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Pirates Of The ‘Carry-On-Regardless’

Posted by jayfromeire on Mar 25th, 2010 and filed under Economic Crisis, International. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry from your site


William K. Black wrote a book in 2005 titled “The Best Way to Rob a Bank is to Own One” where he outlined the fraud and corruption at the highest levels of international banking.                   

What we are seeing now in the light of massive bonuses, involving billions of Euro, Dollars and Pounds, being handed out to executives and lower level employees, is simply the same culture of fraud and corruption which has seeped down to the lower levels of an industry which has utterly disregarded any pretence of moral conscience.       

           
 

This industry has deliberately plunged the world and the majority of ordinary people into a period of extreme doubts and anxieties over the future of themselves, their children and future generations.        

The climate of greed in this industry has undeniably never changed. Whilst the international bankers have absconded with the wealth of nations, their cronies in subsidiary banks, where ordinary people’s financial security is crucial, are now doing the same. These lower level parasites continue to coerce governments into passing legislation, in Ireland’s case, NAMA – (Never Any Money Again).                   

This is happening across the developed world and allows governments, without the consent of its citizens, to literally tax working people to pay for the illegal and corrupt practices of a criminal cabal responsible for the state of the world today.                    

This is piracy of the highest order, and the ordinary people paying for this, for generations to come, will be born into a financial bondage to the coming world state which amounts to nothing less than SLAVERY.               

We are being financially raped by the banking elite who simply demand that our government pass the very legislation which will condemn the citizens to a future of indentured servitude. We, the taxpayers, will have to cough up our last cent to the parasites of finance to furnish their lavish lifestyles of champagne parties and fancy yachts, whilst we are left struggling to make ends meet.                 

The government tells us we need to get through this current financial crisis together, by pulling together don’t you know, whilst they maintain their positions of power over us and live the highlife with their banker and building developer buddies. They don’t take responsibility for, or account to the public for, the catastrophe they’ve inflicted on families and businesses in this country. At the same time they try to justify their uselessness and inflated salaries, presumably in line with their inflated egos and ludicrous self belief in their value to society, whilst at the same time maintaining their massive expense accounts and lavish pension arrangements which nobody else in the country is entitled to.

machholz responce 

Careful what you ask for!

With the cries of change the government getting louder, I caution and ask the question will we be any better off?

Make no mistake I want to have a change of government and I want to jail All the corrupt Basta***

Responsible for the mess we are now in.

What exactly will the new government do about the political gangsters responsible for the mess we are now in?

see posting

Market Notes (March2010)

 

March 9th, marked the one-year anniversary of the elusive bottom of the most brutal bear market since the 1930’s. At the time, job losses were running in excess of 700,000 /month, and fear was rife that the US-banking system was on the verge of being nationalized. American factories and miners were using 68% of industrial capacity, the lowest level since records began in 1948. Corporate profits fell sharply for the seventh consecutive quarter, the longest losing streak since the 1930’s. The second coming of the “Great Depression” looked imminent.

In a final act of desperation to stop the carnage, the infamous “Plunge Protection Team,” (PPT) unleashed the most powerful weapons in its arsenal, resorting to accounting gimmickry, and nuclear-QE, – injecting $1.75-trillion into the coffers of the Wall Street Oligarchs, in order to turn the bearish tide. Bankers were set free of mark-to-market accounting, and instead, were allowed to value their toxic assets at “mark-to-make-believe” prices, leading to a strong recovery in the financial sector.

Over the course of the next four-weeks, the Dow Jones Industrials climbed 1,500-points to close at 8,083 on April 9th, 2009. Still, there was great skepticism about the sustainability of the so-called “green-shoots” rally, – the third such rally since the horrific crash of Sept-October 2008 that followed the default of Lehman Brothers and the bailout of American International Group (AIG).

Before hitting the ultimate bottom at 6,500, previous Dow rallies ended-up as “bear traps,” that fizzled out, before the market turned sharply lower again. There was a 1,500-point run-up during the week that culminated in the election of Barack Obama as US president, after which the Dow lost 2,000-points over the next-three weeks. The Dow Industrials staged another 1,500-point gain in December, triggered by Obama’s selection of Wall Street favorite Timothy Geithner as Treasury chief, before plunging 2,500-points during the first two-months of 2009.


