September 5/China to start a petro-yuan backed by gold/North Korea fires a hydrogen bomb test/gold rises to $1339.65 for a gain of $13.45 and silver gains 14 cents up to $17.87/Hurricane Irma will be a category 5 storm and it is heading straight for Miami/

GOLD: $1339.05 UP   $13.45

Silver: $17.87  UP 14 CENT(S)

Closing access prices:

Gold $1339.90

silver: $17.90

SHANGHAI GOLD FIX:  FIRST FIX  10 15 PM EST  (2:15 SHANGHAI LOCAL TIME)

SECOND FIX:  2:15 AM EST  (6:15 SHANGHAI LOCAL TIME)

SHANGHAI FIRST GOLD FIX: $1339.89 DOLLARS PER OZ

NY PRICE OF GOLD AT EXACT SAME TIME:  $1336.42

PREMIUM FIRST FIX:  $3.47

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

SECOND SHANGHAI GOLD FIX: $1336.64

NY GOLD PRICE AT THE EXACT SAME TIME: $1335.50

Premium of Shanghai 2nd fix/NY:$1.14

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

LONDON FIRST GOLD FIX:  5:30 am est  $1331.15

NY PRICING AT THE EXACT SAME TIME: $1331.50

LONDON SECOND GOLD FIX  10 AM: $1335.55

NY PRICING AT THE EXACT SAME TIME. 1334.30 ???

For comex gold:

SEPTEMBER/

NOTICES FILINGS TODAY FOR SEPT CONTRACT MONTH: 0 NOTICE(S) FOR  nil  OZ.

TOTAL NOTICES SO FAR: 49 FOR 4900 OZ  (0.1524 TONNES)

For silver:

SEPTEMBER

 373 NOTICES FILED TODAY FOR

1,865,000  OZ/

Total number of notices filed so far this month: 2918 for 14,590,000 oz

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

end

Let us have a look at the data for today

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

In silver, the total open interest ROSE BY AN SMALL BUT STEADY 798 contracts from 178,897 UP TO 179,695 WITH THE GOOD SIZED GAIN IN PRICE THAT SILVER UNDERTOOK WITH  FRIDAY’S TRADING (UP 22 CENTS). WE NOW HAVE MORE NEWBIE LONGS ENTER THE SILVER CASINO WITH NO SILVER LONGS EXITING FOR EFP’S. THE BANKERS ARE STILL LOATHE TO SUPPLY THE SHORT PAPER IN TOTAL CONTRAST TO GOLD

RESULT: A SMALL RISE IN OI COMEX  WITH THE 22 CENT PRICE RISE. 

 In ounces, the OI is still represented by just UNDER 1 BILLION oz i.e.  0.898 BILLION TO BE EXACT or 128% of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT MAY MONTH/ THEY FILED: 373 NOTICE(S) FOR 1,865,000  OZ OF SILVER

In gold, the open interest ROSE BY A GOOD SIZED 5372 CONTRACTS WITH THE RISE  in price of gold ($8.65 GAIN YESTERDAY). The new OI for the gold complex rests at 555,543.

CONDITIONS ARE RIPE AND AMPLE FUEL FOR ANOTHER  HUGE RISE IN THE NUMBER OF  NEWBIE SPECS  ENTERING THE GOLD ARENA WITH THE COMMERCIALS AGAIN SUPPLYING THE NECESSARY PAPER.  AS SOON AS FRIDAY’S JOB REPORT WAS ANNOUNCED AS A DUD, THIS ENCOURAGED  MORE NEWBIE LONGS WHO BECAME EMBOLDENED IN THEIR CONTINUING QUEST OF TAKING ON THE BANKERS WHO RECIPROCATED IN KIND WITH  SHORT PAPER.

Result: A HUGE SIZED GAIN IN OI WITH THE RISE IN PRICE IN GOLD ($8.65). THE COMMERCIALS SUPPLIED THE NECESSARY SHORT PAPER. 

we had: 0 notice(s) filed upon for nil oz of gold.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

With respect to our two criminal funds, the GLD and the SLV:

GLD:

Tonight , we had a huge  changes in gold inventory: a massive deposit of 14.78 tonnes

Inventory rests tonight: 831.21 tonnes

IN THE LAST 36 TRADING DAYS: GLD SHEDS 5.76 TONNES YET GOLD IS HIGHER BY $105.70 .

SLV

Today:  WE HAD NO CHANGES IN SILVER INVENTORY TONIGHT:

INVENTORY RESTS AT 331.178 MILLION OZ

end

.

First, here is an outline of what will be discussed tonight:

1. Today, we had the open interest in silver ROSE BY A STEADY 798 contracts from 178,897 UP TO 179,695 (AND now A LITTLE CLOSER TO THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21/2017 AT 234,787) WITH FRIDAY’S 22 CENT GAIN IN TRADING. SILVER RESPONDED LIKE GOLD TO THE ECONOMIC CLIMATE.  NEWBIE LONGS TOOK COMFORT IN THE POOR JOBS REPORT TO PILE INTO THE SILVER ARENA. THE BANKERS HOWEVER ARE STILL LOATHE TO SUPPLY THE NECESSARY SHORT PAPER. OLDER SPECS EXITED WITH A NICE PROFIT .

RESULT:  A  HIGHER OI AT THE COMEX WITH THE INCREASE IN PRICE OF 22 CENTS.  BANKERS REFUSE TO SUPPLY THE SHORT PAPER AND ARE TRYING TO GET OUT OF THEIR SHORTFALL 

(report Harvey)

.

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

3. ASIAN AFFAIRS

i)Late MONDAY night/TUESDAY morning: Shanghai closed UP 4.73 POINTS OR 0.14%   / /Hang Sang CLOSED UP 1.09 POINTS OR 0.01%/ The Nikkei closed DOWN 122.44 POINTS OR 0.63%/Australia’s all ordinaires CLOSED UP 0.07%/Chinese yuan (ONSHORE) closed UP at 6.5490/Oil UP to 47.90 dollars per barrel for WTI and 52.59 for Brent. Stocks in Europe OPENED MIXED/ TO GREEN. Offshore yuan trades  6.5540 yuan to the dollar vs 6.5490 for onshore yuan. NOW THE OFFSHORE MOVED SLIGHTLY WEAKER  TO THE ONSHORE YUAN/ ONSHORE YUAN MUCH STRONGER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS MUCH STRONGER TO THE DOLLAR AND THIS IS COUPLED WITH THE  WEAKER DOLLAR. CHINA IS HAPPY TODAY 

 

3a)THAILAND/SOUTH KOREA/NORTH KOREA

i)NORTH KOREA/

Friday night

North Korea displays a purported advanced hydrogen bomb capable of sitting on top of a missile.  If this is verified, it certainly will be of grave concern to Trump

( zero hedge)

ii)Saturday midnight EST/the second big story of the weekend

North Korea conducts a Hydrogen bomb test

( zero hedge)

More chaos on Monday after South Korea detected the North’s preparations for another launch of an ICBM probably around Sept 9.

( zerohedge)

( zerohedge)

vi)North Korea/China/USA

China slams Trump’s trade threat as unacceptable. If the USA sanctions trade with China, that would cut off $650 billion dollars worth of imports that Americans buy and that just would not happen. Also threats to cut off oil important into North Korea from China may cause a huge confrontation between these two countries that would probably transcend the conflict between the USA and North Korea.

( zerohedge)

vii) SOUTH KOREA proposes a full oil, currency blockade of the North and the stoppage of labourers from working in other countries. China said no to this.  Russia seems to be siding with South Korea

( zerohedge)

viii) As promised, North Korea has been seen moving an ICBM into position for another launch probably on the weekend

( zero hedge)

ix)Tuesday afternoon:

I do not like the looks of this;  A furious North Korea slams the USA as the aggressor who is begging for war and they state that they will respond in their own way;

( zerohedge)

b) REPORT ON JAPAN

c) REPORT ON CHINA

i)The story that we have been waiting 10 years to hear:  China will set crude oil purchases in yuan and then back the yuan with gold. This will be the death knell of the petro-dollar scheme as the world by-passes the dollar.  Either the USA joins by backing their dollar with verifiable gold or their dollar sinks. This move by China bypasses all sanctions as well as the SWIFT system of payment.  Recall that China has their own CIP or CHIP payment system.

( Paraskova/OilPrice.com)

ii)China sees a new world order with the oil benchmark backed by gold

(asia.nikkei.com)

iii)Dave Krantzler discusses how China’s move to create a petro-yuan will reset the world’s reserve currency system

(courtesy zero hedge)

4. EUROPEAN AFFAIRS

In a leaked BREXIT document, the UK reveals that they will deter low skilled workers from entering the country: they will allow only high skilled labour

( zerohedge)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

i)Russia/USA

Moscow is furious with uSA plans to search the Russian Trade Mission.  The property is owned by Russia:

(courtesy zerohedge)

ii) Turkey/Germany/EU

Both candidates agree that Turkey should not become an EU member.  Turkey will become extremely angry and then it is plausible that they will release their 3 million migrants onto Greece:

(courtesy zero hedge)

iii) Russia/North Korea/USAPutin weighs in on the North Korean situation and states that further sanctions will not help one bit.  They warn of a huge global catastrophe if more sanctions are applied and or a military strike

( zerohedge)

6 .GLOBAL ISSUES

7. OIL ISSUES

i)Gasoline prices tumble as several US Gulf Coast refineries resumed operations

( zerohedge)

 ii) Gasoline drops as refiners restart. However Irma is heading straight for Miami but could head into the Gulf and cause more damage( zerohedge)

8. EMERGING MARKET

VENEZUELA

The messy state of affairs for Venezuela

( zerohedge)

9.   PHYSICAL MARKETS

i)Monday gold/silver trading

At 2 am EST as silver was approaching $17.90 and gold at around $1337.00, another flash crash was initiated by our bankers with over ONE billion dollars worth of gold (750,000 oz) supplied short. Again this was foiled.

( zerohedge)

ii)Saturday

Bitcoin crashes 500 dollars down to $4500.00

( zerohedge)

iii)Monday

China states that it will punish initial offerings  of cryptocurrencies. Bitcoin and Ethereum, the two leading cryptos fall.

Bitcoin falls to $4480 from $4600. Ethereum down to $310 from $400. China no doubt has now made its move with the real true currency:  gold and silver and that should completely replace crypto currencies.

( zero hedge)

iv)Bill Murphy describes the gold suppression scheme and how GATA is working to expose the crime.
(courtesy GATA)

v)Mark Mobius believes (and he is probably correct) that the crackdown in the cryptocurrencies will spark a rush into gold

( Mark Mobius/Bloomberg)

10. USA Stories

i)Trading early Tuesday

( zerohedge)

ii)The tweet from Trump which got everybody riled up:

( zero hedge)

iii)Tuesday trading/

July factory orders plunge to its weakest level since February

( zero hedge)

iv)Hurricane Harvey could bankrupt the Federal flood insurance program. It is already in debt to the tune of 25 billion dollars  and because private insurers will not cover flood damage, they provide up to 98% of insurance for floods. Because of the huge shortfall, they need to raise funds immediately and that should allow the safe passage of the debt ceiling to pay for huge damage cause by Harvey.

( zerohedge)

v)Sunday night/Irma

A professor with more advanced models predicts that Hurricane Irma is heading straight for Southern Florida and it’s wrath would cause considerable flooding in 3 potential areas of Florida including Miami

( zerohedge)

vi)Monday night/Irma

Irma now intensifies as a category 4 hurricane and it is looks like it is head straight for Miami

( zerohedge)

vii)Tuesday morning/Irma/Category 5 Hurricane

hitting straight  for Miami

(/zerohedge)

viii(This is going to get messy! Mueller finds his opening by teaming up with the IRS criminal division looking at Trump’s inner circle
( zerohedge)

ix)Judicial watch now sues the Dept of Justice for records of political contributions make to FBI’s assistant director’s wife Jill McCabe

( zerohedge)

x)Well that did not take long:  Kevin McCarthy and the House has decided that it will not add “Harvey” funds to the Debt Ceiling bill

chaos followed..

(courtesy zero hedge)

xi)The underfunding of public pensions is highlighted in Minnesota where the liabilities tripled when the reduced the assumed rate of return from 8% down to 4.7%

( zerohedge)

xii)Now we will witness grocery store chains joining the retail bankruptcy chaos

( zerohedge)

xiii)David Stockman analyzes the latest Trump tax plan and he outlines how that will have no effect whatsoever in helping the taxpayer or create more revenue for government. Stockman’s  plan is essentially to remove the costly payroll taxes and replace them with a larger VAT or consumption tax.  In this way the taxpayer and the small businessmen are not saddled with high payroll taxes.

these high payroll taxes:

 “cost precisely where the China Price (imported goods), the India Price (off-shored services) and the Robot Price (capital substitution) put immense competitive pressure on domestic, lower-wage jobs”

( David Stockman/Daily Reckoning)

xiv)this sent the dollar lower:  Lael Brainard who has the ear of Fed Governor Yellen in a speech today, stated that inflation must rise before any additional rate hikes are done  Gold rose on that.

(courtesy CNBC

Let us head over to the comex:

The total gold comex open interest ROSE BY A GOOD  SIZED 5,372 CONTRACTS UP to an OI level of 555,543 WITH THE FAIR SIZED GAIN IN THE PRICE OF GOLD  ($8.65 GAIN IN YESTERDAY’S trading). This time the bankers again supplied the necessary gold short paper when newbie longs took on our criminal bankers realizing that the geopolitical climate in the States was to the liking. They were further emboldened by the poor jobs report as these longs continued to pile into the gold comex with the commercials, undaunted, supplying the necessary short paper.

We had 0 notices of gold filed for Tuesday and thus nil oz will be delivered upon.

Result: a  GOOD SIZED open interest increase with an good sized rise in the price of gold coupled with the poor jobs report on Friday. 

The new non active September contract month saw it’s OI LOSE 18 contracts DOWN to 833.   We had 9 notices filed on Friday so we lost 9 contracts or an additional 900 oz will not stand but these guys received 9 EFP’s which entitles them to a fiat bonus plus a deliverable contract on a different exchange and most likely that would be London.  These are private deals so we do not get to see the makeup of these deals only the number of EFP’s issued.

The next active contract month is Oct and here we saw a LOSS of 3 contracts DOWN to 45,841.

The November contract saw its first loss of 8 contracts down to 2.

The very big active December contract month saw it’s OI gain 985 contracts up to 435,966.

We had 0 notice(s) filed upon today for  nil oz

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
And now for the wild silver comex results.  Total silver OI ROSE BY 798 CONTRACTS FROM 178,897 UP TO 179,695 WITH FRIDAY’S  22 CENT GAIN IN PRICE.  SILVER RESPONDED TO THE GEOPOLITICAL CLIMATE THROUGHOUT THE WORLD AND BECAME MORE EMBOLDENED TO TAKE TO TAKE ON SOME OF OUR BANKERS WITH THE RELEASE OF THE POOR JOB NUMBERS ON FRIDAY.  HOWEVER IN CONTRAST TO GOLD, THE BANKERS STILL ARE LOATHE TO SUPPLY THE SHORT COMEX PAPER. SOME OLD SPECS EXITED BUT AT A HIGHER PRICE. DEMAND FOR PHYSICAL SILVER REMAINS EXTREMELY HIGH AS AGAIN THE AMOUNT STANDING FOR DELIVERY INCREASED AGAIN.  WE HAVE BEEN WITNESSING THIS PHENOMENA FOR THE PAST 5 MONTHS.  (SEE BELOW). WE LOST NO SEPT LONGS TO EFP’S TODAY
RESULT:  A SMALL SIZED INCREASE IN OI AT THE COMEX WITH A 22 CENT GAIN IN PRICE. DEMAND FOR PHYSICAL SILVER RISES AGAIN AS THE AMOUNT STANDING INCREASES FOR THE SEPT CONTRACT MONTH.  THE BANKERS AGAIN ARE LOSE TO SUPPLY THE NECESSARY SHORT PAPER.

We are now in the active contract month of September (and the last active month until December). Today we witness Sept. OI fall by 304 contacts down to 1875. We had 373 notices filed on Friday, so we again gained 69 contracts or an additional 345,000 oz will stand for delivery. This phenomenon has been happening in silver for the past 5 months whereby the amount standing increases on each and every delivery day.  This queue jumping highlights the huge demand for silver that we have been witnessing around the globe. The next non active contract month for silver after September is October and here the OI GAINED 13 contacts UP TO 912. November saw another gain of 9 contracts up to 15. After November, the NEXT big active contract month is December and here the OI GAINED by 234 contracts UP to 158,719 contracts.

We had 373 notice(s) filed for  1,865,000 oz for the SEPT. 2017 contract

VOLUMES: for the gold comex

ESTIMATED VOLUME TODAY: 520,636 CONTRACTS WHICH IS HUMONGOUS

FRIDAY’S confirmed volume was 395.143 which is HUGE

volumes on gold are STILL HIGHER THAN NORMAL!

INITIAL standings for SEPTEMBER

 Sept. 5/2017.

Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
2,829.200 oz
Scotia
88 kilobars
Deposits to the Dealer Inventory in oz    nil oz
Deposits to the Customer Inventory, in oz 
  NIL oz
No of oz served (contracts) today
 
0 notice(s)
nil OZ
No of oz to be served (notices)
833 contracts
(83300 oz)
Total monthly oz gold served (contracts) so far this month
49 notices
4900 oz
0.1524 tonnes
Total accumulative withdrawals  of gold from the Dealers inventory this month   NIL oz
Total accumulative withdrawal of gold from the Customer inventory this month   5,369.1  oz
Today we HAD  1 kilobar transaction(s)/ 
total dealer deposits: nil oz
We had nil dealer withdrawals:
total dealer withdrawals:  0 oz
we had 0 customer deposit(s):
total customer deposits; NIL  oz
We had 1 customer withdrawal(s)
i) Out of Scotia:  2829.200 oz  (88 kilobars)
total customer withdrawals;  2829.200 oz
 we had 1 adjustment(s)
 i) Out of Delaware:
we had 98.82 oz adjusted out of the dealer and this landed into the customer account of Delaware
For SEPT:

Today, 0 notice(s) were issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 0  contract(s)  of which 0 notices were stopped (received) by j.P. Morgan dealer and 0 notice(s) was (were) stopped/ Received) by j.P.Morgan customer account.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
To calculate the initial total number of gold ounces standing for the SEPTEMBER. contract month, we take the total number of notices filed so far for the month (49) x 100 oz or 4900 oz, to which we add the difference between the open interest for the front month of SEPT. (833 contracts) minus the number of notices served upon today (0) x 100 oz per contract equals 82,200  oz, the number of ounces standing in this active month of SEPT.
 
Thus the INITIAL standings for gold for the SEPTEMBER contract month:
No of notices served so far (49) x 100 oz  or ounces + {(833)OI for the front month  minus the number of  notices served upon today (0) x 100 oz which equals 88,200 oz standing in this  active delivery month of SEPTEMBER  (2.743 tonnes)
We lost 9 contracts or 900 oz will not stand and 9 EFP’s were issued for September which gives the long holder a fiat bonus plus a deliverable product on another exchange and that most likely will be London.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Total dealer inventory 733,699.585 or 22.821 tonnes  (dealer gold continues to disappear)
Total gold inventory (dealer and customer) = 8,690,810.500 or 270.32 tonnes 
 
Over a year ago the comex had 303 tonnes of total gold. Today the total inventory rests at 270.32 tonnes for a  loss of 33  tonnes over that period.  Since August 8/2016 we have lost 84 tonnes leaving the comex. However I am including kilobar transactions and they are very suspect at best.
I have a sneaky feeling that these withdrawals of gold in kilobars are being used in the hypothecating process  and are being used in the raiding of gold!

The gold comex is an absolute fraud.  The use of kilobars and exact weights makes the data totally absurd and fraudulent! To me, the only thing that makes sense is the fact that “kilobars: are entries of hypothecated gold sent to other jurisdictions so that they will not be short with their underwritten derivatives in that jurisdiction.  This would be similar to the rehypothecated gold used by Jon Corzine at MF Global.
 
IN THE LAST 13 MONTHS  84 NET TONNES HAS LEFT THE COMEX.
end
And now for silver
AND NOW THE AUGUST DELIVERY MONTH
September initial standings
 Sept 5  2017
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
41,198.300 oz
Delaware
Scotia
Deposits to the Dealer Inventory
nil  oz
Deposits to the Customer Inventory 
 150,135.600 oz
 Scotia
No of oz served today (contracts)
373 CONTRACT(S)
(1,865,000 OZ)
No of oz to be served (notices)
1502 contracts
(7,510,000 oz)
Total monthly oz silver served (contracts) 2918 contracts (14,590,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month  NIL oz
Total accumulative withdrawal  of silver from the Customer inventory this month 1,879,454.500 oz
today, we had  0 deposit(s) into the dealer account:
total dealer deposit: nil   oz
we had 0 dealer withdrawals:
total dealer withdrawals: nil oz
we had 2 customer withdrawal(s):
 i) Out of Delaware:  988.60 oz
ii) Out of Scotia:  40,209.2 oz
TOTAL CUSTOMER WITHDRAWALS: 41,198.300 oz
We had 1 Customer deposit(s):
 I) into Scotia:  150,135.600 oz
***deposits into JPMorgan have stopped  again
In the month of March and February, JPMorgan stopped (received) almost all of the comex silver contracts.
why is JPMorgan bringing in so much silver??? why is this not criminal in that they are also the massive short in silver
total customer deposits: 600,590.290 oz
 
 we had 0 adjustment(s)
The total number of notices filed today for the SEPTEMBER. contract month is represented by 373 contract(s) for 1,865,000 oz. To calculate the number of silver ounces that will stand for delivery in SEPTEMBER., we take the total number of notices filed for the month so far at 2918 x 5,000 oz  = 14,590,000 oz to which we add the difference between the open interest for the front month of SEPT (1875) and the number of notices served upon today (373) x 5000 oz equals the number of ounces standing.
 

 

.
 
Thus the INITIAL standings for silver for the SEPTEMBER contract month:  2918 (notices served so far)x 5000 oz  + OI for front month of SEPTEMBER(1875 ) -number of notices served upon today (373)x 5000 oz  equals  22,100,000 oz  of silver standing for the SEPTEMBER contract month. This is excellent for this active delivery month. Silver is being constantly demanded at the silver comex and we witness again the amount of silver demanded daily increase right from the get go.
 
WE HAD AN INCREASE OF 69 CONTRACTS OR AN ADDITIONAL 345,000 OZ OF SILVER WILL STAND FOR DELIVERY IN THIS ACTIVE CONTRACT MONTH OF SEPTEMBER. THIS HAS BEEN THE 5th CONSECUTIVE MONTH THAT WE HAVE WITNESSED EITHER AN INCREASE (95% OF THE TIME) OR STANDING PAT (THE OTHER 5%).  WE HAVE NOT HAVE A DECREASE IN STANDING I.E. AS THEY DELIVERY MONTH PROCEEDS NOBODY WISHES AN EFP PRODUCT IN EXCHANGE FOR A DEPARTING LONG.
Last yr on the first day notice for the Sept silver 2016 contract we had 17.070 million oz stand for delivery.
By month end:  16.075 million oz/
 
Volumes: for silver comex
ESTIMATED VOLUME TODAY: 120,681 CONTRACTS WHICH IS  HUMONGOUS
YESTERDAY’s  confirmed volume was 105,018 contracts which is GIGANTIC
YESTERDAY’S CONFIRMED VOLUME OF 105,018 CONTRACTS WHICH EQUATES TO 529 MILLION OZ OF SILVER OR 76% OF ANNUAL GLOBAL PRODUCTION OF SILVER EX CHINA EX RUSSIA). IN OUR HEARINGS THE COMMISSIONERS STRESSED THAT THE OPEN INTEREST SHOULD BE AROUND 3% OF THE MARKET.
 
Total dealer silver:  43.017 million (close to record low inventory  
Total number of dealer and customer silver:   216.612 million oz
The record level of silver open interest is 234,787 contracts set on April 21./2017  with the price at that day at  $18.42
The previous record was 224,540 contracts with the price at that time of $20.44
end

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 6.7 percent to NAV usa funds and Negative 6.5% to NAV for Cdn funds!!!! 
Percentage of fund in gold 62.3%
Percentage of fund in silver:37.7%
cash .+0.0%( Sept 5/2017) 
2. Sprott silver fund (PSLV): STOCK   NAV RISES TO -0.35% (Sept 5/2017) 
3. Sprott gold fund (PHYS): premium to NAV RISES TO -0.34% to NAV  (Sept 5/2017 )
Note: Sprott silver trust back  into NEGATIVE territory at -0.35%/Sprott physical gold trust is back into NEGATIVE/ territory at -0.34%/Central fund of Canada’s is still in jail  but being rescued by Sprott.

Sprott’s hostile 3.1 billion bid to take over Central Fund of Canada

(courtesy Sprott/GATA)

Sprott makes hostile $3.1 billion bid for Central Fund of Canada

 Section: Daily Dispatches

From the Canadian Press
via Canadian Broadcasting Corp. News, Toronto
Wednesday, March 8, 2017

http://www.cbc.ca/news/canada/calgary/sprott-takeover-bid-central-fund-c…

Toronto-based Sprott Inc. said Wednesday it’s making an all-share hostile takeover bid worth $3.1 billion US for rival bullion holder Central Fund of Canada Ltd.

The money-management firm has filed an application with the Court of Queen’s Bench of Alberta seeking to allow shareholders of Calgary-based Central Fund to swap their shares for ones in a newly-formed trust that would be substantially similar to Sprott’s existing precious metal holding entities.

The company is going through the courts after its efforts to strike a friendly deal were rebuffed by the Spicer family that controls Central Fund, said Sprott spokesman Glen Williams.

“They weren’t interested in having those discussions,” Williams said.

 Sprott is using the courts to try to give holders of the 252 million non-voting class A shares a say in takeover bids, which Central Fund explicitly states they have no right to participate in. That voting right is reserved for the 40,000 common shares outstanding, which the family of J.C. Stefan Spicer, chairman and CEO of Central Fund, control.

If successful through the courts, Sprott would then need the support of two-thirds of shareholder votes to close the takeover deal, but there’s no guarantee they will make it that far.

“It is unusual to go this route,” said Williams. “There’s no specific precedent where this has worked.”

Sprott did have success last year in taking over Central GoldTrust, a similar fund that was controlled by the Spicer family, after securing support from more than 96 percent of shareholder votes cast.

The firm says Central Fund’s shares are trading at a discount to net asset value and a takeover by Sprott could unlock US$304 million in shareholder value.

Central Fund did not have any immediate comment on the unsolicited offer. Williams said Sprott had not yet heard from Central Fund on the proposal but that some shareholders had already contacted them to voice their support.

Sprott’s existing precious metal holding companies are designed to allow investors to own gold and other metals without having to worry about taking care of the physical bullion.

end

And now the Gold inventory at the GLD

Sept 5/we had a huge deposit of 14.78 tonnes into the GLD/Inventory rests at 831.21 tonnes

Sept 1/ no change in gold inventory at the GLD/Inventory rests at 816.43 tonnes

AUGUST 31/no change in gold inventory at the GLD. Inventory rests at 816.43 tonnes

August 30/another deposit of 2.07 tonnes into the GLD inventory/inventory rests at 816.43 tonnes

August 29/a huge deposit of 9.16 tonnes of probable paper gold/inventory rests at 814.36 tonnes

AUGUST 28/a huge deposit f 5.91 tonnes of gold into GLD inventory/inventory rests at 805.20 tonnes

AUGUST 25/NO CHANGE IN GOLD INVENTORY/INVENTORY RESTS AT 799.29 TONNES

AUGUST 24/no change in gold inventory at the GLD/inventory rests at 799.29 tonnes

August 23/no change in gold inventory at the GLD/Inventory rests at 799.29 tonnes

August 22/no change in gold inventory at the GLD/Inventory rests at 799.29 tonnes/

AUGUST 21/this is good!! a huge deposit of gold into the GLD to the tune of 3.85 tonnes/Inventory rests at 799.29 tonnes

August 18/NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 795.44 TONNES

August 17/late last night, a deposit of 4.43 tonnes of gold at the GLD/inventory rests at 795.44 tonnes/the bleeding of gold has stopped.

