Governments Desperately Trying To Keep The Illusion Going As Crashing Stock & Bond Markets Set To Shock The World!

Today the man who has become legendary for his predictions on QE, historic moves in currencies, and major global events warned King World News that governments are now desperately trying to keep the illusion going as crashing stock & bond markets are set to shock the world!

Egon von Greyerz:  “Eric, I don’t think the general public has any understanding of what is happening in the world today and the incredible risks we are seeing.  Since 2008, world debt is up over 40 percent and so now the world has unsustainable debt levels of over $200 trillion….

Governments have tried to keep the illusion going by moving rates to zero or even negative in many countries.  But even with all the money printing and stimulus, the world economy has still not reacted to it and has stopped growing.  In fact, economies are actually starting to contract in many countries.

China contributed 85 percent of global growth in 2012.  But China is beginning to struggle and their contribution to global growth this year is only expected to be 24 percent.  Of course that will have major repercussions for the entire world because China has been a huge buyer of both commodities and machinery.  That buying spree is now declining dramatically.

The only thing left in the various governments' tool kits is fiscal stimulus.  But with countries mismanaging their economies and running major deficits, it will be impossible to increase the deficits because it will cause the debt to skyrocket.  Who will repay the additional printed money and debt?

Demographics is also a major problem for industrialized nations.  Take Germany, where 20 percent of the population is already over 65 years old.  That figure will grow to 30 percent by the year 2040.  In Japan, today 25 percent of the population is over 65 but that figure will grow to a staggering 40 percent by the year 2060.

Japanese Economy Won't Survive 400 Percent Debt/GDP Ratio

So there won’t be enough young people working in Japan to keep the economy going in order to pay the pensions for the elderly, much less to pay off the massive debts of Japan.  Look at Japan:  They have 250 percent Debt/GDP ratio today.  By 2035 they will have a Debt/GDP ratio of 400 percent.  Obviously that is totally unsustainable.  This is why the Japanese economy will not survive.

And at the same time that world economic problems are becoming insurmountable, geopolitical risk is increasing dramatically.  ISIS is likely to take all of Iraq in the next few months and then they will threaten Saudi Arabia.  Saudi Arabia is also likely to be attacked from Yemen.  If ISIS foments a civil war in Saudi Arabia, both the United States and Israel will get involved.

The other danger zone, besides Ukraine, is the South China Sea.  China is expanding their territory and they consider that it belongs to them.  But of course the Pentagon has said that they consider China to be a major threat to peace because of this expansion.  China has responded to that by saying that war is inevitable if the U.S. does not stop asking Beijing to halt construction of artificial islands.

So, Eric, the risks are increasing everywhere and the situation could become uncontrollable at any time, both economically and geopolitically.  Problems could erupt at any moment that would shock an unprepared world that would lead to stock and bond markets crashing together along with the dollar.  This will mean skyrocketing gold prices.  In that environment people may see gold soar a few hundred dollars in just a single day.

Exchange Controls To Trap Citizens And Their Money

At the same time governments are doing more and more to control people.  Cash withdrawals are being reduced and more draconian banking measures are being put in place.  This trend will only accelerate with governments seeking even more control over their people.

I could also see exchange controls being introduced in the not-too-distant future.  That will make it impossible to take any money out of the country.  That’s why it is so important to keep physical gold outside of the banking system and preferably outside of your country of residence as insurance against the unprecedented risks that the world is now facing.  

Unfortunately, when disaster strikes, very few people will be prepared.”

China to attempt first moon landing

China will next year attempt to land an exploratory craft on the moon for the first time, state media reported, in the latest project in the country's ambitious space programme.

China's third lunar probe will blast off in the second half of 2013, the state Xinhua news agency reported late on Monday. Other reports said it would land and transmit back a survey of the moon's surface.

If successful, the landing would be China's first on the lunar surface and mark a new milestone in its space development. It is part of a project to orbit, land on and return from the moon, Xinhua said.

China said in its last white paper on space it was working towards landing a man on the moon, although it has not given a time frame.

Beijing sees its multi-billion-dollar space programme as a symbol of its rising global stature, growing technical expertise, and the Communist Party's success in turning around the fortunes of the once poverty-stricken nation.

It kicked off in 1999 with the launch of the unmanned Shenzhou-1.

Two years later, Shenzhou-2 lifted off carrying small animals, and in 2003, China sent its first man into space. Since then, it has completed a spacewalk in 2008 and an unmanned docking between a module and rocket last year.

