The IEA warns of shortages - "The next oil crisis is coming"

by Michael Kläsgen

A shortage of oil could trigger another global recession around 2013 – says the IEA. By 2010 the price will reach new highs.

The IEA in Paris is warning of a new, much more severe global economic crisis around 2013. The reason is that investments in oil from new projects are being cancelled by large oil companies. If demand starts increasing in 2010, the oil price could explode, fire up inflation and put global growth at risk.

"We are concerned, that oil companies are reducing their investment levels. When demand returns a supply shortage could appear. We are even predicting that this shortage could occur in 2013." Said Nobuo Tanaka, head of the IEA in an interview with Sueddeutsche Zeitung.

Oil reserves declining markedly

He is alarmed, because he has data that shows that the global oil supply capacity is declining and that oil reserves will likely be markedly reduced by 2013. The stronger oil demand will be in a recovery starting in 2010, especially in the US, China and India, the sooner the shortage will appear and strangle global growth. (more)

Why I Prefer the Silver Lining

Howard Ruff
The Ruff Times
Posted Apr 6, 2009

In my recent interview on CNBC’s Squawk Box, I was asked why I preferred silver. Here’s why:

1) I am bullish on gold. I can enthusiastically endorse all the bullish arguments. In fact, my investment in the Central Fund of Canada Ltd. (CEF) contains one ounce of gold for every 50 ounces of silver. I am not negative on gold; far from it. It’s a question of better or best.

2) At these prices, gold is not a greatly in-demand industrial metal. It has industrial uses, but many of these uses are too expensive for gold. Gold is a monetary and jewelry metal. It also is enthroned in human consciousness as a store of value. I expect gold to continue to rise if Barack Obama continues to create so much currency.

3) Silver is also a jewelry and monetary metal, but it is also a very important industrial metal. It has over 2,000 industrial uses. Back in the ‘70s when I liked silver over gold, there was ten times as much silver above ground as there was gold. Despite that, we made two to three times as much money on silver as we did on gold. (more)

Swiss slide into deflation signals the next chapter of this global crisis

Watch Switzerland closely. It is tipping into deflation, the first Western country to succumb to Japan's disease.

By Ambrose Evans-Pritchard
Last Updated: 7:17PM BST 05 Apr 2009

Comments 36 | Comment on this article

Swiss consumer prices fell 0.4pc in March (year-on-year). Swiss CPI will be minus 1pc at least by July, nearing the level where spending psychology changes. By the time you have a self-feeding spiral, it is too late.

"This is something that we must prevent at all costs. The current situation is extraordinarily serious," said Philipp Hildebrand, a governor of the Swiss National Bank.

The SNB is not easily spooked. It is the world's benchmark bank, the keeper of the monetary flame. Yet even the SNB's hard men have thrown away the rule book, taking emergency action to force down the exchange rate of the Swiss franc.

Here lies the danger. If other countries try to export deflation by this means, we will face a second phase of the global crisis. Taiwan is already devaluing. Korea, Singapore, and Sweden all seem tempted to follow. Japan is chomping at the bit.

"We don't fully realise in the West what a catastrophic collapse Japan has suffered," says Albert Edwards, global strategist at Société Générale. "The West has dumped a large part of its economic downturn onto Japan by devaluing against the yen."

This is about to go into reverse as Tokyo hits the ping-pong ball back across the net. "As the unfolding collapse in the yen gathers pace, the West will see its green shoots incinerated to dust," he said.

Japan's industrial output fell 38pc in February (year-on-year), mostly concentrated into the last four months. No major economy imploded at this speed in the 1930s. The country has been hit by a double shock. As an export power it has taken the brunt of Anglo-Saxon belt-tightening: as the world's top creditor it is cursed by a "safe-haven" currency that soars in moments of danger – largely because the Japanese bring home their wealth till the storm passes. Normally, Japan can cope. This time, the yen's rise has pushed the economy over a cliff.

The yen must come back down to earth, and soon, or Japanese society will start to disintegrate. If necessary, the Bank of Japan will force it down by intervention, as occurred in 2003-2004.

Will China stand idly by as Japanese unleashes a shock to the global system through competitive devaluation? That depends whether you think China's spring recovery is the real thing, or an inventory build-up before the next downward slide. The Communist Party says 20m jobs have been lost since the bubble burst. This cannot be tolerated for long.

It is remarkable that China's fall into deflation has attracted so little notice. China's CPI was minus 1.6pc in February. The country has built too many factories producing goods that the world cannot absorb. The temptation is to shunt this excess capacity abroad. A faction of the politburo is already itching to devalue the yuan.

Of course, Britain has already played the currency card. That is different. The pound's fall, though welcome, is a side-effect of the Bank of England efforts to stem the credit crunch. There has been no currency intervention.

Crucially, Britain has a current account deficit. Many countries toying with devaluation are exporters with surpluses – 15.4pc of GDP for Singapore, 8.4pc for Switzerland, and 6.1pc for China. If these countries refuse to let their imbalances correct, world demand must implode.