August 16/no change in gold inventory at the GLD. Inventory rests at 791.01 tonnes

August 15/no change in gold inventory at the GLD/inventory rests at 791.01 tonnes

August 14/this is good!!: a gain of 4.14 tonnes of gold into the GLD inventory/the removal of GLD gone to the east has now stopped probably because there is no physical to send/inventory rests at 791.01 tonnes

August 11/no change in gold inventory/Inventory rests at 786.87 tonnes

August 7/no changes in gold inventory at the GLD/Inventory rests at 787.14 tonnes

AUGUST 4/ANOTHER LOSS OF 4.48 TONNES OF GOLD FROM GLD INVENTORY/INVENTORY RESTS AT 787.14 TONNES.THIS IS A HUGE CRIME SCENE!!

August 3/no change in gold inventory at the GLD/Inventory rests at 791.88 tonnes

August 2/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 791.88 TONNES

Aug 1/NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 791.88 TONNES

July 31/NO CHANGES AT THE GLD/INVENTORY RESTS AT 791.88 TONNES

July 28/ANOTHER MASSIVE WITHDRAWAL OF 3.54 TONNES OF GOLD WITH GOLD UP $9.15/INVENTORY RESTS AT 791.88 TONNES

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Sept 5 /2017/ Inventory rests tonight at 831.21 tonnes
*IN LAST 225 TRADING DAYS: 118.67 NET TONNES HAVE BEEN REMOVED FROM THE GLD
*LAST 163 TRADING DAYS: A NET  38.76 TONNES HAVE NOW BEEN ADDED INTO  GLD INVENTORY.
*FROM FEB 1/2017: A NET  721.95 TONNES HAVE BEEN ADDED.

end

Now the SLV Inventory

Sept 5/2017: no change in silver inventory at the SLV/Inventory rests at 331.178 million oz/

Sept 1/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 331.178 MILLION OZ

AUGUST 31/STRANGE!! a huge withdrawal of 2.019 million oz with silver up today./INVENTORY RESTS AT 331.178 MILLION OZ

August 30/no change in silver inventory at the SLV/inventory rests at 333.178 million oz

August 29/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 333.178 MILLION OZ

AUGUST 28/no change in silver inventory at the SLV/Inventory rests at 333.178 million oz/

AUGUST 25/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 333.178 MILLION OZ

AUGUST 24/A HUGE WITHDRAWAL OF 1.229 MILLION OZ FROM THE SLV/INVENTORY RESTS AT 333.178 MILLION OZ

August 23/no change in silver inventory at the SLV/Inventory rests at 334.407 million oz

August 22/no change in silver inventory at the SLV/inventory rests at 334.407 million oz.

AUGUST 21/no change in silver inventory/inventory rests at 334.407 million oz/

August 18/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY REST AT 334.407 MILLION OZ

August 17/A WITHDRAWAL OF 1.418 MILLION OZ LEAVES THE VAULTS OF THE SLV (WITH SILVER UP 25 CENTS YESTERDAY?)/INVENTORY RESTS AT 334.407 MILLION OZ

August 16/no change in silver inventory at the SLV/Inventory rests at 335.825 million oz/

August 15/no change in silver inventory at the SLV/Inventory rests at 335.825 million oz.

August 14./no change in silver inventory/inventory rests at 335.825 million/

August 11/no change in silver inventory tonight.  However we lost 3,781 million oz from Tuesday through Thursday. Inventory rests at 335.825 million oz/

August 7/no change in silver inventory at the SLV/Inventory rests at 339.606 million oz

AUGUST 4/A WITHDRAWAL OF 945,000 OZ/INVENTORY RESTS AT 339.606 MILLION OZ

August 3/A WITHDRAWAL OF 1,181,000 OZ FROM THE SLV/INVENTOR RESTS AT 340.551 MILLION OZ/

August 2/NO CHANGES IN SILVER INVENTORY AT THE SLV

INVENTORY RESTS AT 341.732 MILLION OZ/

August 1/A HUGE WITHDRAWAL OF 945,000 OZ/INVENTORY RESTS AT 341.732 MILLION OZ/

July 31/no change in silver inventory at the SLV/inventory rests at 342.677 million oz

July 28/ A HUGE WITHDRAWAL OF 1.15 MILLION OZ OF SILVER LEAVES THE SLV DESPITE SILVER BEING UP 11 CENTS TODAY/INVENTORY RESTS AT  342.677 MILLION OZ

Sept 5.2017:

Inventory 331.761  million oz
end
  • 6 Month MM GOFO

    Indicative gold forward offer rate for a 6 month duration

    + 1.38%
  • 12 Month MM GOFO
    + 1.50%
  • 30 day trend

end

Major gold/silver trading/commentaries for TUESDAY

GOLDCORE/BLOG/MARK O’BYRNE.

GOLD/SILVER

 

Gold Surges To $1338 as U.S. Warns of ‘Massive’ Military Response

– Safe haven gold extends rally to 11-month high after North Korea nuke test and U.S. warns of ‘massive’ response
– Asian and European stocks fall, bonds flat, gold, silver, palladium, Swiss franc rise as Korea tensions flare as North Korea tests ‘hydrogen bomb’
– North Korea prepares for possible ICBM launch says S. Korea
– U.S. warns of ‘massive,’ ‘overwhelming’ military response to North Korea after meeting with Trump
– Trump weighing new economic sanctions that target China
– Gold is consolidating above the $1,300/oz key resistance level and building on 4% gain seen in August

Relative Performance (1 Day) – Finviz.com

Safe haven gold continued to eke out further gains of 0.73% today and reached its highest level in 11 months at $1,338.65/0z. The latest gains came after North Korea’s latest and most powerful nuclear test again saw investors diversify into safe haven gold and other safe haven assets.

Asian and European shares have fallen and the geo-political risk led to the the usual knee-jerk shift to safe havens pushing the yen, Swiss franc, gold and silver higher.

The Nikkei was down 0.93 and EuroStoxx 50 was down 0.45%. The Stoxx Europe 600 Index declined, with all industry sectors in the red.

The U.K.’s FTSE 100 Index dipped 0.3 percent and Germany’s DAX Index fell 0.5 percent. The MSCI All-Country World Index sank 0.2 percent, the largest dip in more than two weeks. Stock market futures suggest a difficult day for global equities.

The White House warned any nation doing business with Kim Jong Un’s regime would be met with economic sanctions and trade embargoes, and Trump’s defense chief said the U.S. has “many military options.”

Gold’s gains came after gold rose both last week and in August when gold and silver saw strong safe haven gains of 4% and 5% respectively.

Related Content
Precious Metals Outperform Markets In August – Gold +4%, Silver +5%

4 Reasons Why “Gold Has Entered A New Bull Market” – Schroders

Diversify Into Gold On U.S. “Political Instability” Advise Blackrock

Gold and Silver Bullion – News and Commentary

Gold Surges To $1338 as U.S. Warns of ‘Massive’ Military Response (Reuters)

Asian Stocks Fall, Yen Jumps After Korea Bomb Test (Bloomberg)

Yen, bonds and gold gain after North Korea tests ‘hydrogen bomb’ (Reuters)

Gas, Gold Are Boosted by Geopolitical Tensions (Bloomberg)

President Trump denounces North Korea’s ‘hostile, dangerous’ weapons test (CNBC)

Source: Marketwatch

The Depression You’ve Probably Never Heard Of (Moneyweek)

Gold Pops, Stocks Drop As Futures Open After Korean Chaos (Zerohedge)

China’s New World Order – Own Oil Benchmark Backed By Gold (Asia Nikkei)

A “Super-Powerful” EMP Attack: North Korea’s Newest Weapon Against The U.S. (Zerohedge)

The US Cities with the Biggest Housing Bubbles (Wolfstreet)

Gold Prices (LBMA AM)

04 Sep: USD 1,334.60, GBP 1,030.98 & EUR 1,114.15 per ounce
01 Sep: USD 1,318.40, GBP 1,020.18 & EUR 1,106.85 per ounce
31 Aug: USD 1,305.80, GBP 1,013.17 & EUR 1,098.31 per ounce
30 Aug: USD 1,310.60, GBP 1,014.93 & EUR 1,096.71 per ounce
29 Aug: USD 1,323.40, GBP 1,020.34 & EUR 1,097.36 per ounce
25 Aug: USD 1,287.05, GBP 1,003.90 & EUR 1,090.90 per ounce
24 Aug: USD 1,285.90, GBP 1,003.26 & EUR 1,090.44 per ounce

Silver Prices (LBMA)

04 Sep: USD 17.80, GBP 13.75 & EUR 14.95 per ounce
01 Sep: USD 17.50, GBP 13.53 & EUR 14.69 per ounce
31 Aug: USD 17.34, GBP 13.47 & EUR 14.62 per ounce
30 Aug: USD 17.44, GBP 13.49 & EUR 14.60 per ounce
29 Aug: USD 17.60, GBP 13.59 & EUR 14.62 per ounce
25 Aug: USD 17.02, GBP 13.26 & EUR 14.40 per ounce
24 Aug: USD 16.93, GBP 13.20 & EUR 14.36 per ounce


Recent Market Updates

– Precious Metals Outperform Markets In August – Gold +4%, Silver +5%
– 4 Reasons Why “Gold Has Entered A New Bull Market” – Schroders
– Gold Reset To $10,000/oz Coming “By January 1, 2018” – Rickards
– Gold Surges 2.6% After Jackson Hole and N. Korean Missile
– Diversify Into Gold On U.S. “Political Instability” Advise Blackrock
– Trump Presidency Is Over – Bannon Is Right
– The Truth About Bundesbank Repatriation of Gold From U.S.
– Cyberwar Risk – Was U.S. Navy Victim Of Hacking?
– Global Financial Crisis 10 Years On: Gold Rises 100% from $650 to $1,300
– Mnuchin: I Assume Fort Knox Gold Is Still There
– Buffett Sees Market Crash Coming? His Cash Speaks Louder Than Words
– Gold, Silver Consolidate On Last Weeks Gains, Palladium Surges 36% YTD To 16 Year High
– Must See Charts – Gold Hedges USD Devaluation, Rise in Oil, Food and Cost of Living Since Nixon Ended Gold Standard

end

Monday gold/silver trading

At 2 am EST as silver was approaching $17.90 and gold at around $1337.00, another flash crash was initiated by our bankers with over ONE billion dollars worth of gold (750,000 oz) supplied short. Again this was foiled.

(courtesy zerohedge)

Precious Metals Flash-Crash After Silver Surged To 4-Month Highs, Gold Nears Election-Day Spike Highs

While stocks have been limping higher since around 2am ET (following headlines on an imminent ICBM launch) they remain lower from Friday’s close:

But precious metals the biggest gainers of post-North Korean “hydrogen bomb” testing safe haven flows.

Silver broke above resistance at early June highs to test $18 and the highest levels since April 25th.

But that was clearly not acceptable to someone:

At 0451ET, someone decided it would be an opportune time to dump over a quarter of a billion dollars notional of gold into the futures market…

Taking out the Asia opening low stops. For now the gains in PMs are holding.

end

Saturday

Bitcoin crashes 500 dollars down to $4500.00

(courtesy zerohedge)

Cryptocrash: Bitcoin Tumbles To Pre Korea-Missile-Launch Level After Topping $5000

Shortly after topping $5,000 (according to several exchanges), Bitcoin began to tumble dramatically – now down almost $500 – erasing all the post-North-Korea missile anxiety gains.

Ethereum has crashed even more.

In fact, 9 of the 10 largest cryptocurrencies are all plunging this morning…

While there is no specific catalyst for this drop, two events have been cited: in the US, regulators have begun officially cracking down on ICOs.

Meanwhile, one of the world’s largest bitcoin exchange, Shanghai-based BTC China, announced it had suspended ICOCoin deposits as well as trading and withdrawals, starting 6pm on Sunday, while Caixin reports that authorities shut down a blockchain conference over the weekend on concerns unregulated Initial Coin Offerings were being used to raise funds illegally, adding that Chinese market regulators have begun cracking down on ICOs as “illegal fundraising vehicles” in disguise, and in taking a page out of the SEC playbook, will soon issue official rules on ICOs.

As CoinTelegraph adds, the self-regulatory group National Internet Finance Association of China warned its members about the dangers in participating in initial coin offerings (ICO). The group claimed that ICOs could be using misleading information as part of fundraising campaigns. In a statement in late August 2017, the online finance organization further warned its member companies to exercise extreme caution when dealing with the new fundraising mechanism. Part of the statement reads:

“China Internet Finance Association members should take the initiative to strengthen self-discipline, to resist illegal financial behavior.”

end

Monday

China states that it will punish initial offerings  of cryptocurrencies. Bitcoin and Ethereum, the two leading cryptos fall.

Bitcoin falls to $4480 from $4600. Ethereum down to $310 from $400. China no doubt has now made its move with the real true currency:  gold and silver and that should completely replace crypto currencies.

(courtesy zero hedge)

Ethereum, Bitcoin Crash After China Declares Initial Coin Offerings Illegal

Ethereum and bitcoin are crashing this morning, after China confirmed its recent threat of an ICO crackdown (reported here last Monday) when the central bank said on Monday that initial coin offerings are illegal and disrupt financial markets, according to statement on China’s central bank websiteThe PBOC also asked all related fundraising activity to be halted immediately, issuing the strongest regulatory challenge so far to the burgeoning market for digital token sales.

The crackdown was announced in a statement on the PBOC’s website in which the central bank said that it had completed investigations into ICOs, and will strictly punish offerings in the future while penalizing legal violations in ones already completed. The regulator said that organizations or individuals that completed initial coin offerings should return the money raised, in move “to protect investors’ rights and properly handle risks,” though it didn’t specify how the money would be paid back to investors.

Taking the recent SEC crackdown on Initial Coin Offerings several steps further, the PBOC also said digital token financing and trading platforms are prohibited from doing conversions of coins with fiat currencies. Digital tokens can’t be used as currency on the market and banks are forbidden from offering services to initial coin offerings, and are also also banned from offering pricing and information services on coins. Most importantly was the PBOC’s determination that “digital token can’t be used as currency on the market” and its warning that “China will strictly punish over sustained offerings and law violations in completed ones.”

The central bank’s Monday directive made no mention of cryptocurrencies such as ether or bitcoin. Bitcoin tumbled over 8%, the most since July on a closing basis, to $4,480. Ethereum was down more than 11% Monday, to just above $310, after trading nearly $400 last week.

“This is somewhat in step with, maybe not to the same extent, what we’re starting to see in other jurisdictions – the short story is we all know regulations are coming,” Jehan Chu, managing partner at Kenetic Capital in Hong Kong, which invests in and advises on token sales, told Bloomberg. “China, due to its size and as one of the most speculative IPO markets, needed to take a firmer action.”

As described previously, ICOs are controversial digital token sales that have seen unchecked growth over the past year, raising $1.6 billion and surpassed traditional venture capital raising pathways. They have been deemed a threat to China’s financial market stability as authorities struggle to tame financing channels that sprawl beyond the traditional banking system. Widely seen as a way to sidestep venture capital funds and investment banks, they have also increasingly captured the attention of central banks that see in the fledgling trend a threat to their reign.

While hardly the world’s biggest coin offering market, China accounts for about a quarter of the blockchain based capital raising activity YTD: there were at least 43 ICO platforms in China as of July 18, according to a report by the National Committee of Experts on the Internet Financial Security Technology. Sixty-five ICO projects had been completed, the committee said, raising 2.6 billion yuan ($398 million).

Incidentally, just as we speculated in late July, when the SEC announced its own crackdown on initial coin offerings, a move we deemed would be beneficial in the long run for weeding out the various criminal and ponzi schemes that have proliferated in the unregulated market, so today’s move by China is seen by some as favorable for blockchain dynamics:

“This is a positive move given the rapid proliferation of low quality and possibly fraudulent coin sales promising the moon,” said Emad Mostaque, London-based co-chief investment officer at Capricorn Fund Managers Ltd. “There is tremendous value in the model but we need to see more separation of high quality, ethical offerings versus those seeking to circumvent securities law for a quick buck.”

Indeed, the SEC signaled greater scrutiny of the sector when it warned that ICOs may be considered securities, though it stopped short of suggesting a broader clampdown. The regulator reaffirmed its focus on protecting investors, however, and said issuers must register the deals with the government unless they have a valid excuse. The vast amount of money amassed in a short span of time has also attracted cyber criminals, with an estimated 10 percent of money intended for ICOs looted away by scams such as phishing this year, according to Chainalysis, a New York-based firm that analyzes transactions and provides anti-money laundering software.

China will likely eventually allow token sales, according to Chu of Kenetic Capital, however only on approved platforms, and may even vet projects individually. “I think they will allow the sale of tokens in a format which they deem safe and more measured,” he said.

Bill Murphy describes the gold suppression scheme and how GATA is working to expose the crime.
(courtesy GATA)

GATA chairman describes gold price suppression and our work to expose it

 Section: 

9:36a ET Sunday, September 3, 2017

Dear Friend of GATA and Gold:

In an interview with Ken Koh of the Pork Chop Report, GATA Chairman Bill Murphy describes international central banking’s gold price suppression scheme and GATA’s work to expose it. The interview is 27 minutes long and can be viewed at You Tube here:

https://www.youtube.com/watch?v=tSKcu39olks

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

 END
Mark Mobius believes (and he is probably correct) that the crackdown in the cryptocurrencies will spark a rush into gold
(courtesy Mark Mobius/Bloomberg)

Mobius foresees cryptocurrency crackdown sparking a rush to gold

 Section: 

By Kana Nishizawa
Bloomberg News
Monday, September 4, 2017

Mark Mobius is sensing danger in the explosive growth of cryptocurrencies.

Governments will begin clamping down on digital currencies because of their use in illicit financing, with terrorist groups to drug dealers contributing to their rise, Mobius, executive chairman at Templeton Emerging Markets Group, said in an interview in Hong Kong on Monday.

“Cryptocurrencies are beginning to get out of control and it’s going to attract the attention of governments around the world,” Mobius said. “You’re going to get a reversion back to gold because people are going to wonder: Can I really trust these currencies?”

And the crackdown may have already started — at least in China, home to the majority of bitcoin miners.

The People’s Bank of China said Monday that initial coin offerings are illegal and that all related fundraising activity should be halted immediately. The central bank said it has completed investigations into organizations and individuals who have conducted so-called ICOs, and have ruled that such activities disturb financial order and will be banned. …

… For the remainder of the report:

https://www.bloomberg.com/news/articles/2017-09-04/mobius-foresees-crypt…

END
An excellent interview of Bill Holter with Greg Hunter
(courtesy Bill Holter/Greg hunter)


Your early TUESDAY morning currency, Asian stock market results,  important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight

 
 

1 Chinese yuan vs USA dollar/yuan MUCH STRONGER 6.5490 (REVALUATION NORTHBOUND   /OFFSHORE YUAN MOVES SLIGHTLY WEAKER TO ONSHORE AT   6.5540/ Shanghai bourse CLOSED UP 4.73 POINTS OR 0.14%  / HANG SANG CLOSED UP 1.09 POINTS OR 0.01% 

2. Nikkei closed DOWN 122.44 POINTS OR 0.63%    /USA: YEN FALLS TO 109.37

3. Europe stocks OPENED MIXED TO  GREEN     ( /USA dollar index FALLS TO  92.60/Euro DOWN to 1.1886

3b Japan 10 year bond yield: RISES  TO  -+.006%/ GOVERNMENT INTERVENTION    !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 114.34/ THIS IS TROUBLESOME AS BANK OF JAPAN IS RUNNING OUT OF BONDS TO BUY./JAPAN 10 YR YIELD FINALLY IN THE POSITIVE/BANK OF JAPAN LOSING CONTROL OF THEIR YIELD CURVE AS THEY PURCHASE ALL BONDS TO GET TO ZERO RATE!!

3c Nikkei now JUST BELOW 17,000

3d USA/Yen rate now well below the important 120 barrier this morning

3e WTI::  47.90 and Brent: 52.59

3f Gold DOWN/Yen UP (RARE)

3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa./“HELICOPTER MONEY” OFF THE TABLE FOR NOW /REVERSE OPERATION TWIST ON THE BONDS: PURCHASE OF LONG BONDS  AND SELLING THE SHORT END

Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.

3h Oil UP for WTI and UP for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund FALLS TO  +.357%/Italian 10 yr bond yield DOWN  to 2.026%    

3j Greek 10 year bond yield FALLS TO  : 5.5180???  

3k Gold at $1330.00  silver at:17.88 (8:15 am est)   SILVER NEXT RESISTANCE LEVEL AT $18.50 

3l USA vs Russian rouble; (Russian rouble DOWN 17/100 in  roubles/dollar) 58.00-

3m oil into the 47 dollar handle for WTI and 52 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/GOT A FAIR SIZED REVALUATION NORTHBOUND 

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 109.37 DESTROYING JAPANESE CITIZENS WITH HIGHER FOOD INFLATION

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning  0.9600 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1412 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

3p BRITAIN VOTES AFFIRMATIVE BREXIT/LOWER PARLIAMENT APPROVES BREXIT COMMENCEMENT/ARTICLE 50 COMMENCES MARCH 29/2017 

3r the 10 Year German bund now POSITIVE territory with the 10 year FALLING to  +0.357%

The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”.  Next step for Greece will be the recapitalization of the banks and that will be difficult.

4. USA 10 year treasury bond at 2.132% early this morning. Thirty year rate  at 2.755% /POLICY ERROR)GETTING DANGEROUSLY HIGH

5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.

6. USA CASH BALANCES ON HAND: $55 BILLION

(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)

Global Stocks Shake Off North Korea Jitters; Chinese Yuan Slides

Yesterday morning, with the US closed for holiday but with S&P futures trading modestly lower on the latest set of North Korean geopolitical fears, we asked “is this time different“, referencing last week’s similar setup, when futures gapped lower on Monday after the Kim regime shot a missile over Japan, only to surge into the end of the week.

Well, as of this morning, it seems that traders are eager to buy the latest dip, as US futures pared yesterday’s losses before markets reopen after the Labor Day holiday, as global stocks looked to put any North Korean unpleasantries into the rear view mirror and assume another happy ending: Japanese shares fell fractionally overnight, but the decline was modest as yen gains appear to have stabilized, while Asia ex Japan was higher and Europe has already moved on with bourses on the continent glowing green ahead of Thursday’s ECB meeting.

In a nutshell, North Korean risks remain just below the surface as U.S. markets reopen following long weekend. U.S. equity futures continue to remain in a tight range midway between Friday close and Globex reopening gap-lower precipitated by ICBM news from Korea. European equities open higher and rally further, led by German DAX, future closes Friday upside gap. Auto sector well supported after GM reports record Aug. China vehicle deliveries. Merck KGaA (+3.5%) also outperforms after divestment reports; energy stocks lifted as crude futures push through yesterday’s high. USD trades broadly flat, AUD marginally supported by comments RBA’s Lowe on continuing current policy. USD/JPY partially unwinds overnight risk-off move lower, TRY underperforms EMFX after political warning from Merkel. German curve slightly steeper with peripheral spreads tightening; USTs remain within yesterday’s range

The biggest dip buyers so far emerged in Europe, where most industry sectors in the Stoxx Europe 600 Index gained as data from China to the euro area pointed to more growth for the global economy. Confirmation that euro zone business activity remained robust last month helped the pan-European STOXX 600 to claw back most of the 0.5 percent it lost on Monday amid international condemnation of the previous day’s nuclear test

Meanwhile Asian markets were somewhat less euphoric: overnight China’s Caixin/Markit services PMI rose to 52.7 in August, the highest reading in three months. The market reaction to that was muted, however, with sentiment in Asian equity markets still subdued. Chinese bourses eked out small 0.2-0.3 percent gains but Seoul and Tokyo remained red. Speaking at a summit of the world’s biggest emerging economies in China, Russian President Vladimir Putin again warned that threatening military action against North Korea could trigger “a global catastrophe”. “Russia condemns North Korea’s exercises, we consider that they are a provocation … (But) ramping up military hysteria will lead to nothing good,” he told reporters.

More on the political front, overnight South Korea’s Asia Business Daily, citing an unidentified source, reported North Korea had been observed moving a rocket that appeared to be an intercontinental ballistic missile (ICBM) possibly in preparation for a launch.

As with many political risk plays over the past couple of years, market moves suggested a reluctance to price in tail risks on every possible bad outcome and more of a focus on the prosaic but upbeat global economic picture. As we showed yesterday, it has taken markets roughly 31 days on average to “fill the gap” from all post-WWII geopolitical shocks, and this time appears to be no different.

Which while understandable, is in some ways is odd, because the escalation from a potential nuclear war with North Korea shows no signs of abating: President Trump agreed to support billions of dollars in new weapons sales to South Korea after North Korea’s largest nuclear test, while the US ambassador to the United Nations, Nikki Haley said America would seek the strongest possible sanctions against Kim Jong Un’s regime. Tensions escalated after Asia Business Daily reported North Korea was preparing to fire an ICBM missile.

In currencies, the early risk off tone has dampened in early European trade, as CHF and JPY have both lost ground against their main counterparts. The Dollar recovered from earlier losses as investors unwound shorts built on Monday as Treasuries pared gains while bunds fall, though still trade higher from Friday on persistent haven demand amid a report that North Korea is preparing to fire an intercontinental ballistic missile before Saturday.

The RBA kept rates on hold, as expected at 1.5%, with markets fairly unfazed. Immediate slight depreciation was seen in the AUD, reacting to comments from the RBA stating that a rise in AUD would lead to slower economic growth than otherwise, however, the 20-pip fall was quickly retraced. 0.8 continues to behave as resistance in AUD/USD as the August high continues to hold. Yen gains were limited. Perhaps the biggest surprise was the tumble in the onshore yuan, which after a record long rise of more than two consecutive weeks, suffered its biggest drop since Feb. 7 as the greenback erased earlier losses and the PBOC set a weaker-than-expected fixing. The CNY slid 0.29% to 6.5502 per dollar as of early morning trading. The PBOC strengthened the yuan reference rate by 0.45% to 6.5370, however this was less than the average Bloomberg survey estimate of 6.5291.

In rates, treasuries erased earlier gains and bunds slipped from the open as European stocks rose and German PMIs print stronger than forecast. The yield on 10-year Treasuries fell two basis points to 2.14 percent; Germany’s 10-year yield increased one basis point to 0.37 percent; Britain’s 10-year yield gained one basis point to 1.057 percent.

In commodity markets, U.S. WTI oil prices edged higher, while U.S. gasoline prices slumped to pre-Hurricane Harvey levels, as oil refineries and pipelines in the U.S. Gulf Coast slowly resumed activity, easing supply concerns. WTI crude futures ticked up 0.2% to trade at $47.38 per barrel, though global benchmark Brent prices barely budged at $52.37. The reassuring China PMI data helped copper hit a three-year high in industrial metals markets, and nickel hovered near a 14-month peak.

Meanwhile, bitcoin BTC=BTSP dropped further from Saturday’s all-time high of $4,979.9 to trade at $4,012. China said on Monday it was banning the practice of raising funds through launches of token-based digital currencies, known as initial coin offerings (ICOs).

Economic data include July factory orders, several Fed speakers are due. Companies reporting earnings include Hewlett Packard Enterprise and HealthEquity.

