The currency traders are at present a cautious approach to decision on interest rates in Euroland. If a status quo on the cost of money is massively anticipated, traders will pay attention to every detail of the speech of the President of the ECB could support the thesis of a rate hike at the next meeting of the Board of Governors month next.

Around 11.15am, the spot euro / dollar was worth approximately 1.4615. In New York, a barrel of U.S. light crude (light sweet crude) are treated at a price close to $ 101.20.

From a graphical perspective, a further consolidation before the speech of the President of the ECB is assumed by our team of analysts. No trade on the currency pair in the immediate future.

In this context, the team makes a neutral for the next few hours and offers dealers to stay out of the market in anticipation of future technical signs clear. However, we take care to note that a crossing of the voltage to 1.4700 revive the purchase of 1.4557 while a break would boost the selling pressure.

On the macroeconomic level, currency traders will take note of the decision on interest rates in the United Kingdom at 13.00 and at 13.45 euro zone. Three indicators of U.S. economic conditions are expected this afternoon: Registration for weekly unemployment benefits to 14.30, the trade balance at 14.30 and also wholesale inventories at 16:00.

According to The Scotsman:

“Finance ministry checks showed 990 people who owed more than 6.7 million euros in taxes owned a total of 2,917 real estate assets on the scenic islands of Mykonos and Santorini, worth more than 288 million euros. The ministry gave tax dodgers until July 20 to settle their debts.

“‘After this deadline, there will be urgent procedures of forced payment, including auctions,’ it said in a statement. Greece has pledged to improve its dismal tax collection record as part of a mammoth 110-billion euro bailout by the European Union and the International Monetary Fund.

“Tax evasion, particularly by well-off citizens such as doctors and lawyers, is rampant in Greece. Estimates on the size of the shadow economy range between 10 to 30 per cent of GDP.”

If Greece is the harbinger of what’s to come in an overly-indebted US, it’s worth paying attention to how this threat turns out. The US has already taken to executing tax punishment deadlines on wealthy citizens who have used tax shelters in Switzerland. As the deficit and debt situation gets worse it won’t be a surprise to see the US get on this same Greek-style bandwagon and continue escalating its tax enforcement measures domestically.

You can read more details in The Scotsman’s coverage of how debt-ridden Greece is getting tough on its tax dodgers.

Best,

Rocky Vega,
The Daily Reckoning

8 Days Left Until Greece Raids the Island Estates of its Wealthiest Citizens originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

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Well, interestingly, he doesn’t get into that whole controversy about whether there is actually any silver in SLV, but he writes that SLV has “been raided heavily over the past seven weeks,” and indeed since February 26, “17.9 million ounces – or 2,2557,000 ounces – have been withdrawn from the ETF by authorized participants.”

Naturally, being the typical clueless guy who can’t remember facts, figures or children’s birthdays (“There’s three of them, for crying out loud! How can I possibly keep up with that many dates or names?”), I don’t really know how to evaluate this information, but it becomes a little clearer when he goes on “to put it another way, 3% of the world’s silver inventory disappeared in just seven weeks!” Hmmm!

Immediately, I see that this is something that I can use to wave in the sneering faces of those disbelieving people who scoff at my advice to buy silver! I am almost drooling in anticipation of saying to them, with a nasty sneer on my face and with a voice dripping with contempt, “Now, what were you saying about me being an ugly little troll with crippling mental problems and an apparent fetish for silver? Huh? What about now, ya moron?”

Other interesting facts are that by 2008 worldwide demand for silver was about 900 million ounces a year, having grown by an average of 19.5 million ounces a year for the previous five years, while supply from mining and scrap was only 858.5 million ounces and growing at only 2.2% a year, meaning that supply was being outstripped by over 40 million ounces per year the whole time!

If that is not enough of a supply/demand imbalance to make you jump to your feet in eagerness to buy silver, longer-term it gets more interesting, because “in 1900 there were 12 billion ounces of silver in the world. By 1990, that figure had been reduced to around 2.2 billion ounces,” and now “today, there are less than 1 billion ounces in above-ground refined silver.”