However, since the Dow Industrials hit rock-bottom, US-stocks have staged a $5.3-trillion recovery, amid the biggest percentage gain since the Great Depression. Yet when viewed through the prism of Gold, measured in “hard money” terms, one can see that the performance of the Dow Jones Industrials was less than stellar. The blue-chip indicator has been locked within a narrow trading band for the past 11-months, fluctuating on both sides of 9.5-ounces of gold since April 2009.  

The “green shoots” rally is therefore, an Optical Illusion, simply reflecting the side-effects of the Fed’s hallucinogenic “quantitative easing” QE-drug. Utilizing the chart above, one could argue that the value of the Dow Industrials is artificially inflated by about 2,500-points, engineered by the Fed’s monetization scheme, and ultra-low interest rates. An ocean of liquidity is buoying the Dow Industrials above the 10,000-level, designed by the PPT to bolster household confidence, since the valuations of 401-k’s and investor portfolios can influence the propensity to spend.

Still, there are huge worries about unrelenting job losses, multi-trillion dollar budget deficits for years to come, and the “Volcker rule,” which could put the shackles on the Wall Street’s Oligarchs, and force the liquidation of widely held stocks and commodities. But for now, the market’s climb above the 10,000-level, means the possibility of a “double-dip” recession is more remote, and instead, trying to short-sell stock indexes, is like trying to push a helium balloon under water.


The S&P-500 Index has rocketed +62% higher over the past year, a gain that would normally take five-years to realize. The speed and strength of the stock market’s recovery caught many bond traders off-guard, and knocked US-Treasuries for their worst annual losses since 1978. Most notably, the yield curve, – the spread between short-term interest rates and government bond yields, rose to its widest level ever. The yield on the Treasury’s 30-year bond compared to the one-year T-bill rate hit +440-basis points in December, the widest in history.

Traders reckon that the size of the US-national debt, now exceeding $12.3-trillion, is weighing on bond prices, and a huge avalanche of debt still lies ahead. The Treasury is expected to issue $1.6-trillion in new debt in 2010, and $1.3-trillion the following year. Chinese central banker Zhu Min has warned it would become more difficult for foreigners to buy Treasuries, when the US-government has to fund its deficit by printing more dollars. China slashed its holdings of Treasury securities by $34.2-billion in December, after months of complaining about the Fed’s QE scheme.

full article link http://www.financialsense.com/fsu/editorials/dorsch/2010/0311.html

By Gary Dorsch

The Irish New Poor

Call them the new poor: people long accustomed to the comforts of middle-class life who are now relying on public assistance for the first time in their lives — potentially for years to come.

Yet the social safety net is already showing severe strains. Roughly 2.7 million jobless people will lose their unemployment check before the end of April unless Congress approves the Obama administration’s proposal to extend the payments, according to the Labor Department.

Here in Southern California, Jean Eisen has been without work since she lost her job selling beauty salon equipment more than two years ago. In the several months she has endured with neither a pay check nor an unemployment check, she has relied on local food banks for her groceries.

“I pray for healing,” says Ms. Eisen, 57. “When you’ve got nothing, you’ve got to go with what you know.”

Warm, outgoing and prone to the positive, Ms. Eisen has worked much of her life. Now, she is one of 6.3 million Americans who have been unemployed for six months or longer, the largest number since the government began keeping track in 1948. That is more than double the toll in the next-worst period, in the early 1980s.

Men have suffered the largest numbers of job losses in this recession. But Ms. Eisen has the unfortunate distinction of being among a group — women from 45 to 64 years of age — whose long-term unemployment rate has grown rapidly.

source http://www.nytimes.com/2010/02/21/business/economy/21unemployed.html?em

comment

The problem is that we could easily be talking about the Irish unemployed
Anybody of that age group (40 to 65) here in Ireland is effectively consigned to the scrapheap!