Bulletin Headline Summary from RanSquawk

  • Asian equities traded with little in the way of firm direction amid upbeat Chinese data and lingering geopolitical concerns
  • RBA kept the Cash Rate Target unchanged as expected and noted slow income growth
  • Looking ahead, highlights include: US factory orders, Fed’s Brainard, Kashkari and Kaplan

Market Snapshot

  • S&P 500 futures down 0.2% to 2,469.75
  • STOXX Europe 600 up 0.4% to 375.72
  • MSCI Asia down 0.1% to 160.04
  • MSCI ASia ex Japan up 0.2% to 530.88
  • Nikkei down 0.6% to 19,385.81
  • Topix down 0.8% to 1,590.71
  • Hang Seng Index unchanged at 27,741.35
  • Shanghai Composite up 0.1% to 3,384.32
  • Sensex up 0.2% to 31,772.63
  • Australia S&P/ASX 200 up 0.07% to 5,706.23
  • Kospi down 0.1% to 2,326.62
  • German 10Y yield rose 1.0 bps to 0.376%
  • Euro down 0.1% to $1.1882
  • Italian 10Y yield fell 3.9 bps to 1.746%
  • Spanish 10Y yield rose 0.4 bps to 1.553%
  • Brent Futures up 0.1% to $52.40/bbl
  • Gold spot down 0.3% to $1,330.41
  • U.S. Dollar Index up 0.04% to 92.68

Top Overnight News

  • There is a high chance North Korea will fire an ICBM missile before the Sept. 9 foundation day after the Pyongyang regime started moving such a weapon, Asia Business Daily reported Tuesday, citing unidentified intelligence officials.
  • Hurricane Irma has strengthened into a Category 4 storm as it approaches the Leeward Islands; reports from the Hurricane Hunter aircraft indicate that the maximum sustained winds have increased to near 140 mph (220 km/h) with higher gusts
  • United Technologies Corp. agreed to buy Rockwell Collins Inc.for about $23 billion, creating an aerospace behemoth that can outfit jetliners and warplanes from tip to tail
  • Prime Minister Theresa May is to use a speech on Sept. 21 to try to force the pace of Brexit negotiations as an October showdown with her European counterparts looms, EU Parliament Brexit coordinator Verhofstadt says
  • Nafta: latest talks are nearing conclusion without a major breakthrough or agreements on even the least-contentious topics according to people familiar
  • European Aug. Service PMIs: Spain 56.0 vs 57.0 est; Italy 55.1 vs 55.5 est; France 54.9 vs 55.5 est; Germany 53.5 vs 53.4 est; U.K. 53.2 vs 53.5 est.
  • RBA’s Lowe: stimulatory policy continues to be appropriate; lower rates would have increased medium-term risks; an appreciating AUD would hit tourism
  • Merkel: will press for EU to break off accession talks with Turkey
  • Russian Energy Minister: extension of output cut deal is an option, have already discussed with Saudi Arabia but no decision yet
  • China Aug. Caixin Services PMI: 52.7 vs 51.5 prev.
  • Trump and Moon Agree to Show Muscle After North Korea Nuke; Trump Confronts Accelerating Russia Probes on Multiple Fronts
  • Putin Rejects Sanctions as Ineffective Against North Korea; Putin Says Trump’s ‘Not My Bride,’ But Still Hopes for Detente
  • Activist Fund Takes Stake in Millicom to Push M&A, Africa Exit
  • Latest Nafta Talks Said to Near End Without Big Breakthrough
  • Big Win Has U.S. Investors Wanting More From European Stocks
  • September’s Bringing Tons of Catalysts to Shatter Market Calm
  • Cellectis Cancer Trials Suspended by U.S. FDA After Fatality
  • U.K. Minister Bradley Receives Regulator’s Response on Fox-Sky
  • Google, Xiaomi Revive Stalled Android One Program for India
  • Euro Area Poised for Fastest Economic Expansion in a Decade

Asia equity markets traded with a mixed tone as the region mulled over encouraging Chinese PMI data and the lingering North Korea concerns. ASX 200 and Nikkei 225 both failed to sustain an early rebound and traded in mild negative territory, with financials weighing on Australia alongside ongoing money laundering issues at CBA which is the largest constituent in the index. Shanghai Comp. and Hang Seng traded choppy and struggled to maintain the early optimism from strong Chinese Caixin Services and Composite PMI data, as geopolitical woes remained at the forefront of attention and after the PBoC refrained from  open market operations for a 4th consecutive occasion. Finally, 10yr JGBs were slightly weaker despite the cautious risk tone in Japan, as today’s 10yr JGB auction results showed weaker demand with b/c lower than prior while the tail in price also widened. Chinese Caixin Composite PMI (Aug) M/M 52.4 (Prev. 51.9) Chinese Caixin Services PMI (Aug) 52.7 vs. Exp. 51.8 (Prev. 51.5)

Top Asian News

  • Xi, Modi Seek Stable Ties After Worst Border Spat Since 1962
  • China’s Xi Sees Risks to Global Economy, Opposes Protectionism
  • Modi’s 10 Million Jobs Challenge May Be Biggest Re- Election Risk
  • Man Whose Gear Found VW Fraud Says Diesel’s Death Overstated
  • Noble Group Expects to Find Buyer for Oil Business by End-Sept
  • Noble Group’s Shareholders Approve Gas & Power Sale in SGM Vote
  • Recruit, Japan Post Holdings to Be Added to Nikkei 225

European equity markets opened marginally higher this morning, as investors seemingly shrug off fears of a sell-off amid North Korean led geopolitical concerns. Equity specific news has been headlined by Aveva and Schneider Electric making the deadline with their tie-up, as the British Co. jumped 25%. Fixed Income markets have seen some slow and tentative selling, as peripheral spreads marginally tighten. The 10y Italy/ Germany spread has seen support at 165bps, with further support expected at 160. The Spain/ German 10 traded to 112bps last week, however has followed the tightening nature and now trades around 105bps. Corporate issuance has been a theme of the day, with GlaxoSmithKline announce a 3-part EUR deal and Disney naming banks for its 5y Eurodollar bond The UK’s DMO have opened books to sell their 5% 2065 Gilt with guidance seen at +0.5-0.75bps to UKTs.

Top European News

  • Schneider to Take Control of U.K.’s Aveva in Software Merger
  • Angry Birds Maker Plans IPO That May Value It at $2 Billion
  • Merkel Says Diesel Needed as Bridge Technology to Electric Cars
  • Merkel to Press EU Leaders on Ending Accession Talks With Turkey
  • U.K. Economy Loses Steam as Services Weaken More Than Forecast
  • Payments Firm Nets Hit by Sudden Selloff as M&A Talks Drag On
  • GAM Holding Is Said to Pick New London Base After Brexit U-Turn
  • Warhammer Maker Tops U.K. Stock Gains for 2017 as Profit Surges

In currencies, the risk off tone has dampened in early European trade, as CHF and JPY have both lost ground against their main counterparts.
NZD outperforms, as NZD/USD looks to break out from Septembers range, with Kiwi traders set to await the GTD auction later.
The RBA kept rates on hold, as expected at 1.5%, with markets fairly unfazed. Immediate slight depreciation was seen in the AUD,
reacting to comments from the RBA stating that a rise in AUD would lead to slower economic growth than otherwise, however, the
20-pip fall was quickly retraced. 0.8 continues to behave as resistance in AUD/USD as the August high continues to hold.

In commodities, a marginal bid was seen in WTI and Crude futures, as September’s highs were broken. Elsewhere, the window for refiners in Asia
to grow profits does, as opportunity is slowing in order to replace the production lost in the US amid Hurricane Harvey.
OPEC news sees commentary from Iran, stating that OPEC members compliance with the agreement has improved in recent
months, with the minister stating yesterday that unofficial talks were underway among the oil producing countries to extend their
cuts next year.
Iranian oil minister Zanagneh says that unofficial talks are underway to extend OPEC/non-OPEC production cut deal.
OPEC Secretary General says OPEC will continue its ongoing efforts to ensure much needed stability in the oil market, to
contribute to mitigating any disruption to current or future supply following Hurricane Harvey.
Azerbaijan oil production for August stood at 734.8k bpd, according to the energy ministry.

Looking at the day ahead, this morning the UK and Italy’s service and composite PMIs for August are due. Then there are final readings for the service and composite PMIs for the Eurozone, Germany and France. Elsewhere, the Eurozone’s retail sales and final readings for 2Q GDP are also due. Across the pond, factory orders for July and final readings for durable and capital goods orders will be released. Onto other events, the US congress returns from the August recess and Fed Governor Brainard, Minneapolis Fed President Kashkari and Dallas Fed President Kaplan will speak at separate functions.

US Economic Data

  • 10am: Factory Orders, est. -3.25%, prior 3.0%; Factory Orders Ex Trans, prior -0.2%
  • 10am: Durable Goods Orders, est. 1.0%, prior -6.8%; Durables Ex Transportation, prior 0.5%
  • 10am: Cap Goods Orders Nondef Ex Air, prior 0.4%; Cap Goods Ship Nondef Ex Air, prior 1.0%
  • 7:30am: Fed’s Brainard Speaks on Economic Outlook and Monetary Policy
  • 12:30pm: Fed’s Kashkari Speaks at University of Minnesota
  • 1:10pm: Fed’s Kashkari Holds Townhall Event in Minneapolis
  • 7pm: Fed’s Kaplan Speaks in Dallas

DB’s Jim Reid concludes the overnight wrap

North Korea aside it was a slightly slow start to the week yesterday with the US out. In fact, when you see headlines about socialite Paris Hilton being the latest celeb to buy into crypto currencies then you know it’s been a quiet day.

Away from the simple life, despite some acknowledgement that Sunday’s nuclear test by North Korea represented an escalation in terms of magnitude and show of force, the biggest reaction certainly for equities at least came at the open, before markets settled down into a bit of holding pattern for the rest of the session which is a consistent theme that we’ve seen after North Korea tensions flare up. After we went to print yesterday the news out of South Korea’s intelligence agency suggesting that North Korea might be in the process of preparing another intercontinental ballistic missile launch certainly turned a few heads though. Later on in the day we also heard from the US ambassador to the UN, Nikki Haley, who didn’t hold back by saying that Kim Jong-Un is “begging for war” and that “only the strongest sanctions will enable us to resolve this problem through diplomacy”. Haley also indicated that the US will now circle a draft of new sanctions which she has proposed a vote on in the UN Council on September 11th.

Since then, late last night the White House released a statement saying that President Trump and South Korea President Moon “agreed to maximise pressure on North Korea using all means at their disposal”. Trump has also agreed for South Korea to buy “many billions of dollars’ worth of military equipment and weapons from the US”.

In terms of the market reaction, the Stoxx 600 closed -0.52%, with only the energy sector finishing firmer. Across the region, the DAX fell -0.33%, FTSE 100 -0.36% and CAC -0.38%. At the other end of the risk spectrum, Gold (+0.66%) rose as high as $1,339.8/oz intraday which was the highest since September 2016, while the Yen and Swiss Franc ended the day +0.51% and +0.70% respectively. Bond markets were a smidgen firmer although again the moves were fairly modest all things considered. 10y Bunds ended 1bp lower at 0.362%, Gilts were broadly flat, but Italian BTPs and Spanish yields fell 3.6bps and 5.0bps respectively.

This morning in Asia, markets are a bit more mixed with the Kospi (-0.27%), ASX 200 (-0.20%) and Nikkei (-0.67%) in the red but the Hang Seng (+0.23%) and Shanghai Comp (+0.20%) a smidgen higher. 10y Treasury yields have opened the week down over 3bps while US equity futures are about -0.32% lower. The remaining PMIs released in China this morning were broadly positive, with the services PMI at 52.7 in August (vs. 51.5 previously) and the composite PMI at 52.4 (vs. 51.9 previously). Elsewhere, the Nikkei Japan services PMI was a tad softer than last month at 51.6 (vs. 52.0 previously).

So with the US back from Labour Day it also means that Congress returns from the August recess and with that, the debt ceiling debate will come back to the forefront. As we said yesterday, Treasury Secretary Steven Mnuchin noted that funding relief for Tropical Storm Harvey could be tied into lifting the debt ceiling which in theory would then lower the risks around a shutdown but at the same time this also shortens the timeline to reach an agreement. However, according to a House Republican aide overnight, the House of Representatives is expected to vote on Wednesday on a Hurricane Harvey relief bill that “will not”  combine the bill with legislations seeking to raise the US debt ceiling. Elsewhere, the  Republican Study Committee Caucus Chairman Walker said that “the debt ceiling should be paired with significant fiscal and structural reforms”. So we will have to wait and see. Notably, October bills are still telling a different story compared to the rest of the market so it’ll be interesting to see if there is much price action today in that part of the curve.

Moving on. While there wasn’t much economic data released yesterday, we did get the latest weekly ECB CSPP holdings data. As of September 1st the ECB held €107.3bn which implies net purchases settled last week of €1.1bn. That marks an average daily run rate last week of €268m which compares to the €347m since the program started. The more interesting stat however was that the latest CSPP/PSPP ratio was 10.9% in the month of August which compares to 10.8%, 13.6%, 14.7% and 12.5% in previous months. So this shows that throughout Q2, CSPP was trimmed more than PSPP relative to pre-April flows. This could be explained by the relative liquidity drop in corporates versus govies which means the September data is well worth keeping an eye on.

Turning to the limited economic data yesterday, in the UK the construction PMI for August was slightly lower than expected at 51.1 (vs. 52.0 expected), while the Sentix investor confidence index was above market at 28.2 (vs. 27.0 expected) and up from 27.7 the month prior, meaning it has now returned to just below the cycle high. Elsewhere, the Eurozone PPI for July was slightly below expectations at 0.0% mom (vs. 0.1% expected) and 2.0% yoy (vs. 2.1% expected).

Before we look at the day ahead, we thought it was interesting to note that Norway’s sovereign wealth fund is proposing that its $333bn bond fund should shift away from its multi-currency benchmark index to one which only includes the Euro, Sterling and Dollar, and thus removing other G10 currencies like the Yen, Aussie Dollar as well as EM currencies, although systematic strategies should be put in place to invest in these. The justification is that “in the long term, the gains from broad international diversification are considerable for equities but moderate for bonds” and that “for an investor with 70% of his investments in an internationally diversified equity portfolio, there is little reduction in risk by also diversifying his bond investments across a large number of currencies”. Further, it notes the Japanese bond market is large but “far less liquid than those” other three currencies. The proposal will need to be approved by the government.

Looking at the day ahead, this morning the UK and Italy’s service and composite PMIs for August are due. Then there are final readings for the service and composite PMIs for the Eurozone, Germany and France. Elsewhere, the Eurozone’s retail sales and final readings for 2Q GDP are also due. Across the pond, factory orders for July and final readings for durable and capital goods orders will be released. Onto other events, the US congress returns from the August recess and Fed Governor Brainard, Minneapolis Fed President Kashkari and Dallas Fed President Kaplan will speak at separate functions.

3. ASIAN AFFAIRS

i)Late MONDAY night/TUESDAY morning: Shanghai closed UP 4.73 POINTS OR 0.14%   / /Hang Sang CLOSED UP 1.09 POINTS OR 0.01%/ The Nikkei closed DOWN 122.44 POINTS OR 0.63%/Australia’s all ordinaires CLOSED UP 0.07%/Chinese yuan (ONSHORE) closed UP at 6.5490/Oil UP to 47.90 dollars per barrel for WTI and 52.59 for Brent. Stocks in Europe OPENED MIXED/ TO GREEN. Offshore yuan trades  6.5540 yuan to the dollar vs 6.5490 for onshore yuan. NOW THE OFFSHORE MOVED SLIGHTLY WEAKER  TO THE ONSHORE YUAN/ ONSHORE YUAN MUCH STRONGER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS MUCH STRONGER TO THE DOLLAR AND THIS IS COUPLED WITH THE  WEAKER DOLLAR. CHINA IS HAPPY TODAY 

3a)THAILAND/SOUTH KOREA/NORTH KOREA

NORTH KOREA/USA/SOUTH KOREA

Friday night

North Korea displays a purported advanced hydrogen bomb capable of sitting on top of a missile.  If this is verified, it certainly will be of grave concern to Trump

(courtesy zero hedge)

More chaos on Monday after South Korea detected the North’s preparations for another launch of an ICBM probably around Sept 9.

(courtesy zerohedge)

 

North Korea Making Preparations For Another ICBM Launch, South Says

Barely had the market digested news of the latest, 6th – and this time allegedly thermonuclear – test by North Korea (with the South Korean Kospi cutting initial losses of as much as 1.6% in half on yet another BTFNWD ramp), when Yonhap reported that South Korea’s spy agency said it had detected that North Korea is making preparations for a possible intercontinental ballistic missile launch, a move that would further raise tensions a day after it conducted its sixth and most powerful nuclear detonation.

Chang Kyung-soo, acting chief of the defense ministry’s policy planning office, told lawmakers on Monday that North Korea was making preparations for a missile firing, according to Bloomberg while Yonhap adds that South Korea’s spy agency said there was a chance the North could fire an ICBM into the Pacific Ocean, saying that the isolated state was able to conduct a nuclear test at any time. Gen. Jang didn’t say what the signs of activity were, nor did he give a time frame for a possible launch. But many experts have been preparing for a weapons test around Sept. 9, when North Korea marks the anniversary of its foundation in 1948.

His assessment was echoed by South Korean intelligence officers, who said North Korea could test launch another ICBM toward the northern Pacific Ocean or a submarine-launched ballistic missile, according to lawmakers who attended a closed-door legislative meeting on Monday. The intelligence officers also said North Korea could conduct further nuclear tests at any time, based on construction work on two tunnels at its test site that appear to be near completion, these lawmakers said.

The National Intelligence Service (NIS) told lawmakers in a closed session that Pyongyang may lob the missile around the anniversary of the regime’s foundation slated for Saturday or the establishment of the ruling Workers’ Party of Korea on Oct. 10.

North Korea fired ballistic missiles, including two ICBMs fired in July, at a lofted angle to prevent them from crossing over other countries including Japan. But Pyongyang lobbed a Hwasong-12 intermediate-range ballistic missile that flew over Japan last week.

“There is a possibility that the North would fire an ICBM on a standard trajectory,” the NIS was quoted as saying by lawmakers.

Separately, Gen. Jang said the U.S. and South Korea are in talks about deploying an aircraft carrier or stealth bombers to South Korea as part of the response to North Korea’s recent actions. Top South Korean officials had said in recent days that the two allies were in discussions about the deployment of “strategic assets” to the Korean Peninsula. At the time, officials didn’t elaborate on what strategic assets they were considering, but the phrase typically refers to aircraft carriers, bombers or nuclear weapons.

The NIS also said that more analysis is needed to verify whether the North detonated an electromagnetic pulse-based bomb or a hydrogen bomb during its nuclear test, according to lawmaker. “North Korea claimed an H-bomb test, but we are analyzing it on the assumption that there could be three possibilities — a hydrogen bomb, an atomic detonation and a boosted fissile weapon,” the agency was quoted as saying.

It said that Pyongyang appeared to try to show that international sanctions are not working and to express its complaints against China or Russia by timing the detonation with a Beijing-hosted five emerging nations BRICS summit and Russia’s economic forum slated for later this week.

“The North also seemed to want to spark tensions to pressure the United States into changing its North Korea policy,” it added.

It said that the latest detonation was conducted in a northern tunnel of its nuclear site in the northeastern area where Pyongyang previously carried out three tests.

Meanwhile, South Korea earlier in the day paved the way for the full deployment of a U.S. missile defense system while its military conducted a live-fire drill with North Korea’s test site as the virtual target. The Environment Ministry on Monday conditionally approved an environmental impact report on the Terminal High-Altitude Area Defense system.

That removes the final administrative hurdle for complete installment of the missile shield, known as Thaad, which China sees as a threat to the region’s “strategic equilibrium.” South Korea’s Defense Ministry said it would install the system’s remaining launchers “soon.” The governments in Seoul and Washington were also discussing deployment of a U.S. carrier group and strategic bombers, Yonhap said.

Following Sunday’s latest nuclear test, President Trump threatened to increase economic sanctions and halt trade with any nation doing business with North Korea – a threat he has used before without following through. That list would include China – the U.S.’s biggest trading partner – which accounted for about a sixth of its overseas commerce. China hit back at Trump’s threat, with Foreign Ministry spokesman Geng Shuang saying the comments were “neither objective nor fair.”

While Asian stocks fell on Monday as investors turned to haven assets, sending the yen, gold and Treasury futures higher, the fallout was relatively contained with S&P futures down just 0.3% as of 6am ET. The biggest declines were in Tokyo and Seoul, with more moderate reactions elsewhere in the region.

Trump, who threatened over the weekend to pull out of the U.S.-South Korea trade agreement, took a shot at President Moon Jae-in’s administration after the nuclear test. On Twitter, he said that South Korea is finding that its “talk of appeasement with North Korea will not work.” In response, Moon’s office said that war shouldn’t be repeated and that South Korea and its allies “will pursue the denuclearization of the Korean peninsula through peace.” The two leaders haven’t spoken since North Korea detonated what it called a hydrogen bomb.

end

(courtesy zerohedge)

North Korea Is “Begging For War”: Haley Tells Un “The Time For Half-Measures Is Over”

U.S. United Nations Ambassador Nikki Haley is escalating the rhetoric from Trump’s “we’ll see” comment and aggressive tweets as she tells an emergency meeting of the U.N. Security Council, that “enough is enough” and that North Korea’s leader, Kim Jong Un, is “begging for war” with his “abusive use of missiles.”

Haley admonished the council, urging the “strongest possible” response…

The time for half measures in the security council is over. The time has come to exhaust all of our diplomatic means before it is too late.

We must now adopt the strongest possible measures.Kim Jong Un’s action cannot be seen as defensive.”

Just last month, the 15-member Security Council unanimously adopted new sanctions to slash by a third Pyongyang’s US$3 billion annual export revenue, which could be channeled to fund its nuclear and ballistic missile programs.

Some additional quotes from Haley include:

“We have taken an incremental approach, and despite the best intentions, it hasn’t worked.

“War is never something the United States wants, we don’t want it now, but our people’s patience is not unlimited.”

“We have kicked the can down the road long enough. There is no road left.”

Finally, Haley warned,

“The United States will view every country that does business with North Korea” as aiding their nuclear ambitions.”

Here are the countries that trade with North Korea, based on 2015 data from MIT’s Observatory of Economic Complexity.

  • China is the biggest player, buying 83% of North Korean exports and selling 85% of the goods that North Korea imports. China is also the United States’ largest trade partner. The countries traded $578 billion in goods last year.
  • India is second, accounting for 3.5% of exports and 3.1% of imports from North Korea.
  • All told, Asian countries buy 92% of North Korean exports and source 93% of North Korean imports
  • Russia is a European leader in North Korean trade, but accounts for less than 2% of imports and exports.
  • Over 100 additional countries trade with North Korea, includingFrance, Mexico, Pakistan, Saudi Arabia, Brazil and Chile.
  • North Korea’s exports increased 54% from $1.83 billion to $2.83 billion from 2010 to 2015.
  • Coal comprises a third of North Korean exports, and garments represent another third.

Additionally, in a veiled swipe at China, she also said it is “insulting” to propose a so-called “freeze for freeze” under which South Korea and the U.S. would suspend its annual military exercises that provoke Pyongyang in exchange for a halt to the North’s provocations.

Finally, we noted that at the top of the emergency meeting, Axios reports, a top U.N. official said North Korea’s hydrogen bomb test blast was 5 times as powerful as those resulting from the attacks on Hiroshima and Nagasaki.

end

North Korea/China/USA

China slams Trump’s trade threat as unacceptable. If the USA sanctions trade with China, that would cut off $650 billion dollars worth of imports that Americans buy and that just would not happen. Also threats to cut off oil important into North Korea from China may cause a huge confrontation between these two countries that would probably transcend the conflict between the USA and North Korea.

(courtesy zerohedge)

China Slams Trump’s Trade Threat As “Unacceptable”

An angry China slammed President Trump’s threat on Monday to cut off trade with countries that deal with North Korea, as “unacceptable” and “unfair.” As a reminder, following Sunday’s nuclear test by North Korea, Trump threatened to increase economic sanctions and halt trade with any country doing business with North Korea, a threat he has used before without following through. That list would include China, the U.S.’s biggest trading partner, which accounted for about a sixth of its overseas commerce.

The United States is considering, in addition to other options, stopping all trade with any country doing business with North Korea.

The comments were seen as a not-so-veiled warning to China, Kim’s closest ally and commercial partner, and led to a prompt response by China’s Foreign Ministry spokesman Geng Shuang who classified Trump’s comments as definitely unacceptable.

What is definitely unacceptable to us is a situation in which on the one hand we work to resolve this issue peacefully but on the other hand our own interests are subject to sanctions and jeopardized,” Geng said at a regular briefing in Beijing, according to the Associated Press.

Of course, a full-blown trade war would have adverse consequences for both nations: China would be drastically affected if the US were to cut trade ties with it, as the United States imports goods worth about $40 billion a month. Of course, such a move would have devastating, and inflationary, consequences on the US as supply chains are forced to find alternatives to China.

When asked on Monday whether Beijing would support tougher UN sanctions including cutting off oil supplies to North Korea, Geng said that whatever happened would depend on discussions among UN Security Council members. He added that China – a permanent member of the UN’s Security Council with the power to veto UN actions – would take part in a “responsible and reconstructive way.”

Geng also addressed Australian Prime Minister Malcolm Turnbull’s recent remark that Beijing “has by far the greatest leverage” as Pyongyang’s main trading partner and needs to “step up now and bring this regime to its senses.”

“We keep stressing that we cannot solely rely on China to resolve this issue,” Geng said. “We need all parties to work in the same direction.”

China has previously noted that it is not solely responsible for ending the crisis on the Korean Peninsula. In July, Geng said that “certain people” had been “exaggerating and giving prominence to the so-called ‘China responsibility theory’,” in an apparent reference to Trump’s repeated calls for Beijing to put pressure on Pyongyang.  China has repeatedly called for all sides to avoid further provocations in the crisis, warning last week that tensions on the peninsula were at “tipping point” and “approaching a crisis.”

As discussed previously, Beijing and Moscow have proposed a ‘double-freeze’ plan which would see North Korea suspend its missile launches in exchange for a halt in joint US-South Korea military drills. That plan was promptly rejected by Washington, with State Department spokesperson Heather Neuert stating last month that the US is “allowed” to conduct exercises with its ally and “that’s just not going to change.

* * *

On Sunday afternoon, Julian Assange also reacted to Trump’s threat to end trade with China, with the WikiLeaks founder tweeting that the US president would be “deposed immediately” if he followed through with the proposed idea.

90% of North Korea’s trade is with China. If Trump blocks $650B of US trade with China he’ll be deposed immediately.

https://twitter.com/realDonaldTrump/status/904377075049656322 

US trade with China totaled $648 billion back in 2016, according to data from the USTR. This makes China the “largest goods trading partner” of the US, and the 3rd largest US goods export market.

In the meantime, China’s Global Times newspaper warned against cutting off the North’s oil supply.

“If China completely cuts off the supply of oil to North Korea or even closes the China-North Korea border, it is uncertain whether we can deter Pyongyang from conducting further nuclear tests and missile launches. However, confrontation between the two is likely to occur,” it said.

The newspaper warned that a potential conflict between Beijing and Pyongyang would “transcend any conflict between the US and North Korea, and take center stage on the Korean Peninsula.

end

SOUTH KOREA proposes a full oil, currency blockade of the North and the stoppage of labourers from working in other countries. China said no to this.  Russia seems to be siding with South Korea

(courtesy zerohedge)

South Korea Proposes Full Oil, Currency Blockade Of North; China Says No

Unable to make de-escalation progress using conventional diplomatic means at the United Nations, on Monday South Korean President Moon Jae-in proposed that the U.N. Security Council hold serious discussions about imposing an energy and capital blockade on North Korea, by cutting off oil supplies to Kim’s regime coupled with a block of North Korean sources of foreign currency, the South Korean president’s office said. Moon discussed the idea with his Russian counterpart, Vladimir Putin, during a phone call, according to South Korea’s Blue House.

It’s time for the U.N. Security Council to seriously consider ways to block North Korea’s sources of foreign currency, including a halt to oil supplies to the North and a ban on its exportation of laborers,” the office quoted Moon as saying in the wake of the 6th North Korean nuclear test.

According to Yonhap, the South Korean leader also said Sunday’s nuclear test “was different from past experiments in size and character, and expressed his heightened concern over North Korea’s claim that it was an H-bomb that can fit atop an intercontinental ballistic missile.”