Most recently, a 13-day voyage of the Shenzhou-9 spacecraft became China's longest-ever space mission and was notable for including the nation's first woman astronaut among its three-member crew.

The crew also achieved China's first manual docking with an orbital module, the Tiangong-1, a highly complex manoeuvre first conducted by the Americans in the 1960s and essential to building a permanent manned space station.

Next year's planned lunar probe launch will follow the Chang'e 1 in 2007 and Chang'e 2 in 2010, both named for the Chinese goddess of the moon.

Xinhua quoted the State Administration of Science, Technology and Industry for National Defence as saying the project was proceeding smoothly.

It Is Absolutely Shocking How Much Gold China is Acquiring

Today Stephen Leeb told King World News, “... there is a controlled desperation in China when it comes to acquiring gold.”  Leeb, who is Chairman of Leeb Capital Management, also said, “They are acquiring as much as they possibly can without tilting the markets dramatically to the upside.”

The acclaimed money manager also stated, “China mined a total of 355 tons, which was by far the largest amount of gold mined for any country.  And yet they are still buying every single available ounce they can get in the open market.”  Leeb was also quick to point out the strength gold is displaying, “Today we have global stock markets under significant pressure, the US dollar breaking out on the upside, and yet gold is holding firm.”

Here is what Leeb had to say about what is happening with Europe, the Chinese and gold:  “Europe is a mess and sooner or later the Europeans are going to have to come to grips with the dire situation they face.  Yesterday, Moody’s put the three AAA countries on credit watch, Germany, Luxembourg, and the Netherlands.”

“Unless the European bank is willing to print money in order to start buying the debt of the failing countries, you are going to have a catastrophe.  The patchwork schemes they have been using are not going to get the job done.  Right now, Eric, as we look at the European crisis, it’s worse now than it has ever been. 

5-Year Spanish bond yields are now trading at 7.6%.  That’s an extraordinary number, and it really says Spain cannot finance anything....

“For practical purposes, Spain has come to a halt unless they get help.  This means lots of money printing going forward and tremendous inflation down the road.  All of this favors the price of gold going dramatically higher.

In the past, when you have seen these kinds of situations, people sell things to get liquid.  The item that is most liquid is gold.  But you are not seeing intense selling of gold today.  I just don’t think gold will go down very much.  If gold does eventually test the lows or break lower, I don’t believe it will go much lower than the previous low. 

In the past, people felt gold could go much lower in a full-fledged crisis, but that is not the case this time.  The Chinese will continue to step in and buy and this is the primary reason gold has remained so strong during this European upheaval.  You have to remember that the stock market is down in China and it is likely to remain down until you see a shift in leadership.

So gold has become increasingly important and China has encouraged its citizenry to buy gold.  With the stock market already frustrating people in China, the Chinese, interestingly, will not want gold to be added to that list of frustrations for their investing public.

In the past, if the Chinese could step out of the way and let gold tumble in price so they could purchase it cheaper they would.  Right now I think they just don’t want to add to their citizen’s frustrations with key markets, gold being one of them.  If I’m right, then the Chinese will continue to support the price of this metal.

I would also note that China mined an unbelievable 20% of their proven reserves of gold last year.  That’s an almost impossible achievement.  That number was reported by the USGS, which is a very credible source for this type of information.

China mined a total of 355 tons, which was by far the largest amount of gold mined for any country.  And yet they are still buying every single available ounce they can get in the open market.  Australia was second with 270 tons.  Keep in mind that Australia has 4 times the reserves that China has.  I have never seen any country mine that percentage of any commodity.  What China has done in truly a Herculean feat.

So there is a controlled desperation in China when it comes to acquiring gold.  They are acquiring as much as they possibly can without tilting the markets dramatically to the upside.

Today we have global stock markets under significant pressure and the US dollar breaking out on the upside, and yet gold is holding firm.  The bottom line is the weak hands are out of gold and China is creating a floor in the market.  So if your downside is around $1,520 and your upside is many thousands of dollars, I would buy.”

Nouriel Roubini: Five factors that could derail the global economy

By Edward Krudy, Reuters

NEW YORK – Economist Nouriel Roubini is standing by his prediction for a global “perfect storm” next year as economies the world over slow down or shudder to a complete halt, geopolitical risk grows and the eurozone’s debt crisis accelerates.

Roubini, the New York University professor dubbed “Dr. Doom” for predicting the 2008 financial crisis, highlighted five factors that could derail the global economy.