There is a lot of talk from the politicians about “The Unemployed” but nothing else is happening

FAS is a joke and the likes of Bill Cullen telling us on the Frontline last night to get up and find a job is adding insult to over 500,000 honest people who would love to get the money the taxpayers have just given him

Cullen is just one of a string of well healed individuals who from time to time come on our screens and tell us we got to help ourselves at the same time they are getting bailed out themselves from taxpayer’s funds

Another example of this is yesterday the central bank governor said that wages must come down

What was his salary again?????

Bet it’s not the minimum wage!

Sooner or later the New Poor will not take anymore platitudes from the real leaches sponging off the taxpayers .the well paid spin doctors, the overpaid top civil servants and top government Minsters

And what about top presenters in the public owned media

Beware of the ides of March I say to you all

It may be the right direction

 

Markets nosedived on Thursday when Barack Obama set out broad new measures on financial regulation. The most significant of them is banning deposit-taking banks from proprietary trading that is “unrelated to serving customers”. This activity has generated politically incendiary profits for banks and bonuses for bankers.

The timing was political: the president spoke on the day that Goldman Sachs announced fourth-quarter earnings of $4.95bn. Those of a more populist nature than Mr Obama – both on the left and on the right – will say that he comes late to the game.

The Recession is not over.  

Economists may see the recession as being over, but the man on the street does not. Roughly 60% of the public believes the recession still has a way to go, a NBC/Wall Street Journal poll reported last October. Even those who have not suffered know someone—a friend, a neighbor, a family member—who is being hurt. Two in three say the rally in the stock market has not changed their views.

The uptrend is broken.
— The uptrend in the S&P 500 Index was broken this week.  There is a lot of backpedaling in Washington, which was all too ready to claim success as the market was rising, but asked us to ignore the last two day decline.

The uptrend, which was technically “on the edge” since early December, has finally lost what is called trend support.  Look for much lower prices ahead.


Obama’s proposals strengthened Treasuries.

Treasuries headed for a third weekly gain as speculation that President Barack Obama’s bank- regulation plans will crimp economic growth weakened equities and added to demand for fixed-income securities.  The yield on the 10-year note reached its lowest in a month after the Obama administration yesterday proposed to limit the size and trading activities of financial institutions as a way to prevent another systemic meltdown. The Treasury is scheduled to sell $118 billion in notes next week.

Gold’s decline ready to resume?

Gold may decline as a rebounding dollar curbs demand for the metal as an alternative investment, a survey showed.

Twelve of 17 traders, investors and analysts surveyed by Bloomberg, or 71 percent, said bullion would fall next week. Four forecast higher prices and one was neutral. Gold for delivery in February was down 2.9 percent for this week at $1,097.70 an ounce at noon in New York yesterday.

The Nikkei turns south.

— Japanese stocks slumped the most since November after the U.S. proposed to reduce risk-taking at banks and concern mounted that China will raise interest rates to curb inflation. The Nikkei 225 fell 2.6 percent to close at 10,590.55 in Tokyo, almost erasing this year’s gain. The broader Topix index slid 1.6 percent to 940.94, with six times as many stocks declining as advancing. Both gauges lost the most since Nov. 27.

Shanghai isn’t immune to troubles, either.

Investors pulled $348 million from China equity funds last week, the biggest outflow in 18 weeks, on concern China’s moves to cool its economy will slow growth, according to EPFR Global.     Chinese stocks fell since the government this month started tightening monetary policy to curb record loan growth and prevent bubbles in the nation’s property and stock markets.  Technically, the Shanghai Index violated a potential Head and Shoulders formation, which calls for a large decline.  The bubble may be popped.

The dollar is showing bullish tendencies.

The dollar is poised for an upside breakout.  The “line in the sand” in red is a technical pattern called a neckline of an inverted Head and Shoulders pattern.  Tuesday’s election in Massachusetts is considered a change in the outlook of Washington to “dollar friendly.”    In the past, Washington talked a good talk, but their actions were quite destructive to the dollar.  The outlook may have reversed.

A safety net hides the risk of bank failure.

