http://www.zerohedge.com/news/how-chinas-rehypothecated-ghost-steel-just-vaporized-and-what-means-world-economy
Submitted by Tyler Durden on 09/17/2012 17:20 -0400
One of the key stories of 2011 was the revelation, courtesy of MF Global, that no asset in the financial system is "as is", and instead is merely a copy of a copy of a copy- rehypothecated up to an infinite number of times (if domiciled in the UK) for one simple reason: there are not enough money-good, credible assets in existence, even if there are more than enough 'secured' liabilities that claim said assets as collateral. And while the status quo is marching on, the Ponzi is rising, and new liabilities are created, all is well; however, the second the system experiences a violent deleveraging and the liabilities have to be matched to their respective assets as they are unwound, all hell breaks loose once the reality sets in that each asset has been diluted exponentially.
and.......
http://harveyorgan.blogspot.com/2012/09/again-run-on-spanish-banksriots-in-arab.html
We will go over all of these stories and more but first..............let us head over to the comex and assess damage today
The total gold comex OI rose by a monstrous 6,178 contracts which of course set the stage for today's raid. The boys had to get the OI down for fear of too many contracts taking delivery. The non active month of September saw it's OI fall from 57 to 42 for a loss of 15 contracts. We had 10 delivery notices on Friday so we lost a tiny 5 contracts or 500 oz of gold standing. We are less than two weeks away from first day notice in the October contract. In October we saw the OI fall marginally by 414 contracts down to 23,095. All eyes will however focus on the big December contract and here the OI rose by 4807 contracts from 321,788 up to 326,595. The estimated volume today at the gold comex was weak at 104,694. The confirmed volume on Friday was a rather robust 208,874 as the markets reacted to Bernanke's QE to infinity.
The total silver comex OI rose again today to 123,402 from 124,366 and this is getting to be quite bothersome to JPMorgan and his cohorts. The OI for the entire silver complex continues to inch up slowly but surely. The active September contract month saw its OI rise by 178 contracts from 339 to 517. We had 18 delivery notices filed on Friday so we gained an additional 196 contracts or 980,000 oz of silver. The next non active October contract fell by 65 contracts down to 208.
The big December contract remained relatively unchanged at 80,094. The estimated volume at the silver comex came in at 41,388. On Friday we had confirmed volume of 56,493 which is very good action.Activity was quite good today.
We had the following customer deposit: 56,262.5 oz into Scotia
We had the following customer withdrawal :
i) 192.60 oz out of Brinks.
we had the following adjustment whereby 202.59 oz was adjusted out of the customer account and into the dealer account at Scotia as a probable lease.
The registered or dealer inventory rests tonight at 2.52 million oz or 78.38 tonnes of gold.
The CME reported that we had only 5 delivery notices for 500 oz of gold. The total number of notices filed so far this month total 716 for 71600 oz. To obtain what is left to be served upon, I take the OI standing for September (42) and subtract out today's delivery notices ( 5) which leaves us with 37 notices or 3700 oz left to be served upon our longs.Activity was brisk in the silver vaults on Friday.
We had no dealer deposit and no customer silver deposit.
We had the following dealer withdrawal:
i) out of Brinks: 170,543.76 oz
We had the following customer withdrawal:
i) out of Brinks: 1052.2 oz
ii) out of Delaware: 988.000 oz
iii) out of Scotia; 683,483.68 oz
total withdrawal by customer: 685,523.88 oz
we had one adjustment of 25,610.9 oz whereby the dealer at Brinks repaid the customer account.
Thus tonight the dealer inventory rests at 39.267 million oz
The total of all silver rest at 140.810 million oz.
The CME reported that we had only 13 notices filed today for 65,000 oz. The total number of notices filed so far this month total 1317 for 6,585,000 oz. To obtain what is left to be filed upon, I take the OI standing for September (517) and subtract out today's notices (13) which leaves us with 504 notices or 2,520,000 oz left to be served upon our longs.
* * *
* * *
end
The following paper is self explanatory:
(courtesy James Turk/GATA)
and other news you can use.....