In short, all the silver that was mined and refined since 1900 was used to create the gigantic electronic-based and electrical-powered economies of, mainly, America and Europe, and now that the silver has been used and thus disappeared, here comes China to need twice as much silver as was used by America and Europe! Wowser wow wow!

My few remaining brain cells that are still in, at least, intermittent working order are suddenly operating in hyper speed, conjuring up wild plans to somehow get some money, more money, lots of money, hopefully money acquired without actually working, to buy silver, which is the most ludicrously undervalued asset in the Whole Freaking World (WFW) and such a bargain at current prices that it makes the decision to buy it so easy that one must exclaim, seemingly involuntarily and with great relish, “Whee! This investing stuff is easy!”

The Mogambo Guru
for The Daily Reckoning

Staggering Stats About Silver Supply originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

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SpaceX was the first company to launch a privately funded rocket, Falcon 1, into orbit in late 2008. Other rockets being used by the defense industry are privately manufactured, of course, but they are the product of taxpayer funding. The Falcon is the first orbital platform that adheres to what we could consider an effort of free market entrepreneurship.

The new rocket, called Falcon 9, is of a more powerful design, with sufficient thrust to bring passengers into orbit. The payload was an unmanned space capsule, called Dragon. It is a test bed for a future human-rated space vehicle. It is orbiting the planet as I write. It is scheduled to return to Earth in a few weeks.

SpaceX has pursued a simple, redundant, scalable design for their rockets. Falcon 9, for example, uses the same Merlin engines as the Falcon 1. As its name suggests, Falcon 9’s first stage uses nine Merlins. The second stage also uses a Merlin engine, with modifications for re-ignition and operation in a vacuum. This reduces the final cost of the launch vehicle.

Having multiple engines also improves reliability for the same reason that multi-engine aircraft are safer. The rocket can lose an engine and still make it into space. Since reuse also helps reduce costs, the Dragon capsule is designed to perform many missions. Eventually, SpaceX wants to reuse the first and second stages, as well.

Although many folks regretted the cancellation of Constellation, NASA’s future space vehicle program, that cancellation might actually prove a catalyst for increased long-term space exploration. Rather than depending on a vast wasteful bureaucracy to design and launch rockets, the US space program will contract out transportation services to more efficient startups like SpaceX. No more mythical 0 toilet seats. Instead of a single platform, a diversity of many smaller players will emerge in the space launch business. This is the sort of environment that cuts costs and improves performance.

With the Space Shuttle winding down as a launch platform, SpaceX has already earned contracts to resupply the International Space Station to the tune of .8 billion. Full ISS resupply missions are scheduled for 2011. Following on June’s successful Falcon 9 launch, SpaceX also inked the largest launch contract in history. Iridium Communications plans to put its next-generation communications satellites in space via SpaceX and has signed a 0 billion contract with SpaceX to do so.

I strongly suspect that if space launch costs fall enough, we will be seeing space access put to commercial use in unexpected ways. How many people saw the eventual existence of Google, Facebook or even Musk’s own PayPal back when the Internet was a small government defense network?

Even with more efficient designs and organizational structures, however, rocket technology of the kind being used by SpaceX suffers from the same drawback: propellant. Moving fuel and oxidizer is the single most important logistical component of any space mission. More than 70% of the mass required to get to orbit is fuel. When we consider a possible return to the Moon, this percentage rises to over 95%.

Quicklaunch is one of the companies working on resolving this problem. Quicklaunch is a private company founded by Dr. John Hunter, a rocket scientist (literally). From 1989 to 1995, Hunter conducted the Super High Altitude Research Project (SHARP) to develop the so-called “space gun” concept. Instead of cordite explosive detonation, SHARP used gas gun technology. SHARP set records for kinetic energy above Mach 9. It also successfully launched hypersonic scramjet test vehicles for the Air Force between Mach 5 and Mach 9.

Dr. Hunter believes that the space gun technology he pioneered at Lawrence Livermore would reduce launch costs for fuel to 5% of the current price. Space gun technology, however, can’t be used for humans. The acceleration required to get vehicle to orbital speed is simply too great. This leaves the market for passengers open to companies like SpaceX, which has designed the Falcon for human space launch from the very beginning.

