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Wednesday, 30 November 2011

Japanese diversifies rare earths suppliers

Japanese manufacturers continue to form alliances with non-Chinese rare earths miners to reduce dependence upon unreliable and politically controlled Chinese monopoly supply. Mitsubishi and Daido Steel have now formed a joint venture with Molycorp of California, after Sojitz Corporation formed a strategic alliance with Lynus Corporation of Western Australia. I acknowledge the article Molycorp, Daido, Mitsubishi form next generation rare earth magnets JV. Disclosure: the author holds Lynus Corporation stock.

Tuesday, 29 November 2011

Beating a path to a Euro break-up

I thank Garry Sladden for bringing this article to my attention:

Beating a path to a euro break-up
Gavyn Davies, Financial Times, Published 6:41 AM, 29 Nov 2011 Last update 10:00 AM, 29 Nov 2011

It has suddenly become respectable to ask the question: what would happen if the euro broke up? Last week’s rise in German bond yields signals that a euro break-up is being taken more seriously by investors.

The Web of Debt

The diagram at Eurozone debt web - BBC summarizes clearly the web of debt which underlies the western world's financial problems:  not only for Europe, but for the US also.  I thank Keven McAfee for drawing my attention to this.

Sunday, 27 November 2011

Euro disintegration seems inevitable

The Euro is a currency out of fiscal control. The Euro will likely come apart well before any Euro fiscal control can be implemented. Greek protestors, waving Nazi flags, won’t surrender fiscal control to a centralised Europe. Neither would Greece, Germany or other nations within the near future. Survival of the Euro requires centralized European fiscal control, but the surrender of national fiscal responsibilities would require years of negotiation and referenda.

Saturday, 26 November 2011

Eurobonds won’t solve crisis either

Financial communities appear to be keener to restore positive market sentiment than to fix the financial problems.  The proposal to issue collectivised eurobonds will only exacerbate Europe’s problems.  The problem is that some countries borrow and spend too much. Eurobonds will not fix spendthrift nations.  Eurobonds will only make it easier for them to continue borrowing, deepening the problem.  Henry Ergas has clearly outlined eurobond difficulties in comparison with Australian borrowing after federation.   That Eurobond solution would mask market signals to spendthrift nations, in the form of high interest rates, that they need to borrow less.   Widespread media has been persistently calling upon Germany to agree to that and other “solutions”, such as European QE (money printing).   None of those proposals would fix the problem, and all have potentially very serious consequences.   Market sentiment can only be restored temporarily at best.

I acknowledge the following sources: “Eurobonds anything but a panacea”, Henry Ergas, p16, The Weekend Australian, Nov 26-27, 2011; and National Leaders Pledge Closer Integration .

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Continued erosion of US dollar’s global reserve currency status

China will now permit trading of the yuan against the Australian and Canadian dollars.  This reconfirms the continuing gradual erosion of the US dollar’s status as the global reserve currency.  That will simplify trade between China and those nations, reduce the need for US dollars, and increase yuan usage outside mainland China.  China already permits the yuan to be traded against the US dollar, euro, sterling, yen, Hong Kong dollar, Malaysian ringgit and Russian rouble.

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Thursday, 24 November 2011

Failed German bond sale reconfirms US Vs German Euro stalemate.

The inability to reconcile the threat of European inflation with those who want to print Euros will probably lead to an inevitable third outcome:  dismantling of the Euro.  The US advocates money printing, euphemistically known as quantitative easing (QE), because they do not fear inflation; whereas Germany has a profound abhorrence of inflation.  Germany strenuously resists European QE, for fear of letting inflation consume Europe, with the risk of political extremism and potentially ominous consequences.  The US strongly advocates QE for fear of bankrupting their large financial insurance institutions if called upon to cover a Greek or other sovereign debt default.