Those factors are:

•A worsening of the debt crisis in Europe
•Tax increases and spending cuts in United Sates that may push the world’s biggest economy into recession
•A hard landing for China’s economy
•Further slowing in emerging markets
•A military confrontation with Iran

“Next year is the time when the can becomes too big to kick it down (the road)…then we have a global perfect storm,” Roubini said in a television interview with Reuters.

Roubini’s gloomy 2013 outlook isn’t new, but it’s getting more purchase as slowing economies and Europe’s debt crisis drive turbulence in financial markets.

After what he expects will be a flat year for U.S. stocks in 2012, Roubini said the equity market could face a sharp correction next year, with little the Federal Reserve can do to stop it.

“There might be a weak rally because people are being cheered by more quantitative easing by (Chairman Ben) Bernanke and the Fed, but if the economy is weakening, that is going to put downward pressure on earnings growth,” said Roubini.

Roubini said the Federal Reserve may be pushed toward unconventional policy options as the simulative effect of successive waves of quantitative easing – effectively printing money to buy government bonds – diminishes over time.

Unconventional policy could include “targeting the 10-year Treasury at 1 percent, doing credit easing rather than quantitative easing, targeting nominal GDP, price-level targeting and lots of stuff that is more esoteric,” said Roubini. “Eventually if everything goes wrong, they can even buy equities.”

5 ‘real world’ signs of the coming Chinese apocalypse

By Pamela Heaven

From shrinking trade to stalling factories to surprise rate cuts, signs are mounting that China is headed for a hard landing.

Tuesday investors fretted as China’s imports in June grew at half the expected pace, entrenching concerns that domestic demand in the world’s second-largest economy is cooling quickly.

The news was also not a good harbinger for China first-half GDP data to be released later this week.

While economists crunch the latest numbers, Trefor Moss, writing for Foreign Policy magazine, provides “real-world signs of China’s economic malaise.”

The stimulus that China pumped into the economy during the 2009 downturn is coming home to roost for local governments.

Municipalities are being asked to repay their debts and local officials, who indulged in fancy fleets among other luxuries during the boom years, are feeling the pinch.

The city of Wenzhou is planning on auctioning off 80% of its vehicles this year, 1,300 cars, with similar fire sales being held nationwide.

About 30 people were hurt and two police cars were smashed last month when a riot broke out in Shaxi township in Guangdong province — known as the ‘world’s factory floor.’

As exporters go bust and factories cut shifts, tensions between migrant workers and locals over layoffs and wage cuts are mounting. Migrant workers are the elbow grease of China’s growth and their disaffection could be its undoing, writes Moss.

More than half of China’s millionaires are either considering emigrating or have already taken steps to do so, a survey by Bank of China and wealth researcher Hurun Report revealed. And if they haven’t moved yet they are spending their money elsewhere.

Another survey by Allianz China Life Insurance says China’s wealthy are losing confidence in the domestic market and socking money into cash and less into stock, real-estate and other investments. Sales of luxury goods inside China are down, but investment in high-end property overseas is up.

A ‘naked official’ is a term in China that refers to an official who has sent his family and money abroad and is poised to make a getaway himself. And their numbers are rising.

Chinese prosecutors say 18,487 officials, including executives from state-owned companies, have been caught during the last 12 years while allegedly trying to flee overseas with ill-gotten gains, the Los Angeles Times reports.

As Moss points out, China’s wealthy are often members of the same family, and if China really does go into recession, a lot of rich people may decide to cut and run.

China’s ports are piled high with surplus coal as businesses and citizens try to save on electricity bills. Factory production cuts have contributed to the slump in demand.

The national price of coal is down 10% since late last year, a drop that will hit the global economy and in turn cut demand for Chinese exports.

Last year pork prices skyrocketed 57% in response to the growing Chinese appetite for meat, but over the past four months that demand has slipped. So much so that the hog-to-corn price ratio which measures whether rearing pigs is profitable dipped into the red and the government had to step in. At the same time the price of eggs has shot up so quickly that shoppers now call them ‘rocket eggs’ and Chinese consumers, shaken by the faltering economy and food safety scares, are opting to grow their own food.

Saudis are buying nuclear-capable missiles from China

DEBKAfile  Exclusive Report 

debkafile’s military sources report that Saudi Arabia has set its feet on the path to a nuclear weapon capability and is negotiating in Beijng the purchase of Chinese nuclear-capable Dong-Fen 21 ((NATO-codenamed CSS-5) ballistic missile.

China, which has agreed to the transaction in principle, would also build a base of operations near Riyadh for the new Saudi purchases.

