interest rates. The only way they can get out of this is to have significant recessions.”

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aqC8ID1EeNEI

Moody's downgrades Hungarian government debt

December 6, 2010

BUDAPEST, Hungary — Credit ratings agency Moody's downgraded Hungary's government bonds by two notches on Monday, citing worries about public finance policies and exposure to foreign financial shocks, such as the European debt crisis.

Moody's Investor Service said it cut the rating to Baa3 from Baa1 — just one step above junk category — and kept its outlook as negative, meaning more downgrades are possible in the coming three months.

"The government's (financial) strategy largely relies on temporary measures rather than sustainable fiscal consolidation policies," said Dietmar Hornung, Moody's' senior credit officer and lead analyst for Hungary.

The agency has also cut Hungary's rating for foreign-currency debt and bank deposits.

The move lowered Moody's listing for Hungary to the equivalent rating category of Standard & Poor's — BBB- — while Fitch lists the country at BBB, one step higher.

-----"While market reaction has been moderate for now ... it's conceivable that foreign investors will turn more cautious for a time, until the issues of the 2011 budget and the private pension funds are settled," Equilor said.

Prime Minister Viktor Orban's center-right government has committed to budget deficit limits set by the European Union but has resorted to unusual methods — including special taxes on banks and energy, telecommunications and retail companies — to reduce the deficit below 3 percent of GDP in coming years.

The government is also planning to fill budget holes with some $13.3 billion (€10 billion) accumulated on private pension funds. People opting to stay in the private pension scheme instead of transferring their savings and all future contributions to the state system by the end of January will lose 70 percent of their pensions when they retire, Economics Minister Gyorgy Matolcsy said last month.

http://www.msnbc.msn.com/id/40526537

At the Comex silver depositories Monday, final figures were: Registered 49.16 Moz, Eligible 57.93 Moz, Total 107.09 Moz.

+++++

Crooks and Scoundrels Corner.

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

No Crooks today, they are all gathered in Dublin for a treasonous vote.

The fairness of taxing more lightly income from wages, salaries or from investments is beyond question. In the first case, the income is uncertain and limited in duration; sickness or death destroys it and old age diminishes it; in the other, the source of income continues; the income may be disposed of during a man’s life and it descends to his heirs. Surely we can afford to make a distinction between the people whose only capital is their mettle and physical energy and the people whose income is derived from investments. Such a distinction would mean much to millions of American workers and would be an added inspiration to the man who must provide a competence during his few productive years to care for himself and his family when his earnings capacity is at an end.

Andrew Mellon.

The monthly Coppock Indicators finished November:

DJIA: +178 Down. NASDAQ: +247 Down. SP500: +167 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. November is the sixth down month in a row.

Friday, 12 November 2010

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.

Monday, 8 November 2010

The Great Gold U-Turn.

Baltic Dry Index. 2495 -15
LIR Gold Target by 2019: $30,000. Revised.

"Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium."

Murray N. Rothbard

Later this week, on November 11 -12, the world’s greatest and goodest, assemble in Seoul South Korea, to all intents and purposes, to give President Obama and his Chief Devaluation Officer, Dr. Bernoccio, a “shellacking”. But first this bombshell news from the World Bank. Stay long precious metals and say goodbye the silver shorts. While the gold shorts might have a case for a bailout if they were secretly doing the central banksters bidding, there is no such case for the silver shorts. Having abandoned a bi-metalic standard more than 100 years ago, no central bank had a legitimate interest in manipulating the price of silver lower. This truly represents a seismic shift. The World Bank is now speaking the unthinkable. The next Lehman, or the next currency crisis brings back the official remonetisation of gold. The world's publc has already unofficially remonetised it.

"As fewer and fewer people have confidence in paper as a store of value, the price of gold will continue to rise."

Jerome F. Smith

Nov. 7, 2010, 11:19 p.m. EST

World Bank chief calls for new gold standard

HONG KONG (MarketWatch) –- The president of the World Bank said in a newspaper editorial Monday that the Group of 20 leading economies should consider adopting a global reserve currency based on gold as part of structural reforms to the world’s foreign-exchange regime.

World Bank chief Robert Zoellick said in an article the Financial Times that leading economies should consider “employing gold as an international reference point of market expectations about inflation, deflation and future currency values.”

Zoellick made the proposal as part of reforms to be considered at this week’s G-20 meeting in Seoul.

“Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today,” said Zoellick.

He said such a reform would reflect economic realities and should be considered as a successor to the existing global currency paradigm known as “Bretton Woods II.”

----Zoellick said a return to some sort of currency link to gold would be “practical and feasible, not radical.”