Putin, who is attending a BRICS emerging economies summit in China, sided with his South Korean peer and said that North Korea’s nuclear and ballistic missile programs destroy the international nonproliferation regime and pose a “real threat” to regional peace and stability. He also noted that the leaders at the summit adopted a statement condemning the latest test. Moon underscored his commitment to resolving the North Korean nuclear issue diplomatically and peacefully. Putin, in turn, said the leaders at the summit agreed there is only a diplomatic solution to the problem.

“In order to do that, North Korea must refrain from additional provocations,” Moon was quoted as saying during the 20-minute talks. The leaders agreed to hold further discussions at their summit in Vladivostok, Russia, later this week.

Meanwhile, in its populist tabloid Global Times, China’s ruling communist party similarly slammed Kim’s decision to demonstrably escalate tensions, writing that “the test marks another wrong choice that Pyongyang has made in violation of UN Security Council resolutions and against the will of the international community. This test will result in a new round of escalating tensions on the Korean Peninsula and heighten the risk of the situation spiraling out of control due to possible miscalculations by all sides.”

The article’s condemnation continued: “The latest nuclear test and its recent launches of intermediate- and long-range ballistic missiles prove that Pyongyang is determined to obtain a nuclear strike capability and will not yield to external international pressures. The North Korean nuclear issue has now reached deadlock” and added that in the face of such a complicated situation, “China needs a sober mind and must minimize the risks Chinese society has to bear. The security of China’s northeastern regions is a priority.”

We need to make clear to Pyongyang through various channels that its nuclear tests can never contaminate China’s northeastern provinces. China’s strategic security and environmental safety is the bottom line for China in showing restraint. If North Korea crosses this line, the current framework for Sino-North Korean ties will break down.”

And yet, despite the far more somber take on its wayward neighbor, the Global Times said that “despite the anger of the Chinese public toward North Korea’s new nuclear test, we should avoid resorting to rash and extreme means by imposing a full embargo on North Korea.” Why not a full embargo?

If China completely cuts off the supply of oil to North Korea or even closes the China-North Korea border, it is uncertain whether we can deter Pyongyang from conducting further nuclear tests and missile launches. However, confrontation between the two is likely to occur. If so, the conflict between China and North Korea will transcend any conflict between the US and North Korea, and take center stage on the Korean Peninsula.

And the punchline: “Then Washington and Seoul can boldly shift the responsibility of the North Korean nuclear issue to China, which does not fit China’s national interests.

Unless, of course, Washington and Seoul are right, and North Korea’s action and behavior has indeed been a “Chinese issue”, although as Bill Blain noted earlier today, “North Korea is no longer playing to the Chinese script.”

That said, there is certainly an industrial-strength element of truth to the Global Times conclusion:

If North Korea’s nuclear activities don’t contaminate China’s northeastern regions, China should avoid imposing overly aggressive sanctions on North Korea. The root cause of the North Korean nuclear issue is that the military pressure of the Washington-Seoul alliance generates a sense of insecurity for Pyongyang who then believes that owning a nuclear strike capability is its sole guarantee for survival of its regime.

Yet while spot on, this observation does not make the de-escalation of the N.Korea crisis any easier, since the likelihood of the US and/or S. Korea “retreating” in the face of North Korea is nil. Which is also why the Kim regime will continue poking the US with ever greater provocation until one it reaches the breaking point, at which point the military incursion will begin.

In the meantime, South Korea’s weapons just got more deadly, because also on Monday, President Moon and President Trump agreed to remove the limit on the payload of South Korean missiles under the allies’ missile guideline in a move to enhance South Korea’s own defense capabilities against North Korean provocations, Seoul’s presidential office Cheong Wa Dae said Tuesday. The agreement was reached in a telephone conversation between the two leaders held late Monday.

“President Moon held a telephone conversation with U.S. President Donald Trump between 10:45 p.m. and 11:25 p.m. (Seoul time) and discussed countermeasures against North Korea’s sixth nuclear test in-depth,” Cheong Wa Dae spokesman Park Soo-hyun said in a press release.  As an “effective” countermeasure, the two agreed to remove the limit on the payload of South Korean missiles under the Korea-U.S. missile guideline, he added.

The U.S. president agreed on the need for what his South Korean counterpart earlier called the most powerful and practical measures against the North that the communist state can feel keenly.

And then, there was this from Reuters:

  • TRUMP, S.KOREA’S MOON AGREE TO `MAXIMIZE PRESSURE’ ON N.KOREA; U.S., S. KOREA TO STRENGTHEN JOINT MILITARY CAPABILITIES: STMT
  • TRUMP PROVIDED “CONCEPTUAL APPROVAL” FOR SOUTH KOREA TO PURCHASE “MANY BILLIONS OF DOLLARS’ WORTH” OF WEAPONS FROM U.S. -WHITE HOUSE

Well, at least the US military-industrial complex is profiting from the latest nuclear-armed geopolitical crisis… as usual

END

As promised, North Korea has been seen moving an ICBM into position for another launch probably on the weekend

(courtesy zero hedge)

North Korea Seen Moving ICBM Into Position For Possible Launch: Report

The USDJPY and 10Y yields snapped lower and gold kneejerked higher following the latest North Korea-related headline out of Bloomberg, according to which:

  • NKOREA STARTS MOVING ICBM FOR POSSIBLE LAUNCH BEFORE SAT.:DAILY

Bloomberg references a just released article in the Asia Business Daily, according to which North Korea started moving the ICBM-class missile, produced at a new Pyongyang research center, on Monday following Sunday’s thermonuclear test.

The report confirms overnight intelligence from South Korea: recall first thing this morning, Yonhap reported that South Korea’s spy agency said it had detected that North Korea is making preparations for a possible intercontinental ballistic missile launch, a move that would further raise tensions a day after it conducted its sixth and most powerful nuclear detonation.

Chang Kyung-soo, acting chief of the defense ministry’s policy planning office, told lawmakers on Monday that North Korea was making preparations for a missile firing, according to Bloomberg while Yonhap adds that South Korea’s spy agency said there was a chance the North could fire an ICBM into the Pacific Ocean, saying that the isolated state was able to conduct a nuclear test at any time.

According to the just released Business Daily report, there is high chance N. Korea will fire ICBM missile before Sept. 9 national founding day. More details from the original report, Google translated:

According to the authorities, one ballistic missile produced by a weapons research institute dedicated to the production of North Korea’s ICBM was found to be moving to the west of Hwanghae Island after being mounted on the 4th Mobile Launch Base (TEL) on the day after the 6th nuclear test.

Earlier this year, North Korea built a 1980-square-meter weapons lab, which could manufacture ICBMs, in Pyongyang. It was last February that the weapon laboratory was released to the outside world. Although it was a wilderness until 2009, it has now been transformed into a strategic hub for North Korea’s major missiles.

According to a joint US-ROK report, North Korea has a maximum of 900 ballistic missiles, and it has been confirmed that there are 108 aircraft capable of launching surprise attacks. According to ballistic missiles, the number of Scud missiles and TEL that can mount Scud missiles are the most common. The number of Scud missiles is 430 (TEL 36).

The report concludes by noting that according to S. Korean intel, “if North Korea conducts further ICBM provocations there is a high possibility that it will choose an unpredictable time and place. To this end, Pyongyang may launch missiles directly from the mobile launch base, or launch multiple missiles at multiple locations simultaneously.

The report also notes that the ICBM mobile launcher is moving “at low speed mainly during the night time” to avoid detection by foreign intelligence authorities. In other words, the US now has a conveniently moving target and a due date by which North Korea will likely launch its next rocket, effectively giving Trump a greenlight for a “preemptive” strike over the next five days.

The market’s reaction to the news, while not as dramatic as to Sunday’s nuclear test, confirms just how much on edge traders remain for every headline out of North Korea.

10Y Yield:

USDJPY:

Gold:

ES:

end

Tuesday afternoon:

I do not like the looks of this;  A furious North Korea slams the USA as the aggressor who is begging for war and they state that they will respond in their own way;

( zerohedge)

Furious North Korea Slams US As “Heinous Aggressor Who Is Begging For War”, Vows To “Respond In Our Own Way”

North Korea said Tuesday it will “respond in our own ways” to any new sanctions that may be put in place following Pyongyang’s latest nuclear test.

According to Yonhap, In a Q&A session with the state-run Korean Central News Agency, the North Korean foreign ministry spokesman blasted the United States for leading the international efforts to adopt a fresh sanctions resolution. Flipping the table on Nikki Haley’s Monday Statement that North Korea is begging for war, North Korea said that it was the US that a “heinous aggressor who is begging for war.”

“Testing an H-bomb for an intercontinental ballistic rocket is a normal process that we must carry out to accomplish our policy of byongjin,” the spokesman said, referring to the North’s signature policy of seeking nuclear armament and economic development.

“In the face of the U.S. scheme of putting pressure through sanctions, we’ll respond in our own ways,” he added. “And the U.S. will be fully responsible for the catastrophic consequences that follow.”

KCNA also said that the US “should not forget even for a moment about the presence of the DPRK, the full- fledged nuclear power in possession of ICBM as well as A-bomb and H-bomb”

As a reminder, the U.S. and South Korea reportedly want new sanctions to include a cutoff of oil supplies to the North, though China appears reluctant to take a measure that it worries would lead to the collapse of its neighbor.

Earlier on Tuesday, North Korea said its recent missile launch and other “self-defense” measures were a “gift package” to the United States and warned other such gifts are on the way if Washington continues its “reckless provocations.”

“The recent self-defense measures by my country, the DPRK, are a gift package addressed to none other than the US,” Han Tae-song, North Korea’s ambassador to the United Nations, said during an address to the UN-sponsored Conference on Disarmament on Tuesday. “The US will receive more gift packages from my country as long as it relies on reckless provocations and futile attempts to put pressure on the DPRK,” he continued.

Meanwhile, also according to Yonhap, in the latest sign of escalation, South Korea and the U.S. had agreed to strengthen US asset deployment to the country, although it was unclear if any such deployment would also include the previously requested re-deployment of US tactical nuclear weapons.

So what happens next?  According to several sellside desks, if North Korea indeed launches an ICBM, as highly likely, it will be virtually impossible that the US could ignore it and some form of military response would be forthcoming.  Whether this was a massive military reinforcement of the RoK with ground troops and other assets, (full invocation of OPLAN 5027) or limited strikes against critical targets remains to be seen.

b) REPORT ON JAPAN

end

c) REPORT ON CHINA

The story that we have been waiting 10 years to hear:  China will set crude oil purchases in yuan and then back the yuan with gold. This will be the death knell of the petro-dollar scheme as the world by-passes the dollar.  Either the USA joins by backing their dollar with verifiable gold or their dollar sinks. This move by China bypasses all sanctions as well as the SWIFT system of payment.  Recall that China has their own CIP or CHIP payment system.

(courtesy Paraskova/OilPrice.com)

De-Dollarization Accelerates: China Readies Yuan-Priced Crude Oil Benchmark Backed By Gold

Authored by Tsvetana Paraskova via OilPrice.com,

The world’s top oil importer, China, is preparing to launch a crude oil futures contract denominated in Chinese yuan and convertible into gold, potentially creating the most important Asian oil benchmark and allowing oil exporters to bypass U.S.-dollar denominated benchmarks by trading in yuan, Nikkei Asian Review reports.

The crude oil futures will be the first commodity contract in China open to foreign investment funds, trading houses, and oil firms. The circumvention of U.S. dollar trade could allow oil exporters such as Russia and Iran, for example, to bypass U.S. sanctions by trading in yuan, according to Nikkei Asian Review.

To make the yuan-denominated contract more attractive, China plans the yuan to be fully convertible in gold on the Shanghai and Hong Kong exchanges.

Last month, the Shanghai Futures Exchange and its subsidiary Shanghai International Energy Exchange, INE, successfully completed four tests in production environment for the crude oil futures, and the exchange continues with preparatory works for the listing of crude oil futures, aiming for the launch by the end of this year.

“The rules of the global oil game may begin to change enormously,” Luke Gromen, founder of U.S.-based macroeconomic research company FFTT, told Nikkei Asia Review.

The yuan-denominated futures contract has been in the works for years, and after several delays, it looks like it may be launched this year.

Some potential foreign traders have been worried that the contract would be priced in yuan.

But according to analysts who spoke to Nikkei Asian Review, backing the yuan-priced futures with gold would be appealing to oil exporters, especially to those that would rather avoid U.S. dollars in trade.

“It is a mechanism which is likely to appeal to oil producers that prefer to avoid using dollars, and are not ready to accept that being paid in yuan for oil sales to China is a good idea either,” Alasdair Macleod, head of research at Goldmoney, told Nikkei.

end

China sees a new world order with the oil benchmark backed by gold

(asia.nikkei.com)

and a special thanks to Robert H for sending this to us;

CHINA SEES NEW WORLD ORDER WITH OIL BENCHMARK BACKED BY GOLD

https://asia.nikkei.com/Markets/Commodities/China-sees-new-world-order-with-oil-benchmark-backed-by-gold?page=1

September 1, 2017 8:56 pm JSTChina sees new world order with oil benchmark backed by gold

Yuan-denominated contract will let exporters circumvent US dollar

DAMON EVANS, Contributing writer

DENPASAR, Indonesia — China is expected shortly to launch a crude oil futures contract priced in yuan and convertible into gold in what analysts say could be a game-changer for the industry.

The contract could become the most important Asia-based crude oil benchmark, given that China is the world’s biggest oil importer. Crude oil is usually priced in relation to Brent or West Texas Intermediate futures, both denominated in U.S. dollars.

China’s move will allow exporters such as Russia and Iran to circumvent U.S. sanctions by trading in yuan. To further entice trade, China says the yuan will be fully convertible into gold on exchanges in Shanghai and Hong Kong.

“The rules of the global oil game may begin to change enormously,” said Luke Gromen, founder of U.S.-based macroeconomic research company FFTT.

The Shanghai International Energy Exchange has started to train potential users and is carrying out systems tests following substantial preparations in June and July. This will be China’s first commodities futures contract open to foreign companies such as investment funds, trading houses and petroleum companies.

http://www.ine.cn/en/news/news/911319711.html

Most of China’s crude imports, which averaged around 7.6 million barrels a day in 2016, are bought on long-term contracts between China’s major oil companies and foreign national oil companies. Deals also take place between Chinese majors and independent Chinese refiners, and between foreign oil majors and global trading companies.

Alan Bannister, Asia director of S&P Global Platts, an energy information provider, said that the active involvement of Chinese independent refiners over the last few years “has created a more diverse marketplace of participants domestically in China, creating an environment in which a crude futures contract is more likely to succeed.”

China has long wanted to reduce the dominance of the U.S. dollar in the commodities markets. Yuan-denominated gold futures have been traded on the Shanghai Gold Exchange since April 2016, and the exchange is planning to launch the product in Budapest later this year.

Yuan-denominated gold contracts were also launched in Hong Kong in July — after two unsuccessful earlier attempts — as China seeks to internationalize its currency. The contracts have been moderately successful.

The existence of yuan-backed oil and gold futures means that users will have the option of being paid in physical gold, said Alasdair Macleod, head of research at Goldmoney, a gold-based financial services company based in Toronto. “It is a mechanism which is likely to appeal to oil producers that prefer to avoid using dollars, and are not ready to accept that being paid in yuan for oil sales to China is a good idea either,” Macleod said.

Yuan-denominated gold contracts have significant implications, especially for countries like Russia and Iran, Qatar and Venezuela, said Louis-Vincent Gave, chief executive of Gavekal Research, a Hong Kong-based financial research company.

These countries would be less vulnerable to Washington’s use of the dollar as a “soft weapon,” if they should fall foul of U.S. foreign policy, he said. “By creating a gold contract settled in renminbi [an alternative name for the yuan], Russia may now sell oil to China for renminbi, then take whatever excess currency it earns to buy gold in Hong Kong. As a result, Russia does not have to buy Chinese assets or switch the proceeds into dollars,” said Gave.

Grant Williams, an adviser to Vulpes Investment Management, a Singapore-based hedge fund sponsor, said he expects most oil producers to be happy to exchange their oil reserves for gold. “It’s a transfer of holding their assets in black liquid to yellow metal. It’s a strategic move swapping oil for gold, rather than for U.S. Treasuries, which can be printed out of thin air,” he said.

Market share

China has been indicating to producers that those happy to sell to them in yuan will benefit from more business. Producers that will not sell to China in yuan will lose market share.

Saudi Arabia, a U.S. ally, is a case in point. China proposed pricing oil in yuan to Saudi Arabia in late July, according to Chinese media. It is unclear if Saudi Arabia will yield to its biggest customer, but Beijing has been reducing Saudi Arabia’s share of its total imports, which fell from 25% in 2008 to 15% in 2016.

Chinese oil imports rose 13.8% year-on-year during the first half of 2017, but supplies from Saudi Arabia inched up just 1% year-on-year. Over the same timeframe, Russian oil shipments jumped 11%, making Russia China’s top supplier. Angola, which made the yuan its second legal currency in 2015, leapfrogged Saudi Arabia into second spot with an increase of 22% in oil exports to China in the same period.

If Saudi Arabia accepts yuan settlement for oil, Gave said, “this would go down like a lead balloon in Washington, where the U.S. Treasury would see this as a threat to the dollar’s hegemony… and it is unlikely the U.S. would continue to approve modern weapon sales to Saudi and the embedded protection of the House of Saud [the kingdom’s ruling family] that comes with them.”

The alternative for Saudi Arabia is equally unappetizing. “Getting boxed out of the Chinese market will increasingly mean having to dump excess oil inventories on the global stage, thereby ensuring a sustained low price for oil,” said Gave.

But the kingdom is finding other ways to get in with China. On Aug. 24, Saudi Vice Minister of Economy and Planning Mohammed al-Tuwaijri, told a conference in Jeddah that the government was looking at the possibility of issuing a yuan-denominated bond. Saudi Arabia and China have also agreed to establish a $20 billion joint investment fund.

Furthermore, the two countries could cement their relationship if China were to take a cornerstone investment in the planned initial public offering of a 5% state in Saudi Aramco, Saudi Arabia’s national oil company. The IPO is expected to be the largest ever, although details on the listing venue and valuation are yet scant.

If China were to buy into Saudi Aramco the pricing of Saudi oil could shift from U.S. dollars to yuan, said Macleod. Crucially, “if China can tie in Aramco, with Russia, Iran et al, she will have a degree of influence over nearly 40% of global production, and will be able to progress her desire to exclude dollars for yuan,” he said.

“What is interesting is that China’s leadership originally planned to clean up the markets next year, but brought it forward to this year. One interpretation of that change is that they have brought forward the day when they pay for oil in yuan,” said Simon Hunt, a strategic adviser to international investors on the Chinese economy and geopolitics.

China is also making efforts to set other commodity benchmarks, such as gas and copper, as Beijing seeks to transform the yuan into the natural trading currency for Asia and emerging markets.

Yuan oil futures are expected to attract interest from investors and funds, while state-backed oil majors, such as PetroChinaand China Petroleum & Chemical (Sinopec) will provide liquidity to ensure trade. Locally registered entities of JPMorgan, a U.S. bank, and UBS, a Swiss bank, are among the first to have gained approval to trade the contract. But it is understood that the market will be also open to retail investors.

end

Dave Krantzler discusses how China’s move to create a petro-yuan will reset the world’s reserve currency system

(courtesy zero hedge)

China Begins To Reset The World’s Reserve Currency System

September 3, 2017Financial Markets, Gold, Precious Metals, U.S. Economycurrency reset, oil, yuan

It’s a strategic move swapping oil for gold, rather than for U.S. Treasuries, which can be printed out of thin air. – Grant Williams

A report released by the Nikkei Asian Review indicates that China is prepared to release a yuan-denominated oil futures contract that is convertible (backed by) physical gold. The contract will enable China’s largest oil suppliers to settle oil sales in yuan, rather than in dollars, and then convert the yuan into gold on exchanges in Hong Kong and Shanghai.

This is a significant step in removing the global reserve currency status of the dollar and resetting the the global economic and geopolitical “landscape.” Over the past several years, China has quietly established yuan-based currency exchange facilities, which has set up the ability to implement this new non-dollar trade settlement financial instrument. According to the Brookings Institute, 34 Central Banks around the world have signed bilateral local currency swap agreements with the PBoC as of of the end of September 2016, including the major oil-producing countries. With this new contract, China’s largest oil suppliers will now be able to transact directly with China, and other oil importing countries, using yuan which are directly convertible into gold to settle the trade.

As Alasdair Macleod asserts, “It is a mechanism which is likely to appeal to oil producers that prefer to avoid using dollars, and are not ready to accept that being paid in yuan for oil sales to China is a good idea either.”

Since 1973, OPEC oil has been quoted and traded using to U.S. dollars, otherwise known as “petrodollars.” The “recycling” of petrodollars into U.S. Treasuries has been the life-blood of the U.S. economic and political system. In addition to reducing a major source of funding for the the U.S. Government’s enormous deficit spending, the introduction of a gold-backed yuan oil futures contract is an important step toward removing the dollar as the world’s reserve currency. More significantly it reintroduces gold into the global monetary system.

While the new gold-backed “petroyuan” will allow oil producers to sell oil for gold rather than Treasuries. Furthermore, it reduces the ability of the U.S. Government to impose its will on the rest of the world. It’s a strategic step toward not only ridding the world of its dependence on dollars, but also of reducing the ability of the U.S. to exert global economic and financially tyranny. I would also argue that it’s one of the primary reasons behind the inability of the western Central Banks to drive the price of gold lower recently.

http://investmentresearchdynamics.com/china-begins-to- reset-the-worlds-reserve-currency-system/

In a leaked BREXIT document, the UK reveals that they will deter low skilled workers from entering the country: they will allow only high skilled labour

(courtesy zerohedge)

Leaked Brexit Document Reveals UK Hardline Plan To Deter EU Immigrants

According to a document leaked by the Guardian and prepared by the Home Office, the UK has prepared a “hardline” Brexit plan according to which Britain will end the free movement of labor immediately after Brexit and introduce restrictions “to deter all but highly-skilled EU workers.” The proposal seeks to drive down the number of lower-skilled EU migrants, as well as a phased-in introduction to a new immigration system ending the right to settle in Britain for most European migrants.

While the end of free labor mobility was largely expected, the 82-page paper – marked as extremely sensitive and dated August 2017 – provides previously unreleased clarity and sets out for the first time how Britain intends to approach the controversial issue of immigration, “refocusing policy to put British workers first.”

As the document summarizes, “to be considered valuable to the country as a whole, immigration should benefit not just the migrants themselves but also make existing residents better off.”

Specifically, the controversial draft proposes measures to drive down the number of lower-skilled EU migrants – offering them residency for a maximum of only two years, in a document likely to cheer hardliners in the Tory party. Those in “high-skilled occupations” will be granted permits to work for a longer period of three to five years. Additionally, showing a passport will be mandatory for all EU nationals wanting to enter Britain. The paper also proposes introducing a system of temporary biometric residence permits for all EU nationals coming into the UK after Brexit for more than a few months.

The Home Office paper, entitled the Border, Immigration and Citizenship System After the UK Leaves the European Union, makes clear the proposals within it have yet to be endorsed by ministers, and are “subject to negotiations with EU”. But, as the Guardian writes, with the help of examples and flowcharts, the document sets out the direction of Home Office thinking in one of the most controversial subjects of the Brexit debate.

Plans to restrict EU immigration by giving “preference in the job market to resident workers”. The government could also restrict EU nationals from seeking work, reduce the opportunities for workers to settle in the UK long-term, and limit the number of EU citizens able to come to the UK to do low-skilled work.

Among the EU immigration proposals are:

  • Proposals for a “stepping stone” temporary implementation period for “at least two years” after Brexit day. That would be followed by the introduction of the full immigration policy for EU nationals.
  • Plans to scrap EU rules on the rights of extended family members to reside in the UK. The document says “there is virtually no limit on the distance of the relationship between the EU citizen and the family member” in the current system. “We propose to define family members as direct family members only, plus durable partners,” it adds.
  • If an EU national living in the UK wants to bring their spouse from outside the EU here, he or she will have to earn a minimum of £18,600 a year, bringing EU nationals in line with the restriction already imposed on Britons.
  • No new border checks for EU nationals entering the country, although they will be required to travel on a passport not a national identity card. Instead all new EU arrivals will have “deemed leave” to enter Britain for as yet unspecified period likely to between three and six months. After that, to stay longer, they will have to apply for a biometric residence permit, which may include a fingerprint.
  • In contrast to the “free movement directive”, residence permits will not be granted to jobseekers. A specific “income threshold” will be introduced for “self-sufficient” migrants.
  • Plans to introduce “right to work” checks. These would have to be carried out by employers, with criminal sanctions possible against companies and individuals if illegal working is discovered.

The draft’s release comes at a tenuous time for the UK’s Brexit negotiations, with recent soundbites from EU negotiators stating that “no progress” has been made on any of the key underlying issues. Since the proposals have yet to be endorsed by government ministers, they could merely be a trial balloon to gauge negotiation and market impact.

That said, it is unclear what the new document’s impact on sterling will be: with the GBPUSD having surged above 1.300 today on the latest plunge in the dollar, cable appears to have caught a bid following the report’s release on what some say is incremental clarity into Theresa May’s Brexit negotiating position, although it remains to be seen if the proposals will be sufficient to appease the crowd during the October EU summit, during which a determination must be made if enough Brexit progress has been to proceed to the next stage.

Earlier today, Bloomberg reported that the EU’s deputy Brexit negotiator told German lawmakers that she’s “skeptical” talks with the U.K. will be able to move on to trade in October. Sabine Weyand briefed a special session of the European Affairs Committee of the lower house, or Bundestag, in Berlin on Monday and told lawmakers that no movement had been made in the key areas under discussion, those who attended the hearing said.

Given the scant advance made so far, Weyand said there’s no indication that the fourth round of negotiations scheduled to begin on Sept. 18 will yield any more progress than the third, according to one of those present. As a result, she doesn’t currently see EU leaders agreeing when they next meet to turn to the U.K.’s relationship with the bloc after Brexit, both of those attending said.

Weyand, who is deputy to the chief European Brexit negotiator, Michel Barnier, told the Bundestag committee that she doesn’t see any progress being made before Prime Minister Theresa May’s Conservative Party conference at the beginning of October, according to one of those present. “In any case, the EU summit scheduled for Oct. 19-20 was never a binding date to agree to move on to the next phase of negotiations.”

The full leaked document can be found here.

5. RUSSIA AND MIDDLE EASTERN AFFAIRS

Russia/USA

Moscow is furious with uSA plans to search the Russian Trade Mission.  The property is owned by Russia:

(courtesy zerohedge)

Moscow Furious Over US Plan To Search Russia Trade Mission, Calls It “Unprecedented Aggressive Action”

Yesterday, the San Francisco fire department scrambled a team of firefighters to the city’s Russian consulate (scheduled to be vacated today in the latest tit-for-tat diplomatic escalation between the US and Russia) following reports of “blowing smoke” emerging from the building, only to learn that the Russians were engaged in what appears to have been some last minute confidential document “redaction.”

Maria Zakharova, the spokeswoman for the Russian foreign ministry, explained that the smoke was part of a “mothballing” according to Reuters.

“In relation to this, the windows could be closed, the light could be turned off, the water could be drained out, the heating appliances could be turned off, the garbage could be thrown away, essential services could be turned off and many other things.”

Of course, what was really going on was 11th hour document destruction (albeit the old-fashioned way, one not involving a hammer, blackberries, and thousands of deleted emails) and as subsequent events have showed, the Russians had reason to be paranoid: on Saturday, the US unveiled its intention to search the soon to be vacant Russian trade mission in Washington, a move which has infuriated Moscow, prompting Russia to summon the deputy chief of mission of the US Embassy in Moscow to lodge a note of protest over the planned search.

Anthony F. Godfrey was summoned to the ministry on Saturday, it said in a statement, adding that Russian diplomats have been denied access to the trade mission building despite it being owned by Russia and protected by diplomatic immunity. 

The ministry called the planned “illegal inspection” of Russian diplomatic housing an “unprecedented aggressive action”, which could be used by the U.S. special services for “anti-Russian provocations” by the way of “planting compromised items”.