Mr Hildebrand denies that the SNB is pursuing a "beggar-thy-neighbour' strategy. Like the yen, the franc suffers from the safe-haven curse: everybody buys it in a storm. This tightens monetary conditions. The SNB cannot easily offset this. It has already cut interest rates to near zero. There are not enough Swiss government bonds in the market to rely on the sort of "QE" asset purchases being carried out by the Bank.

Ultimately, I suspect this crisis may mark the moment when the Swiss franc loses its safe-haven role. Credit default swaps (CDS) measuring risk on five-year government debt have reached 127 for Switzerland, higher than Britain at 118. Norway has the world's lowest CDS at 48, reflecting its status as a petro-democracy.

Switzerland's banks are over-leveraged. Loans to emerging markets equal 50pc of GDP (half to Eastern Europe). Banking secrecy is dying. Fortunately for the Swiss, they have built up $700bn in net foreign assets for a rainy day. Improvident Britons are less lucky. But that is another story. What we risk now is a game of deflation "pass-the-parcel" worldwide. The economic establishment was caught off guard from 2003 to 2007 because it overlooked the way that Asia's unbalanced relationship with the West was feeding a credit bubble.

It may be caught again as the same warped structure leads to a chain of (panicked) devaluations.

Enjoy the "bear-trap" rally on global bourses this spring. But remember, we have only just begun to see the mass lay-offs and hardship caused by this slump. The politicians will act to save their skins. Markets may not like the result.

Billionaire Buffett benefits from bailout he promoted

By Charles Piller
cpiller@sacbee.com

Published: Sunday, Apr. 5, 2009 - 12:00 am | Page 1A
Last Modified: Sunday, Apr. 5, 2009 - 12:25 pm

Financier Warren Buffett has been lauded for his plain-spoken denunciation of the greed and foolishness behind the economic crisis. He has pushed the massive federal bailout of imploding banks as the essential response to an "economic Pearl Harbor."

When Buffett speaks, people in high places listen. The famous investor is so highly regarded that in a debate last fall, both presidential candidates said they were considering him for treasury secretary.

A Bee examination of regulatory records shows that Buffett, the world's second-wealthiest person, also quietly has become a top beneficiary of the banking bailout he so vigorously advocated.(more)

The Soft Panic of 2009 Has Just Begun, (collapse of commercial real estate)

By Andrew Mickey, Q1 Publishing

Boston’s Clarendon Street sits on one of city’s most iconic buildings. It’s also the symbol of what could kick off what I call the “Soft Panic of 2009.”

Locals know it simply as “The Hancock.” The 60-story frame wrapped in reflective blue glass makes it look like the tallest mirror in the world. I’m sure it was an impressive sight when it was built in the 70’s. It still is.

The I.M. Pei designed building stood as a symbol of financial strength and ingenuity. Now, it’s looking a whole lot different.

And for those of us looking into this situation now we will be protected. And for more aggressive folks, we’ll actually be able to profit from it all. Here’s how.

BIS Admits $190 Billion Silver Fraud

Silver Stock Report

by Jason Hommel, April 6th, 2009

In the past, I've pointed out various frauds in the silver market such as, the excessive futures contracts on the COMEX, the excessive trading in "London" silver, and the excess silver in the new ishares Silver ETF, SLV.

In 10 years of reading and writing and searching, I've never known the numbers of paper silver in the OTC "Over the Counter" market until a reader informed me, just today.

This is directly from the BIS, the Bank of International Settlements. This is good data.

http://www.bis.org/statistics/derstats.htm

At the link above, see

21 Amounts outstanding of OTC single-currency interest rate derivatives

"21C By instrument, maturity and counterparty"

That's this link:
http://www.bis.org/statistics/otcder/dt21c22a.pdf

See the center middle column towards the bottom, under "Other Precious Metals", which excludes Gold. This would be Silver, Platinum, and Palladium. We can exclude Platinum and Palladium as nearly irrelevant, because those markets are much smaller than silver, and very few people hold paper instruments of that type. Furthermore palladium is much like silver in that the market is dominated by industrial demand, and investor demand is less than 5% of the market.

The number of "Single currency interest rate derivatives in other precious metals (SILVER)" from June 2006 to June 2008, in two short years, more than doubled:

From $84 billion to $190 billion!

That's about 40 times larger of a fraud than I had thought.

This is serious news. This is original reporting. Will any other news agency cover it? Probably not.

How much new paper silver is that?

Well, the physical silver investor market annual demand is about $1.3 -$2 billion per year! And yet, they sold $100 billion in new paper silver in the span of 2 years, which is over 50 times as much paper silver as exists in the world annual physical silver investment market!

Previously, I had written and exposed that one or two banks sold, over the span of about a month, 130 million ounces of silver at COMEX to depress silver prices, which is only 1.3 times as much as annual investor demand.

I'm shocked at the figures. Most people who are thinking that they are "buying silver" are still just trusting banks and brokerage firms that have no silver.