Mark Twain once famously said that history does not repeat itself, but it does rhyme. In a sense, access to orbital travel is taking a path similar to what colonial exploration did in the 15th and 16th centuries. Early expeditions were government-sponsored affairs. The Spanish crown, for example, financed Christopher Columbus. However, over time, private enterprises came to dominate the sea routes to the New World.

A competitive market of private space taxis will lower the cost to get to orbit, and will open up new vistas for space exploration. Like the early venture capitalists looking to get rich in the New World, today’s investors will also grow wealthy. We hope to see space access companies like SpaceX go public in the future. And of course, I’ll be keeping a close eye on many other types of transformational technologies.

Patrick Cox
for The Daily Reckoning

The Final Frontier…for Your Portfolio originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

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Yes…pity the poor rich. Or those who thought they were rich. They’re losing their houses.

The New York Times reports that the rich are defaulting on their mortgage loans faster than the poor:

The housing bust that began among the working class in remote subdivisions and quickly progressed to the suburban middle class is striking the upper class in privileged enclaves like this one in Silicon Valley.

Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.

More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.

Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment.

“The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist.

Ruthless? They are just coming to the obvious conclusion faster than their poorer brethren. And it makes sense that they should. They have more money at stake.

The obvious conclusion: this is no normal ‘recovery.’ If prices aren’t coming back, why pay off a mortgage loan when you don’t have to?

We continue to live in a gray zone.

It is not as black as the Great Depression.

But it’s certainly not as bright as the go-go Bubble Era, either.

What is it, exactly?

Is it a correction?

What is it correcting?

We don’t know. Not exactly.

When will it be over?

We don’t know that either.

What will happen next?

Wish we could tell you.

Let’s keep it simple: will prices go up or down?

Hey, stop asking so many questions!

Look, we’re way ahead of most people. Most people – including most economists – think we are in a period of ‘fragile recovery.’ They think we had a recession. Now the economy is in recovery. If the recovery doesn’t seem much like other recoveries in the Post-War era, it doesn’t trouble them particularly.

Besides, they know what to do – keep money flowing!

Here at The Daily Reckoning we are coming to a growing awareness of what bumblers and self-absorbed preeners our fellow economists are. But we’ll come back to that.

Let’s push ahead with what we think we know about what it going on.

So far, the economy gives no sign of normal ‘recovery.’ We’d be deeply concerned if it did. Because what it had before the crisis of ’07-’09 was not something to have again. It had the bubble heebie-jeebies, if you know what we mean.

Now, the economy gives every sign of being in a Great Correction…

…unemployment is not recovering. In fact, it seems to be getting worse. It would not be at all surprising to see the official unemployment rate go up to 12% in the next leg down…

…housing is not recovering. It has stabilized…but only tentatively. There is still a huge overhang of inventory and underwater mortgages to be resolved. And the latest figures show they’re not moving. Under these circumstances, you’d have to be one heckuva optimist to think prices would ‘recover’ anytime soon…

…credit is not recovering. Instead, it is shrinking… Last week’s figures show more contraction.

These things do not point to the end of the world. They point to the end of the credit expansion that ballooned up the economy from the first Reagan administration through the last administration of George W. Bush.

That expansion is over. Kaput. Finished. What’s coming next? We’ll see…

Bill Bonner
for The Daily Reckoning

Fragile Recovery or Great Correction originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

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And that brings me to a story that a reader sent me over the weekend…

Recall last week I told you that there was a story going around about how Canadian dollars/loonies (CAD) were being picked up by central banks? Well, this report, done by Morgan Stanley analyst, Emma Lawson, goes on to say that central banks have dropped their allocation to US dollars by nearly a full percentage point to 57.3% from 58.1%, and calls this “unexpected given the global environment.” She adds, “Over time we anticipate that reserve managers may reduce their holdings further.”

What is surprising is that the managers of those central banks aren’t buying traditional fall-backs like the euro (EUR), the British pound (GBP) or the Japanese yen (JPY). Instead, she suggests they’re putting their faith in other dollars – the kind that come from Australia and Canada. The allocation to those currencies, which fall under “other” in the data, rose by a full percentage point to 8.5%, accounting almost exactly for the drop in the US dollar allocation.