“We consider the planned illegal search of Russian diplomatic premises in the absence of Russian officials and the threat we have received to break down the door of the building as an aggressive action, which the US intelligence service may use to orchestrate an anti-Russian provocation by planting compromising items.”

We call on Washington to refrain from compromising the immunity of Russian missions in the USA https://on.rt.com/8m1q 

Moscow has called on Washington to stop violating international law and refrain from compromising the immunity of Russian missions in the country. Otherwise, retaliation may follow, the ministry warned. On Friday, Russian Foreign Ministry spokesperson Maria Zakharova said the FBI was planning to search the general consulate premises, including homes of the diplomatic staff, which would violate diplomatic immunity.

Former US diplomats, questioned the reasons behind the searches, saying it will only lead to a further escalation of tensions. The US authorities are highly unlikely to find “anything of interest” in the Russian Consulate in San Francisco, as there is probably nothing more than “confidential diplomatic materials,” which are supposed to be there anyway, said Ted Seay, a former US diplomat.

“What are our people going to do in your ambassador’s apartments or in the consulate in San Francisco? Look for illegal recipes for borsch? Of course, you have to respond and to go into our consulate in St. Petersburg – looking for what? Perhaps, for too many copies of Doctor Zhivago in the embassy’s library?” John Graham, former US ambassador to Libya, said.

“This foolishness happens [but] it happens usually at the lower levels,” he added. Meanwhile, Seay warned that “things are already too tense between the two countries” and both sides should proceed with “great care. To me, that means again that anyone who is actually planning to raid diplomatic premises in San Francisco, has lost their mind,” the former US diplomat said.

end

GERMANY/EU/TURKEY

Both candidates agree that Turkey should not become an EU member.  Turkey will become extremely angry and then it is plausible that they will release their 3 million migrants onto Greece:

(courtesy zero hedge)

Merkel, Schulz Agree: “It’s Clear, Turkey Should Not Become An EU Member”

Having blasted Germany for “abetting terrorists,” Turkish president Edrogan was on the receiving end of some ire this weekend as the refugee crisis and the EU deal with Turkey dominated the TV debate between Chancellor Angela Merkel and her coalition ally SPD challenger Martin Schulz on Sunday.

The rivals agreed, however, that Turkey can’t be part of the EU.

“If I become German chancellor, if the people of this country give me a mandate, then I will propose to the European Council that we end the membership talks with Turkey. Now all red lines are crossed, so this country can no longer become a member of the EU,”said Schulz during the debate, forcing the CDU leader to clarify her position on the issue.

“The fact is clear that Turkey should not become a member of the EU,”said Merkel, agreeing with Schulz.

“I’ll speak to my [EU] colleagues to see if we can reach a joint position on this so that we can end these accession talks,” added Merkel, who is hoping to get re-elected for a fourth term.

As RT notes, the government in Ankara is moving away from democratic principles at a “breathtaking” speed, Merkel said, adding that at the moment “the accession negotiations are non-existent.”

However, she refused to completely freeze the relationship with Turkey.

Additionally, Reuters reports that the actions of the Turkish authorities are making it “impossible” for the country to join the European Union, an EU executive said on Monday after German Chancellor Angela Merkel called for ending accession talks.

Quoting European Commission President Jean-Claude Juncker from last week, before Merkel’s election campaign comment, the Commission’s chief spokesman told a regular news briefing:

“Turkey is taking giant strides away from Europe and that is making it impossible for Turkey to join the European Union.”

He stressed, however, that any decision on whether to formally halt the long-stalled membership process would be up to the 28 member states of the bloc, not the Brussels executive.

Turkey has been receiving funding from the EU, which will reach €6 billion by 2018, as part of the deal to halt the migrant flow into Europe, signed in March 2016. Turkey was also promised visa free travel and expedited talks on joining the EU, but the discussion of those issues remains stalled due to Ankara’s refusal to relax its harsh anti-terrorism laws. As EU-Turkish ties hang in the balance, President Recep Tayyip Erdogan has been actively reiterating his threats to withdraw from the deal and again allow migrants to pour into the EU.

end

Putin weighs in on the North Korean situation and states that further sanctions will not help one bit.  They warn of a huge global catastrophe if more sanctions are applied and or a military strike

(courtesy zerohedge)

Putin Rejects More Korea Sactions, Warns US Risks “Global Catastrophe, Huge Loss Of Human Life”

After UN Ambassador Nikki Haley asked the security council to pass the “strongest possible” sanctions against North Korea which was “begging for war” following the isolated nation’s sixth nuclear test which took place over the weekend, Russia President Vladimir Putin has hinted that Russia may – and most likely will – use its Security Council veto power to stop any further sanctions from being implemented.

Putin, who is in China for a meeting of leaders from the BRICS countries, said that sanctions at this point would be “counter-productive” and that US threats of military action could trigger “a global catastrophe and a huge loss of human life,” according to Reuters. Some US diplomats have quietly agreed with the Russian leader, noting that if the barrage of already imposed sanctions on Pyongyang hasn’t changed the country’s behavior, then any incremental actions would likely have no impact either.

PUtin added that Pyongyang wouldn’t halt its nuclear tests until it “felt secure.” More details:

“Ramping up military hysteria in such conditions is senseless; it’s a dead end,” he added. “It could lead to a global, planetary catastrophe and a huge loss of human life. There is no other way to solve the North Korean nuclear issue, save that of peaceful dialogue.”

His remarks followed similar statement from China, which chafed at the notion that the US would seek to punish all countries that trade with the North, and similarly suggested that it too would veto any further sanctions on North Korea.

“Russia condemns North Korea’s exercises, we consider that they are a provocation … (But) ramping up military hysteria will lead to nothing good. It could lead to a global catastrophe,” he told reporters. “There’s no other path apart from a peaceful one.”

Putin’s remarks followed South Korea which said it had agreed with the US to scrap a weight limit on its warheads, helping it respond to the North Korea threat after Pyongyang conducted its sixth and largest nuclear test two days ago. While Putin described further sanctions as “the road to nowhere,” he said Russia was prepared to discuss “some details” around the issue, without elaborating.

According to Bloomberg, even before North Korea detonated its most powerful nuclear bomb on Sunday, Japan was calling for moves to cut off its oil supply. However, Chinese Foreign Ministry spokesman Geng Shuang dodged a question at a briefing in Beijing about whether his nation would consider limiting oil shipments to North Korea.

“The actions and reactions of the Security Council will depend on the conclusions reached through debate by its members,” Geng said, according to an official transcript. “China will promote denuclearization and the maintenance of stability on the peninsula, and promote solving problems on the peninsula through dialogue and consultation.”

The Russian leader also lashed out at the United States, saying it was preposterous for Washington to ask for Moscow’s help with North Korea after sanctioning Russian companies whom U.S officials accused of violating North Korea sanctions. Putin also blasted Washington for imposing more sanctions against Russian entities. A few days ago, Russia was forced to withdraw diplomats from the US after the Trump administration shuttered three Russian consulates.

“It’s ridiculous to put us on the same (sanctions) list as North Korea and then ask for our help in imposing sanctions on North Korea,” said Putin. “This is being done by people who mix up Australia with Austria,” he added.

In a tweet, President Donald Trump floated the idea of sanctioning any country or entity that trades or does any kind of business with the North. For Moscow, that would mean stopping the use of North Korean laborers, tens of thousands of whom work in Russia, and halting fuel supplies to Pyongyang. Russia has so far refused to consider doing either. According to RT, Putin warned that the North would never stop its nuclear program.

“As I told my colleagues yesterday, they will eat grass but will not stop their program as long as they do not feel safe,” Putin said. “What can restore their security? The restoration of international law.”

For their part, North Korea’s ambassador warned that the US will receive more “gift packages” as long as it continues to threaten the DPRK.

6 .GLOBAL ISSUES

7. OIL ISSUES

Gasoline prices tumble as several US Gulf Coast refineries resumed operations

(courtesy zerohedge)

Gasoline drops as refiners restart. However Irma is heading straight for Miami but could head into the Gulf and cause more damage

(courtesy zerohedge)

8. EMERGING MARKET

VENEZUELA/USA

The messy state of affairs for Venezuela

(courtesy zerohedge)

Venezuela Headed For “Messiest Debt-Restructuring In History” Thanks To US Sanctions

After being effectively shut out from global financial markets – a situation that was made more precarious by US sanctions prohibiting purchases of Venezuelan debt (unless you’re buying them off Goldman Sachs, should the bank’s asset-management arm desire to liquidate its $3 billion “hunger bond” position) – Venezuela is drawing ever-nearer to what the Financial Times describes as potentially the “messiest debt restructuring in history.”

So far, Venezuela has managed to forestall a default by stripping assets from its state-owned oil company, Petroleos de Venezuela, commonly referred to as PVDSA, and shaking down local institutions of spare dollars – not to mention the explicit financial support of China and RussiaRecently, Rosneft, the largest Russian oil company, helped support its troubled ally, which enjoys the largest crude reserves in the world, by offering billions of dollars in advance payments for future crude supplies. Thanks to a deal brokered by deceased former President Hugo Chavez, Venezuela has for years been Rosneft’s largest foreign supplier of crude. Last year, the oil giant accepted a 49.9% stake in PVDSA’s US-based subsidiary, Citgo, as collateral for a $1.5 billion loan.

Venezuelan President Nicolas Maduro

However, thanks to the US sanctions, which prohibit purchases of newly issued debt and existing bonds that have so far not been sold outside of Caracas, the country will once again need to innovate or risk sliding into bankruptcy. Making matters all the more urgent, the country recently suffered a loss in US courts after a judge ruled that Canadian miner Crystallex can seize Venezuelan money held in a custody account at Bank of New York Mellon to cover a $1.4 billion judgment awarded by a World Bank tribunal.

Crystallex’s victory could further embolden the country’s creditors, who collectively may be owed as much as $3.7 billion.

“Venezuela has been taken to the World Bank’s ICSID tribunal 43 times. Only Argentina has been subjected to more claims. Of these 24 are still pending, including claims from Anglo American, ConocoPhillips, Air Canada and Vestey. The Eurasia Group estimates that Venezuela owes a total of $3.7bn as a result of ICSID rulings, and Crystallex’s progress is likely to embolden other creditors.”

Adding to the country’s troubles, a major US clearing house has said it will stop settling some Venezuelan bonds, and Cantor Fitzgerald has stopped trading them altogether.

After months of rhetoric, the US – which for years maintained an uneasy business relationship with Venezuela, formerly South America’s wealthiest economy – has severed the country’s last tenuous ties to the global financial system…

“The message is that the US doesn’t want its financial system enabling the Venezuelan government in any way,” says Charles Blitzer, of Blitzer Consulting, who is a former International Monetary Fund official.

…And with the Crystallex ruling compounding the country’s troubles, its government is being set up for a “slow burn” leading ultimately to financial insolvency as creditors root out and seize whatever foreign assets they can find.

“Crystallex is the camel’s toe under the tent,” says Mark Weidemaier, a law professor at the University of North Carolina. “It will be a slow burn, but I wouldn’t be surprised to see people use the courts to ferret out where Venezuela’s assets are . . . and break down the barriers between the government, PDVSA and other entities.”

Typically, in a sovereign bankruptcy, creditors negotiate some kind of debt relief and trade their old, defaulted bonds for less valuable new ones. However, US sanctions may preclude this as an option for Venezuela, as the FT explains.

“…such a debt exchange would fall foul of the US sanctions regime, precluding any US banks from arranging one and any US bondholders from tendering their debts. In practice, it would mean indefinite financial purgatory for Venezuela until the US administration decides to lift the prohibition.

“If these sanctions stay in place, then Venezuela cannot restructure and it goes into limbo,” says Edward Al-Hussainy, a senior analyst at Columbia Threadneedle.”

Since Venezuela’s economic crisis began four years ago, imports have fallen precipitously, leading to dire shortages of essentials like medicine and foodstuffs as the country’s currency depreciated to the point of worthlessness. Unless the country can find some way to circumvent the sanctions, it will be forced to decide between countenancing further import declines, or a disorderly default.

According to Torino Capital, a Latin American-focused investment bank, Venezuela could choose the latter.

“Torino Capital…argued that this might counter-intuitively make a restructuring less likely. ‘It is possible that, faced with this choice, Venezuelan authorities end up deciding that the negative effects of a disorderly default on PDVSA’s capacity to generate export revenue are worse than the contractionary effects of further import cuts,’ the bank wrote in a note to clients.”

To be sure, a default could still be years away. And investors, for one, aren’t worried. The country’s debt has been largely unperturbed by the recent developments: PDVSA bonds have largely traded sideways, despite the recent developments.

“In the near term the impact will probably be minimal. Given Venezuela’s messy finances, the country is in practice already shut out of the international bond market. And while Crystallex won a legal skirmish, it is far from winning the war. It is unclear how much money Venezuela holds at BNYM and it may still be protected by sovereign immunity. Underscoring the investor view that little has changed, Venezuela and PDVA’s bonds have largely traded sideways.”

Still, a default, whenever it arrives, could signal the last gasp of the country’s embattled government. The country’s foreign reserves have already fallen below $10 billion (though they received a boost following the Goldman deal…).

“If they default, they will be out of government within three months,” says Federico Kaune, head of emerging market debt at UBS Asset Management. “The calculation is that they’re either in government, in exile or jail.”

With the fate of the Maduro regime hanging in the balance, we imagine Washington will do everything in its power to force Venezuela into bankruptcy, allowing the US to claim victory over yet another foreign adversary.

end

Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings TUESDAY morning 7:00 am

Euro/USA   1.1886 DOWN .006/REACTING TO  + huge Deutsche bank problems + USA election:/TRUMP HEALTH CARE DEFEAT//ITALIAN REFERENDUM DEFEAT/AND NOW ECB TAPERING BOND PURCHASES/ /USA FALLING INTEREST RATES AGAIN/HOUSTON FLOODING/EUROPE BOURSES MIXED

USA/JAPAN YEN 109.37 DOWN 0.819(Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER/   

GBP/USA 1.2959 UP .0037 (Brexit  March 29/ 2017/ARTICLE 50 SIGNED

THERESA MAY FORMS A NEW GOVERNMENT/STARTS BREXIT TALKS

USA/CAN 1.2391 DOWN .0023 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT AND GREXIT FROM EU/(TRUMP INITIATES LUMBER TARIFFS ON CANADA)

Early THIS TUESDAY morning in Europe, the Euro ROSE by 2 basis points, trading now ABOVE the important 1.08 level  RISING to 1.1843; / Last night the Shanghai composite CLOSED  UP 4.73 POINTS OR 0.14%     / Hang Sang  CLOSED  UP 1.09 POINTS OR 0.01% /AUSTRALIA  CLOSED UP 0.14% / EUROPEAN BOURSES OPENED  GREEN/MIXED  

The NIKKEI: this TUESDAY morning CLOSED DOWN 122.44 POINTS OR 0.63%

Trading from Europe and Asia:
1. Europe stocks  OPENED DEEPLY IN THE GREEN 

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 1.09 POINTS OR 0.01%  / SHANGHAI CLOSED UP 4.73 POINTS OR 0.14%   /Australia BOURSE CLOSED UP 0.07% /Nikkei (Japan)CLOSED DOWN 122.44  POINTS OR 0.63%   / INDIA’S SENSEX IN THE GREEN

Gold very early morning trading: 1329.60

silver:$17.87

Early TUESDAY morning USA 10 year bond yield:  2.132% !!! DOWN 3   IN POINTS from FRIDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%.

The 30 yr bond yield  2.7550, DOWN 2  IN BASIS POINTS  from FRIDAY night.

USA dollar index early TUESDAY morning: 92.60 DOWN 3  CENT(S) from FRIDAY’s close.

This ends early morning numbers  TUESDAY MORNING

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

And now your closing TUESDAY NUMBERS

Portuguese 10 year bond yield: 2.841% UP 0 in basis point(s) yield from FRIDAY 

JAPANESE BOND YIELD: +.006%  UP A FRACTION   in   basis point yield from FRIAY/JAPAN losing control of its yield curve/NOW NEGATIVE

SPANISH 10 YR BOND YIELD: 1.534% DOWN 6   IN basis point yield from FRIDAY 

ITALIAN 10 YR BOND YIELD: 1.99 DOWN 7 POINTS  in basis point yield from FRIDAY 

the Italian 10 yr bond yield is trading 47 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: +.338% DOWN 4  IN  BASIS POINTS ON THE DAY

END

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

IMPORTANT CURRENCY CLOSES FOR TUESDAY

Closing currency crosses for TUESDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/1:00 PM 

Euro/USA 1.1916 UP .0023 (Euro UP 23 Basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 108.82 DOWN 1.385(Yen UP 139  basis points/ 

Great Britain/USA 1.3026 UP  0.01031( POUND UP 103 BASIS POINTS)

USA/Canada 1.2364 DOWN .0053 (Canadian dollar UP 53 basis points AS OIL ROSE TO $48.85

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was UP  by 23 basis points to trade at 1.1916

The Yen ROSE to 108.82 for a GAIN of 139  Basis points as NIRP is STILL a big failure for the Japanese central bank/HELICOPTER MONEY IS NOW DELAYED/BANK OF JAPAN NOW WORRIED AS AS THEY ARE RUNNING OUT OF BONDS TO BUY AS BOND YIELDS RISE  /OPERATION REVERSE TWIST ANNOUNCED SEPT 21.2016

The POUND ROSE BY 103  basis points, trading at 1.3026/ 

The Canadian dollar ROSE by 53 basis points to 1.2364,  WITH WTI OIL RISING TO :  $48.85

The USA/Yuan closed at 6.5390/
the 10 yr Japanese bond yield closed at +.006%  UP 1/2 IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield DOWN 6  IN basis points from FRIDAY at 2.08% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 2.698 DOWN 5 in basis points on the day /

Your closing USA dollar index, 92.29  DOWN 35 CENT(S)  ON THE DAY/1.00 PM 

Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for TUESDAY: 1:00 PM EST

London:  CLOSED DOWN  38.55 POINTS OR 0.52%
German Dax :CLOSED UP 21.50 POINTS OR 0.18%
Paris Cac  CLOSED DOWN 17.41 POINTS OR 0.34% 
Spain IBEX CLOSED DOWN 63.40 POINTS OR 0.62%

Italian MIB: CLOSED DOWN 52.93 POINTS OR 0.24% 

The Dow closed DOWN 234.25 OR 0.18%

NASDAQ WAS closed DOWN 59.76  POINTS OR 0.93%  4.00 PM EST

WTI Oil price;  48.85 at 1:00 pm; 

Brent Oil: 53.44 1:00 EST

USA /RUSSIAN ROUBLE CROSS:  57.47 DOWN 34/100 ROUBLES/DOLLAR (ROUBLE HIGHER BY 34 BASIS PTS)

TODAY THE GERMAN YIELD RISES TO  +0.334%  FOR THE 10 YR BOND  4.PM EST EST

END

This ends the stock indices, oil price, currency crosses and interest rate closes for today

Closing Price for Oil, 5 pm/and 10 year USA interest rate:

WTI CRUDE OIL PRICE 5:00 PM:$47.35

BRENT: $52.73

USA 10 YR BOND YIELD: 2.166%  (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)

USA 30 YR BOND YIELD: 2.770%

EURO/USA DOLLAR CROSS:  1.1842 DOWN .0066

USA/JAPANESE YEN:110.22  UP  0.089

USA DOLLAR INDEX: 92.85  UP 19  cent(s)  

The British pound at 5 pm: Great Britain Pound/USA: 1.2929 : DOWN 19 POINTS FROM LAST NIGHT  

Canadian dollar: 1.2337 UP 137 BASIS pts 

German 10 yr bond yield at 5 pm: +0.334%

END

And now your more important USA stories which will influence the price of gold/silver

TRADING IN GRAPH FORM FOR THE DAY

Bond Bulls Best Day Since Brexit Amid Bomb Tests, Brainard Bombshells, & Barometric Behemoths

 
Tyler Durden's picture

Well that escalated quickly…

Since North Korea ‘escalated’ by flying missiles over Japan, there’s only one clear winner – but today saw bonds starting to catch up…

From Friday’s close, futures show Sunday’s opening drop and then the pressure come back on as US opened after Labor Day…

All the major indices fell and stabilized relatively uniformly…

Thanks to an afternoon VIX smash…

S&P managed to cling just above its 50DMA…

VIX across all the major indices jumped today but did not fade like it did last time…

FANG Stocks were unable to stage the same epic squeeze after the NK missiles over Japan plunge…

Insurers were pummeled… (down over 7% from pre-Harvey highs

Treasury yields crashed 9-10bps today as they caught up with all the chaotic headlines of recent days… even 2Y Yields tanked 6bps after Brainard backed off her uber-dovishness…

10Y Treasury yields tumbled today to a 2.06% handle, lowest intraday low yield since 11/10/16 – with bond bulls enjoying their best day since Brexit (June 2016)…

The drivers behind the reinvigorated rally come straight from the headlines. Tensions between the U.S. and North Korea have intensified after Kim Jong Un’s regime conducted its most powerful nuclear test. Meanwhile, Hurricane Irma is threatening to strike Florida or other areas of the country and roil an economy already dealing with the devastation from Harvey.

“The combination of North Korea worries, weakness in risk assets, and dovish Fed comments from Brainard have pressed yields back toward the bottom of the range,” Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets, wrote in a report around 10 a.m. in New York.

The yield curve collapsed to its lowest in over 12 months…

With all the Trumpflation trades unwound now…

The Dollar Index tumbled today, testing the lows from Payrolls spike on Friday…

Bitcoin rebounded notably are it utter collapse over the weekend…

WTI Crude prices jumped today, testing towards $49 for the first time in 3 weeks as RBOB Gasoline prices tumbled further amid refinery and pipeline restart plans…

Finally precious metals continue to push higher as debt ceiling anxiety builds and global thermonuclear war looms… Gold nears $1350 and Silver tops $18.

end

Trading early Tuesday

(courtesy zerohedge)

Bond Yields Tumble On Trump Tweet

Anxiety seems to be the word of the day in bond markets. While reports of North Korea moving its ICBMs managed to send 10Y Treasury yields 1bps lower, a Trump Tweet on building strategic forces in Japan and South Korea has sparked a solid bid in bonds, pushing 10Y back a 2.10% handle…

Traders – or algos – are increasingly knee-jerking on these headlines…

Next test looks like Payrolls spike lows. at 2.10%, as it’s clear just how jittery markets have become.

end

Trading late Tuesday morning:

Is Turmoil Back? Dollar, Stocks, & Bond Yields Drop; Goldl Silver, & OJ Pop

It appears nuclear armageddon, Russian tensions, debt ceiling anxiety, and ongoing weakness in macro-economic data have finally hit home as Washington gets back to work…

Dollar is dumping back to North Korea missiles over Japan lows…

Bonds are well bid… 10Y Yields at 2017 lows…

Precious Metals are surging – wth silver over $18..

Stocks are rolling over…

And OJ is spiking…

end

The tweet from Trump which got everybody riled up:

(courtesy zero hedge)

Trump Tweets About Weapon Sales After South Korea Suggests Bringing Back US Tactical Nukes

As part of South Korea’s response to the latest escalations out of its northern neighbor, the country’s defense minister on Monday said it was worth reviewing the redeployment of American tactical nuclear weapons to the Korean Peninsula” to guard against the North, a step that analysts warn would sharply increase the risk of an accidental conflict. On Monday, South Korean Defense Minister Song Young-moo said that he asked his American counterpart, Jim Mattis, during talks at the Pentagon last week that strategic assets such as  U.S. aircraft carriers, nuclear submarines and B-52 bombers be sent to South Korea more regularly.

“I told him that it would be good for strategic assets to be sent regularly to the Korean Peninsula and that some South Korean lawmakers and media are strongly pushing for tactical nuclear weapons [to be redeployed],” Song told a parliamentary hearing on North Korea’s nuclear test, without disclosing Mattis’s response.

A poll that YTN, a cable news channel, commissioned in ­August found that 68 percent of respondents said they supported bringing tactical nuclear weapons back to South Korea.

“The redeployment of tactical nuclear weapons is an alternative worth a full review,” Song said, echoing a position closely associated with conservatives in South Korea but not with progressives like Moon, who was elected president in May after vowing to engage with the North.

South Korean officials have been asking for fighter jets and ballistic missile-equipped submarines to be based on the peninsula, and have long wanted B-1Bs and B-52s to land rather than just fly over — all to give a greater sense of U.S. commitment to South Korea. The United States had about 100 nuclear-armed weapons, including short-range artillery, stationed in South Korea until 1991. Then President George H.W. Bush signed the Presidential Nuclear Initiatives and withdrew all tactical nuclear weapons that had been deployed abroad.

Shortly afterward, the two Koreas signed an agreement committing to making the peninsula free of nuclear weapons — a deal that North Korea violated by developing its own nuclear arms. But Pyongyang has maintained that Seoul has also broken its promise because remaining under the U.S. nuclear umbrella is tantamount, it says, to having such weapons. After the defense minister spoke at the hearing, the South Korean president’s office said that it was not considering redeploying tactical nuclear weapons. “Our government’s firm stance on the nuclear-free peninsula remains unchanged,” said Kim Dong-jo, a spokesman for Moon.

Addressing this, and other issues, President Trump and his South Korean counterpart, Moon Jae-in, spoke on the phone for 40 minutes Monday night, Korean time — some 34 hours after the nuclear test and more than 24 hours after Trump took to Twitter to criticize Moon’s “talk of appeasement.”

As the WaPo reports, the two presidents agreed to remove the limit on allowed payloads for South Korean missiles — something Seoul had been pushing for — as a way to increase deterrence against North Korea, according to a statement from South Korea’s Blue House. They agreed as well to work together to punish North Korea for Sunday’s nuclear test, pledging “to strengthen joint military capabilities,” a White House statement said, and to “maximize pressure on North Korea using all means at their disposal.”

In a later phone call, Trump and German Chancellor Angela Merkel “reaffirmed” the necessity of coordinating a response at the United Nations.

At a U.N. Security Council meeting, Haley pressed for the “strongest possible” sanctions against the North. The administration plans to circulate a new sanctions draft this week. Haley did not spell out how she would overcome the objections of veto-wielding permanent members China and Russia.

But she cautioned, “War is never something the United States wants. We don’t want it now. But our country’s patience is not unlimited. We will defend our allies and our territory.”

And to underscore just that, moments ago Donald Trump tweeted “I am allowing Japan & South Korea to buy a substantially increased amount of highly sophisticated military”

I am allowing Japan & South Korea to buy a substantially increased amount of highly sophisticated military equipment from the United States.

Meanwhile, China balked at the possibility of further escalation: China will never allow chaos and war” in Korea, said Liu Jieyi, the Chinese ambassador to the United Nations. Sanctions alone will not solve the crisis, said Russia’s U.N. ambassador, Vassily Nebenzia. On Tuesday, Putin made it clear that Russia and China will most likely veto another sanctions vote in the UN Security Council.

Furthermore, military experts in the United States are almost universally opposed to the idea of deploying strategic or tactical weapons in South Korea. “The thing that most concerns me about redeployment is that it introduces more room for miscalculation or unintended escalation,” said Catherine Dill of the Center for Nonproliferation Studies in Monterey, Calif.

In that situation, the ability to react more quickly could be a negative factor. From the perspective of the military alliance between the United States and South Korea, having long-range ballistic missiles or strategic bombers is “perfectly sufficient” to continue to deter North Korea, Dill said.

As the North Korean threat has increased this year, the United States has sent F-35 stealth aircraft and other strike fighters on flyovers across the southern half of the peninsula in a not-so-thinly veiled warning to Kim. The U.S. Pacific Command even released photos last week of B-1B Lancers dropping bombs on a range on the southern side of the demilitarized zone that separates the two Koreas.

Still, that has not convinced local politicians, and a growing number of policy­makers in Seoul say that Guam is too far away and that, if the South comes under attack from North Korea, it can’t wait the two-plus hours it would take American bombers to arrive from their base in the Pacific.