Real silver investment demand has therefore not yet really begun, because those banks have not bought any silver. Just wait. It's going to get absolutely crazy.

I just watched a History Channel show last night on the Madoff Scandal. This is nearly 4 times as big! It's the same kind of Ponzi scheme, as they have not bought the real silver that they owe their clients.

People kept saying that the Madoff Scandal was the biggest Ponzi scheme in history. It wasn't. The biggest is not even this silver scandal. It's paper money; that's also a Ponzi Scheme!

I know many people who have most of their wealth with the brokerage houses, and just "some" of their assets "in silver" with the same firms. It's time to pull 100% of your assets out of those firms. Put most of it, if not all of it, into silver first, palladium second, and gold third. Let the diverse metals be your diversification.

Spread it around in several locations if you have a lot. Buy the vaults you need to protect it.

Buy it now, when the silver market is relatively calm, when silver is available.

We offer about $78,000 worth of physical silver at auctions nightly at seekbullion.com. And it's available for immediate delivery, unlike many of our competitors who offer silver for delayed delivery.

It won't be enough.

Also, we won't be ordering or making any more of the following items, so when we sell out, those will be the last ones available:

New Obama, Old Obama, Fish, Bull, CFTC, Snake.

We will continue to re-order all of the replicas such as the Buffalo and the '29 Indian, and our other designs such as the Beer, NWO, "Love God" and the Pirates (except Obama).

At our Coin Shop in Rocklin, and online at seekbullion.com, we will be offering rounds and bars at $1.75 over spot again. Our suppliers have been good to us, and have lowered costs once again for us due to our large volume.

Sincerely,

Jason Hommel

Agora, Pensions and Mortgages

State pension funds across the U.S. have lost $1 trillion over the last year… and that’s just the beginning. Welcome to the great deleveraging issue of your 5 Min. Forecast.

In 2002, we forecast that the tech bubble would mutate into a housing and consumption bubble… and when that burst it would do far greater harm than techs, because so many more “innocents” would be adversely affected. This morning, we’ve got an entire issue of data points that show what the deleveraging of America looks and feels like.

According to a study published this week by the Center for Retirement Research at Boston College, public pensions will need $270 billion in new contributions over the next four years just to stay afloat, and another $100 billion annually for the 20 years afterward. All during the greatest wave of public retirement in U.S. history -- the last chapter of the baby boom.

As a consequence, states all over the country are coming clean: Kentucky has unfunded pension liabilities exceeding $27 billion. In Illinois, Chicago alone is $17 billion in the hole. New Mexico is unfunded by $4.6 billion. Teachers in West Virginia are short $4 billion… this list is long.

Over 14 million Americans are counting on a public pension to help fund their retirement. We’ll visit this topic again soon. And then again. And again… In the meantime, we strongly advise you take matters into your own hands.

This crisis in pension funding comes at a really bad time. “Check out the unemployment rate among baby boomers,” for example, says Rob Parenteau, whose been mining Friday’s job report for worthy nuggets.

“The unemployment rate for the 45-55 age cohort is about to break the spring of 1983 highs that followed the double-dip recession of 1980-2.

“This segment represents the tail end of the baby boom that should be both in its peak earnings years, as well as in a position to save out of retirement. The 55-and-over unemployment rate is also at an all-time post-World War II high, while the percent of the total unemployed who have been out of work for 15 weeks or longer is also at a post-World War II high of 43%.

“This shedding of workers in the prime saving age range of 45-55 poses a challenge to those trying rebuild their savings. Given the damage done to portfolios, crude estimates indicate the gross personal saving rate should be migrating toward 8%, while it’s currently half that. Although the 91.5% of the labor force still employed may continue to cut back spending to achieve savings goals, clearly, there is a rising cohort of older unemployed workers who will need to draw down their saving rates, as unemployment benefits are unlikely to pay their existing bills.

“The upcoming personal tax cuts may help cushion this blow, but we believe the heavy hit to older workers -- probably the same workers hardest hit by falling home and equity prices -- could make further gains in the household saving rate more difficult to achieve.”

And so it goes.

Americans across the board are already falling behind on loans at a record rate. In the last quarter of 2008, a record 4.2% of all consumer loans were delinquent at least 30 days, says data from the Fed this week. Another 4% were in default.

“The wheels have fallen off the economy," James Chessen, chief economist for the American Bankers Association, told USA Today. "There have been significant job losses, and that translates into people having a hard time paying their bills."

And as we’ve been expecting for nearly a year, prime and Alt-A mortgage delinquencies are soaring: From the Office of Thrift Supervision (sic):

Subprime mortgages are suffering the highest rate of delinquency.

But the delinquency growth rate among prime and Alt-As, from the beginning of 2008 to the end, more than doubled. Plus, delinquent prime and Alt-A loans far outnumber subprime.

That makes our forecast last May all the more daunting… we have likely yet to see the worst of the housing bust.