As we reported last year, Saudi Arabia has struck a deal with Pakistan for the availability on demand of a nuclear warhead from Islamabad’s arsenal for fitting onto a ballistic missile.

Riyadh owns a direct interest in the two most active Middle East issues: Iran and Syria.
Iran’s nuclear weapons program has been advancing for two decades regardless of countless attempts at restraint by every diplomatic tool under the sun and a rising scale of sanctions – to no avail.

Tehran marches on regardless of impediments. In Istanbul, Tuesday, July 3, the six powers and Iran failed the fourth attempt to reach an accommodation on Iran’s nuclear program.

The Syrian ruler Bashar Assad remains equally undeterred by international condemnation. Saturday, June 30, the US and Russia again failed to agree on a joint plan of action in Syria.

Saudi forces have been poised for action in Syria on the Jordanian and Iraqi borders since US Secretary of State Leon Panetta visited Riyadh in late June.

On July 1, they redoubled their military preparedness when the European Union clamped down an oil embargo on Iran. The Saudis, the US Fifth Fleet and the entire Gulf region are since braced for Iranian reprisals which could come in the form of closure by Tehran of the vital Straits of Hormuz to shipping or strikes against the Gulf emirates’ oil exporting facilities.

Tension shot up again when Iran’s Revolutionary Guards launched a three-day missile drill against simulated enemy bases in the region – expanding its threats to include US forces and bases in the region, Israel and Turkey.

WATCH VIDEO

Sinkhole swallows minibus in S China

By People's Daily Online

A sinkhole engulfed a minibus Thursday morning in Guilin, south China's Guangxi Zhuang autonomous region, injuring the vehicle's driver. The incident was a geological disaster that happened around 4 a.m. on Fuxing Road in the city's Qixing district. It left a big hole which is 4 meters long, 2.5 meters wide and 2 meters deep. The driver, the only person in the minibus, was being treated in hospital.

Global slump alert as world money contracts

Growth of the world money supply has dropped to the lowest level since the financial crisis of 2008-2009, heralding a severe economic slowdown later this year unless authorites rapidly take action.

By Ambrose Evans-Pritchard

The latest data show that the real M1 money supply – cash and overnight deposits – for China, the eurozone, Britain and the US has been contracting since the early Spring. Any further falls risk a full-blown global recession.

Clear signs of trouble are emerging in the US, until now the last bastion of strength. The New York Institute of Supply Management said its ISM business index – a proxy for business demand – flashed a "screeching halt" in May, crashing to 49.9 from 61.2 in April, where anything below 50 denotes contraction. Unemployment is rising again after grim jobs data for April and May, indicating that the economy may have fallen below stall speed.

Central bank governors and finance ministers from the G7 bloc are to hold an emergency teleconference call on Tuesday to grapple with Europe's escalating crisis. There is mounting anger in North America and Asia over the failure of the Europeans to use their vast resources to contain the brushfire in Spain.

The world money data collected by Simon Ward at Henderson Global Investors show that real M1 for the G7 economies and leading E7 emerging powers peaked at 5.1pc in November and has since plunged to 1.6pc in April. The data explain why commodity prices are falling hard, with Brent crude down to a 16-month low of under $97 a barrel.

China's money data are falling at the fastest pace since records began. The gauge – six-month real M1 – gives advance warning of economic output half a year ahead. "Europe needs to start quantitative easing [QE] immediately and China must ease policy," said Mr Ward.

The Americans may act first. Goldman Sachs expects Federal Reserve chair Ben Bernanke to open the door for QE in testimony on Thursday.

Stock markets rallied in Madrid and Milan led by bank shares on rumours of an EU plan to recapitalise banks directly with funds from the EU bail-out machinery.

Olli Rehn, the EU economics chief, said use of the European Stability Mechanism to bail out lenders was a "serious possibility", adding that it was imperative to "break the link between banks and sovereigns".

However, there is no sign yet that Germany will be willing to drop its veto on such action, viewed by Berlin as the start of debt mutualisation. Chancellor Angela Merkel crushed talk of an instant "banking union" after meeting commission president Jose Barroso, saying their could be no quick fix. She called instead for EU banking supervision as a "mid-term goal".

Her spokesman said any options that "resemble eurobonds" are for the distant future. "It's up to national governments to decide whether they want to avail themselves of aid. That also applies to Spain," he said.

Use of the ESM for bank bail-outs would meet fierce resistance in the German, Dutch and Finnish parliaments. A senior EU official said even Germany's Social Democrats are cooling on eurobonds. "They looked at the polling data and shivered. The German people are not willing to send money into a bottomless pit," he said.