That’s some good news for loonie and Aussie dollar (AUD) holders, eh? But the big thing in my mind is that central banks are diversifying… Shouldn’t you? Like that old soap commercial… Aren’t you glad you used Dial? Don’t you wish everyone did? HA!

The currencies, led by the Big Dog, euro, are weaker this morning, with the euro backing off 3/4’s of a cent (0.75) versus the dollar. I really haven’t come across anything that points to a reason for this backing off… Except the noise regarding the upcoming Street Tests results… But, to me, it’s really just “noise”…

Speaking of the euro… I was reading this weekend about how industrial production is rising along with factory output in Germany… And that is a Big Deal! Germany is the growth engine of the Eurozone, and with the weaker euro, manufacturing is taking off once again. The BIG automakers, BMW, Audi and Mercedes have all announced that they are hiring workers, and canceling holidays to catch up with demand.

If the German economy weren’t so strong right now, Chancellor Angela Merkel would not have been able to push through a four-year package of spending cuts that total 81.6 billion euros…

Again… I love this back and forth between the US who wants to spend their way out of the mess, and wants other countries to follow them, and the other countries that are in the opposite corner, wearing the blue trunks, and their pledge to cut spending and deficits.

Anyway… The Chicken Littles who were screaming that the sky was falling and that the euro would collapse and that there would be a break up, have all gone away… For now… I’m not saying the euro is out of the woods, folks… But for now… The cries have faded…

Over in Japan there was an Upper House election called that has rocked the yen a bit… I tell you this… If I had a 1 oz. gold coin for every new Japanese official and election that I’ve seen since 1992 (when I began trading foreign bonds), I would be a very rich man today!

Speaking of gold… With the euro backing off some, gold is back above ,200… Back and forth we go, but the thing to take from this back and forth is that ,200 seems to be the new “base”… Usually, what you have, in these assets like this, is a probe higher, then profit taking… Then a back and forth as the new base forms… And once everyone is strapped in, with their arms and legs inside the Gold Express at all times, the asset can then move higher and put the “base” in the rear view mirror.

And to all those naysayers and doomsday people who said that China’s economy was going to collapse, I guess they’ll have to go drape their black ribbons on some other economy… Hint, wink, wink… You don’t have to go far… Wink, wink…

China reported record exports for June and their largest trade surplus in eight months! And it’s just like old times again in China…

Especially after the US failed to name China a “currency manipulator”… Chickens… Bawk, Bawk… I mean wasn’t it the President who pledge to press China hard to stop manipulating its currency during the campaign? And then there was US Treasury Secretary Geithner, who told lawmakers during his confirmation hearings that he thought China was guilty of manipulation…

But for the third time since these two took office, they have failed to name China a currency manipulator… Hmmm…

Aussie Home Loan Data showed the first increase in last October, which is a good thing. However, the home financing is still down almost 12% year-to-date… So, here’s my take on this data… October was about the time the RBA began their rate hike cycle, and it took six months of rate hikes to get in people’s minds that home loan rates were going to be higher, and they should go ahead and book their loan now before they go higher!

And in Canada… The jobs data on Friday, has people talking rate hikes left and right for Canada… Whoa there, Partner! I’m still on board for a July 20 rate hike, which will be next week, when I’m in Canada… I’m not fully convinced there’s enough breathing room for another rate hike in September too! However, if the data keeps coming in strong, then I’ll change my mind! Today we might see something that leads us to the rate hike path in September, when Canada prints their Business Outlook and Senior Loan Officer Surveys… These will be the last data prints the Bank of Canada sees before their rate announcement next week.

No data in the data cupboard here in the US today… So… We could drift throughout the day with no rudder and no main sail!

To recap… The currencies are softer against the dollar this morning… The euro is off 3/4’s of a cent. The Aussie and Canadian dollars are getting picked up by the central banks looking for something other than dollars, euro, yen, and even gold! Japanese yen is weaker on the upper house election mess in Japan, and the rumors of a Chinese economic death have been greatly exaggerated, with China posting a record month of trade surplus in June!