“This new system is likely to need to involve the dollar, the euro, the yen, the pound and a renminbi that moves towards internationalization and then an open capital account,” he said

http://www.marketwatch.com/story/world-bank-chief-calls-for-new-gold-standard-2010-11-07

Now back to the coming Sumo tag team match in Seoul. The G-1 has infuriated the other G-18, by setting out on a currency war with all the others. Great Britain, G-6 or G-7 in the pecking order of America, the EU, China, Japan, Germany et al, fully supports the G-1 since it’s following the same QE policy, but the British Prime Minister, leader of a weak coalition government likely heading to oblivion if their compromise austerity program doesn’t deliver as promised, will likely try just to keep out of the way. Away in a corner ignored and pitied by all, will be the US Treasury Secretary rambling away about his “strong dollar” policy, and how America will never use the fiat reserve dollar standard for its own advantage. Below, Reuters covers the upcoming meeting, and luckily for Prime Minister Cameron, hasn’t noticed that H.M.’s G. was the first of the big nations to adopt devaluation via QE to seek competitive advantage.

"The first requisite of a sound monetary system is that it put the least possible power over the quantity or quality of money in the hands of the politicians."

Henry Hazlitt

G20 finds common ground opposing U.S

Sun Nov 7, 2010 3:02pm EST

WASHINGTON (Reuters) - The Group of 20 is beginning to look more like the G19 plus 1 as emerging and rich countries alike accuse the United States of breaking a vow of unity.

This week's G20 summit will require every bit of President Barack Obama's diplomacy skills after the Federal Reserve embarked on a new $600 billion bond-buying spree, sparking criticism from four continents that the U.S. central bank was ignoring the global repercussions.

Officials from Germany, Brazil, China and South Africa were among those expressing concern that the Fed's money printing could weaken the dollar, drive up commodity prices and send uncontrollable waves of investor cash into emerging markets.

If the G20 fails to defuse these global tensions, it may heighten investor concerns that policymakers are drifting further apart, leaving the world economy vulnerable to another bout of upheaval.

Domestic politics and policies make Obama's job tougher.

He arrives in Seoul for the November 11-12 summit weakened by a crushing congressional election defeat for his Democratic Party. His primary task will be to convince his peers the Fed's actions do not run counter to a U.S.-led push for global cooperation to even out economic imbalances

South African Finance Minister Pravin Gordhan said the Fed's move "undermines the spirit of multilateral cooperation that G20 leaders have fought so hard to maintain during the current crisis."

German Finance Minister Wolfgang Schaeuble was less diplomatic. He called U.S. policy "clueless."

---- G20 countries submitted their medium-term economic plans for International Monetary Fund review last month. Leaders may agree to keep this process going beyond Seoul, keeping the IMF as arbiter.

The Fund told the G20 nations in June that if they adopt mutually supportive policies, they could raise global output by $4 trillion and create 52 million jobs in the medium term.

Unless leaders can put on a convincing show of cooperation in Seoul this week, those loftier economic goals may remain well out of reach.

http://www.reuters.com/article/idUSTRE6A62BC20101107?pageNumber=1

It’s hard to see anything meaningful coming out of this G-20 meeting, since the Fed can hardly reverse a policy that they only announced last week. Worse, the G-1 following last week’s elections, has gone from the Goldilocks economy of 2005 to the Gridlocked economy of 2011, with 3 hard liners joining the Fed in January, very likely taking away Dr Bernoccio’s ability to bring in QE3. At least, for a year or so anyway. With the political side of US government gridlocked, the Fed’s arriving 3 musketeers, threaten to gridlock the last remaining fully functioning part of the US government. If that happens, it’s all down to the Fed’s NY trading desk of serial interventionists. Great vampire squids and pigs in heaven come to mind, as the great commodity super cycle embarks on the next leg up.

Below, the NY Times covers the new age of austerity coming to America no matter what happens in Washington. While austerity is good once it ends and the populace reaches the promised land, going through the process leads to a lot of discontent and unexpected outcomes. Below, the Republican Moses line up to lead America’s masses towards the promised land of fiscal milk and honey. I suspect that 2011-2012 will bring it’s Aaron golden calf moment, before the land of milk and honey is reached.

Now in Power, G.O.P. Vows Cuts in State Budgets

By MONICA DAVEY and MICHAEL LUO Published: November 7, 2010

Republicans who have taken over state capitols across the country are promising to respond to crippling budget deficits with an array of cuts, among them proposals to reduce public workers’ benefits in Wisconsin, scale back social services in Maine and sell off state liquor stores in Pennsylvania, endangering the jobs of thousands of state workers.

States face huge deficits, even after several grueling years of them, and just as billions of dollars in stimulus money from Washington is drying up.