How China's Rehypothecated "Ghost" Steel Just Vaporized, And What This Means For The World Economy
One of the key stories of 2011 was the revelation, courtesy of MF Global, that no asset in the financial system is "as is", and instead is merely a copy of a copy of a copy- rehypothecated up to an infinite number of times (if domiciled in the UK) for one simple reason: there are not enough money-good, credible assets in existence, even if there are more than enough 'secured' liabilities that claim said assets as collateral. And while the status quo is marching on, the Ponzi is rising, and new liabilities are created, all is well; however, the second the system experiences a violent deleveraging and the liabilities have to be matched to their respective assets as they are unwound, all hell breaks loose once the reality sets in that each asset has been diluted exponentially.
Naturally, among such assets are not only paper representations of securities, mostly stock and bond certificates held by the DTC'sCede & Co., but physical assets, such as bars of gold held by paper ETFs such as GLD and SLV. In fact, the speculation that the physical precious metals in circulation have been massively diluted has been a major topic of debate among the precious metal communities, and is the reason for the success of such physical-based gold and silver investment vehicles as those of Eric Sprott. Of course, the "other side" has been quite adamant that this is in no way realistic and every ounce of precious metals is accounted for. While that remains to be disproven in the next, and final, central-planner driven market crash, we now know that it is not only precious metals that are on the vaporization chopping block: when it comes to China, such simple assets as simple steel held in inventories, apparently do not exist.
From Reuters:
Chinese banks and companies looking to seize steel pledged as collateral by firms that have defaulted on loans are making an uncomfortable discovery: the metal was never in the warehouses in the first place.
This means that in an economy in which the creation of liabilities, and pledging of assets took place at a furious pace in the past 5 years, nobody really knows just what the real state of credit creation truly was. What is 100% certain is that as a result of this revelation, the GDP number of the country, which is and always has been a derivative of credit formation and expansion (and heaven forbid contraction), is massively overrepresenting what it is in reality, and that the Chinese economy has been expanding at a far slower pace if defined not only by the creation of liabilities, but by matched assets. Most importantly, it means that every single Renminbi in circulation is impaired as a country-wide liquidation event would see huge losses by every creditor class. It also would mean, naturally, zero residual value left for the equity.
And just like that the Chinese growth "miracle" goes poof... as does its steel first, and soon all other commodities (coughcoppercough) that served as the basis of "secured" liability creation.
Reuters continues, even if the punchline is already known:
China's demand has faltered with the slowing economy, pushing steel prices to a three-year low and making it tough for mills and traders to keep up with payments on the $400 billion of debt they racked up during years of double-digit growth.As defaults have risen in the world's largest steel consumer, lenders have found that warehouse receipts for metal pledged as collateral do not always lead them to stacks of stored metal. Chinese authorities are investigating a number of cases in which steel documented in receipts was either not there, belonged to another company or had been pledged as collateral to multiple lenders, industry sources said.Ghost inventories are exacerbating the wider ailments of the sector in China, which produces around 45 percent of the world's steel and has over 200 million metric tons (220.5 million tons) of excess production capacity. Steel is another drag on a financial system struggling with bad loans from the property sector and local governments."What we have seen so far is just the tip of the iceberg," said a trader from a steel firm in Shanghai who declined to be identified as he was not authorized to speak to the media. "The situation will get worse as poor demand, slumping prices and tight credit from banks create a domino effect on the industry."Ultra-rehypothecation 101:Police have arrested an employee from Baoyang Warehouse in Shanghai and are investigating documentation for steel stocks that the employee issued to a trading firm, said an official with the surname Ou at Baoyang. Baoyang is owned by China Railway Materials Shanghai Company Limited.The trade firm used the stocks more than once as collateral to obtain loans, said an executive at Shanghai Minlurin, another trading firm that had steel stocks in the warehouse. The receipts used were for steel worth around 380 million yuan ($59.96 million), the executive said.Similar cases have prompted some trading houses to temporarily halt transactions related to warehouse receipts, disrupting China's steel business, traders said.If the above makes readers queasy, it should: after all rehypothecation of questionable assets is precisely what serves as the backbone of that critical component of the shadow banking system: the repo market, where anything goes, and where those who want, can create money virtually out of thin air with impunity as long as nobody checks if the assets used for liability creation are actually in the system (and with JPM as the core private sector tri-party repo entity, secondary only to the Fed, one can see why this question has never actually arisen).In the meantime, the entire Chinese economy is unraveling:
Banks, too, are giving less credit against warehouse receipts.
"Fake warehouse receipts have become a problem for some banks and because of this, many banks have boosted monitoring of existing stocks at warehouses and temporarily stopped accepting steel stocks as collateral for loans," said a Shanghai-based branch manager from a Chinese bank who declined to be identified as he was not authorized to speak to the media.
Steel mills and end users rely heavily on trading firms to keep steel flowing from producers to consumers. Steel traders often buy consignments with full payment, ensuring cash flow to the mills. End users can buy small volumes from the traders, more convenient for them than the big volumes the mills sell.
Industry sources estimated cases that have already come to light account for about 5 billion yuan ($787.50 million) of bad debt in Shanghai, one of China's biggest steel trading centers.
At another warehouse, a logistics unit of giant steelmaker Baosteel rented a small office to a company called Shanghai Yiye Steel Trade Market Management Co Ltd. Documents were forged stating Yiye was the owner of some of the steel stored in the warehouse, said Wang Xueying, the spokeswoman for the unit called Shanghai Baosteel Logistics Co Ltd.
Yiye used the documents in dealings with two companies, China Railway Harbin Logistics and Wuhan Iron Yitong, the spokeswoman said.The two companies came to the warehouse to collect the stocks only to find that Yiye did not own the materials, she said. The case is still under investigation, she added.Nobody answered telephone calls to Yiye made by Reuters to request comment for this story. Both China Railway Harbin Logistics and Wuhan Iron Yitong declined to comment when contacted.
In conclusion we can only add that we hope none of this comes as a surprise to our regular readers: we have been warning for years that i) the inventory of the world's credible assets is literally evaporating in absence of technological efficiency and CapEx spending (which is also the reason for the ECB's endless lowering of collateral requirements) and ii) illegal rehypothecation of assets, which infinitely dilutes claims on real assets, can and will lead to total losses even for investors who thought they had strong collateral backing.
We now know that this has been happening in China with the most critical component of its economic growth miracle: steel. We will soon discover that all other assets: stocks, bonds, commodities (including gold and silver) and finally cash (think deposits) have been comparably rehypothecated and criminally commingled. The end result will be the most epic bank run in world history, which incidentally is precisely what the central banks are attempting desperately to delay as much as possible by generating excess inflation to "inflate" away the debt, leading to rematching of finite assets and virtually infinite liabilities. Alas, in a world in which credit-money liabilities are in the quadrillions, and in which the real assets are in the tens of trillions, only hyperinflation can seal the deal.
Or, in other words, lose-lose.
and.......
http://harveyorgan.blogspot.com/2012/09/again-run-on-spanish-banksriots-in-arab.html
MONDAY, SEPTEMBER 17, 2012
Again, run on the Spanish banks/Riots in Arab countries and in Spain/Spanish 10 year yields reach 6% again./
Gold closed down today as the bankers are getting quite nervous about the OI levels. At comex closing time, the price of gold finished at $1767.70 down $1.90 on the day. Silver also faltered a bit dropping 30 cents to $34.30. However the bankers decided to raid in the access market dropping gold down to as low as $1654.00 and silver below $34.00
At 4:30 pm, the access market has the following prices for gold and silver:
gold: 1760.00
silver: $34.13
Gold shares started to rise almost 10 minutes after the hit suggesting the mini raid had no real material affect and we should see gold and silver rise tomorrow.
Today, we had bad news from Spain as again the Spanish banks are bleeding as depositors flee to other jurisdictions. The yield on the 10 year Spanish bond jumped back again to the 6% level as rioting returned to the streets of Madrid. All bourses finished in the red as the realize that global QE to infinity will not be the ultimate fix. The middle east again saw tensions rise as country after country stages another "Arab fall"!
At 4:30 pm, the access market has the following prices for gold and silver:
gold: 1760.00
silver: $34.13
Gold shares started to rise almost 10 minutes after the hit suggesting the mini raid had no real material affect and we should see gold and silver rise tomorrow.
Today, we had bad news from Spain as again the Spanish banks are bleeding as depositors flee to other jurisdictions. The yield on the 10 year Spanish bond jumped back again to the 6% level as rioting returned to the streets of Madrid. All bourses finished in the red as the realize that global QE to infinity will not be the ultimate fix. The middle east again saw tensions rise as country after country stages another "Arab fall"!
The total gold comex OI rose by a monstrous 6,178 contracts which of course set the stage for today's raid. The boys had to get the OI down for fear of too many contracts taking delivery. The non active month of September saw it's OI fall from 57 to 42 for a loss of 15 contracts. We had 10 delivery notices on Friday so we lost a tiny 5 contracts or 500 oz of gold standing. We are less than two weeks away from first day notice in the October contract. In October we saw the OI fall marginally by 414 contracts down to 23,095. All eyes will however focus on the big December contract and here the OI rose by 4807 contracts from 321,788 up to 326,595. The estimated volume today at the gold comex was weak at 104,694. The confirmed volume on Friday was a rather robust 208,874 as the markets reacted to Bernanke's QE to infinity.
The total silver comex OI rose again today to 123,402 from 124,366 and this is getting to be quite bothersome to JPMorgan and his cohorts. The OI for the entire silver complex continues to inch up slowly but surely. The active September contract month saw its OI rise by 178 contracts from 339 to 517. We had 18 delivery notices filed on Friday so we gained an additional 196 contracts or 980,000 oz of silver. The next non active October contract fell by 65 contracts down to 208.
The big December contract remained relatively unchanged at 80,094. The estimated volume at the silver comex came in at 41,388. On Friday we had confirmed volume of 56,493 which is very good action.Activity was quite good today.
We had the following customer deposit: 56,262.5 oz into Scotia
We had the following customer withdrawal :
i) 192.60 oz out of Brinks.
we had the following adjustment whereby 202.59 oz was adjusted out of the customer account and into the dealer account at Scotia as a probable lease.
The registered or dealer inventory rests tonight at 2.52 million oz or 78.38 tonnes of gold.
The CME reported that we had only 5 delivery notices for 500 oz of gold. The total number of notices filed so far this month total 716 for 71600 oz. To obtain what is left to be served upon, I take the OI standing for September (42) and subtract out today's delivery notices ( 5) which leaves us with 37 notices or 3700 oz left to be served upon our longs.Activity was brisk in the silver vaults on Friday.
We had no dealer deposit and no customer silver deposit.
We had the following dealer withdrawal:
i) out of Brinks: 170,543.76 oz
We had the following customer withdrawal:
i) out of Brinks: 1052.2 oz
ii) out of Delaware: 988.000 oz
iii) out of Scotia; 683,483.68 oz
total withdrawal by customer: 685,523.88 oz
we had one adjustment of 25,610.9 oz whereby the dealer at Brinks repaid the customer account.
Thus tonight the dealer inventory rests at 39.267 million oz
The total of all silver rest at 140.810 million oz.
The CME reported that we had only 13 notices filed today for 65,000 oz. The total number of notices filed so far this month total 1317 for 6,585,000 oz. To obtain what is left to be filed upon, I take the OI standing for September (517) and subtract out today's notices (13) which leaves us with 504 notices or 2,520,000 oz left to be served upon our longs.
* * *
Two South Africa mines reopen, situation still tense
JOHANNESBURG |
(Reuters) - Two South African mines reopened on Monday after labor strife forced them to suspend operations last week, but striking miners vowed to keep operations run by world No. 1 platinum producer Anglo American Platinum (Amplats) shut.
Wage talks were set to resume in a bid to end a violent 5-week strike that has killed 45 people around the Marikana mine of platinum producer Lonmin, bringing its production to a halt and pushing up the price of the precious white metal.
The unrest has its roots in a bloody turf war for members between an upstart union and the dominant National Union of Mineworkers (NUM) but it is now unclear who the strikers are taking their direction from.