 — There is a fascinating phenomenon that occurs in the banking system when capital is running short.  At least, this was the case before the government decided to be the ultimate financial backup for the entire banking structure of our country.  Places like Washington Mutual or Countrywide were offering stellar rates on various savings vehicles only days before their demise.  How can this be?  Well for one, banks are allowed to chase public capital and realize that the public will put money into a bank so long as the FDIC backs up the bank.  Unfortunately, if the bank fails the FDIC only covers your principal, not interest.

The chart shows Gasoline prices dropping faster than at the pump.

 The Energy Information Agency weekly report suggests, “The U.S. average price for regular gasoline dropped a penny to $2.74 per gallon, $0.89 higher than the average a year ago. On a regional basis, price changes were mixed. The East Coast price of $2.75 per gallon moved up less than a penny, while the price in the Rocky Mountains jumped up four cents to $2.62 per gallon. The price on the Gulf Coast was essentially unchanged at $2.62 per gallon. Prices in the Midwest and on the West Coast dropped, moving down over a penny on the West Coast to $2.95 per gallon and dropping nearly five cents to $2.68 per gallon in the Midwest.”

Frigid weather keeps NatGas prices high.

The Energy Information Agency’s Natural Gas Weekly Update reports, “As the extreme cold left much of the lower 48 States this week, natural gas demand for space heating and as a fuel for electric power plants fell precipitously. Compared with the prior report week, U.S. natural gas average daily demand decreased about 25 percent from 106 Bcf to 79 Bcf, according to Bentek Energy LLC. Lower demand led to widespread declines in prices that were generally less than 5 percent.”

Joseph Stiglitz: ‘We’re More Strict With Our Poor Than With Our Banks’

During the economic turmoil of the last few years, Nobel Prize-winning economist and Columbia University professor “ersatz capitalism” in America. He has also repeatedly called for a second round of fiscal stimulus to support struggling Americans.  Read full article here.
Joseph Stiglitz has been one of the most strident and incisive critics of the historic bailout of the banking sector.

Never one to mince words, Stiglitz, who served as the Chief Economist at the World Bank and on President Clinton’s Council of Economic Advisers, has said the meltdown has resulted in a kind of

Is The U.S. Economy Being Tanked By Mistake or By Intent?

Should American bankers be let off the hook because they self-declare, before an investigational panel, that the failure of their newly invented risk swaps and other highly leveraged investment schemes was simply due to “mistakes”? Not malfeasance – just every-day mistakes? Bankers just fell asleep at the helm at a critical juncture in American history. Is that what we are being led to believe?

Oh well, it’s just 18 million American homes that now lay empty in the wake of unprecedented foreclosures, and the bankers have collected obscene bonuses for reckless lending of their depositors'(and taxpayers’) money. It’s like the captain and crew of a ship saying, not to worry, twenty-percent of the passengers were lost overboard, but this was due to unavoidable mistakes, and then being rewarded with bonuses when they reach port.

for more information follow link http://www.financialsense.com/fsu/editorials/cherniawski/2010/0122.html
source :by Anthony Cherniawski, The Practical Investor, LLC | Janury 22, 2010

“Commodity Super Cycle”

 

This is an excellent article by Gary Dorsch January 6, 2010

Taken from http://www.financialsense.com/fsu/editorials/dorsch/2010/0106.html

“Anybody interested in the current position of the world’s economy should and must read this article” TC

The colossal V-shaped recovery of the global stock markets in 2009 was indeed, the most remarkable feat, ever engineered by the “Plunge Protection Team,” (PPT). Step by step, the Federal Reserve, the US Treasury, and its key allies in the “Group-of-20” nations,rescued the world’s top financiers from their own greedy mistakes. The staggering size of the G-20’s rescue package, totaling about $12-trillion, was equal to a fifth of the entire world’s annual economic output.

The G-20 bailout included capital injections pumped into banks in order to rescue them from collapse, the cost of soaking up so-called toxic assets, guarantees over debt, and liquidity support from central banks.Tossing aside all arguments of “moral hazard,” the PPT utilized all the weapons in its arsenal, to prevent another “Great Depression,” including accounting gimmickry, and the “nuclear option” of central banking – “Quantitative Easing,” (QE), to rescue the global economy.