With some of these new Republican state leaders having taken the possibility of tax increases off the table in their campaigns, deep cuts in state spending will be needed. These leaders, committed to smaller government, say that is the idea.

“We’re going to do what families and businesses all over this country have already had to do, and that is live within their means,” said Brian Bosma, a Republican who will soon become the speaker of the Indiana House, alongside a Republican governor, Mitch Daniels, and a supermajority of Republicans in the State Senate.

Mr. Bosma said state revenues next year are expected to reach only the levels of about five years ago, creating an enormous strain. “We’re going to do what is right, and we’ll let the politics land where they may,” he said.

All sorts of candidates make all sorts of promises along campaign trails, but there is a difference after last week’s election: in many states, Republicans have gained such control that when they take office in the coming months they will have a much easier time carrying out whatever agenda they choose.

Republicans gained more than 690 seats in state legislatures (leaving them with numbers last seen more than 80 years ago), at least five more governor seats, and, perhaps most significant, across-the-board power in the legislatures and governor’s offices of at least 20 states — more than twice as many as before the election. Included in that group were Maine and Wisconsin, which the day before the election had been entirely in Democratic hands.

“It’s kind of put up or shut up time,“ said Scott Walker, the governor-elect of Wisconsin, which experienced the largest flip in power in memory. Mr. Walker, a Republican, said he intended to navigate a projected $3 billion budget gap with no tax increases. He also said he planned to remove all “litigation, regulation, excessive cost“ barriers to businesses (declaring Wisconsin, on election night, “open for business!”), and to put an end to a plan for a federally financed rail project between Milwaukee and Madison that he says would cost too much for the state to operate once it is built.

http://www.nytimes.com/2010/11/08/us/politics/08govs.html?_r=1&hp

In European news, the Greek crisis is over according to the Journal. The work and tax shy Greeks voted like turkey’s voting for Thanksgiving and voted to support the government’s harsh austerity plans, in local elections that had morphed into referendum on the government’s austerity program. At least, that’s the way the Greek government and EU spin meisters are spinning it. But was the vote really that simple? On to next Sunday for the definitive round two.

NOVEMBER 8, 2010

Greek Socialists Narrowly Win Local Vote

ATHENS—Greece's ruling Socialists survived a key test of their popularity on Sunday, winning a narrow victory in local elections that were widely seen as a referendum on the government's harsh, three-year austerity program.

With Socialist candidates winning in a majority of Greece's 13 electoral regions and in three of the country's five biggest cities, the government is now less likely to proceed with snap national elections, a threat it had dangled before voters but one that had unsettled the country's financial markets and drawn veiled criticism from Greece's international lenders.

In nationally televised remarks, Prime Minister George Papandreou said voters had backed the government's program and gave no hint that he planned to call early elections after just 13 months in office.

"We know that change is not an easy process," Mr. Papandreou said. "But the Greek people brought us to power one year ago to effect that change. And today they confirmed that they still want that change."

In May, Greece narrowly avoided default with the help of a €110 billion ($154 billion) bailout from the International Monetary Fund and European Union in exchange for a three-year austerity and reform program.

That program has led to steep cuts in pensions and public-sector salaries, as well as a raft of new taxes on a range of items from cigarettes to basic foodstuffs.

The spending cuts and new taxes have also weighed on the economy, which is expected to shrink 4% this year, while unemployment has rocketed to 12% in July from 9.6% a year earlier and business bankruptcies have soared.

But the polls also come amid widespread voter discontent with as many as four in 10 Greek voters staying home. In national elections last October, more than 70% of the electorate voted.

"I didn't go to vote because I didn't want to waste my time with this decayed political system," said Kostantina Antonopoulou, a 34-year-old engineer. "I am sick of the incompetence and the corruption, and I can't see anything changing no matter who wins."

What is more, in all but two of the key races, no candidate from either the Socialists, or the opposition New Democracy party secured more than the minimum 50% of the vote required, which means they face run-off elections next Sunday.

And according to projections by two private Greek television stations, the Socialists now command only a two- to three-percentage-point edge over New Democracy, sharply down from their winning 10-percentage-point margin in national polls last October.

Opposition leader Antonis Samaras said the message of the local elections would be determined in next Sunday's run-off, adding that the government had failed to get "the blank check" it wanted from the voters.

http://online.wsj.com/article/SB10001424052748704580304575600051983397766.html?mod=WSJEUROPE_hpp_MIDDLETopStories

This big story this week plays out in Seoul, this Thursday and Friday. Ironically starting on the 92nd anniversary of the end of the disaster of World War One. Then 3 great empires fell, another went bankrupt but couldn’t bring itself to admit it, and the French Republic and Belgian Empire went into terminal decline. An unready America gave away its winning leadership role and went off into isolation and prohibition. After World War Two, America willingly took on its global leadership role, as a wrecked Europe feared it was about to get swallowed by Stalin’s evil Empire. All too soon, China was swallowed by 25 years of murderous communism. We can only hope that at this coming meeting, someone has a sense of history. Setting off a trade war to match the continuing currency war, risks setting off a return to something closer to the 1930s.

"If ever there was an area in which to do the exact opposite of that which government and the media urge you to do, that area is the purchasing of gold."

Robert Ringer

At the Comex silver depositories Friday, final figures were: Registered 51.30 Moz, Eligible 58.88 Moz, Total 110.18 Moz.

+++++

Crooks and Scoundrels Corner.

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

No crooks today, the U-turn by the World Bank is too significant.

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

Irwin A. Schiff

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.

Monday, 25 October 2010

$4 Trillion in QE2?

Baltic Dry Index. 2727 +07
LIR Gold Target by 2019: $3,000.

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

Elgin Groseclose

More on the Fed’s 4 trillion dollar problem later, first this from Germany’s man at the G-20. “Get lost, you’re a nobody”, was the US Treasury Secretary’s reply. Below, Bloomberg on wrong way Geithner. Just wait until the Fed unleashes 4 trillion in brand new funny money created right out of thin air. Stay long precious metals. I sense a commodities boom and food inflation coming on.

Germany Says Fed Is Headed ‘Wrong Way’ With Monetary Easing

Oct. 24 (Bloomberg) -- The Federal Reserve’s push toward easier monetary policy is the “wrong way” to stimulate growth and may amount to a manipulation of the dollar, German Economy Minister Rainer Bruederle said.

Fed Chairman Ben S. Bernanke yesterday gave Group of 20 finance ministers and central bankers meeting in Gyeongju, South Korea an overview of the U.S. central bank’s efforts to jumpstart the world’s largest economy. His strategy, which investors expect will soon include greater asset purchases, drew criticism at the talks, said Bruederle.

“It’s the wrong way to try to prevent or solve problems by adding more liquidity,” Bruederle told reporters yesterday, saying that emerging-market officials were among the critics. Bruederle, a member of the Free Democratic Party, the junior partner in Chancellor Angela Merkel’s government, stepped in for hospitalized Finance Minister Wolfgang Schaeuble at the meeting.

The debate over the Fed’s strategy comes as the G-20’s advanced nations sought to alleviate concerns over big swings in capital flows to emerging markets by promising to be “vigilant against excess volatility” in exchange rates. The U.S. central bank completed purchases of about $1.7 trillion of debt in March to support the recovery. The policy-setting Federal Open Market Committee next meets Nov. 2-3.

Bill Gross, Pacific Investment Management Co.’s co-founder and manager of the world’s biggest mutual fund, said Oct. 8 on Bloomberg TV the central bank may buy about $100 billion in government debt a month, or $1.2 trillion over the next year.

‘Indirect Manipulation’

“Excessive, permanent money creation in my opinion is an indirect manipulation of an exchange rate,” Bruederle said. The minister has taken a pro-market stance in his first year in office, criticizing state intervention in cases such as providing aid for General Motors Co.’s German Opel unit.

U.S. Treasury Secretary Timothy F. Geithner dismissed prospects of mounting criticism of the Fed’s approach in his press conference after the G-20 meeting yesterday. When asked whether he expected Germany’s criticisms to gain steam, he replied: “I do not.”

http://noir.bloomberg.com/apps/news?pid=20601087&sid=aAG7BhwrfMz8

Below, Goldman’s chief economist Jan Hatzius takes time out from doing “God’s work”, to point out to the Fed an inconvenient truth. According to the voodoo economics, as practiced by the Fed, the Fed now needs to embark on 4 trillion dollars of quantitative easing to achieve its announced goal. I wonder what the Germans will make of that. Note, once we exhaust the trillions we set out into the world of the quadrillions. 4 trillion dollars is about 6.66 percent of global GDP. I wonder of God is trying to send us a message!

"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

Goldman: The Fed Needs To Print $4 Trillion In New Money

With just over a week left to the QE2 announcement, discussion over the amount, implications and effectiveness of QE2 are almost as prevalent (and moot) as those over the imminent collapse of the MBS system. Although whereas the latter is exclusively the provenance of legal interpretation of various contractual terms, and as such most who opine either way will soon be proven wrong to quite wrong, as in America contracts no longer are enforced (did nobody learn anything from the GM/Chrysler fiasco for pete's sake), when it comes to printing money the ultimate outcome will certainly have an impact. And the more the printing, the better. One of the amusing debates on the topic has been how much debt will the Fed print. Those who continue to refuse to acknowledge that the economy is in a near-comatose state, of course, hold on to the hope that the amount will be negligible: something like $500 billion (there was a time when half a trillion was a lot of money). A month ago we stated that the full amount will be much larger, and that the Fed will be a marginal buyer of up to $3 trillion.

Turns out, even we were optimistic. A brand new analysis by Jan Hatzius, which performs a top down look at how much monetary stimulus is needed to fill the estimated 300 bps hole between the -7% Taylor Implied Funds Rate (of which, Hatzius believes, various other Federal interventions have already filled roughly 400 bps of differential) and the existing 0.2% FF rate. Using some back of the envelope math, the Goldman strategist concludes that every $1 trillion in new LSAP (large scale asset purchases) is the equivalent of a 75 bps rate cut (much less than comparable estimates by Dudley, 100-150bps, and Rudebusch, 130bps). In other words: the Fed will need to print $4 trillion in new money to close the Taylor gap. And here we were thinking the economy is in shambles. Incidentally, $4 trillion in crisp new dollar bills (stored in bank excess reserve vaults) will create just a tad of buying interest in commodities such as gold and oil...

Here is the math. More.

http://www.zerohedge.com/article/goldman-fed-needs-print-4-trillion-new-money

In other news, 1.9 billion people were more interested in another Asian meeting than that of the useless G-20. Below, Xinhua covers the 7th China-ASEAN conference, the first of the new CAFTA era. Right now CAFTA accounts for about 10% of global GDP. By 2020 that’s very likely to be closer to 20%, although China will still be by far the largest part of CAFTA.

Seventh China-ASEAN Expo closes in south China, boosting FTA operations

NANNING, Oct. 24 (Xinhua) -- The 7th China-ASEAN (Association of Southeast Asian Nations) Expo has helped forge closer ties between China and ASEAN nations and promote the operation of China-ASEAN free trade area (CAFTA), an official with the organizing committee said here Sunday.

The six-day event, which closed here Sunday in Nanning, capital of south China's Guangxi Zhuang Autonomous Region, had been "productive" and "fruitful", said Chen Wu, Vice Co-chair and Secretary General of the China-ASEAN Expo Organizing Committee, and also Guangxi's Vice Governor.

"The Expo has reinforced the China-ASEAN strategic partnership, strengthened regional economic cooperation and facilitated the operation of the CAFTA," said Chen at the closing ceremony of the Expo.

This year's Expo is the first one since the establishment of the much-anticipated CAFTA, which was formally launched on Jan.1, 2010.

With a population of 1.9 billion people and a combined gross domestic product (GDP) of 6 trillion U.S. dollars, CAFTA ranks as the world's third largest trade zone following the North American FTA and the European FTA.

As of 4 p.m. Sunday, trade deals signed at this year's expo were worth 1.71 billion U.S. dollars, up 3.5 percent from last year's event, while a total of 135 cross-border economic cooperation projects had been signed with investment up 3 percent from the 6th Expo to 6.69 billion U.S. dollars, he said.

---- ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam with a total area of 4.5 million square kilometers.

http://news.xinhuanet.com/english2010/china/2010-10/24/c_13573088.htm

With the Bernanke Fed about to put the dollar on a suicide path, Russia and China are making plans for what comes after. The Fed’s Kamikaze plan is expected to be announced right after next week’s US elections.

"We are in a world of irredeemable paper money - a state of affairs unprecedented in history."

John Exter

Russian Central Bank supports ruble-yuan direct currency exchange

MOSCOW, Oct. 22 (Xinhua) -- Russian Central Bank is willing to cooperate with China to push forward the realization of direct currency exchange between ruble and Chinese yuan, Victor Melnikov, deputy head of the central bank, told Chinese ambassador Li Hui on Friday.

During the talks between Li and Melnikov, where they exchanged views on current world economic situation and Sino-Russian financial cooperation, the bank director said Russian Central Bank would like to continue active dialogues with Chinese side so as to deepen financial coordination and mutual investment.

He especially mentioned the issue of ruble-yuan direct exchange, noting that the move, once realized, would bear both economic and strategic significance for the two countries.

The Chinese ambassador said the Chinese and Russian leaders have achieved consensus on further promoting bilateral pragmatic coordination in financial sphere during Russian President Dmitry Medvedev's recent visit to China.

http://news.xinhuanet.com/english2010/world/2010-10/23/c_13571261.htm

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

Irwin A. Schiff

At the Comex silver depositories Friday, final figures were: Registered 52.12 Moz, Eligible 59.86 Moz, Total 111.98 Moz.

+++++

Crooks and Scoundrels Corner.

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

Today, it’s those tax and work shy Greeks again, this time planning to drop producing energy from inefficient, pollution heavy lignite, and replace it with renewable energy from solar and wind. Has anyone got 2 billion euros to lend?

"Increasingly, the wealth of the modern world has come to be represented by financial assets rather than real assets, and this to me is a very unhealthy situation, because financial assets are inherently unstable. Financial assets (currencies, bonds, mortgages, stocks, bank credit, etc.) can be quickly and violently reduced in value, or destroyed completely by either inflation or deflation."

Donald J. Hoppe

PPC plans renewables renaissance, giant solar park

ATHENS Fri Oct 22, 2010 12:04pm EDT

ATHENS (Reuters) - Greek utility PPC plans a sevenfold increase in its clean energy production over the next five years and is thinking of building one of the world's largest solar parks, the head of its renewables unit said on Friday.

Cash-strapped Greece uses state-controlled PPC as a spearhead to meet its ambitious climate change target of green energy accounting for 40 percent of total electricity production by 2020, up from 4 percent currently.

PPC Renewables plans to invest about 2 billion euros ($2.78 billion) to increase its capacity from about 160 megawatts at the end of this year to 1,200 megawatts in 2015, Chief Executive Officer Ioannis Tsipouridis said in an interview.

Back in 1982, PPC built Europe's first wind farm on the gale-swept Aegean island of Kythnos. But it has lost its early lead and the company now has just 8 percent of Greece's renewable energy production.

"We are waking up now," said Tsipouridis. "At the end of the 1980s we were Europe's fourth-largest renewable energy producer, but then a big slump followed," he added.

Failure to boost renewables would cost PPC 1.3 billion euros in extra carbon costs a year after 2013, when the free allocation of carbon emission rights ends. PPC Renewables plans to run 713 MW of wind farms and 245 MW of solar parks by 2015, according to company plans.

The company is seeking partners to help fund more than 600 MW of these projects, including a large 200 MW solar park in northwest Greece.

"It's a plan under discussion, we have to find a strategic partner, mainly for financing," Tsipouridis said.

Last month, PPC Renewables signed a framework agreement with French group EDF Energies Nouvelles. Joint projects will be considered on a case-by-case basis, Tsipouridis said.

"EDF has a total 2,000 MW of mature potential projects in Greece and it wants to do all of them in cooperation with us," he said. "It remains to be seen how many of them will be implemented."

Renewables could help save jobs in the country's lignite heartland of northwest and southern Greece, where polluting lignite-fired units will go offline in the next 10 years.

PPC, the EU's second-biggest producer of lignite, plans to decommission up to 20 of its total 24 thermal plants by 2020. The company is the main jobs provider in Western Macedonia, where unemployment is among the highest in the country.

"We want to produce clean energy, create jobs and make use of the land we already own in these areas," Tsipouridis said.

Red tape and addiction to cheap, polluting coal has turned Greece into a renewables laggard, even though it is one of the sunniest and most windy countries in Europe.

http://www.reuters.com/article/idUSTRE69L3JB20101022

One way or another, tomorrow will not be like today which was like yesterday.

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.

Tuesday, 5 October 2010

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.

Friday, 1 October 2010

A Wet Day in Wales.

Baltic Dry Index. 2446 -22
LIR Gold Target by 2019: $3,000.

Wales is the land of my fathers. And my fathers can have it.

Dylan Thomas.

We have reached another weekend, and a busy weekend too. Latvia holds parliamentary elections of Saturday with an austerity weary electorate likely to give a big boost to a pro-Moscow party. Brazil holds its Presidential election on Sunday. China takes today off for the start of Golden Week. Australia take Monday off for Labour Day. In Wales, America and Europe’s golfers discover why it’s not such a good idea to hold the Ryder Cup contest in wet and windy, beautiful Wales in October. With a little bit of luck though, it will help showcase modern Wales as a destination for tourism and establishing businesses. In Delhi India, the ready or unready Commonwealth Games get underway on Sunday and we wish the organizers and all taking part a successful event that does modern India proud. With bad timing in cricket mad India, the first in the current tour, India v Australia test match also starts this weekend. My guess is that all of them will stay warmer and drier than our American and European guests in Wales.

Later today, Dr. Ben Bernanke gets to address the unfortunately named, U.S.: Financial Stability Oversight Council. What financial stability? What oversight? A council of the three blind mice? Given the Doc’s disastrous track record, a record of misjudgment and error second only to that of fallen maestro Guru Greenspan, why would anyone care what Helicopter Ben has to say other than to bet the other way? Still even a stopped clock is right twice a day, and no one, not even wrong way Bernanke can have a 100% record of always being wrong, so perhaps this is the red letter day we get note in our diaries. All the same I’m sticking with gold and silver.

We open for the day with US tulips, sorry stocks, coming off their best September since 1939, when Europe’s new war promised boom times for America’s industries. This year the prospects don’t look anything like so good, but with the Fed conducting stealth back door quantitative easing and promising more front door QE as well to commence imminently, the unreal artificial Fed induced stock bubble continues to grow. It goes without saying that this too will probably end badly with the Fed loudly proclaiming to all that there was nothing they could do. At least they could plant tulips and sell the flowers or have I missed something important about a coming war?

When you can see the coast of Devon from Swansea it is going to rain. When you can't, it is raining already.

US stock markets enjoy best September for 71 years

Stock markets in the US enjoyed their biggest September rally since 1939 on Thursday despite falling on the day.

Published: 10:11PM BST 30 Sep 2010

The broader S&P 500 rose 8.8pc on the month and the Dow Jones was up 7.7pc.

The last time Wall Street saw a stronger September, when the Dow Jones soared 13.49pc , was at the start of the Second World War, when traders anticipated a strong rise in demand for US manufactured goods and war materials.

However, on Thursday the S&P 500 fell 3.53 to 1141.20 and the Dow dropped 47.23 to 10788.05 as new data on jobs and economic growth continued to indicate the economy was recovering at a slow pace.

Gross domestic product, which measures the output of goods and services in the US, increased at an annual rate of 1.7pc in the second quarter and the number of Americans filing new claims for jobless benefits fell more than expected last week for the third time in four weeks.

Separately, the ISM-Chicago Business Survey rose in September to chalk up a full twelve months of expansion, showing an improvement in industrial activity in the key area.

Sentiment has been underpinned by solid company earnings, a spate of big corporate deals, poor returns from bonds as interest rates hovering around record lows, and hopes that the US Federal Reserve will step in if growth in the world's largest economy stalls.

http://www.telegraph.co.uk/finance/markets/8035449/US-stock-markets-enjoy-best-September-for-71-years.html

Next, Ireland catapults itself over Greece in the race to be the first EU sovereign debt default. The ECB will just have to keep Ireland afloat until the German’s cry enough! Below, what happened after the last Leprechaun left twon.

If you ever go across the sea to Ireland,
Then maybe at the closing of your day,
You will sit and watch the moon rise over Claddagh,
And see the German Euro sink under Galway Bay
.

Ireland's love affair with masochism

Last updated: September 30th, 2010

A more shocking set of numbers is hard to imagine. The latest bailout package for Ireland’s insolvent banks will raise the nation’s budget deficit from an already alarmingly high 12 per cent to a jaw dropping 32 per cent, which will in turn send overall public debt spiralling upwards to just shy of 100 per cent of GDP. Only a few years back, Ireland had one of the best public debt to GDP ratios in the eurozone at under 25 per cent. The scale of the deterioration is truly astonishing, and vivid illustration of the degree to which Ireland’s “tiger economy” was built on the sand of misallocated credit.

It seems almost perverse to start looking for good news amidst all this devastation, but as in the aftermath of an earthquake, it is the triumph of hope over despair which always provides the more uplifting story. The good news for Ireland is that these latest bailouts have the potential to draw a line in the sand, and provide a grounding from which the economy can rebuild.

The other piece of good news to take from all this destruction is that Ireland has already fully funded itself until the middle of next year. Spreads on Irish debt are still painfully high, but the finance minister Brian Lenihan has at least bought a little time to sort out the mess. He can but hope that by the time he comes to tap markets again things will be on the mend and that bond investors will therefore look on his demands a little more sympathetically. Mr Lenihan promises to reduce the deficit to 3 per cent of GDP by 2014.

Even so, there are plenty of reasons for fearing a less happy outcome. Ireland’s nascent economic recovery stalled in the second quarter, when output shrunk by an annualised 1.2 per cent. With even more austerity set to be piled on top of what’s already been announced, there must be some doubt over whether Ireland can grow its way back to health.

The danger is of a vicious cycle of decline where more cuts prompt a further economic contraction, which in turn causes further bad debts in the banking sector, renewed collapse in the tax base, and therefore an ever wider deficit. Stuck with a monetary policy which is essentially set to suit German needs, Ireland could be condemned to a semi-permanent deflationary funk.

http://blogs.telegraph.co.uk/finance/jeremywarner/100007882/irelands-love-affair-with-masochism/

We close for today’s travel shortened update with a good news story that just might be what lifts the west’s economies up to a better future 2014 onwards. Lately there has been a furry of technological breakthroughs in solar power, renewable energy and in e-mobility. I think that we are at the dawn of the second age of electricity. While it doesn’t do a lot for us in 2010-2012, thereafter I think our future looks brighter as we learn to use our resources more efficiently, less pollutingly, and more sustainably. Below, Jaguar and Bladon Jets, unveil a pretty interesting test bed EV car.