Chuck Butler
for The Daily Reckoning

Central Banks Diversify originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

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As a very important source of strength and security, cherish public credit. One method of preserving it is to use it as sparingly as possible, avoiding occasions of expense by cultivating peace, but remembering also that timely disbursements to prepare for danger frequently prevent much greater disbursements to repel it, avoiding likewise the accumulation of debt, not only by shunning occasions of expense, but by vigorous exertion in time of peace to discharge the debts which unavoidable wars may have occasioned, not ungenerously throwing upon posterity the burden which we ourselves ought to bear. The execution of these maxims belongs to your representatives, but it is necessary that public opinion should co-operate.

In his era, the Revolutionary War had caused debt to rise to million in the year of his speech, and it had been climbing slightly in the previous five years (1791 is the earliest record kept by the U.S. Treasury) after having run up to finance the war. Washington’s warning was indeed heeded, for the nation paid down its obligations to million by 1812, enabling the young nation to resist a second British conflict by borrowing another million by 1816. (It also built a strong Navy to resist the Muslim Barbary pirates, who impressed over one million on the high seas, condemning them to slavery in North Africa.) Twenty years later, the country would be essentially debt free. Washington goes on to say that as citizens we should be willing to accept taxation to pay down debt from unavoidable wars:

To facilitate to them the performance of their duty, it is essential that you should practically bear in mind that towards the payments of debts there must be revenue; that to have revenue there must be taxes; that no taxes can be devised which are not more or less inconvenient and unpleasant; that the intrinsic embarrassment, inseparable from the selection of the proper objects (which is always a choice of difficulties), ought to be a decisive motive for a candid construction of the conduct of the government in making it, and for a spirit of acquiescence in the measures for obtaining revenue, which the public exigencies may at any time dictate.

Washington lived in a time when there was no income tax, much less a progressive version. Hence he speaks of choosing “objects” to tax, such as tea or stamps (which were affixed to items). His message to accept taxation applies to the citizenry as a whole, not to a situation as it exists today when the top 25 percent of earners pay 86 percent of all income tax, which would have been unimaginable in his time.

Unlike the citizens of Rome who had no say about their level of taxation, Americans could seize the moment and elect a slate of candidates that truly would abandon the formula of the last century, rather than just tweak the dysfunctional structure of the present in a bipartisan compromise. The trajectory begun under Wilson and Roosevelt has led to a bloated government structure with a fourth branch composed of unelected rule makers — yet another concept inconceivable in Washington’s time.

Today’s government spends heavily, and our elected representatives within it compete for our vote by making promises to spend at an ever-higher level, which has resulted in GAAP obligations that are more than six times greater than the over trillion of public debt outstanding today. Such wanton extravagance is the polar opposite of what Washington advocated, and it is precisely the fallacy which Lord Macaulay predicted.

As surely as the War of 1812 followed the Revolutionary War, another threat from the known unknown of Islamic jihad could erupt, or seemingly from out of the blue such as the Russian advance on Georgia. And if it would not, as even the supposed bipartisans who thoughtfully pontificated on the I.O.U.S.A. town hall panel admitted, the persistence of entitlements and the debt they would perpetuate or grow at a reduced rate would be immoral.

What is missed in their argument is that we have already crossed the Rubicon, for the magnitude of present levels of debt spread over the 25 percent who pay nearly all taxes would place them deeply into bankruptcy.

The remaining majority of the citizenry that has shirked its civic obligation by egging on its representatives to dig surrounding our foundation will ultimately lose the most, for they may be condemning themselves or their children to lives of serfdom. It is a privilege to have democracy, for which the blood of Washington’s soldiers was spilled. For the people to expend it by seizing it for socialistic aims is the veritable immorality of our times.

Regards,

America Invicta originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

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The video is well put together and is produced by Vanguard, the same award-winning documentary group that had two journalists, Laura Ling and Euna Lee, detained in North Korea for several months until Bill Clinton personally met with Kim Jong-il and brokered their release.

This segment just came to our attention this weekend and, although it is from 2009, it’s well worth watching in order to understand these particular consequences of globalization that still impact China today. Watch below, or you can view the original post here.

US Economic Shockwaves Slam China With Unemployment originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

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If the Obama administration decides to step off the spending wheel too late it’s likely to end up with a no-win situation similar to the options pictured below.

An Unsustainable Welfare-State Rat Race originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

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