“We need these strategic or tactical assets that can destroy North Korea’s nuclear-capable missiles before they can inflict harm on us,” said Chun Yung-woo, a former South Korean national security adviser.  “Right now they can retaliate, but by that time, tens of thousands of people might have been killed,” Chun said. “We need a first layer of offensive weapons stationed closer to North Korea’s nuclear and missile sites.”

Jon Wolfsthal, a nuclear expert who served on President Barack Obama’s National Security Council, said that in the South Korean context, “strategic assets” are all about giving “a tangible sense of reassurance” to the government in Seoul. “The reassurance bucket is bottomless,” Wolfsthal said. “You can pour stuff into it and it’s never going to fill up.”

* * *

Finally, while it remains to be seen if the US will concede to S.Korean demands and dispatch tactical nukes, overnight a top U.S. naval commander said the US will “keep sending formidable defense assets” to the Korean Peninsula in combined deterrence and response to North Korea’s “self-destructive” actions. Adm. Scott Swift, who commands the U.S. Pacific Fleet, stressed that although South Koreans stand closest to the North’s threats, they “do not face this aggressor alone.”

He cited the North’s continued provocations, including “ill-advised” ballistic missile launches and inflammatory warnings of nuclear war, highlighted by its sixth nuclear test Sunday.

Speaking at the International Seapower Symposium here, the admiral described the Kim Jong-un regime’s choice as “irrationally self-destructive actions and behaviors that defy logic and explanation.”

“We will continue to deploy carrier strike groups, expeditionary strike groups, AEGIS ships, the world’s most capable submarine force and advanced aircraft like the F-35, P-8 and MH-60R to be prepared to respond decisively when called,” he stressed. “Today, our platforms have longer reach, are more interconnected and possess greater lethality than what has ever been fielded before.” He added that his fleet has also seamlessly integrated operations with South Korean and Japanese navies for overwhelming ballistic missile defense and anti-submarine warfare.

Swift expressed confidence about the might of his unit in charge of defending the Indo-Asia-Pacific region. “Let our potential adversaries take pause and note that the only naval force more powerful than the U.S. Pacific Fleet is the entirety of the United States Navy,” he said. It is unclear if his words will frighten Kim Jong-Un…

end

Tuesday trading/

July factory orders plunge to its weakest level since February

(courtesy zero hedge)

July Factory Orders Plunge To Weakest Since Feb (As Boeing Bounce Disappears)

Following the Boeing-driven spike, July is landing with a thud back to reality as final data today confirms a 3.3% MoM tumble in factory orders and 6.8% plunge in durable goods orders.

In fact, it gets worse as aggregate factory orders are now back at their lowest level since February…

As goes Boeing… so goes America? (or to put it another way, we’re gonna need moar war, baby)

Friday night

Arkema Texas plant blows up. This is the second of 9 trailers that have exploded and burnt to the ground

(courtesy zerohedge)

Arkema Texas Plant Explodes, “Black Smoke Fills The Air”

You can’t say they didn’t warn us: this afternoon, the VP of US manufacturing Daryl Roberts at French chemicals giant Arkema, said the company was on “high alert” as more fires could start at the doomed facility at any moment. Well, that moment took place around 6pm ET, when ABC Houston reported that the doomed Arkema plant has exploded, causing a “massive” fire and “sending dark, black smoke into the air.”

According to reports on the ground, light winds are not pushing into areas around the plant, but there is concern the smoke could injure others.

The smoke could be seen in the residential Newport area of Crosby, about 7 miles away. Harris County officials are advising residents who did not evacuate the 1.5-mile area around the plant to close their windows and turn off their air conditioning systems.

“You could call this a warning sign that more explosions or fires could
be coming soon,” Jeff Carr, a spokesman for Arkema, told the Houston
Chronicle.

Hazardous materials crews are headed to the scene.

Rachel Moreno at the Harris County Fire Marshal’s Office said that the explosion was a result of the product inside the trailers reaching its combustion state, which is causing the black smoke. She said that residents should be safe if they adhere to the one-and-a-half mile evacuation zone, and advised those who are near the site to shelter in place, close all their windows and turn off their air conditioning.

Moreno said no change was made to the evacuation zone.

This is the second of nine trailers at the plant that has caught fire. The trailers each contain liquid organic peroxides, which needs to be cooled to a certain temperature, otherwise it will explode. Officials said that three of the nine trailers have lost power, according to KPRC.

At least 18 people have been injured since the first fire earlier in the week. One of the injured complained of a burning sensation in the eyes and throat and was still feeling the effects, days later.

As reported this afternoon, the Harris County Fire Marshal’s Office has ordered residents within a one-and-a-half mile radius to evacuate the area. In a conference call with reporters on Friday, Arkema President and CEO Rich Rowe said he fully expects the remaining trailers to catch fire, adding the best course of action would be to let the trailers “burn out.”

“The only recourse is to let the eight containers burn out,” Rowe said, according to ABC News. “It’s 500,000 pounds of material; let that material burn out.”

As reported previously, plant officials said they expected the explosion and fire as chemicals began to heat up after the plant lost power during this week’s flood. There are nine containers with 500,000 pounds of material inside. One of the containers already burned.

Earlier this week, officials evacuated workers and residents within a 1.5-mile radius from the plant after flooding which the company says could lead to a massive fire or explosion. On Thursday morning, members of the media were not let within a 2-mile perimeter of the plant as authorities investigated the incident, while nearby residents were briefly advised to shelter-in-place.

The plant makes organic peroxides, some that need to be constantly refrigerated. When they aren’t, they become volatile.

Friday’s fire was the second fire and explosion after a much smaller one erupted Monday.

The plant’s record with state and federal regulators isn’t stellar either, something the plant’s president acknowledged in a phone conference Friday. “We’re not perfect,” said Arkema CEO Richard Rennard. “We’re doing our very best and and will continue to work to get better.”

While the company has refused to give the full breakdown of chemicals stored on location, it has warned that it has around 500,000 pounds of peroxides on the site, all of which are expected to burn.

The company also published a list of the toxic chemicals stored at the doomed facility on its web site, reposted below.

  • 2-ETHYLHEXANOYL CHLORIDE DISTILLED
  • ACETIC ACID 84%
  • ACETONE
  • AROMATIC 100
  • BENZOYL CHLORIDE
  • CAUSTIC POTASH 45%
  • CAUSTIC SODA 50%
  • CUMENE HYDROPEROXIDE
  • CUMENE HYDROPEROXIDE
  • DIMETHYL HEXADIENE
  • DIMETHYL HEXANEDIOL DH-S
  • EPSOM SALTS
  • HEXANE
  • HYDROGEN PEROXIDE 70%
  • ISOAMYLENE
  • ISOAMYLENE
  • ISOBUTYLENE     ISOPROPYL ALCOHOL
  • MINERAL OIL, WHITE
  • MINERAL SPIRITS ODORLESS
  • MONOSODIUM PHOSPHATE
  • NEODECANOYL CHLORIDE >=98.0% UNDISTILLED
  • PIVALOYL CHLORIDE 95-100%
  • PROPYLENE GLYCOL
  • SODIUM BICARBONATE
  • SODIUM CARBONATE ANHYDROUS LIGHT
  • SODIUM SULFATE ANHYDROUS
  • SODIUM SULFITE ANHYDROUS
  • SULFUR DIOXIDE
  • SULFURIC ACID 93% REAGENT ACS
  • T-BUTYL HYDROPEROXIDE 70%

All of these substances are now expected to burn down, many in volatile, explosive fashion, in the coming days.

Trump asks for $8 billion in a “down payment” for the Hurricane relief effort and also hints that it should be added to the debt ceiling bill
(courtesy zero hedge)

Trump Asks That $8 Billion Harvey “Down Payment” Be Added To Debt-Ceiling Bill

Shortly after President Trump backed away from his demand that $1.6 billion in funding for his border wall be included in a continuing-resolution bill to avert a government shutdown, the White House late Friday sent a request for $8 billion in emergency funding for the Hurricane Harvey cleanup effort, and asked that the money be tied to a bill to raise the US debt-ceiling limit. Trump’s request that the two legislative priorities be combined in one bill likely won’t go over well among Congressional Republicans, according toBloomberg.

Rep. Mark Meadows of North Carolina, the leader of the House Freedom Caucus and perhaps Trump’s most intransigent political adversary, urged lawmakers on Thursday not to bundle the two legislative priorities. In a tweet, Meadows said it’d be “inappropriate” and “would send the wrong message” to use Harvey funds as leverage to force conservatives to vote for a debt-ceiling increase.

The aid money will be needed to shore up the nearly bankrupt FEMA’s finances before some 450,000 Texans file requests for aid. The rising toll of flood-related property damage is expected to quickly deplete the $10 billion left in the coffers of the National Flood Insurance Program.

Using  relief spending to pass a separate, unrelated bill would be inappropriate and send the wrong message https://www.washingtonpost.com/powerpost/freedom-caucus-leader-warns-dont-attach-harvey-aid-to-debt-ceiling-increase/2017/08/31/6b53ebc6-8e58-11e7-91d5-ab4e4bb76a3a_story.html?tid=ss_tw&utm_term=.106b5d123746 

Photo published for Freedom Caucus leader warns: Don’t attach Harvey aid to debt-ceiling increase

Freedom Caucus leader warns: Don’t attach Harvey aid to debt-ceiling increase

Rep. Mark Meadows, the leader of a group of House conservatives, said adding tens of billions of dollars of spending to a debt-limit measure would be a ‘terrible idea.’

washingtonpost.com

Here’s Bloomberg:

“In a letter to House Speaker Paul Ryan requesting the storm aid, Budget Director Mick Mulvaney stops short of explicitly asking for the two to be linked. But the letter makes clear that the emergency spending will accelerate the timetable for raising the limit and conveys the idea that failure to pay obligations could imperil essential government services.

The White House disaster aid request includes $7.4 billion for the Federal Emergency Management Agency and $450 million for the Small Business Administration. The request is intended primarily to cover funding demands through the end of the federal fiscal year on Sept. 30.”

The administration intends to ask Congress to allow the aid to be disbursed in one lump sum, rather than parceling out in monthly installments.

“The White House will ask Congress to provide FEMA with $6.7 billion in that legislation, and provide the full funding upfront, rather than pro-rating the appropriation out over the entire fiscal year, an administration official said. That request, if adopted by lawmakers in a vote likely to come at the end of the month, would provide FEMA with additional flexibility to fund Harvey relief efforts in the new fiscal year.”

Republicans are expected to vote on disaster relief next week after they return from summer recess. Congress is already facing a grueling legislative calendar in September with only 12 working days to pass a continuing resolution, disaster relief, a debt-ceiling increase and, potentially, their effort to repeal and replace Obamacare after the Senate Parliamentarian informed party leaders that the provisions allowing them to pass their health-care bill with a simple majority will expire at the end of the month.

“The administration’s move will test the willingness of Republicans in Congress to link the two must-pass pieces of legislation. House GOP leaders plan to vote next week on Trump’s request in initial disaster relief funding but they don’t plan to include a U.S. debt-limit increase in the legislation, two GOP congressional aides said before Mulvaney’s letter was sent.

“The president visited Texas on August 29, 2017 to reassure the people of Texas that the Federal Government would help them rebuild from the catastrophic flooding and damage to affected communities,” Mulvaney said in the letter. “This request is a down-payment on the President’s commitment to help affected States recover from the storm, and future requests will address longer-term rebuilding needs.”

According to Bloomberg, citing unnamed Congressional aides, the Senate might be more willing to combine both measures in a bill, and the House, bizarrely, might be more willing to pass a bundled bill if it makes it through the Senate first. Despite the reported rift between Trump and Senate Majority Leader Mitch McConnell, the Kentucky Republican has promised to cooperate with the president. He hasn’t said whether he’d prefer to combine, or separate, Harvey funding and the debt-ceiling increase.

“‘Working closely with the President and the House of Representatives, the Senate stands ready to act quickly to provide this much-needed assistance to those impacted communities, and support first responders and volunteers,’ he said.”

House Speaker Paul Ryan has also been conspicuously silent about how the House intends to pass Harvey relief…

As families & communities begin long recovery from Hurricane Harvey, House will act quickly on @POTUS request for emergency relief funding.

…though he recently told a Wisconsin newspaper that Congress “will not default” on its debts.

“Ryan told the Milwaukee Journal Sentinel, though, that Congress has until October to act on the debt limit.

‘We will not default,’ the Wisconsin newspaper quoted Ryan as saying. ‘We’ve got a lot of options on our plate. We’re going to assess those options. We have until October to figure that one out.’”

We probably won’t have a clear picture of the combined bill’s chances. For what it’s worth, Goldman is optimistic that a compromise can be reached. It recently lowered its odds of a government shutdown to 15%, down from 50% last week.

Goldman: the probability of a government shutdown has declined further from our prior assessment of 35% and now put it at around 15%.

Let’s hope, for the disaster victims’ sake, that the squid is right

end.

Hurricane Harvey could bankrupt the Federal flood insurance program. It is already in debt to the tune of 25 billion dollars  and because private insurers will not cover flood damage, they provide up to 98% of insurance for floods. Because of the huge shortfall, they need to raise funds immediately and that should allow the safe passage of the debt ceiling to pay for huge damage cause by Harvey.

(courtesy zerohedge)

Harvey Could Bankrupt The Federal Flood-Insurance Program

Hurricane Harvey may solve the auto industry’s inventory problem. But right now, it’s about to create a giant headache for the federal government.

Based on the latest estimates from Irvine, California-based CoreLogic, insured flood losses for homes in the affected areas of Texas and Louisiana could total between $6.5 billion to $9.5 billion. Since private insurers typically don’t provide personal flood insurance, all but $500 million of that will fall to the Federal Emergency Management Agency’s National Flood Insurance Program, or NFIP.

According to the Street, if insured damages reach the high end of this range, it would totally deplete the $7.5 billion of cash and available credit available to the 49-year-old government program, which provides about 98% of residential flood insurance. The program is already about $25 billion in debt to the US Treasury Department and would need Congressional authorization for additional fundingTo be sure, final totals could be much, much higher given the severity of the the “1-in-1000-year” flood.

The potential funding shortfall could create problems if Congress doesn’t act quickly this month to shore up the financially-troubled flood-insurance program. As we’ve reported, Congress already has a full agenda in September – a month where lawmakers must pass a funding bill to keep the government open, and another to raise the debt limit and stave off a technical default on US debt. Initially, President Trump said he would force a government shutdown if Congress didn’t approve funding for his border wall in its next budget. However, it appears that he has backed away from this, as the Washington Post reported today that the administration has quietly notified Congress that the $1.6 billion in wall funding would not need to be included in the September continuing resolution.

Furthermore, Congress must explicitly pass legislation to keep the NFIP intact. Without it, the entire program will lapse.

To be sure, there are some signs that Republicans are taking steps to ensure that emergency disaster-relief funding is approved as quickly as possible. According to a report in the Wall Street Journal, some Republican lawmakers are raising the possibility that funding for the cleanup effort could be attached to the debt-ceiling bill, giving both measures a strong chance of passing. But it didn’t say if funding for the flood-insurance program would be included.

Thanks, in part, to the hurricane, and the perceived political consequences of failing to aid the disaster victims (though Texas has proven to be a reliably red state), Goldman has cut its odds of a government shutdown to 15%.

* * *

To be sure, this problem could’ve been avoided if the federal government didn’t involve itself in the complicated process of responding to natural disasters. Instead, as Ryan McMaken of the Mises Institute suggests, the Federal government should just hand Texas back the income-tax revenue it’s collected this year, and give the state carte blanche to organize and finance the recovery, INCLUDING the reconstruction of flooded and otherwise damaged homes.

“Of course, we’ll be told that federal disaster relief programs are all about “sharing” and “cooperation” and “kindness.” In reality, it’s all just about forcing one group of people to hand over money to another group of people. There is no doubt that Texas and Houston now face significant challenges in rebuilding after the flood. But, when we demand that other regions and states pay for the rebuilding of Texas, we’re acting as if those other states and communities don’t have problems of their own.

Needs related to poverty, infrastructure, and education in, say, Michigan did not magically disappear because Texas experienced a flood. The only reason it now seems right to take money from people in Michigan, and hand it over to Houstonians, is because Houston’s problems are in the headlines, and Michigans mundane daily problems are not. The central planners have decided that Houstonians deserve Michigan’s money. But the rationale for this decision is purely political, and thus arbitrary.”

After all, the state has a larger GDP than Canada, Brazil and Italy.

That would at least spare the 30,000 people living in emergency shelters the anxiety of wondering whether President Donald Trump and Congress will manage to put their political squabbling aside for long enough to authorize the funding.

Especially because Hurricane Irma, currently a category 3 storm, could make landfall in the Gulf of Mexico, or Florida. If it’s the former, southwest Texas could receive its second pummeling in two weeks.

end

Sunday night/Irma

A professor with more advanced models predicts that Hurricane Irma is heading straight for Southern Florida and it’s wrath would cause considerable flooding in 3 potential areas of Florida including Miami

(courtesy zerohedge)

Latest Projections Show Hurricane Irma Headed For Florida

As Hurricane Irma continues to move  west as a Category three storm, in what still is said to be an indeterminate path, according to the latest projections from Met Scientist Michael Ventrice, it now looks like Florida has the highest probability of a US landfall…

Latest 12Z Calibrated ECMWF Ensembles indicates that Florida now has the highest probability to see Hurricane impacts/landfall 👀

…though that doesn’t mean the Gulf of Mexico can rest easy. Hurricane forecasting is notoriously inaccurate one or two weeks out…

Not a shift in guidance anyone wanted to see. Looks like threat growing again for Gulf States. Forecast remains extremely difficult https://twitter.com/RyanMaue/status/904428818831638529 

Before it nears the US, however, the storm is headed toward the Northern Caribbean, threatening to bring flooding rain and damaging winds to the Leeward Islands. Preparations for the storm should already be taking place in these areas, according to Accuweather.com.

“Rain and gusty winds may start as early as Tuesday,” AccuWeather Senior Meteorologist Rob Miller said.

According to Accuweather, Irma’s intensity has vacillated over the past few days. But the storm is expected to strengthen to a category four hurricane with sustained winds of 130-156 mph as it approaches the islands. Thereafter, the storm will turn to the north and west over the coming days. This track will put Antigua and Barbuda, Montserrat, St. Kitts and Nevis, Anguilla and the British Virgin Islands, in the brunt of the storm’s rain and wind spanning Tuesday and Wednesday.

Hurricane watches issued for portions of the Leeward Islands. Latest information on  available at http://hurricanes.gov 

Cruise and shipping vessels in the hurricane’s path will need to reroute.

Later in the week, Irma will move close to Puerto Rico and Hispaniola with the worst of the storm expected to miss the islands to the north. Even so, rough surf, gusty winds and heavy rain will increase.

Experts are concerned that the Turks and Caicos Islands and the Bahamas could face dangerous conditions at the end of the week and into the weekend as Irma passes nearby or possibly through the islands. Impacts will be severe if Irma maintains its strength and passes over them.

Ultimately, the storm could land in Florida, Georgia, the Carolinas or even closer to the Delmarva Peninsula. Or it could curve northward and miss the east coast entirely.

“The eastward or northeast progression of a non-tropical system pushing across the central and eastern U.S. this week will highly impact the long-range movement of Irma,” AccuWeather Hurricane Expert Dan Kottlowski said.

How fast or slow this non-tropical system moves will determine whether Irma takes a west-northwest path toward the southern Atlantic Seaboard or gets steered north and away from land.

* * *

Readers may be wondering, if the storm slams southeast Florida, as is looking increasingly likely. Well, the Miami Herald spoke with one engineer who built a “dynamic” weather forecasting model that incorporates data like rainwater evaporation rates and how much of a given surface area is paved.

“Omar Abdul-Aziz, an engineer and assistant professor at West Virginia University, has done just that with a new model he built while at Florida International University as part of a state-funded project to improve hurricane loss models. At the request of the Herald, he agreed to run three rainfall scenarios that might resemble Hurricane Harvey.

The maps he produced stretch from Homestead north to Port St. Lucie, not including barrier islands which are separate land masses, and depict flooding after 48 hours from 20 inches of rain, 30 inches of rain, and 40 inches of rain.

Because the maps cover a large area, they don’t show flooding at street level. But Abdul-Aziz said they do provide a far more accurate picture of what would happen across the region.”

If his models are accurate, residents of densely populated cities like Miami might want to start bracing for floods. Abdul-Aziz found that floodwaters in parts of Miami, Hialeah, South Dade and Fort Lauderdale could rise between nine and 17 inches at least with this amount of rain. And with 40 inches of rain, flooding in those same neighborhoods, as well as many more, rises to between 23 inches and more than three feet — enough to begin damaging houses and partially submerge cars.

“Because of the flat land and low elevation, water does not move fast. It goes slow and the drainage capacity is not designed to take that much rainfall,” he said.

To build the model, funded with $533,000 from the state, Abdul-Aziz used the Environmental Protection Agency’s latest stormwater management model, which has been used since the 1970s to help communities plan water and sewer systems. They include local hydrology, land cover, ground level and local climate, but cover a smaller area.

Abdul-Aziz mapped out three different flooding scenarios below:

To be sure, the storm is still at least a week away. Depending on atmospheric conditions, it could menace a wide stretch of the US east coast. If it’s still a powerful category 3 or 4 storm when it hits – as projections suggest it would be – the US could be bracing for its second major natural disaster in two weeks.

end

Monday night/Irma

Irma now intensifies as a category 4 hurricane and it is looks like it is head straight for Miami

(courtesy zerohedge)

Florida Declares State Of Emergency As Category 4 Hurricane Irma Barrels Straight For Miami

With Florida already bracing for a hit from Hurricane Irma, which according to some models may attain “monster” Category 5 winds as it nears land prompting locals to store up on everything from water to food to gas and various other housing supplies, late on Monday afternoon Florida Gov. Rick Scott declared a state of emergency ahead of potential landfall, just hours after the governor of Puerto Rico did the same.

View image on TwitterView image on Twitter

BREAKING: @FLGovScott has declared a state of emergency in Florida ahead of Hurricane 

At roughly the same time, the NHC announced that Irma’s top sustained winds have reached 130mph (215 kph), which prompted an upgrade to a Category 4 stormfor Irma. According to the latest update, Irma was moving west at 13mph, and was currently located about 490 miles east of Leeward Islands.

A hurricane warning was in effect for Antigua, Barbuda, Anguilla, Montserrat, St. Kitts, and Nevis, Saba, St. Eustatius, and Sint Maarten, Saint Martin and Saint Barthelemy.

Puerto Rico is expected to be hit at 2pm on Wednesday.

While some models suggest a small chance of (another) Gulf of Mexico hit:

View image on TwitterView image on Twitter

 forecast has shifted a lot further to the west — with some weather models suggesting a small chance (as today) of US GoM hit 

Even more concerning, it now appears that despite hopes for a last minute course revision, Miami is smack in the middle of the latest hurricane path projections.

Based on 11AM Mon NHC track, chances for wind impacts from  nearly equal for Miami, Key West, and Havana.

Which likely means that the preliminary panic which has gripped some Florida residents, is about to get worse. As we reported earlier, WPTV in Palm Beach reported that Shelves of water at several stores were nearly empty Sunday, even as Irma’s path remains uncertain. Hardware stores are also running out of tanks of gas and other supplies. One distressed shopper told WPTV that one Walmart had run out of bottled water.

There was nothing at Walmart,” said Bianca Rodriguez of Palm Beach Gardens. “Not even like one thing of water.”

According to WPTV emergency officials recommend people have one gallon of water per person, per day for at least five days in the event of a hurricane. Florida Gov. Rick Scott warned that “disaster preparedness” should be a priority for every family in the potential path of the storm. One shopper said he bought the last remaining cases of bottled water at the Winn-Dixie in Palm Beach Gardens.

“Rodriguez found cases of bottled water at a Winn-Dixie on Military Trail in Palm Beach Gardens Sunday night.  ‘I lucked out. There’s only a couple left, but at least there was enough for me,’ said Rodriguez.”

A Home Depot in Royal Palm Beach on Monday morning posted a sign that said they were short of some hurricane supplies.

And while some stores have already run out of supplies, for most Florida residents it is not too late to take precautions.

* * *

Here, courtesy of Wunderground’s Bob Henson, is the latest summary on the rapidly intensifying Hurricane Irma, whose threat for Cuba, Puerto Rica and Florida, is rising by the hour.

Threat Increasing for Cuba, Florida from Intensifying Irma

Dangerous Hurricane Irma was intensifying as it approached the northern Lesser Antilles Islands on Monday morning, and island residents in the path of Irma need to rush preparations to completion as the storm heads west-southwest at 14 mph. A NOAA hurricane hunter aircraft in the storm found that Irma’s central pressure was steadily dropping Monday morning, reaching 944 mb at 11 am EDT. Irma’s top sustained winds are estimated at 120 mph, and winds may not yet have fully responded to this pressure drop. Update: Based on Hurricane Hunter measurements, NHC raised Irma’s top sustained winds at 5:00 pm EDT to 130 mph, making it a Category 4 storm. Irma is expected to be a major Category 4 hurricane when it passes very close to the northern Lesser Antilles Islands on Tuesday, near Puerto Rico and the Virgin Islands on Wednesday, and the Turks and Caicos Islands and Hispaniola on Thursday. As of 5 pm EDT Monday, Hurricane Warnings are in effect for the northern Leeward Islands, and Hurricane Watches are up for the U.S. and British Virgin Islands and Puerto Rico.

Tropical storm-force winds are expected to begin affecting the east coast of Florida and the Florida Keys on Friday night (Figure 1 below). An evacuation decision for the Florida Keys may have to come as early as Tuesday, since the Keys require 3+ days to evacuate. As of 5 pm EDT, far southeast Florida, including Miami, was in the 5-day cone of uncertainty fo

Satellite images on Monday morning showed a very symmetric well-organized storm with solid spiral banding and a large eye. Irma had a respectable and improving upper-level outflow on all sides. Conditions were favorable for strengthening, with wind shear a low 5 – 10 knots. Sea surface temperatures (SSTs) along Irma’s path have risen sharply over the past day, to 29°C (84°F), accompanied by a substantial increase in the total heat content of the ocean (Figure 2), giving the storm plenty of heat energy to fuel intensification. The surrounding atmosphere has been steadily moistening, as seen on precipitable water imagery, with a mid-level relative humidity near 55%, according to the 12Z Monday analysis from the SHIPS model.


Figure 1. Most likely arrival time of tropical-storm-force winds from Irma, as of the 11 am EDT Monday, September 4, 2017 advisory from NHC.

Intensity forecast for Irma

For the next five days, wind shear is predicted by SHIPS to remain very favorable for development—a low to moderate 5 – 15 knots. SSTs will be very warm, 29 – 30°C (84 – 86°F), accompanied by a high ocean heat content capable of fueling rapid intensification. Mid-level relative humidity is predicted to steadily rise, reaching 70% by the end of the week. We can expect one or more eyewall replacement cycles (ERCs) this week, which will act to temporarily weaken the hurricane by about 10 mph. On Monday morning, the hurricane hunters found that an ERC was likely in progress, and the current intensification cycle will likely pause late today, as a result.

Our most reliable intensity models–the HWRF, COAMPS-TC, LGEM, and DSHIPS–predicted in their Monday morning runs that Irma would peak as a Category 4 or 5 hurricane with 130 – 160 mph winds, and the official NHC forecast of a Category 4 hurricane when it passes by the islands this week looks reasonable. The only major impediment to Irma’s strength would appear to be interaction with land; a close pass or direct hit on Hispaniola or Cuba could potentially damage or destroy the hurricane’s inner core and knock it down to Category 2 or 3 strength.


Figure 2. 
Total ocean heat content (OHC) along the track of Hurricane Irma, at 2 am EDT Monday, September 4, 2017. Irma is expected to encounter OHC levels of 80 – 100 kilojoules per square centimeter as it passes the Lesser Antilles islands. OHC levels this high are known to be very favorable for rapid intensification, and are similar to what fueled Hurricane Harvey’s rapid intensification over the Gulf of Mexico during its approach to the Texas coast (Figure 3). Image credit: University of Miami Rosenstiel School of Marine and Atmospheric Science.