History will show that the US stock markets reached bottom on March 10th, when Fed chief Ben “Bubbles” Bernanke and influential members of Congress, exerted heavy pressure on FASB to water-down rule #157, thus, allowing American bankers to once again, value their toxic mortgages, at their own discretionary judgment. The switch-back to “mark-to-make-believe” accounting was the most expedient tool allowing the banking elite to essentially cook their books, – concealing losses, and using discredited models to inflate their balance sheets.


Soon after, a spate of better-than-expected earnings reports by US-banking giants, Goldman Sachs, JP-Morgan, Citigroup, Bank of America, and Wells Fargo began to elevate the stock market higher. On March 15th, 2009, Fed chief Bernanke told CBS’s 60-Minutes, “The green shoots of economic revival are already evident. Much depends on fixing the banking system. We’re working on it. I think we’ll get it stabilized, and see the recession coming to an end this year,” he said. Asked if the United States had escaped a repeat of the 1930’s Great Depression, Bernanke replied, “I think we’ve averted that risk.”

In order to fuel a V-shaped recovery for the stock market, the Fed unleashed the most powerful weapon in its arsenal, – “nuclear QE,” – by pumping $1.75-trillion into the coffers of Wall Street Oligarchs, such as Goldman Sachs and JP-Morgan, through the monetization of Treasury notes and mortgage bonds. In a very short period of time, a tidal wave of liquidity began to flow into high-grade corporate and junk bonds, and whetting the speculative appetite for equities.


Wall Street Oligarchs utilized trillions in US-taxpayer bailout money and guarantees, to bolster their balance sheets and generate profits, by speculating in turbulent financial markets. Since March 6th, what’s evolved is a rising US-stock market and inflated bank profits, which in turn, conjures-up hopes that banks will start lending again, to free-up capital for business investment. Angling for the so-called “wealth effect,” the PPT is hopeful that household spending will also rebound.

Many investors were skeptical of the “Green-Shoots” rally, and preferred to call it a “bear-market” suckers’ rally, – destined to fizzle-out and unravel. Yet last year’s bargain hunters saw an “once-in-a-lifetime” buying opportunity, and were guided by the sagely advice of Sir John Templeton, “Bull-markets are born in pessimism, grow on skepticism, mature on optimism, and die of euphoria.” Most of all, “Bubbles” Bernanke restored the market’s love affair with the Fed’s printing press.

Beijing holds keys to World Economy, Commodities,
The V-shaped recoveries in the global commodity and stock markets could not have succeeded however, without the aid of China, which accounted for half of the world’s growth in output last year, and is expected to surpass Japan, as the world’s second largest economy in 2010. Beijing went on a buying spree for industrial commodities, especially for crude oil, and base metals, stockpiling the raw materials used for its 4-trillion yuan ($586-billion) spending plan on infrastructure projects.

The People’s Bank of China (PBoC) ordered its banks to power a V-shaped recovery, through an explosion of credit – a record 10-trillion yuan ($1.5-trillion) in new loans, – or double the 2008 total. Roughly a quarter of the new loans were channeled into the Shanghai red-chips and property markets, designed to inflate their values.


The combined fiscal and monetary stimulus, – equal to 45% of China’s GDP, spurred the juggernaut economy to an estimated +10% growth rate in the fourth-quarter, up from +6% growth in the first-quarter. China’s economic growth is set to return into the double-digits in 2010, with booming factory activity driving its Purchasing Managers’ Index (PMI) to a reading of 56.6 in December from 55.2 in the previous month. South Korea, Asia’s fourth-largest economy, said its exports to China were 75% higher at $54.2-billion, over the first 20-days in December.

However, China’s accelerating economy is also increasing worries among some PBoC think tank economists that the consumer price deflation experienced through most of 2009, will quickly flip to rapidly escalating inflation in 2010. China’s voracious appetite for agricultural commodities, crude oil, base metals, and other industrial raw materials, is transmitting inflationary pressures worldwide, with the epicenter located in China itself and in neighboring India.