Police used tear gas and rubber bullets over the weekend as part of an operation to disarm miners, implementing the government's decision to get tough on strikes that choked off platinum output in the world's top producer. The army has also been brought in to help restore order.
Aquarius Platinum's Kroondal mine and Xstrata's chrome operation near the platinum belt city of Rustenburg restarted on Monday. Aquarius' shares in Johannesburg were up more than 12 percent by 0800 EDT.
Amplats said work at its Rustenburg mines would resume on Tuesday, a move dismissed by one workers' representative as a "joke". The unrest and illegal strikes have spread from Marikana to Rustenburg along the restive platinum belt.
"For us, the reality is that the general strike is on," Mametlwe Sebei, a self-styled Rustenburg community leader and Marxist politician, told Reuters. "We are going to be demonstrating in defiance. We will not be intimidated."
Amplats management was "whistling in the dark" if it believed the mines would reopen on Tuesday, he said.
"They can deploy the army, they can be shooting people, shooting old men in their shacks, tear gassing young kids ... but let us be clear, there will be repercussions," he said.
A spokesman for Xstrata Alloys said miners returning to work in Rustenburg on Monday had been subjected to intimidation by striking colleagues and that the atmosphere remained tense.
"As our employees were coming to work, there has been intimidation which is all over Rustenburg," said Christopher Tsatsawane said.
WILDCAT STRIKES
Xstrata and other platinum mines in the area have been hit by wildcat strikes since police killed 34 miners at Lonmin's Marikana platinum mine on August 16. All of Lonmin's mines remain closed.
South Africa is home to 80 percent of known reserves of platinum, the price of which has gained nearly 20 percent since the Marikana shootings, the bloodiest security incident since the end of apartheid in 1994. The sector accounts for 6 percent of South Africa's economy, the biggest in Africa.
Police raided a Lonmin hostel on Saturday and seized spears, machetes and other weapons from strikers. They later used rubber bullets and tear gas to disperse groups of protesters.
Lonmin said mining activity at Marikana remained minimal and lowered its full-year production guidance to between 685,000 and 700,000 saleable ounces from 750,000 ounces.
Lonmin said on Monday it was temporarily closing its K4 shaft. That ends a contract with construction group Murray & Roberts that supplied about 1,200 staff to that shaft.
On Friday, workers at the mine dismissed an initial Lonmin offer as way below the 12,500 rand ($1,500) a month sought by members of the militant Association of Mineworkers and Construction Union (AMCU), which is challenging the influence of the more established NUM.
Lonmin, which is offering increases of between 9 and 21 percent, said 12,500 rand would put thousands of jobs at risk and challenge the viability of the business.
The ruling African National Congress has become increasingly worried about the impact of the unrest on the wider economy.
Finance Minister Pravin Gordhan said it could be "extremely damaging", although in an interview with Reuters on Sunday he said there was no need yet to revise the outlook for the country's fiscal performance for this year.
The ANC criticized companies for paying lip service to the mining charter, which seeks to give workers and communities a bigger share of mineral wealth and rectify disparities of white apartheid rule by improving their living and working conditions.
"Mining remains the bedrock of the South African economy, and yet the abject poverty and squalor surrounding mining areas remains a matter of deep concern," it said in a statement.
"The current instability at Marikana thus poses challenges to the growth of the sector and the international image of the country," the ANC said.
* * *
end
The following paper is self explanatory:
(courtesy James Turk/GATA)
James Turk: Cyclical or structural deficits?
Submitted by cpowell on Mon, 2012-09-17 12:27. Section: Daily Dispatches
8:25a ET Monday, September 17, 2012
Dear Friend of GATA and Gold:
Free Gold Money Report editor James Turk, founder of GoldMoney and consultant to GATA, writes today that massive U.S. federal government deficits are continuing but are not reviving the real economy, just leading to the devaluation of the dollar. Turk's commentary is headlined "Cyclical or Structural" and it's posted at the FGMR Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Gold Anti-Trust Action Committee Inc.
and other news you can use.....
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