Figure 3. Total ocean heat content (OHC) along the track of Hurricane Harvey on August 25, 2017. Harvey encountered OHC levels of 80 – 100 kilojoules per square centimeter as it moved to the northwest towards Texas. This large amount of heat helped fuel the storm’s rapid intensification into a Category 4 hurricane. Image credit: University of Miami Rosenstiel School of Marine and Atmospheric Science.

How strong could Irma get?

Several computer models have been confronting meteorologists with some eye-opening intensity forecasts for Hurricane Irma, especially for the period around next weekend, when Irma is currently predicted to be arcing northwest from the Eastern Bahamas. We cannot rule out the chance that Irma will reach Category 5 strength, but we can safely discount some of the most extreme model-generated intensities. The GFS global model and the new HMON regional hurricane model have consistently been deepening Irma to pressures below 900 millibars (mb). However, neither of these models fully incorporates the interaction between ocean and atmosphere that serves as a check on a hurricane’s peak strength. A better guide to how strong Irma might get is the HWRF regional hurricane model, which extends out to 126 hours (just over five days). The HWRF has proven to be our most reliable model-based intensity guidance in recent years. The 0Z and 6Z Monday operational runs of HWRF deepened Irma to the 920 – 930 mb range, suggesting Irma will be a very formidable hurricane, but not a mind-blowing all-time record-setter.

For historical context, the lowest hurricane-related pressure ever measured at the surface north of the Caribbean and east of Florida is 921 mb in the Bahamas Hurricane of 1932. Hurricane Hunter dropsondes found a surface pressure of 919 mb within Hurricane Gloria (1985). Such pressures can support a Category 4 or 5 hurricane, but the peak winds depend on the size of the hurricane. As hurricanes move poleward, they typically get bigger. In a larger hurricane, the pressure force from a given central pressure will extend over a larger area, meaning that the top sustained winds will probably be lower but that a larger area could experience high winds and storm surge. This was the case with Hurricane/Superstorm Sandy, which brought record-low surface pressures and record-high surge across a large area despite winds of marginal hurricane force at best when Sandy made landfall.

Potential impact on the Lesser Antilles, Virgin Islands, and Puerto Rico

Irma will assume a more westerly and west-northwesterly track over the next day, bringing the core of Irma just north of the Lesser Antilles, Virgin Islands, and Puerto Rico on Tuesday and Wednesday. Irma is a medium-sized hurricane, with tropical storm-force winds that extend out 140 miles from the center, and hurricane-force winds that extend out 35 miles from the center. Most of the islands along Irma’s path will be on the weaker left side, where maximum wind speeds 10 – 20 mph less than the peak winds of the storm can be expected.

The 11 am EDT Monday Wind Probability Forecast from NHC highlighted a number of islands that might be at risk of tropical storm-force or hurricane-force winds on Tuesday and Wednesday. The highest odds were for Barbuda and Saint Maarten, with a 93% chance of tropical-storm force winds and a 52 -54% chance of hurricane-force winds. For the Virgin Islands and Puerto Rico, a 56 – 82% chance of tropical-storm force winds was given, and a 18 – 38% chance of hurricane-force winds.

The 6Z Monday run of the HWRF model predicted that northern portions of the Dominican Republic and Haiti, as well as eastern portions of Cuba, may receive rains of 8 – 16” from Irma. These rains will be capable of causing life-threatening flooding and mudslides. The model also predicted heavy rains of 8 – 16” in the Turks and Caicos Islands and the southeastern Bahamas.

Long-range outlook for Irma

Computer model guidance on Irma’s future track made an important westward shift on Sunday night. Virtually all models—including our most reliable ones for hurricane track forecasts, the GFS, European, and UKMET—took Irma further west than prior model runs before an expected sharp turn to the north. This shift increases the chance that Irma will directly affect Hispaniola and especially Cuba, as discussed above. The shift also raises the odds for a U.S. landfall considerably, because Irma’s expected right turn toward the north would probably occur too late for Irma to miss the U.S. East Coast entirely. A strong upper-level trough will be moving well offshore by early next week, reducing the odds that Irma would be hauled out to sea.

Figures 4, 5, and 6 show the dramatic shift southwestward and its implications for landfall in three different configurations of ensemble models (GFS, Euro, and Euro high-probability). The 00Z Monday UKMET model, not shown, moves Irma along or near the north coasts of Puerto Rico, Hispaniola, and Cuba.


Figure 4. 
The 20 track forecasts for Irma from the 0Z Monday, September 4, 2017 GFS model ensemble forecast. Image credit: CFAN.


Figure 5
. The 0Z September 4, 2017, track forecast by the operational European model for Irma (red line, adjusted by CFAN using a proprietary technique that accounts for storm movement since 0Z), along with the track of the average of the 50 members of the European model ensemble (heavy black line), and the 50 track forecasts from the 0Z Monday European model ensemble forecast (grey lines). Image
credit: CFAN.


Figure 6
.  The 0Z September 2, 2017, track forecast by the operational European model for Irma (red line, adjusted by CFAN using a proprietary technique that accounts for storm movement since 0Z), along with the track of the average of the 50 members of the European model ensemble (heavy black line), and the track forecasts from the “high probability cluster” (grey lines)—the four European model ensemble members that have performed best with Irma thus far. Image credit: CFAN.

It is unclear exactly why the modeled track shifted so dramatically on Sunday night, but the Monday morning (12Z) GFS run is very consistent with this shift, lending support to it. One piece of the puzzle is that the first Hurricane Hunter observations on Irma, gathered Sunday afternoon, were fed into the 00Z Monday runs. A raft of additional new data will be gathered on Monday and fed into upcoming model runs. This includes observations around Irma’s environment from the NOAA Gulfstream-IV, as well as extra radiosonde launches (weather balloons) that will sample the upper atmosphere at midday Monday (18Z) from 21 locations across the central U.S., where the upper-level trough expected to move offshore late this week will be taking shape. The model runs from 00Z Tuesday will incorporate the new data, so this will give us a much better sense of the steering currents guiding Irma and how those may evolve over the next week.

Irma is still four days from any potential direct U.S. impacts, so there is plenty of time for residents along the East Coast and eastern Gulf Coast to make any standard preparations for hurricane season that haven’t yet been squared away. The Sunday night model runs suggest that the entire Florida peninsula will need to pay very close attention to Irma, but it remains possible that Irma will move further north along the East Coast, or it could enter the eastern Gulf of Mexico. There is strong model support for a north-northwest track once Irma makes its major right turn late in the week. The crucial variables will be how long it takes that turn to occur, how sharp the turn is, and whether Irma’s strength has been dented by interactions with Hispaniola and/or Cuba, as noted above.

Bottom line:  It is becoming more likely that Irma will move close enough to the northern Leeward Islands, Puerto Rico, Hispaniola, and/or Cuba for significant impacts. There is an increasing chance that Irma will strike the U.S. late in the weekend or early next week, quite possibly as a major hurricane. It is still too soon to predict the location or timing of any U.S. landfall with confidence.

end

Tuesday morning/Irma/Category 5 Hurricane

hitting straight  for Miami

(courtesy/zerohedge)

Hurricane Irma Strenghthens To “Extremely Dangerous” Category 5, Eastern Caribbean On Lockdown

Irma has strengthened to an “extremely dangerous” Category 5 hurricane, the National Hurricane Center said in its advisory at 7:45am AST. According to the Hurricane center, NOAA and Air Force hurricane hunter aircraft data indicate Hurricane Irma has intensified into an “extremely dangerous” Category 5 hurricane on the Saffir-Simpson Hurricane Wind Scale with maximum winds of 175 mph (280 km/h) with higher gusts.

View image on TwitterView image on Twitter

Recon finds surface winds of 152 knots (175 mph) in ‘s right front quadrant. Holy crap.

As of this moment, the hurricane is located 270 miles east of Antigua, moving west at 14 mph. States of emergency were declared in Puerto Rico, the U.S. Virgin Islands and all of Florida while people on various Caribbean islands boarded up homes and rushed to find last-minute supplies, forming long lines outside supermarkets and gas stations. This morning the Dominican Republic has issued a Hurricane Watch from Cabo Engano to northern border with Haiti; Tropical Storm Watch from south of Cabo Engao to Isla Saona.

BREAKING: Hurricane  is the first Category 5 storm of the 2017 Atlantic season. Winds are at 175 mph. This is a very dangerous storm!

According to meteorologists, Irma is the 17th hurricane in the Atlantic on record to have max winds >= 175 mph. Atlantic max wind record is Allen (1980) at 190 mph.

 is the 17th hurricane in the Atlantic on record to have max winds >= 175 mph. Atlantic max wind record is Allen (1980) at 190 mph.

Ultimately, the question is how strong Irma will be when it inevitably makes landfall on the Eastern Seaboard, somewhere in the vicinity of Miami.

Meanwhile, officials across the northeastern Caribbean canceled airline flights, shuttered schools and urged people to hunker down indoors as Hurricane Irma barreled toward the region, now as an “extremely powerful” Category 5 storm. Irma’s maximum sustained winds increased to near 175 mph early Tuesday.

According to AP, emergency officials warned that the storm could dump up to 10 inches (25 centimeters) of rain, unleash landslides and dangerous flash floods and generate waves of up to 23 feet (7 meters) as the storm drew closer.

“We’re looking at Irma as a very significant event,” Ronald Jackson, executive director of the Caribbean Disaster Emergency Management Agency, said by phone. “I can’t recall a tropical cone developing that rapidly into a major hurricane prior to arriving in the central Caribbean.”

U.S. residents were urged to monitor the storm’s progress in case it should turn northward toward Florida, Georgia or the Carolinas. “This hurricane has the potential to be a major event for the East Coast. It also has the potential to significantly strain FEMA and other governmental resources occurring so quickly on the heels of (Hurricane) Harvey,” Evan Myers, chief operating officer of AccuWeather, said in a statement.

In the Caribbean, the director of Puerto Rico’s power company predicted that storm damage could leave some areas of the U.S. territory without electricity for four to six months. But “some areas will have power (back) in less than a week,” Ricardo Ramos told radio station Notiuno 630 AM.

The power company’s system has deteriorated greatly amid Puerto Rico’s decade-long recession, and the territory experienced an islandwide outage last year. Meanwhile, the governor of the British Virgin Islands urged people on Anegada island to leave if they could, noting that Irma’s eye was expected to pass 35 miles (56 kilometers) from the capital of Road Town.

“This is not an opportunity to go outside and try to have fun with a hurricane,” U.S. Virgin Islands Gov. Kenneth Mapp warned. “It’s not time to get on a surfboard.”

Antigua and Anguilla shuttered schools Monday, and government office closures were expected to follow. On the tiny island of Barbuda, hotel manager Andrea Christian closed the Palm Tree Guest House. She said she was not afraid even though it would be her first time facing a storm of that magnitude.

“We can’t do anything about it,” Christian said by phone, adding that she had stocked up on food and water. “We just have to wait it out.”

Both Puerto Rico and the U.S. Virgin Islands expected 4 inches to 8 inches (10-20 centimeters) of rain and winds of 40-50 mph with gusts of up to 60 mph. Puerto Rico Gov. Ricardo Rossello activated the National Guard, canceled classes for Tuesday and declared a half-day of work. He also warned of flooding and power outages. “It’s no secret that the infrastructure of the Puerto Rico Power Authority is deteriorated,” Rossello said.

Meteorologist Roberto Garcia warned that Puerto Rico could experience hurricane-like conditions in the next 48 hours should the storm’s path shift. “Any deviation, which is still possible, could bring even more severe conditions to Puerto Rico and the U.S. Virgin Islands,” Garcia said. The U.S. Virgin Islands said the school year would open Friday instead of Tuesday.

Gov. Kenneth Mapp said most hotels in the U.S. territory were at capacity with some 5,000 tourists. He noted the storm was expected to pass 40 miles (64 kilometers) north of St. Thomas and warned that the island could experience sustained winds as high as 80 mph

“It’s not a lot of distance,” he said, adding: “It could affect us in a tremendous way. I’m not saying that to alarm anyone or scare anyone, but I want the Virgin Islands to be prepared.”

Residents on the U.S. East Coast were urged to monitor the storm’s progress due to the possibility it could turn northward toward Florida, Georgia or the Carolinas. “This hurricane has the potential to be a major event for the East Coast. It also has the potential to significantly strain FEMA and other governmental resources occurring so quickly on the heels of (Hurricane) Harvey,” Evan Myers, chief operating officer of AccuWeather, said in a statement.

Just spoke to @POTUS – he offered the full resources of the federal government as Floridians prepare for Hurricane Irma.

In Miami-Dade County, the early scramble was on to stock up on hurricane supplies, reports CBS Miami. People were shopping for gasoline, generators, food, batteries, and everything else they’d need get by were Irma to hit the region hard.

“We are not yet at the height of hurricane season and people have not taken steps to get prepared yet,” Miami-Dade County Emergency Management Director Curt Sommerhoff said Monday. “We are encouraging them to take those steps today.” Miami-Dade officials were to meet Tuesday to assess the danger.

end

This is going to get messy! Mueller finds his opening by teaming up with the IRS criminal division looking at Trump’s inner circle
(courtesy zerohedge)

“Trump Should Be Concerned”: Mueller Partners With “Elite” IRS Investigations Unit

Special Counsel Robert Mueller’s team of investigators are leaving no stone unturned in their crusade to find something they can use to try and turn a member of Trump’s inner circle, The Daily Beast is reporting, citing a source close to Mueller, that the special counsel’s office has teamed up with the IRS’s Criminal Investigations Unit. The “elite” IRS investigations squad will help ensure that investigators apply the maximum possible scrutiny to the finances of Trump’s inner circle in an investigation that’s nominally about election fraud.

Of course, the public has long been aware, thanks to Mueller’s collaborators in the media, that his team has no solid evidence to support a charge of election fraud against Trump or members of his circle. And while this latest “partnership” just confirms widely held suspicions that Mueller & Co. are grasping at straws, it could provide Mueller an opening to strike directly at the president, his family and closest advisers – or at least embarass Trump with a fresh batch of leaks.

First, as the Daily Beast points out, partnering with the IRS will allow Mueller’s team to access Trump’s tax returns, which we can only assume will promptly be leaked to one of the former FBI director’s favorite journalists at the Washington Post or New York Times.

“This unit—known as CI—is one of the federal government’s most tight-knit, specialized, and secretive investigative entities. Its 2,500 agents focus exclusively on financial crime, including tax evasion and money laundering. A former colleague of Mueller’s said he always liked working with IRS’ special agents, especially when he was a U.S. Attorney.

And it goes without saying that the IRS has access to Trump’s tax returns—documents that the president has long resisted releasing to the public.

Potential financial crimes are a central part of Mueller’s probe. One of his top deputies, Andy Weissmann, formerly helmed the Justice Department’s Enron probe and has extensive experience working with investigative agents from the IRS.”

Both Mueller and his deputy, Andy Weissmann, who formerly led the Justice Department’s Enron probe, have “extensive” experience working with IRS agents. So there’s little doubt they will play ball.

“’From the agents, I know everyone has the utmost respect for both Mueller and Weissmann,’ said Martin Sheil, a retired IRS Criminal Investigations agent.”

In its report, the Daily Beast shares some fresh insight into the prosecution’s case against Manafort. Naturally, we have a few questions: Can somebody explain what role Paul Manafort’s forgetting to check a box on his tax returned played in the grand conspiracy to rig the 2016 election?

“It’s been widely reported that the special counsel’s team is trying to “flip” Paul Manafort, the president’s former campaign CEO, in hopes he will provide evidence against his former colleagues. Former federal prosecutors tell The Daily Beast one of Manafort’s biggest legal liabilities could be to what’s called a “check the box” prosecution. Federal law requires that people who have money in foreign bank accounts check a box on their tax returns disclosing that. And there’s speculation that Manafort may have neglected to check that box, which would be a felony. This is exactly the kind of allegation the IRS would look into.”

Even if Mueller and his team can’t find anything to justify an indictment, at least they can still punish members of Trump’s inner circle for their association with the president. Call it a consolation prize for inconsolable liberals.

“These investigations, which are often extremely complex, can take a lot of time. That means the people involved sometimes have to spend significant amounts of money on legal fees. The Daily Beast previously reported that targets of Mueller’s probe—including Manafort—are facing financial strain because of the probe, and that Manafort recently parted ways with the law firm WilmerHale in part because of his financial troubles.”

In a shocking moment of candor, the Daily Beast hints at what looks to be an ulterior motive for Mueller’s partnership with the IRS. The Trump administration never appointed an AAG to supervise the DOJ’s tax division, which would have to sign off on any charges relating to their finances. Therefore, he has “no one to keep Mueller in check,” as one former prosecutor phrased it.  

“The fact that there is not a senate-confirmed Assistant Attorney General for the Tax Division, and that the Trump people have disregarded it despite warnings as far back as December that they needed to fill the AAG’s spot… shows what a self-created mess the Trump administration has found itself in,” said the former prosecutor, who requested anonymity to speak candidly. “They have no one to keep Mueller and his Brooklyn team honest. They should be concerned about that.”

To summarize, even if it has nothing to do with Donald Trump Jr.’s willingness to acquire “opposition research” on the Clinton’s, or Jared Kushner’s initial failure to disclosure meetings with certain foreign officials on his security clearance application – or any of the other leaks used to cast aspersions on Trump and his associates – Mueller may have found his opening. It may only be a matter of time before the other shoe drops.

end

Judicial watch now sues the Dept of Justice for records of political contributions make to FBI’s assistant director’s wife Jill McCabe

(courtesy zerohedge)

Retired FBI Agent Sues DOJ For Records On Contributions Made By A Clinton Ally To McCabe’s Wife

Over the weekend, Judicial Watch announced that it had filed a lawsuit against the DOJ on behalf of retired special agent Jeffrey Danik seeking records related to roughly $700,000 in political contributions made by groups tied to Virginia Governor Terry McAuliffe, a long-time Clinton confidant, to the wife of FBI Deputy Director Andrew McCabe…the same Andrew McCabe who was conveniently overseeing multiple Hillary Clinton investigations at the time and even oversaw components of her email investigation. Here’s more from Judicial Watch:

The suit was filed in the U.S. District Court in the District of Columbia in support of Danik’s October 25, 2016, and February 28, 2017, FOIA requests for records about McCabe’s “conflicts of interest” regarding his wife’s (Dr. Jill McCabe’s) political campaign, and McCabe’s reporting to the FBI of any job interviews or offers.  Specifically, the two FOIA requests seek:

Text messages and emails of McCabe containing “Dr. Jill McCabe,” “Jill,” “Common Good VA,” “Terry McAuliffe,” “Clinton,” “Virginia Democratic Party,” “Democrat,” “Conflict,” “Senate,” “Virginia Senate,” “Until I return,” “Paris,” “France,” “Campaign,” “Run,” “Political,” “Wife,” “Donation,” “OGC,” Email,” or “New York Times.”

In 2015, a political action committee run by McAuliffe, a close friend and political supporter of Bill and Hillary Clinton, donated nearly $500,000 to Jill McCabe, wife of McCabe, who was then running for the Virginia State Senate. Also, the Virginia Democratic Party, over which McAuliffe had significant influence, donated an additional $207,788 to the Jill McCabe campaign. In July 2015, Andrew McCabe was in charge of the FBI’s Washington, DC, field office, which provided personnel resources to the Clinton email probe.

mccabe

The Judicial Watch lawsuit comes after Danik’s two previous FOIA requests went unanswered.  Meanwhile, Danik says he’s pursuing records on McCabe’s conflicts because he knows he’s “not the only retired (or serving) FBI special agent who is concerned about Mr. McCabe’s conflicts of interest on the Clinton email matter.”

“I am saddened by how the FBI’s reputation has been tarnished by the poor judgement and ethics of its leadership,” stated Mr. Danik. “I know I’m not the only retired (or serving) FBI special agent who is concerned about Mr. McCabe’s conflicts of interest on the Clinton email matter.  The agency seems to be illegally hiding records about this scandal, which is why I’m heading to court with Judicial Watch.”

“We’re honored to help Mr. Danik hold accountable the FBI—the agency he served for decades,” said Judicial Watch President Tom Fitton. “We believe Mr. McCabe’s text messages and emails will be particularly enlightening to the public seeking answers about the Clinton email debacle.”

Of course, for those who haven’t followed Andrew McCabe so closely, this is the same former Acting FBI Director who is also being investigated for sexual harassment and violations of the Hatch Act (see:  “FBI Director McCabe Subject Of Three Separate Federal Inquiries Into Alleged Misconduct: Report“).

A couple of days ago we noted that, according to a report from Circa, Acting FBI Director Andrew McCabe may have made a serious error by refusing to recuse himself from the Michael Flynn investigation.  As it turns out, per court documents reviewed by Circa, McCabe may have harbored a personal vendetta against Flynn after he intervening on behalf of an FBI Special Agent, Robyn Gritz, who had accused McCabe and other top FBI officials of sexual discrimination.  Apparently the lack of inter-agency camaraderie didn’t sit well with McCabe as other FBI agents subsequently confirmed that his complete disdain for Fylnn was readily apparent.

But, according to the U.S. Office of Special Counsel (OSC), McCabe’s apparent conflict of interest in the Flynn investigation may not be his only issue these days as he’s also the subject of an ongoing investigation for an alleged violation of the Hatch Act for illegally campaigning in his wife’s Virginia Senate race.  Per Circa:

Gritz also filed a complaint against McCabe with the main federal whistleblower agency in April, alleging social media photos she found show he campaigned for his wife’s Virginia state senate race in violation of the Hatch Act.

FBI employees are held to a higher standard than other federal workers under the Hatch Act and may not “endorse or oppose a candidate for partisan political office or a candidate for political party office in a political advertisement, broadcast, campaign literature, or similar material if such endorsement or opposition is done in concert with a candidate, political party, or partisan political group.”

The OSC told Circa  that complaint is still being actively investigated.

For those who aren’t familiar, this is the same Senate race in which McCabe’s wife, Jill McCabe, took nearly $500,000 from Virginia Governor Terry McAuliffe to fund her campaign.  Of course, Terry McAuliffe is a long-time confidant of the Clinton family and was rumored as a potential running mate for Hillary.  All of which was apparently overlooked when former FBI Director James Comey allowed McCabe to participate in the investigation of Hillary’s email scandal.

And just when you thought McCabe’s issues couldn’t get much worse, Circa notes that the Justice Department Inspector General is also investigating allegations from Senate Judiciary Committee Chairman Charles Grassley that McCabe may not have properly disclosed campaign payments to his wife on his ethics report.

You may be good but you’re no Clinton, Mr. McCabe.

This should create a huge firestorm in the USA.  Trump has decided to end DACA which is a program that allows children of illegal immigrants to stay in the country.  Some of these children, already mature adults have served their country in the armed forces and now they will be sent back to their mother country.

(courtesy zerohedge)

Trump Has Decided To End DACA, “Igniting A Political Firestorm”

On Friday, the White House announced that Trump would make his decision whether to end the Obama-era Deferred Action for Childhood Arrivals (DACA), or “Dreamer, program on Tuesday. Well, we won’t have to wait to long, because according to Politico, Trump has made the decision to end the DAVA program with a six-month delay.

Trump, who has faced strong warnings from both Democrats and Republicans not to scrap the program and struggled with his own misgivings about targeting minors for deportation, is said to have made up his mind and according to Politico, “senior White House aides huddled Sunday afternoon to discuss the rollout of a decision likely to ignite a political firestorm — and fulfill one of the president’s core campaign promises.”

Trump will announce his decision on Tuesday, with Politico noting that the White House informed House Speaker Paul Ryan of the president’s decision on Sunday morning. Ryan had said during a radio interview on Friday that he didn’t think the president should terminate DACA, and that Congress should act on the issue. However, Trump’s conversations with Attorney General Jeff Sessions, who argued that Congress rather than the executive branch is responsible for writing immigration law, helped persuade the president to terminate the program, although Politico hedges that “the White House aides caution that — as with everything in the Trump White House — nothing is set in stone until an official announcement has been made.”

In what appears to be another victory for the recently exiled “nationalist” wing of the Trump inner circle, the president’s expected announcement is likely to shore up his base, which rallied behind his broader campaign message about the importance of enforcing the country’s immigration laws and securing the border. At the same time, the president’s decision is likely to be one of the most contentious of his early administration, opposed by leaders of both parties and by the political establishment more broadly. It also indicates that despite his departure, Steve Bannon still continues to have major influence on the Trump White House.

Still, in a nod to reservations held by many lawmakers, the White House plans to delay the enforcement of the president’s decision for six months, giving Congress a window to act, according to one White House official. But a senior White House aide said that chief of staff John Kelly, who has been running the West Wing policy process on the issue, “thinks Congress should’ve gotten its act together a lot longer ago.”

As a result, the vast majority of the nearly 800,000 people brought to the country illegally as children and who have benefited from the program, are expected to lose their legal basis for continued presence in the United States, promoting even greater animosity between the Trump administration and the immigrant community.

end

Well that did not take long:  Kevin McCarthy and the House has decided that it will not add “Harvey” funds to the Debt Ceiling bill

chaos followed..

(courtesy zero hedge)

McCarthy Defies Trump, Says House Won’t Add Harvey Funds To Debt-Ceiling Bill

Despite President Trump, Treasury Secretary Steven Mnuchin and OMB Director Mick Mulvaney’s urgings, it appears that Congress will not combine funding for the Hurricane Harvey cleanup effort with a measure to raise the debt ceiling, according to House Majority Leader Kevin McCarthy. Congress’s decision will create a major headache for the Trump administration in the coming weeks, as it tries to push through a government-funding bill and a measure to raise the debt ceiling over objections of conservatives who are calling for budget cuts and other concessions.

The House will bring a bill to approve the $8 billion in emergency funding requested by the White House early Wednesday, McCarthy said.

McCarthy, who appeared on Fox Business with Maria Bartiromo, tried his best to sound conciliatory, praising the president for meeting with lawmakers and other members of the “Big Six” group that’s supposedly handling tax reform, while adding that a spending bill and debt ceiling hike would inevitably be approved.

“Wednesday morning we’ll pass relief to make sure FEMA has enough money to get moving right now while the cities and counties get the estimates in so we can go farther in providing more assistance. But you’re going to hit that debt ceiling regardless. They’re afraid what Mnuchin is telling us, if you pass just the supplemental they may not be able to put that money forward without getting the debt ceiling raised. The thing I look for is this is an issue that we’re going to have regardless. This is not an issue you want to run away from, but congress has been successful in capping discretionary spending. Now we have.”

McCarthy said not combining the two measures wouldn’t create problems because they inevitably must be passed. Of course, the House is only in session for 12 days this month while the Senate is also in session, so the clock is ticking…

“We will deal with the debt ceiling regardless if Harvey even arrived in America and now we are asking for more money to provide for FEMA so FEMA does not run out of money,” McCarthy told Maria Bartiromo on Mornings with Maria.

“What Munchin is telling us, if you pass just the supplemental, they may not be able to put the money forward without having the debt ceiling raised.”

“What the Treasury secretary and it’s not just him saying it Mick Mulvaney the OMB director and the president are saying it, we have to deal with the debt ceiling regardless of whether Harvey arrived in America. And now we’re asking for more money to provide for FEMA so FEMA doesn’t run out of money. All they’re looking at are the numbers.”

He also stressed that the president is already making progress on tax reform by meeting with lawmakers, and that he expects a reform bill to reach the president’s desk by the end of the year, the administration’s official self-imposed deadline, which is becoming increasingly important to markets.

“Now we’ve got to move to tax to get the economy growing. We will deal with the wall a little later in the year. We have to finish off eight more appropriation bills. We have the budget to get this month. The budget is the beginning of tax reform. It allows us to go to reconciliation to tackle tax reform. All of that will get done this month.”

“This is a very good sign that they’re meeting with the president now. What we’re doing is learning the lessons from health care.Making sure the White House the House and the Senate are on the same page. That’s why I’m an even stronger believer that tax reform gets out of the house this year. We all know the way to make America stronger is economic growth.”

Voting for aid for Texans is an issue that should transcend political squabbling, McCarthy said.