The PBoC finds itself far behind the “inflation curve,” and hasn’t yet gone beyond meaningless “open mouth” operations, in order to tame budding pressures lurking beneath the surface. The Dow Jones Commodity Index made a stunning U-turn last year, rebounding sharply from an annualized rate of decline of -52% in July, to an annual inflation rate of +23% in December. With key commodity prices expected to extend their advance in the year ahead, an outburst of escalating inflation lies on the horizon for the Chinese economy.


Fan Gang, an influential member of the PBoC, has warned the markets that the central bank would gear its monetary policy toward dealing with the asset bubbles it created. China’s banking regulator aims to slow

On Jan 5th, China’s central bank chief Zhou Xiaochuan added, “We will keep a good handle on the pace of monetary and credit growth, guiding financial institutions towards balanced release of credit and avoiding excessive turbulence,” he said.
Zhou said forcing banks to put aside more of their deposits on reserve with the PBoC is a key tool for mopping-up cash flowing into the economy.

So far, traders in Shanghai are skeptical of the warnings. Instead, the PBoC’s threat of slower money growth is viewed as a bluff. Last year, Beijing set a growth target of +17% for M2, but instead, expanded it 30-percent. If the 17% target for M2 growth is taken seriously, the PBoC would have to aggressively soak-up yuan thru T-bill sales, or force banks to lend less, in order to contain inflation. Yet if the PBoC doesn’t tighten its monetary policy, consumer price inflation could easily accelerate at a +6% clip in 2010, blowing even bigger asset bubbles caused by excessive liquidity.

PPT Engineers V-shaped Recovery, Inflation

“We came very, very close to a depression. The markets were in anaphylactic shock,” Bernanke told TIME magazine last month. “I’m not happy with where we are, but it’s a lot better than where we could be,” he said. Bernanke and the “Plunge Protection Team,” confounded their skeptics last year, – proving that a central bank can engineer a V-shaped economic recovery, from the depths of the Great Recession, by pumping vast quantities of money in the capital markets.

Since the March 2008 lows, US-listed stocks recouped $5.2-trillion in value, boosting household wealth, and confidence in the fate of America’s $14-trillion economy. Even with foreclosure filings in the US reaching a record 3.9-million last year, sales of existing homes in November rose to a 6.54-million annual rate, the highest level in three-years, although foreclosures accounted for 33% of all sales. The S&P/Case-Shiller index of average home prices was 29% lower in October 2009 from its peak in July 2006, making homes more affordable.

The Dow Jones Industrials ended last year at 10,425, recouping most of its losses from the apocalyptic meltdown since September 2008, when Lehman Brothers went into bankruptcy, and in a domino effect, toppled other Wall Street titans. Nowadays, financial markets are under the constant surveillance of G-20 central bankers and treasury officials, always attempting to influence their direction.

One of the tools of the PPT is “Jawboning,” or brainwashing operations, designed to influence trader psychology and behavior in the markets. Governments have another key tool at their disposal, – the ability to fudge key economic statistics, to achieve the political aims of the ruling parties. Such was the case on Dec 4th, when Labor apparatchiks shocked the markets, saying the US-economy had lost a scant 11,000 jobs, the fewest since the Great Recession started in December 2007.

For extra “shock and awe,” the BLS dropped another bombshell, saying the number of jobs lost in September and October were 159,000 less than originally reported.
Moreover, employers are increasing work hours and hiring temporary employees to meet rising demand, – the first steps before hiring permanent workers. The number of temporary workers jumped 52,400, the largest increase in five-years. These trends are solidifying ideas the US-economy could actually see job creation in the second quarter, and give the Fed enough wiggle room to begin draining liquidity.


Similar to the PBoC’s dilemma, the most worrisome side-effect of the Fed’s ultra-easy money scheme is a revival of inflation, which if left unchecked for too-long, could morph into hyper-inflation. When measured in US$ terms, the Dow Jones Commodity Index is now +25% higher than a year ago, a reliable indicator pointing to higher costs of goods from the nation’s farms and factories.

