Baltic Dry Index. 1406 -03
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
"Annual income twenty pounds, annual expenditure nineteen, nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."
Charles Dickens. David Copperfield.
For once we don’t open with Greece, basket case of the ill fated European Monetary Union. Greece will be saved by a European Union leaders junket, as the EU’s Lords of the Universe gather in Brussels for sumptuous feast this evening, to celebrate the survival of Brussels man in Athens, and a new round of crushing austerity to be imposed on the tax and work shy Greeks. Would the last Greek out turn off the lights and hand the keys over to Chancellor Merkel.
No, this morning we open with quantitative easing, which the Fed and the Old Lady of Threadneedle Street, seem to be conditioning the market for another round of QE later in the Autumn.
“Damn the inflation, full QE speed ahead”.
With apologies to Admiral David Farragut.
Federal Reserve admits US economy is struggling
The Federal Reserve has again cut its growth forecasts for the US economy and admitted that "longer-lasting" factors may help explain the current slowing in the recovery.
By Richard Blackden, US Business Editor 10:51PM BST 22 Jun 2011
The central bank took a red pen to its projections for this year and next, as well as to the unemployment rate. The world's biggest economy will expand between 2.7pc and 2.9pc this year, weaker than it expected just two months ago.
Unemployment, meanwhile, will stay above 8pc throughout next year in a prediction that will depress President Barack Obama, who is already on the back foot over the sluggish economy.
The new forecasts come as the Fed confirmed that its second, controverisal round of quantitative easing – or money printing – will end this month and as it pledged to keep the US interest rates at between 0pc and 0.25pc for an extended period.
The latest evidence from manufacturing, the housing market and the consumer – still the engine of the economy – all suggest the deterioration that started in the first quarter of this year has extended into the second.
"Part of the slowdown is temporary, part of it may be longer lasting," said Fed chairman Ben Bernanke. "We don't have a precise reading on why this slower pace of growth is persisting."
The Fed chief reiterated a view, first voiced in April, that a third round of quantitative easing is not currently needed but added: "We'd be prepared to take additional action, obviously, if conditions warranted."
However, the Fed also reiterated its expectation that higher energy prices will prove short-lived and the recovery is self-sustaining. The bank cut its forecast for headline inflation this year to a range of between 2.3pc and 2.5pc from an April forecast of 2.1pc to 2.8pc.
More
http://www.telegraph.co.uk/finance/economics/interestrates/8592432/Federal-Reserve-admits-US-economy-is-struggling.html
Quantitative easing back on Bank of England's agenda
Another round of money printing may be necessary to keep the recovery on track, Bank of England policymakers have warned.
By Philip Aldrick, Economics Editor 5:45AM BST 23 Jun 2011
In its most pessimistic outlook for months, the Bank's rate-setting Monetary Policy Committee (MPC) "judged that the downside risks to the prospects for medium-term inflation had increased", according to the minutes for this month's meeting.
Seven members voted to hold rates at 0.5pc, with two calling for an immediate quarter-point rise to counter soaring inflation of 4.5pc – twice the MPC's 2pc target.
The vote, and the minutes, "struck a distinctly dovish tone", KPMG chief economist Andrew Smith said after four months in which the vote has been 6-3.
The change was caused by the departure last month of Andrew Sentance, who wanted a half-point rise. His successor, Ben Broadbent, voted for policy to remain unchanged.
Economists were struck that "for some of these members [voting for unchanged policy], it was possible that further asset purchases might become warranted if the downside risks to medium-term inflation materialised".
Adam Posen again called for the £200bn of quantitative easing (QE) to be increased by £50bn, as he has since October.
"This confirms that the die is cast – for good or ill, the strategy is to ignore rising inflation and wait for the recovery to strengthen," Mr Smith said.
More
http://www.telegraph.co.uk/finance/economics/8592491/Quantitative-easing-back-on-Bank-of-Englands-agenda.html
With nothing much to do in Brussels, other than blame the Germans for everything, including the weather, the EU’s out of touch arrogant leaders are getting down to what they do best, talking, wining and dining. Not to worry, all the first class travel, rest and recreation is fully funded by austerity stricken European taxpayers. No banksters were asked to contribute to picking up the cost. Rumour has it that Germany is going to suggest that the hapless Greeks have to dress like country Bavarians in lederhosen, until they payoff all their debts to Europe’s near insolvent banksters. Other’s say it’s just dark arts spin from the tax and work shy Greeks. In the battle of the Gs, the northern Europeans hold all the cards, except the trump card of Greece declaring default and dropping out of the insane German euro. With Brussels’ man in charge in Athens, there’s no chance of this trump getting played anytime soon.
“Politicians fascinate because they constitute such a paradox; they are an elite that accomplishes mediocrity for the public good.”
George Will on US politicians. Europe’s only aspire to mediocrity.
EU leaders await new Greece vote
Thursday, 23 June 2011
Europe's leaders are due to gather in Brussels with the Greek economic crisis on a knife-edge and nothing - for the moment - that they can do about it.
The long-arranged summit comes just after the Greek Prime Minister George Papandreou survived a confidence vote and just before the Greek parliament votes next week on more austerity measures being demanded by the EU and IMF in return for more bailout money, due to be paid next month.
"It's down to the Greeks now to approve austerity measures and then we can see about further assistance" said one EU official. "In the meantime there can be no developments at this summit, and there will be pressure on leaders to say as little as possible at this delicate time".
Prime Minister David Cameron is joining the summit dinner after a day of talks in Prague with the Czech prime minister and president.
When he gets to Brussels he is expected to repeat his insistence that the UK - which did not contribute to the first Greek 110 billion-euro (£96.5 billion) bailout last year - should not be involved in a second, similar, deal likely to be concluded later this year.
The final summit declaration is likely to be restricted to emphasising that efforts remain on track to stabilise the Greek economy and restore confidence in the embattled euro.
An extra meeting of EU finance ministers has already been scheduled for July 3 to assess the situation after the Greek parliament vote next week, when anything less than approval of more austerity will be seen as a political as well as economic catastrophe for the euro.
more
http://www.belfasttelegraph.co.uk/news/world-news/eu-leaders-await-new-greece-vote-16015111.html#ixzz1Q4scdMIc
In other alarming news today, yet more sign of Asia slowing. It’s probably why the Baltic Dry Index has become stalled in the doldrums around a weak 1400. Sounds like another job for the miracle of fiat currency QE.
"Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood. For these few gold has been the asset of last resort."
Antony C. Sutton
June 22, 2011, 11:54 p.m. EDT
China data show almost flat growth: HSBC
Bank’s advance PMI hits lowest in 11 months
HONG KONG (MarketWatch) — China’s manufacturing activity eased in June to its slowest rate of expansion in 11 months, barely above the level indicating no growth at all, according to preliminary results from a key survey published Thursday.
The HSBC flash Purchasing Managers’ Index (PMI) eased to 50.1 in June, down from 51.6 in May.
The new export orders component indicated contraction at an accelerating rate, while new orders remained expansionary, although at a slower rate.
Meanwhile the employment subindex showed conditions were now contracting, reversing from an expansion.
More
http://www.marketwatch.com/story/china-data-show-almost-flat-growth-hsbc-2011-06-22
SK Shipbuilders just starting to feel 2008 downturn
The 2008 global downturn is only now hitting South Korea's shipbuilders, the world's largest. As they complete orders placed before the downturn, they face a gap created by virtually no orders in 2009
http://www.marketwatch.com/story/china-data-show-almost-flat-growth-hsbc-2011-06-22
We end for the day awaiting the crumbs of knowledge from our betters in Brussels, with a telling article from the press of the great white north. Our days on fiat currency are numbered, as on fiat currency debt has gone out of control. My thanks to reader Ian for sending it along. Stay long physical precious metals.
“The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.”
Adam Smith
A debt disaster by whatever measure you use
Last updated Wednesday, Jun. 22, 2011 8:34AM EDT Neil Reynolds
The U.S. federal government spent $30,000 per household last year, an increase of $5,000 in two years. State and local governments spent $25,000 per household. Total government spending thus reached $55,000 per household – in a country with 114,825,421 households.
To provide this exceptional largesse, the federal government borrowed $12,600 per household. Without this loan, these various levels of governments would have spent only $17,400 per household – or precisely the spending (adjusted for inflation) that federal, state and local governments required four decades ago.
Economists usually speak in trillions when discussing U.S. government debt. The household economy provides a different perspective. Does the United States really need to spend $55,000 a year per household? Surely it could get by with $42,400 per household, the spending that doesn’t require credit cards. But debt spending is now deeply entrenched. People expect $5 in government services for $4 in taxes as a fundamental (and, in some instances, constitutional) right.
The $55,000 in per-household spending, however, doesn’t begin to convey the full cost of federal, state and local government. For example, the U.S. Small Business Administration, a federal agency, reports that the cost of complying with federal regulations last year equalled $15,000 per household; and California reports that compliance with state regulations equalled $13,000. But these kinds of spending involve some degree of double-counting. In this analysis, we’ll ignore them.
Federal, state and local debt obligations, however, must be counted. For starters, the average household owes $80,000 as its share of the country’s “national debt,” the U.S. federal debt held by people, companies and governments around the world. It owes another $44,800 as its share of state and local debt – even though most states are prohibited by law from running deficits. It owes another $534,000 per household as its share of unfunded liabilities (legally binding promises) to Social Security, Medicare and pension plan recipients.
The per-household share of government debt thus rises to more than $650,000 – or six times as much government debt as personal debt (in mortgages, credit cards and loans). This number closely tracks the lifetime cost of the average U.S. federal public service pension: $700,000.
A precise calculation of per-household government debt is difficult because governments are not required to report fully on unfunded liabilities. (The CEO of a private company would risk jail time for not doing so). But, by some tough-minded calculations, U.S. unfunded liability, per household, now exceeds $1,000,000. Boston University economist Laurence Kotlikoff, who puts unfunded liabilities at $200-trillion, says the U.S. would have to double permanently all of its taxes to eliminate the country’s “fiscal gap” – the difference between probable revenue and probable spending. (He uses this fiscal gap, rather than accumulated deficits, to define debt.)
More.
http://www.theglobeandmail.com/report-on-business/commentary/neil-reynolds/a-debt-disaster-by-whatever-measure-you-use/article2069420/
"When paper money systems begin to crack at the seams, the run to gold could be explosive."
Harry Browne
At the Comex silver depositories Wednesday, final figures were: Registered 27.72 Moz, Eligible 72.39 Moz, Total 100.11 Moz.
+++++
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Following Mrs. Thatcher’s dispatch, and after two decades of kowtowing to Europe and the Franco-German envy of establishing a United States of Europe to best America, the UK media finally seem to have figured out, just like German media before them, that it’s time to put self interest foremost again. Self delusion about building some sort of Utopia among the polyglot nations of Christendom, is dragging continental Europe towards a wealth destroying breakup of the European Monetary Union. It’s time for H.M.G.’s Great Britain to move on.
At least once each century continental Europe gets swept up in a collective madness, be it wars, socialism, or currency unions. The early 21st century version is a snake bit currency union. Like all currency unions before it this one too will not last. The strong will always abuse the weak, and this Emu is no exception as we see daily in Greece and Ireland and soon to see in Portugal and Spain. The Emu abuses the PIGS.
"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
Britain should save the euro – and then cash in
Full fiscal union would allow us to profit from Europe, even as we sat on the sidelines, says Jeremy Warner.
7:21PM BST 22 Jun 2011
For many in Britain, the apparent death throes of the single currency allow a smug sense of “we told you so”. The present crisis was as predictable as it is familiar. In every particular, it provides validation for the view Britain adopted nearly 20 years ago when it was ignominiously forced out of the ERM – namely that it’s tough, if not impossible, to sustain a currency union with Germany.
----Britain couldn’t stand the heat and got out. Now the same choice – only a much worse one, because leaving the euro is far more difficult and disruptive than simply abandoning a currency peg – confronts the single currency’s peripheral nations.
Yet break-up is not the only option open to Europe. There is another, which is that the solvent North agrees to bail out the stricken South on a more or less permanent basis. Although the politicians dare not admit it in public, this is in fact what’s being progressively forced upon them.
For the moment, however, the rhetoric continues to be that of denial. In Germany’s insistence that the euro cannot be allowed to fail, because it would destroy the European Union itself, and in its coincidental refusal to contemplate the only thing that will ultimately save the single currency in its current form – a permanent transfer union – we see the irresistible force meeting the immovable object.
----A year ago, the idea of a second bail-out for Greece would have been regarded as completely unthinkable. But now, here we are with every prospect of the unthinkable happening. Policymakers have convinced themselves that the collateral damage inflicted by a break-up of the eurozone would be infinitely greater than the cost of coughing up. The transfer union has, in practice, all but arrived.
By the way, the debt forgiveness and restructuring urged by some is not a viable third option. You could wipe out Greece’s entire stock of national debt and it still wouldn’t make any difference to the country’s underlying lack of competitiveness relative to Germany. The build-up of external indebtedness would begin anew and we’d soon be back to where we started. No, it’s either kick out the euro fringe, or the political challenge of persuading Germans to subsidise Greeks.
But let’s not worry about which of these options – break-up or fiscal union – is in the best interests of the periphery. That’s ultimately for them to decide. The key question for Britain is which is best for us. The perhaps surprising answer to this question is very much the latter, for what it would do is crystallise a separate choice for the UK – whether we want to be a part of a Europe bounding headlong into full political union or not. Since it is impossible to imagine the UK ever abandoning its fiscal sovereignty to European bureaucrats and political grandstanders, there is no doubt which way we’d swing.
In time, the European Union and its political institutions would become one and the same thing as the eurozone, allowing Britain to retreat to its historic position on the sidelines of Europe, free from the tyranny of majority voting and the insanities of the European Parliament. Like Switzerland and Norway, both of which enjoy something close to free trade with the EU, we could reap the fruits of the single market without being a part of it.
More
http://www.telegraph.co.uk/finance/comment/jeremy-warner/8592773/Britain-should-save-the-euro-and-then-cash-in.html
"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
The monthly Coppock Indicators finished May:
DJIA: +196 Up. NASDAQ: +249 Up. SP500: +200 Up.
The Dow and SP 500 and NASDAQ have all reversed from down to up. The Fed’s rigging of the indicators seems to have worked. Note: like all indicators, they were devised for normal markets not markets where the central bank is flooding the economy with new cash. In current conditions where risk is suspended by too big to fail, I doubt any indicators are showing more that where the Fed’s new cash is flowing in our world of casino capitalism.