And the latest news from the Glamorgan county cricket ground at St. Helen's in Swansea: Two and a half inches of rain have fallen for seven runs.

Paris Motor Show 2010: Jaguar creates electric supercar with jet engine

Jaguar has made a radical step forward in the development of electric cars and provided a glimpse into its future by producing a supercar capable of speeds over 200mph.

By Graham Ruddick Published: 6:55AM BST 30 Sep 2010

The Daily Telegraph can today reveal the first images of the C-X75 concept car, which has a top speed of 205mph, making it the fastest ever electric road car.

The C-X75, which will be officially unveiled at the Paris motor show today, can also travel for 560 miles without needing to be recharged through a plug – significantly further than the current industry peak of around 100 miles – because of a gas turbine system designed by a British engineer.

The gas turbine technology from Bladon Jets, which is based in Shropshire, recharge the battery beyond its basic range and provides extra power to the four electric motors driving the wheels.

Ralf Speth, chief executive of Jaguar Land Rover, said: “The C-X75 demonstrates that Jaguar is still leading the field automotive design and technology. And will always continue to build beautiful, fast cars."

The gas turbines on the car need to be refueled, meaning the car essentially uses hybrid technology. However, it is classed as an electric car because it is driven by electric motors and there is no petrol engine.

More.

http://www.telegraph.co.uk/motoring/motor-shows/paris-motor-show/8033781/Paris-Motor-Show-2010-Jaguar-creates-electric-supercar-with-jet-engine.html

Bladon Jets.

http://www.bladonjets.com/

A certain political appointment once lay between a Welsh and a Scottish M.P.

An Englishman was asked who he thought should get the job.

'Well,' he replied, 'if we get the Welshman he'll pray on his knees on Sundays and on his neighbours the rest of the week.

If we get the Scotsman he'll keep the Sabbath and anything else he can lay his hands on.'

At the Comex silver depositories Thursday, final figures were: Registered 53.88 Moz, Eligible 57.19 Moz, Total 111.07 Moz.

+++++

Crooks and Scoundrels Corner.

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

Today, the news from Europe is all bad.

European Manufacturing Cools, Export Orders Weaken

Oct. 1 (Bloomberg) -- Growth in Europe’s manufacturing industry slowed in September and export orders weakened as a cooling global recovery restrained demand.

A gauge of manufacturing in the 16-nation euro region declined to 53.7 from 55.1 the previous month, London-based Markit Economics said today. That compares with an initial estimate of 53.6 released on Sept. 23. It’s the 12th straight month with a reading above 50, indicating expansion.

Europe’s economy is cooling after growth accelerated to the fastest pace in four years in the second quarter. The European Commission sees a more “moderate” expansion in the second half as unemployment close to a 12-year high hobbles consumer spending and governments step up austerity measures to reduce budget deficits.

http://noir.bloomberg.com/apps/news?pid=20601087&sid=a_iNu0sRTMq4&pos=5

Swiss Tax Treaty With Germany May Finish Bank Secrecy in Europe

Oct. 1 (Bloomberg) -- Switzerland’s tax treaty with Germany may finish banking secrecy in Europe and prompt withdrawals as Swiss banks will no longer guarantee client confidentiality.

The treaty will allow investigators to request Swiss assistance in tracking down undeclared money deposited by German nationals, said Eric Jucker, a Zurich-based tax lawyer. It probably will be signed this month by Swiss Finance Minister Hans-Rudolf Merz and his German counterpart Wolfgang Schaeuble.

“The agreement that will come into force will go very much further on the information that can be exchanged between officials,” Jucker said. “Banking secrecy will come to an end outside of Switzerland” as the country adopts international tax standards, he said.

Germans are the biggest clients of Swiss money managers with assets of about 260 billion francs ($264 billion), according to estimates from Geneva-based broker Helvea. Swiss banks, including Julius Baer Group Ltd. and Bank Sarasin & Cie., are now setting up branches around Europe to retain cross-border clients.

The German accord follows standards set out in Switzerland’s agreement with the Organization for Economic Cooperation and Development in March 2009 after the country was threatened with being blacklisted as a tax haven. It will spell out circumstances under which Switzerland will give Germany “administrative assistance” in cases where there is evidence of tax evasion, said Mario Tuor, a spokesman for the Swiss State Secretariat for International Financial Matters in Bern.

http://noir.bloomberg.com/apps/news?pid=20601087&sid=a5kWoTlMi31Q&pos=3

I hear Evan Morgan broke the world 100 metre record wearing mining boots."

"How did he manage that?"

"He fell down the shaft."

Have a great weekend everyone, whatever pastime you’re up to or sport you’re following. Check with the blog ofr the weekend update.

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.