“To those members who don’t want to tackle the tough issues, the sooner we get it done the sooner we can get to greater growth. Economically, Texas is hurting, think about what Texas’s economy contributes to the US.”

While the controversial border-adjusted tax is out, repatriation – another one of Trump’s top nationalist economic policy objectives – could make it into the final bill.

“Bring it back here and invest it in American or return it to shareholders as dividends.”

When pressed about the priorities for tax reform, McCarthy said it would be a package deal tackling both corporate and individual tax-rate reform.

He also couldn’t resist making a subtle dig at his colleagues in the Freedom Caucus, while urging lawmakers to come together to reach an agreement on Tax Reform.

If a member is out there worried about a tough vote, maybe this isn’t the right job for them.They’ve got to make decisions to move this country forward and that’s what we’re doing. The meeting at the White House is the right thing to do, and a good indication that tax reform is happening. Especially coming off of Harvey.”

McCarthy added that he would be in favor of lower the number of individual tax brackets.

“Why are there seven individual tax rates. Let’s make it three.”

To be sure, we await for a response from the president which, thanks to the influence of Chief of Staff John Kelly, might come in the form of an official statement instead of a tweet. As far as the budget is concerned, Trump still needs a plan for neutralizing intransigent Republicans, because he’s not likely to get any support from Democrats.

end

The underfunding of public pensions is highlighted in Minnesota where the liabilities tripled when the reduced the assumed rate of return from 8% down to 4.7%

(courtesy zerohedge)

Pension Ponzi Exposed: Minnesota Underfunding Triples After Tweaking This One Small Assumption…

Defined Benefit Pension Plans are, in many cases, a ponzi scheme.  Current assets are used to pay current claims in full despite insufficient funding to pay future liabilities… classic Ponzi.  But unlike wall street and corporate ponzi schemes no one goes to jail here because the establishment is complicit.  Everyone from government officials to union bosses are incentivized to maintain the status quo…public employees get to sleep better at night thinking they have a “retirement plan,” public legislators get to be re-elected by union membership while pretending their states are solvent and union bosses get to keep their jobs while hiding the truth from employees.

So what allows this ponzi to persist?  It all comes down to one simple assumption: Discount Rates.  You see, if you simply discount future liabilities at a high enough discount rate then you can make any massively underfunded pension ponzi look like a stable, healthy retirement gold mine. 

In fact, just over a year ago we took a look at what would happen if we calculated the true underfunded level of America’s public pensions at more reasonable discount rates.  The result showed that the media’s highly referenced underfunding of $2 trillion soared to something closer to $5-$8 trillion when more reasonable discount rates were employed.

We decided to take a look at what would happen if all federal, state and local pension plans decided to heed the advice of Mr. Gross. As one might suspect, the results are not pleasant.  We conservatively assume that public pensions are currently $2.0 trillion underfunded ($4.5 trillion of assets for $6.5 trillion of liabilities) even though we’ve seen estimates that suggest $3.5 trillion or more might be more appropriate.  We then adjusted the return on asset assumption down from the 7.5% used by most pensions to the 4.0% suggested by Mr. Gross and found that true public pension underfunding could be closer to $5.5 trillion, or over 2.5x more than current estimates.  Others have suggested that returns should be closer to risk-free rates which would imply an even more draconian $8.4 trillion underfunding.  

 

Pension Underfudning

Now, the state of Minnesota has gracefully stepped forward to beautifully illustrate our point.  Upon making a few minor “tweaks” to their various funds’ discount rates, the state found that their aggregate pension underfunding more than tripled from roughly $16 billion to over $50 billion.  Here’s more from Bloomberg:

Minnesota’s debt to its workers’ retirement system has soared by $33.4 billion, or $6,000 for every resident, courtesy of accounting rules.

The jump caused the finances of Minnesota’s pensions to erode more than any other state’s last year as accounting standards seek to prevent governments from using overly optimistic assumptions to minimize what they owe public employees decades from now. Because of changes in actuarial math, Minnesota in 2016 reported having just 53 percent of what it needed to cover promised benefits, down from 80 percent a year earlier, transforming it from one of the best funded state systems to the seventh worst, according to data compiled by Bloomberg.

The Minnesota’s teachers’ pension fund, which had $19.4 billion in assets as of June 30, 2016, is expected to go broke in 2052. As a result of the latest rules the pension has started using a rate of 4.7 percent to discount its liabilities, down from the 8 percent used previously. As a result, its liabilities increased by $16.7 billion.

But other factors also helped boost Minnesota’s liabilities: Eight of Minnesota’s nine pensions reduced their assumed rate of return on their investments to 7.5 percent from 7.9 percent, while three began factoring in longer life expectancy.

All of which resulted in this:

Minnesota

Of course, Minnesota’s underfunding didn’t just magically “soar by $33.4 billion” as Bloomberg puts it…in reality, the state’s pensions were always underfunded by ~$50 billion…the only difference is that that some pension administrators finally decided to stop lying to their retirees and report reality.

All of which rendered this Bloomberg map from just two months ago showing an 80% funding ratio for Minnesota completely obsolete…

…Sorry, Minnesota teachers but you’re almost as screwed as your counterparts in Illinois…you just didn’t know it until your bosses finally decided to stop lying to you.

Pension map

end

Now we will witness grocery store chains joining the retail bankruptcy chaos

(courtesy zerohedge)

Are Grocery Chains About To Join The Retail-Bankruptcy Bloodbath?

Amazon officially assumed control of Whole Foods Market on Monday and by noon, channel checks at WFM stores revealed that its new tech overlords had already slashed prices by nearly 50%, sending bonds of its grocery-chain rivals reeling as grocers confronted a new dilemma: either slash prices to the point of unprofitability, or hold the line and risk seeing sales evaporate.

And as bonds of even highly rated grocery chains have underperformed this week, Bloomberg is questioning whether the WFM acquisition has fundamentally changed market dynamics in what was previously an island of stability in a retail sector beset by bankruptcies.

Even before the WFM acquisition, the industry experienced the first signs of strain as Amazon launched its Amazon Fresh grocery service and Wal-Mart started stocking up on reasonably priced organics – factors that contributed to the massive drop in WFM’s market cap, allowing Amazon to scoop it up for less than $14 billion.

Prior to this, the conventional wisdom dictated that grocers were impervious to the onslaught of e-commerce that was decimating industries such as clothing and electronics. Investors reasoned that consumers would probably balk at buying perishable goods like food online.

But Amazon, with its seemingly infinite capacity to slash prices and brook losses, has created new risks for Whole Foods’ rivals.

Apollo Global thought buying North Carolina-based Fresh Market for the “every day low price” of $1.4 billion would be a turnaround slam dunk after its success with Sprouts Farmers Markets. One year later, the future profitability of that deal is in doubt, and that uncertainty is being reflected in the price.

“The bonds that financed Apollo Global Management’s purchase last year of upscale grocer Fresh Market plunged to new lows this week. The cost of buying contracts to protect against a default in Albertsons Cos.’s debt has jumped. Bonds of Bi-Lo Holdings have lost almost half their value this year.”

When Apollo Global bought Greensboro, North Carolina-based Fresh Market for $1.4 billion last year, the grocery world seemed quite different. The chain, known for its fresh produce, had seen sales slow. To lure customers back to Fresh Market’s roughly 170 stores, the private-equity titan was betting it could rely on its experience with previous – and profitable – investments in companies such as organic grocer Sprouts Farmers Markets.

But Fresh Market is struggling for some of the same reasons that sent Whole Foods into the arms of Amazon. Mainstream competitors including Kroger Co. and Wal-Mart Stores Inc. have pushed deeper into sales of fresh produce and organic products. Supermarkets have opened so many stores that many analysts expect a shakeout. Before the Amazon deal, Fresh Market bonds traded as high as 91 cents on the dollar. Now they fetch less than 76 cents.”

The reason is simple: Amazon, which is insulated not only by its e-commerce hegemony but also by investors who don’t expect the company to turn a profit. One analyst aptly referred to this as the Amazon-Whole Foods “fear factor.”

“It’s the fear factor of Amazon,” said Mickey Chadha, an analyst at Moody’s Investors Service. “No retailer can under-price as long as Amazon can, make no money and get away with it. That’s why people are scared.”

* * *

News of the Amazon deal obliterated billions of dollars of grocers’ valuations, slicing $2 billion off Kroger’s market cap in one day. The grocer’s stock is down 35% this year. Yet its bonds have held steady.

Meanwhile, nearly $3 billion in Albertsons bonds due in 2021 have tumbled..

“Kroger’s bonds, which are investment grade, haven’t been hit. But about $3 billion of Albertsons debt coming due in 2021 has felt a chill. The loans have been trading at 97.6 cents on the dollar. Large, liquid, secured loans of that size typically command par, or 100 cents. A public stock offering for the Cerberus Capital Management-backed grocer was again put on hold after Amazon announced its purchase of Whole Foods.”

…causing the cost of insuring them to skyrocket.

As one might expect, analysts now believe that large chains with relatively low debt burdens will somehow manage to survive.

But smaller chains like Bi-Lo Holdings may soon find that their debt burdens are untenable:

“For example, Bi-Lo Holdings has borrowed hundreds of millions to make cash payouts to private-equity owner Lone Star Global Acquisitions. One of the bonds the company sold to pay the dividends now trades at levels indicating investors expect to recoup only a third of what they loaned the company.”

Tops Friendly Markets, another troubled grocer, is being choked by its $720 million debt pile.

“Tops Friendly Markets, which is reporting millions in losses, is straining under $720 million in debt. Using a maneuver typical of distressed companies, it put off repayments due in 2018 while it grapples with price deflation and traditional rivals in its western New York home turf. If earnings and the balance sheet don’t improve, investors holding the rest of Tops’ bonds could find they’re stuck with spoiled goods.”

However, there’s at least one factor that may insulate the market’s weaker hands, at least for a little while. There are 40,000 grocery stores in the US, only 400 of which are WFMs…

So, should investors be bracing for a wave of grocery bankruptcies resembling this year’s record run of failures among department stores, apparel sellers and electronics retailers? Maybe not right away. But once Amazon’s had a few years to expand its footprint, a massive shakeout seems inevitable. 

end

this sent the dollar lower:  Lael Brainard who has the ear of Fed Governor Yellen in a speech today, stated that inflation must rise before any additional rate hikes are done  Gold rose on that.

(courtesy CNBC)

A key Fed official just admitted the central bank got inflation wrong and so it may delay a hike

  • Fed Governor Lael Brainard acknowledges that it could be a while before the central bank hits its inflation target.
  • She argues against the notion that inflation was staying low due to transitory factors, which has been a linchpin of Fed philosophy since the financial crisis.
  • Brainard now believes the Fed should move slower on rate hikes and even allow inflation to run above the 2 percent target for a while.
  • She is considered a close ideological ally of Fed Chair Janet Yellen.

Published 5 Hours Ago  | Updated 1 Hour Ago

Fed unlikely to hike rates this year: Clearnomic's James Liu

Fed unlikely to hike rates this year: Clearnomics’ James Liu  9:11 AM ET Fri, 1 Sept 2017 | 01:32

The Federal Reserve appears ready to accept that its inflation assessments have been wrong, indicating an important shift in how it will approach rate hikes ahead.

In a speech Tuesday, Fed Governor Lael Brainard said the long-standing assessment at the central bank that persistently low inflation is the result of transitory factors that eventually will pass does not add up considering current circumstances.

As a result, she said, policymakers should reconsider the current path they expect for future rate hikes.

“I am concerned that the recent low readings for inflation may be driven by depressed underlying inflation, which would imply a more persistent shortfall in inflation from our objective,” Brainard told the Economic Club in New York. “In that case, it would be prudent to raise the federal funds rate more gradually.”

Brainard’s comments are important because she is considered a close ideological ally of Fed Chair Janet Yellen. While Yellen herself has indicated that the end of the rate-hiking cycle could be near, she and her fellow Federal Open Market Committee members have stood by the belief that inflation ultimately will gravitate toward their 2 percent target.

Tuesday’s speech challenges that notion.

Specifically, Brainard pointed to the current low unemployment rate — 4.4 percent — and compared it to the last time the economy was around “full employment” from 2004 to 2007. During that run, inflation averaged about 2.2 percent. Currently, the three-year average is 1.5 percent.

Brainard acknowledged that certain factors driving down inflation, such as a drop in cellphone rates, are transitory. But she said there also are temporary factors pushing up inflation, such as a rise in prescription drug prices.

Lael Brainard, governor of the U.S. Federal Reserve, listens during an event sponsored by the Economic Club of New York in New York, U.S., on Tuesday, Sept. 5, 2017.

Mark Kauzlarich | Bloomberg | Getty Images
Lael Brainard, governor of the U.S. Federal Reserve, listens during an event sponsored by the Economic Club of New York in New York, U.S., on Tuesday, Sept. 5, 2017.

“What is troubling is five straight years in which inflation fell short of our target despite a sharp improvement in resource utilization,” she said.

At the core could be a general drop in “underlying” or long-term trend inflation that is feeding on itself and keeping the rate low, simply because that is what consumers have come to expect. Economists have long accepted the notion that inflation can stay high or low simply because of public perceptions.

“Households and firms have experienced a prolonged period of inflation below our objective, and that may be affecting their perception of underlying inflation,” Brainard said. “In short, frequent or extended periods of low inflation run the risk of pulling down private-sector inflation expectations.”

The Fed has hiked its benchmark rate four times since December 2015 and was on target for one more before year’s end. Traders in the fed funds futures market, though, have shifted expectations and now don’t expect the next rate hike until at least June.

Brainard said the Fed should follow through on its intentions to begin reducing its $4.5 trillion balance sheet of bonds that it acquired mostly during stimulus efforts that started during the financial crisis.

But she believes it should tread carefully when it comes to future rate hikes.

If her sentiments reflect the majority of FOMC members, the shift could pull the Fed away from the majority’s preference for slow but steady rate hikes and more toward the sentiment expressed by Minneapolis Fed President Neel Kashkari and some economists who believe rate hikes should wait until inflation becomes more pronounced.

In fact, Brainard said the Fed should consider letting inflation run “modestly above” the 2 percent goal before hiking again.

“I will be looking closely at the evolution of inflation before making a determination about further adjustments to the federal funds rate,” she said. “We have been falling short of our inflation objective not just in the past year, but over a longer period as well. My own view is that we should be cautious about tightening policy further until we are confident inflation is on track to achieve our target.”

end

The house is set to vote on the Harvey aid bill tomorrow but will not combine it with the debt ceiling:  the Senate will combine the two or basically kicking the can down another few months.

should be interesting few days.

(courtesy zerohedge)

House To Vote On Harvey Aid Bill Wednesday, Senate To Combine With Debt Limit Extension

Tyler Durden's picture

Appending to an earlier announcement by House Majority Leader Kevin McCarthy, according to whom the House would not add Harvey disaster funds to any debt ceiling bill, Dow Jones reports that Republican lawmakers are set to vote on the Harvey aid bill on Wednesday, and instead of raising the debt ceiling, they – or rather the Senate – will suspend it, likely kicking the can until some time in December when the whole farce would repeat itself again, although the exact length of the extension remains under discussion.

According to Bloomberg, the House still plans to pass a Harvey aid bill without debt language, leaving Senate to add it in. Keeping the House’s hands clean, Senate Majority Whip (R. Tex) John Cornyn told reporters that debt limit raise, or rather extension, will likely to be tied to Harvey aid and approved by the Senate.

“It’s imperative that we get that supplemental passed. And the leader has made the decision to attach the debt limit to that, and I support that,” Cornyn, whose state was hit hard by the hurricane, told reporters.

The reason to simply extend, instead of raise the debt limit, is because the former is considered a politically less difficult vote than raising it by a specific dollar figure, which would likely be well over $1 trillion; Such a move would also provide more predictability on the timing of next action and would come as House conservatives have warned against attaching the two issues.

To be sure, with the Treasury rapidly running out of cash, and down to just $32 billion as of today’s close, some sort of Federal debt extension would need to be taken to unlock the funding needed for the Texas recovery efforts.

Earlier, the White House suggested that lawmakers attach a debt ceiling measure to the Harvey bill, but the request stopped short of explicitly asking for that, due to opposition from House conservatives. Instead, White House budget director Mick Mulvaney suggested that relief operations could be disrupted if the debt limit isn’t addressed quickly.

“If the debt ceiling is not raised, it may not be possible to outlay the requested supplemental appropriations or funds for other critical government operations,” Mulvaney wrote Friday night in a letter to Ryan.

It’s unclear whether Republican lawmakers will go along with the idea of pairing the two measures. The Senate could add a debt ceiling provision to the Harvey bill after the House passes it, but House conservatives have demanded spending cuts or other cost-cutting changes in return for raising or suspending the debt limit. Representative Mark Walker of North Carolina, who heads the conservative Republican Study Committee, on Monday said his stance hasn’t changed.

Potentially complicating matters, Cornyn, the No. 2 Senate Republican, added it was his “understanding” that the increase in the debt ceiling would be “clean”,  or that it won’t be tied to spending cuts, a move that could antagonize conservatives according to the Hill. Cornyn also downplayed any conservative backlash over the move, while noting that “none of this is easy.”

Senate Majority Leader Mitch McConnell (R-Ky.) listed passing money for Hurricane Harvey recovery, raising the debt ceiling and funding the government as the three biggest priorities as Congress returns from its August recess. Republicans will need at least eight Democratic votes in the Senate to clear any of the proposals.

But McConnell didn’t signal if the debt ceiling vote and Harvey aid would be linked. Asked about Cornyn’s comments, a spokesman for McConnell noted they “have not made any announcements on procedure.”

Finally, if a debt limit provision isn’t added to the Harvey bill, GOP leader could still add it to the stopgap spending bill, which is also likely to contain necessary extensions for other expiring programs like federal flood insurance and the Federal Aviation Administration, and whose passage could be just as problematic.

Meanwhile, sensing the a near-term resolution is at hand, the Bil “fear premium” for October Bill posted its first notable drop today as the market appears to have breathed a sigh of relief that a technical default has been if not avoided, then delayed for at least a few months.

David Stockman analyzes the latest Trump tax plan and he outlines how that will have no effect whatsoever in helping the taxpayer or create more revenue for government. Stockman’s  plan is essentially to remove the costly payroll taxes and replace them with a larger VAT or consumption tax.  In this way the taxpayer and the small businessmen are not saddled with high payroll taxes.

these high payroll taxes:

 “cost precisely where the China Price (imported goods), the India Price (off-shored services) and the Robot Price (capital substitution) put immense competitive pressure on domestic, lower-wage jobs”

(courtesy David Stockman/Daily Reckoning)

Stockman On The Donald’s ‘Seinfeld’ Tax Plan: “It’s A Big Show About Nothing”

Authored by David Stockman via Daily Reckoning blog,

Someone should remind the Donald that he actually is President and that it’s high time he accomplished something. Anything.

Back on April 21st, for example, he promised that a core feature of his platform — a sweeping, pro-jobs tax reduction — would be soon unveiled.

Trump said the tax reform package will be introduced on “Wednesday or shortly thereafter,” just before his 100th day in office. While the president would not reveal details about the tax plan, he did say that the cuts will be “bigger I believe than any tax cut ever.”

Well, we’ve passed the eighteenth Wednesday since that promise. What was actually delivered back then, of course, was a one-page statement of vague principles, fond aspirations and apple pie.

So in Springfield, Missouri this week, the Donald is launched tax reform efforts again. And yet again the White House spin brigade has already made clear that it’s all about tone, not substance.

That is, he will orate about tax fairness and closing loopholes, but not name any. He will promise big rate reductions but not say how big and for whom. He will promise to liberate jobs by slashing the corporate tax rate without explaining exactly why that will result in more jobs rather than more stock buybacks. And there were no numbers about how the implied trillions of revenue lost over the next decade will be paid for.

Instead, Donald puckered himself up into a meld of Huey Long and Jack Kemp while preaching up a storm in favor of the “little guy”. A reference to the average worker who purportedly is being crushed by the Federal income tax and who gets tangled in the complexity of the IRS code without a high-priced tax lawyer alongside loophole-savvy financial advisors.

Accordingly, the Donald is going to “unrig” the tax code for these little guys, thereby keeping faith with the millions of dispossessed citizens of Flyover America who voted for him last November.

Except that narrative is essentially nonsense. This isn’t 1981. There is no raging inflation and bracket creep propelling the middle class into tax tyranny. In fact, owing to indexing and large increases in the standard deduction and personal exemption over the last 35 years, the income tax has essentially morphed into a Rich Man’s Levy.

The Donald’s song and dance about tax simplification and reduction comes right out of the well-thumbed GOP hymnal. It speaks little to the blue collar folks — in places like the western Pennsylvania steel country, industrial Ohio, the Michigan auto belt and the manufacturing towns of Wisconsin and Iowa — who on the margin accounted for his electoral college victory.

The Donald, Tax Plan Rhetoric and the Gong Show

Trump’s tax reform airball will promise to make filing with the IRS more palatable to tens of millions of citizens who, apparently, find it inconvenient to shell out $25 to file their Federal income tax return with TurboTax.

Among the 148 million income tax filers, the bottom 53 million owed zero taxes in the most recent year (2014), and the bottom half (74 million) paid an aggregate total of just $45 billion. That amounted to just $8 per week per filer.

If you take all filers with AGI (adjusted gross income) under $100,000 per year, you end up with 122 million taxpayers or 83% of the total. Upwards of 85% of this group uses the standard deduction. So they are not caught up at all in the puzzle palace of IRS code that the Donald denounces.

The 122 million taxpayers — who make ends meet on less than $100,000 of income — paid a total of just $278 billion in income taxes during 2014. That was just 6.5% of their $4.3 trillion of AGI.

To be very clear, there was still $4 trillion left in the collective pockets of these 122 million taxpayers — even after the IRS had its way with them!

Even if a Keynesian demand side tax cut was a good idea, which it isn’t, the fact is there is not much more that could be put “back in their pockets” by income tax cuts.

The truth is that the Laffer Curve has gone missing. At average tax rates of under 7%, the bulk of US wage and salary workers (83%) are not facing prohibitive disincentives to work or production.

By contrast, the top 4% or 6.2 million filers paid $802 billion in Federal income taxes. That amounted to nearly 58% of total Federal income tax payments, and resulted in an average tax rate of 24% on the group’s $3.3 trillion of AGI.

That’s not to object to putting some of that $802 billion back into the pockets of the top 4%. Many of them are small businessmen and the proverbial” job-creators” who make the economy grow, and who also file sub-chapter S business taxes. But incentivizing the job creators in this manner should not be financed on the backs of future taxpayers via borrowing. It must be paid for with spending cuts as a first resort, and less onerous taxes — such as consumption taxes or VAT (if necessary).

The Fed vs Trump’s Tax Plan

The Fed has generated such gigantic financial bubbles and caused all financial assets to become so massively overvalued that incentives for the rich are not really in short supply.

Federal Reserve Chair, Janet Yellen and the other Keynesian economists on the Fed have generated more “trickle-down” wealth and rewards than the Gipper could ever have imagined back in 1981. The $45 trillion in household wealth gains since the 2009 bottom vastly overshadows any possible benefits from lower tax rates, even at the top of the income ladder.

Even Trump’s Goldman duo of Gary Cohn and Steven Mnuchin are saying that there will be no “net cut” for the top tier of households.

If the bottom 83% don’t pay much tax in the first place, and if the top 4% who pay most of the taxes are not to be indulged for social policy/equity purposes, what’s the point of the whole income tax cut charade?

The Goldman geniuses are chasing themselves in a circle trying to cut the rates and broaden the base. But what it actually amounts to is amateurish stumbling around the K-Street corridor where every single “loophole” they propose to close is shot down.

The truth is, there are no politically viable loopholes that can be closed which will generate a dimes worth of “payfors.” There is no tax rate cut for mainly the rich that can pass the Congress if it is not to be financed by adding trillions more to a soon be $30 trillion national debt.

This tax cut charade is getting ludicrous. It’s turning into Seinfeld on the Potomac — a big, noisy show about nothing.

(Chart data is slightly different because it’s for 2013, while the above data is more current for 2014. But the extreme skew to the top is still the same).

Why Laffer Curve is Missing

Why the Laffer Curve Has Gone Missing

The chart below is the key to the real tax problem in America and explains why the Donald is missing his policy and political targets by a mile.

What is killing jobs and shrinking paychecks in Flyover America is the $1.2 trillion Federal payroll tax. It amounts to 15.3% of every payroll dollar up to $127,000 a year, paid 50/50 by employer and employee; and constitutes a destructive wedge on the middle and lower levels of the jobs ladder.

It raises the employers’ fully-loaded payroll cost precisely where the China Price (imported goods), the India Price (off-shored services) and the Robot Price (capital substitution) put immense competitive pressure on domestic, lower-wage jobs. As shown in the graph below, nearly 80% of all US jobs (121.0 million), which were subject to payroll tax withholding in 2014, generated pay of less than $57,000 per year, and nearly 60% (91.2 million) paid less than $35,000 per year.

Yet the payroll tax extracted $410 billion from these jobs on a combined employer/employee basis. In the case of the average $14,500 wage in the bottom quintile of earnings, for example, the employee had $1,100 extracted from his/her paycheck, while a like amount was added to the employers cost of production. At the $35,000 level at the top of the lowest quintile, the extraction was nearly $2,700 each. And for the $45,100 average wage in the second quintile, the extraction would have been $3,459 each.

Laying on thousands of dollars of payroll tax costs on already noncompetitive wage rates is an invitation for employers to go off-shore or to automate.

By driving interest rates to rock bottom, they have drastically lowered capital costs way below market clearing levels, sharply improving the “payback” economics of automation and robots. At the same time, they never cease to drive nominal wages and domestic living costs ever higher in pursuit of their destructive 2.00% inflation target.

An across the board income tax cut from the GOP faithful can’t hold a candle to the economics and politics of slashing the payroll tax, and financing the revenue loss with spending cuts and/or a tax on consumption.

For example, a four-person family earning the $35,000 level at the top of the first quintile would face a $5,355 combined payroll tax extraction, but would pay only $600 in income tax under current law. That’s because the first $29,000 of its income would not be taxable owing to the standard deduction ($12,600) and personal exemptions worth $16,000 ($4,050 each).

Cutting the income tax paid at the bottom of the job ladder can’t hold a candle to alleviating the crushing burden of payroll taxes.

Likewise, even a taxpayer at the top of the second percentile earning $57,000 (and thereby encompassing 121 million wage earners) would pay only $3,300 in income tax compared to an extraction of nearly $8,720 for payroll taxes.

Indeed, even at the $100,000 AGI level, the payroll tax extraction of $15,300 would still vastly exceed income tax liability of $9,700 for a family of four taking the standard deduction and personal exemptions.

Wage Distribution of US Workers

As we said, the Donald is barking up the wrong tree on taxes. The real story is not that US taxes are way too high in the aggregate. Even if you do believe, as we do, that shrinking both the size of government and the tax burden is always he right thing to do, the fact remains that relative to the rest of the OECD (developed world) the US tax burden from all levels of government relative to GDP is quite low.

In fact, at 26% of GDP the total US tax burden is well below the 34% OECD average and far below the 40-50% levels which pertain in the socialist utopias of Europe. The real problem is that we are taxing the wrong thing. Consumption taxes account for 33% of the revenue take on average in the OECD compared to just 17% in the US.

If the Donald really wanted to address the economic pain in Flyover America he would slash or eliminate the payroll tax and replace it with a VAT.

Even the mild semblance of a VAT represented by the BAT (border adjustment tax) has already been killed by the K-Street lobbies and the GOP Senate. Making it logical to believe there is no obvious way forward for rational tax reform, either.

The entire corporate income tax is a stupid, essentially uncollectible relic of a bygone age when industrial America was riding high. In the context of the current Bubble Finance regime at the Fed and other central banks, it would result in more stock buybacks and other distributions to Wall Street. And that’s not what the Donald got elected on, either.

When it comes to the tax cuts and tax reform, we are talking pure Seinfeld: A long-running show about exactly nothing that matters.

end

I will see you WEDNESDAY  night

Harvey.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: