Biz 'journalists' glee over cratering gold prices

Gold is getting smacked around hard when priced in dollars.

While Greece contagion (and it will come in the fall) has not bolstered the precious metal, it has strengthen the greenback, which clobbers all dollar-based commodities.

This is the theory behind Janet Yellen’s September rate hike.

Raise rates and weaken the dollar so our international conglomerates can profit off their exports, without bringing that revenue here to be taxed.

Brilliant.

Strong dollar policy has been relegated to the trash bin by the Obama Administration since the beginning. Neither Treasury chiefs Tim Geithner or Jack Lew spoke up for the greenback in any meaningful way during their tenure. Lip service at best is what we get from the White House.

The globalist view is to weaken the dollar so our debt is not that costly to overseas buyers, since there is little appetite for the paper here.

My pet peeve with gold has little to do with the metal itself, but the reaction or should I say joy certain business “journalists” derive from its fall.

Bloomberg commentators, because I hesitate to call them journalists — since some only seem to be social media darlings as their credentials — are doing back flips over the price cratering the last month.

My thought is that Mayor Mike may be directing this vitriol towards precious metals since his headshot is in the dictionary under globalist.

Either way, I don’t believe for a second that the price will languish at these levels much longer for two concrete reasons.

There is a commodity price manipulation probe going on, which will show how bulge banks such as JPMorgan and Citibank have pushed prices down in the gold paper market just like Libor charges.

And secondly, this fall will see the global economy take another leg down with no growth in the US and slowing growth from China. Europe is already in a recession, it’s just that you have to know where to look.

Advertisements

Loan sharks in Aegean

So here’s what’s it like to pay off a loan shark.

A week later you are in the same hole you were last week.

Turn your attention to Greece.

The EU granted Greece €7.16B payment in which 95 % or €6.8B went to the sharks Greece owed — the Trioka — and the 5% was kept by the Tsipras government.

What will come of next week’s vig?

To put it in context the Greeks have maxed out all their credit cards and are now making half the minimum payment every third month. It’s a recipe for default, but the creditors can handle a default so they extend the terms with no realistic expectation of getting fully paid, but to grab all the late fees they can get.

Also Monday some Greek banks opened to take deposits — as if anyone in their right mind would put money into the system. You can only take out the same  €60 per day though.

There were discussions about be able to take €120 if you wait two days, but that’s still in discussions.

So how is the Greek economy suppose to grow with these capital controls and the treat of a bail in? What business would take a chance in that environment?

Germany likes hippies, no haircuts for Greeks

Greece preps to hear its fate on a bridge loan from EU officials Friday so it can open banks on Monday.

The vote is not a given since the IMF has come out and said that Greek debt levels are unsustainable and that a substantial haircut is needed on the principal amount owed.

It’s Greece’s best last chance to get out from under the burden of a decades-long vassal existence within the euro zone. Unfortunately, it will probably not work out well for Athens, since the Germans are staunchly against a haircut, fearing the rest of southern Europe will come knocking should the haircut be allowed.

Despite this drama, this is the first weekend in a month or so where there is not a vote of measure being voted on in Greece or Brussels.

So let’s take it in and have a good weekend.

Greeks freak, but pay the vig

So the Greek Parliament has agreed to put the country on an unsustainable economic course that will make it a vassal state of the euro zone.

But the Trioka will accept the vote to pile on at least 7 billion euro to immediately pay the banks money owed. Wonderful news for all Greeks.

This should take Greece out of crisis mode until September at the latest. We’ll see.

Now we can turn our attention to the next two global flash points: China and the US.

China’s slowing growth — even “official government numbers” — has large investors dumping their ADR shares out of the country.

Despite the central government plowing funds into market to prop up share prices and barring large institutions from selling or shorting for the next 3 months to 6 months.

In the US we will get the first read on Q2 GDP in two weeks. This number looks to be borderline zero as retail sales are still bottoming out and exports are hurt by strong dollar.

As Wall Street lowers its forecasts each week — consensus is not near zero, because of the cheerleading factor of bolstering the economy — it is in the 2.5% to 2.9% range.

A negative number would give economists reason to put the US into a recession (two negative GDP quarters in a row), although like a Greece default, that official announcement will not come anytime soon.

So let’s see what the next two months bring us. As I said earlier, late September and October should be interesting times.

Greece debt package crumbles like Feta

The Greek middle is not holding.

The Deputy Finance Minister Valavani resigned this morning. In an open letter to Prime Minister Tsipras, Valavani says it’s not about debt restructuring, it’s about Greeks being able to stay alive after the government passes the measure.

Christine Legarde said Wednesday that the IMF will not be able to participate in this refunding bailout of Greece because the organization cannot participate in loan sharking operations, per its charter.

Lagarde is saying what I have said all along. Greece had debts no honest man can pay, and therefore needs a Marine-style haircut on its debt, before the IMF can become involved. There has to be a possibility of repayment and to be able to grow its economy.

I cannot see how the Greek parliament can pass these draconian measures to enslave their people for decades, with no viable escape from the debt.

One government estimate has the payment on the debt in 2020 will amount to over 300% of estimate GDP. No this can’t work and it should be voted down.

It’s not like re-opening the banks depends on the vote, because there are reports that regardless of the vote outcome, the banks will be closed until August at the earliest.


China released three key economic reports on Wednesday, that all beat the consensus estimates.

  • Retail Sales was up 10.6 percent over last year with expectations of a 10.2 percent gain.
  • Industrial Production rose 6.8 percent beating expectations of a 6.0 percent rise.
  • GDP rose rise 7.0 percent eking past 6.8 percent estimate.  It’s the lowest since beginning of 2009.

Chinese equities took data with a large grain of salt and closed lower on the day, somehow perhaps not believing in the numbers.

So once again the slowing Chinese economy — the biggest fear on the globe — will be pushed aside for the time being as the government numbers have to be accepted until they aren’t.