Ordinarily, a resurgence of inflation would be a worrisome development for stock market operators, out of fear the Fed might tighten the money spigots. However, the Bernanke Fed says it’s content to linger far behind the “inflation curve,” for an extended period of time, preferring higher commodity prices over a deflationary depression. Thus, talk of the Fed’s exit from its ultra-loose QE scheme and draining the liquidity swamp, as telegraphed by the extreme steepening of the Treasury yield curve, is still a bit premature. In any case, government apparatchiks can always skew the inflation statistics, to buy the Fed more time to keep rates low.

Chinese Dragon Gobbles-up Base metals,
Fed officials argue that with so much excess capacity in the industrial sector, tight credit, and a weak job market, that fears over an outbreak of inflation are overblown and imaginary. However, the notion that excess industrial capacity, – with supply outstripping demand, – will contain prices was repudiated in the base metals markets last year. Copper soared 140%, Lead, used in car batteries, doubled to $2,416 /ton, followed by zinc, up 125%, and aluminum, was up 50-percent.

Base metals rocketed sharply higher despite a large build-up of inventories stocked in warehouses in London and Shanghai. Aluminum inventories held at the London Metals Exchange are bulging at near record levels of 4.6-million tons. Global output of aluminum is running at 38.4-million tons /year exceeding demand at 35-million tons. Yet aluminum futures in Shanghai rose to 17,000-yuan /ton, up 60% from a year ago, with Chinese factory output running 19% higher.


Japanese buyers paid premiums of $130 /ton over the spot price for longer-term contracts, after a European trading house bought over 1-million tons from Russia’s Rusal, the world’s biggest aluminum producer. Investment bankers are utilizing new and creative ways of lending money to base metal producers, with nearly 70% of the supply of aluminum sitting in LME warehouses tied-up in such financing deals, and therefore, not available for delivery in the spot market.

Bankers are buying aluminum on the spot market and selling forward at a profit. The metal is stored with a warehouse until delivery. Bankers are financing the deals by borrowing US-dollars in the Libor market at 0.25%, thus creating artificial demand for aluminum. However, there’s always the risk that such quasi “carry trades,” could be unwound in a violent way, when the Fed begins to lift Libor rates.

Still, base metals are buoyed by Chinese demand, absorbing 43% of the world’s supply last year. China imported 1.45-million tons of aluminum in the first eleven months of 2009, up 1,225% from the previous year, and 3-million tons of copper, up 136-percent. The cash price for iron ore doubled from their March lows, to $118 /ton, as Chinese steel mills imported 566-million tons, up 38% compared with the same period of last year. Demand for base metals is likely to get a further boost as factories based in the G-7 nations rebuild their inventories.

Crude Oil Tests OPEC’s Upper Limits,

The Chinese dragon is also blazing a trail under the crude oil market. After sliding to a five-year low under $33 /barrel in December 2008, oil prices staged a steady climb upward to $82 this week, aided by Chinese stockpiling. On Jan 5th, Zhang Xiaoqiang, deputy of China’s National Development commission, said he’s “actively” involved in the global competition for crude oil, natural gas, and minerals to satisfy the country’s thirst for raw materials. Beijing has $2.25-trillion in foreign currency reserves at its disposal, to invest in “infrastructure facilities in key countries which hold resource deposits and have a friendly relationship with China,” Zhang said.

A key component of Beijing’s strategy is to guarantee access to Persian Gulf oil especially from Iran and Saudi Arabia. China is the #1 importer of crude oil and natural gas from Iran, and the two allies are bound by energy deals reaching a total value of $120-billion and growing. China and Japan have been involved in a bidding war over a major pipeline deal to deliver Russian oil from Eastern Siberia.

In Africa, Beijing has invested $8-billion in joint exploration contracts in the Sudan, including the building of a 900-mile pipeline to the Red Sea, which supplies 7% of China’s oil imports. Beijing has also concluded oil and gas deals with Argentina, Brazil, Peru, and Ecuador. But its main interests are focused in Venezuela, and ambitious oil deals in Canada, the #4 and #1 oil suppliers to the United States.


Boosting autos sales has been a key ingredient of Beijing’s stimulus program. China has overtaken America as the world’s #1 buyer of automobiles, not surprising since its population of 1.3-billion persons is more than quadruple that of the US. Roughly 12.7-million cars and trucks were sold in China last year, up 44% from the previous year and far surpassing the 10.3-million sold in the US.