Tuesday, 22 November 2011

China "throws" rare earths monopoly

Some non-Chinese rare earths producers look attractive.  China damaged its own reputation as the global virtual monopoly supplier of critical rare earths in 2010 by withholding rare earth supplies to Japan in an attempt to amplify "fishing boat intrusion diplomacy" pressure upon Japan at the Senkaku Islands, in their projection of Chinese political power, not only over the South China Sea, but also over the East China Sea to test Western responses.  By casting doubt upon their own Chinese reliability of supply, naturally Japanese and other western market electronics manufacturers have been prompted to diversify their field of rare earth suppliers away from the long serving Chinese monopoly.

Clearly, the Chinese Central Communist Party Committee holds projection of power eastward beyond Taiwan and the Japanese island chain to be more important to their national strategic interests than maintaining their Chinese monopoly dominance of the critical global rare earths market.  This is significant.

I acknowledge the article below, which I think is interesting particularly from the viewpoint of those interested in the rare earth metals market and suppliers:  Proposed German industrial alliance aims to secure critical metals supply. Disclosure:  the author holds stock in a rare earths producer.

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Self responsibility for retirement unintendedly exacerbates economic slowdowns

Some nations have encouraged individual self responsibility for retirement savings.  That is wise policy because it insulates government budgets from growing baby-boomer pension liabilities;  or, to put it another way, it reduces the burden upon the young to pay for the retirements of a growing number of old people who are living longer.

But, that policy has an unintended negative side effect:  the exacerbation of the economic slowdown.

Monday, 21 November 2011

China re-uses 1960s ocean floor mining ruse

China is reported to have gained Indian Ocean floor mining rights for mineral “nodules”.  The US hid secret plans to retrieve a sunken Cold War Soviet submarine under the false pretext of mining the ocean floor for “nodules”.  Mining of ocean floor nodules is unusual, if not impractical and commercially unviable.

China seeks to assert naval power over most of the South China Sea; and Japanese, Taiwanese, Vietnamese, Philippine, Bruneian, and Malaysian waters; and East Timorese; and beyond into the Indian Ocean.  It is possible that China’s rights to Indian Ocean territory are not for mining purposes.  China needs to secure import channels for mineral imports from Chinese controlled African mining projects. 

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China's undersea mining deal troubles India

I find this interesting: China's undersea mining deal troubles India. "China has secured exclusive rights to explore 10,000 square kilometres of seabed in the southwest Indian for polymetallic deposits; India is concerned (sic)"
Author: Shivom Seth

Sunday, 20 November 2011

Is Germany being covertly pressured?

I wouldn’t be surprised if the USA and other western nations are putting immense pressure, behind the scenes, upon Germany to continue to bail-out broke European nations.  Large financial institutions have sold financial insurance over Greek and other sovereign debt, in credit default swaps (CDSs) and other financial instruments.  In the event of Greek default, those institutions guarantee to cover any losses incurred by holders of Greek government bonds.  Those institutions are exposed to very large losses should a nation default on its sovereign debt.

Friday, 18 November 2011

G20 elevates gold's currency status

Would you prefer gold or sovereign debt as financial backing?  In November, 2011, the G20 asked Germany to use Germany's substantial gold reserves to back the European Financial Stabilization Facility (EFSF).  Germany rejected that proposal.  That proposal, and more significantly Germany's rejection of that proposal, elevated gold's status as a valuable international currency.  By declaring their wish for gold backing, the G20 inadvertently enhanced gold's status as currency.  And, in a subtle sense, the G20 also betrayed deteriorating sentiment towards sovereign debt.

I acknowledge Greg Hunter's USAWatchdog for this observation.  For more see "Case for gold in Eurozone bail-out".

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Hitler and today's Europe

I think we have the really interesting situation now that for six decades the world has internationally collectively through various means imposed upon Germany the national collective responsibility never again to allow another Hitler; yet now, on the other hand, the world is collectively calling upon Germany to support money printing to help fix Europe's financial problems. That solution, upon which the world calls, risks resulting ultimately in European Weimar Republic inflation: the precise cause of Hitler's assumption of dictatorship.