To meet its growing industrial and transportation needs, China’s imported 17.1-million tons of crude oil in November, up 28% from a year earlier, emerging as the world’s #3 importer after the US and Japan. But China’s demand for oil could double in the next 10-years, according to the IEA, if its economy continues to expand at a 10% growth rate. At some point, the growth in Asian and world demand for oil would exceed the available supply, leading to triple digits for oil prices.

On Dec 25th, Saudi Arabia’s King Abdullah told a Kuwaiti newspaper, “Oil prices are heading towards stability. We expected at the beginning of the year an oil price between $75 and $80 per barrel and this is a fair price,” he said. The Saudi kingdom has about 2.5-million barrels per day of excess oil capacity, and could dump more oil on the market, to prevent prices from climbing above $80 /barrel.

However, speculators in the oil markets are putting Riyadh to the test, betting that the kingdom would allow a rally to $85, with a background of a steadily improving V-shaped recovery in global stock markets. Abdullah hinted at this, when he said, “Oil prices might rise reasonably,” keeping pace with other asset markets.

China and PPT knock froth off Gold market,

China has also vaulted ahead of India to become the world’s buyer of Gold, as small investors scrambled to defend their wealth against the explosive growth of the Chinese money supply. Demand for the yellow metal was expected to eclipse the 450-ton mark, while gold imports by India fell in half
to around 200-tons. India used to import around 600-to-800-tons of gold every year, but even now, the United Arab Emirates may have overtaken India in gold imports.
Still, Indians have accumulated 20,000-tons worth over $730-billion of Gold in private hands.

Gold rose for a ninth straight year in 2009, gaining 24%, even after shaving $130 /oz off its all-time high of $1,225 /oz, set on Dec 2nd. Interestingly enough, gold peaked just a few hours after China’s FX chief, Hu Xiaolian, warned traders in Shanghai to be careful of a potential asset bubble forming. “Watch out for bubbles forming on certain assets, and be careful in those areas,” he said.


On Dec 4th, the People’s Daily, the main newspaper of the ruling Communist Party, blasted the Fed’s weak US$ policy, saying it was forcing Asian nations to choose between a “heavy blow to exports” and inflation risks, from “massive liquidity in their own currencies, further inflating asset prices,” it said. Tokyo was also calling on the G-7 central banks to help bolster the US-dollar, as it plunged to a 14-year low of 85-yen, and triggering a death spiral in the Nikkei-225 Index to the 9,000-level.

With America’s two largest creditors complaining bitterly about the weak US$, the PPT was bailed-out by Labor department apparatchiks on Nov 4th, releasing a better-than-expected outlook on the jobs market. The Fed acquiesced to Beijing and Tokyo, by allowing yields on the Treasury’s 5-year note to zoom 70-basis points higher, thus forcing US$ carry traders to cover over-extended short positions. In turn, unwinding of US$ carry trades, knocked the gold market for a nasty shake-out.

Beijing and the “Plunge Protection Team” bought a few extra weeks of precious time for their shell game of currency debasement. However, if talk of an exit from the Fed’s QE scheme, or the PBoc’s threat to slowdown the M2 money supply, adds-up to nothing more than empty rhetoric, – then we’ll witness another parabolic rise in Gold, and the resurgence of the “Commodity Super Cycle” in 2010.


G-20 spin artists are telling the media that inflation won’t get out of control, because excess capacity in the industrial sector can keep factory and farm prices down. However, outside the Ivory Towers of academia, such theories carry little weight in the marketplace. Instead, the message of the US Treasury’s yield curve is signaling a major outbreak of inflation, with the spread between 30-year and 6-month yields steepening to +450-basis points, the widest in three-decades.

Traders are plowing billions of dollars, Euros, and yen into commodities and precious metals, betting on the debasement of all paper currencies. The resurgence of the “Commodity Super Cycle” is kicking into high gear, with G-20 central bankers fueling asset bubbles, by refusing to lift short-term interest rates. “Paper money eventually returns to its intrinsic value – zero,” Voltaire, 1729.

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