Tuesday, January 21, 2014

Metal Content of US Coins Gets Expensive

Robert Wenzel of Economic Policy Journal reviews WSJ article on mintage . . .

Price Inflation Will Force the US Mint to Once Again Change the Metal Content of Coins

Price inflation indexes may not indicate much 
inflation, but the US Mint knows that the indexes 
don't reflect the true picture .

The  Mint is considering a change to the mix of
metals it uses to make quarters, dimes and 
nickels, because of the climbing cost of 
production of the coins. reports WSJ.

It now costs 1.8 cents to make a penny and 
9.4 cents to make a nickel, costing the 
federal government about $104.5 million 
last year.

If the materials are altered for the first time 
in half a century or more, some coins could 
have new colors and weigh less, says WSJ.
It plans to keep the diameter and thickness 
of any potential new coins the same as 
existing specie.

Richard Peterson, the top official at the Mint,
said completely stopping production of the 
penny is a "discussion topic."

"[D]imes and quarters, they are really the 
workhorses of the coin lineup right now," 
Peterson said.

I fully expect that in the next bout of 
accelerating price inflation that the value 
of the metal content of current nickels will 
soar. Thus, nickels are a great no downside 
investment. If the price inflation I anticipate 
doesn't develop, just spend the nickels. For 
more on nickels as an investment see:
Why You Need to Own Nickels, Right Now

Sunday, January 19, 2014

Chinese Shadow Banks on Verge of Default?

from Bob Wenzel . . . 

SUNDAY, JANUARY 19, 2014

Breaking: Chinese Financial Firm Warns Shadow Bank May Not Repay Its Debt
Reuters reports:
"The trust firm responsible for a troubled high-yield investment 
product sold through China's largest banks has warned investors 
they may not be repaid when the 3 billion-yuan ($496 million)
product matures on Jan. 31, state media reported on Friday.

Investors are closely watching the case to see if it will shatter 
assumptions that the government and state-owned banks will 
always protect investors from losses on risky off-balance-sheet 
investment products sold through a murky shadow banking system.

Based on a loan to an unlisted coal company, the now distressed 
product was created by China Credit Trust Co Ltd, while Industrial 
and Commercial Bank of China , the world's largest bank by assets, 
helped to market it to wealthy investors in central Shanxi province.

On Friday, the official China Securities Journal reported that the 
trust company is considering legal action to press related parties 
for repayment to protect investors' interests.

The newspaper went on to quote trust industry sources saying an 
outright default was likely to be avoided simply by delaying 
repayment until arrangements were made to repay investors by 
other means."

I have been reporting at the EPJ Daily Alert that China is on the
verge of a huge collapse. Indeed, in recent weeks I have been
advising that Chinese financial sector ETFs be shorted.

China may be able to bail out one deal, but the problem is developing
nationwide across the capital goods sector, and a nationwide bailout
would mean massive inflation. Eventually, China is going to have to
either allow a massive crash or print incredible amounts of money
that risks major unrest from the general public who will have to deal
with the price inflation consequences.

Sunday, November 24, 2013

Kotlikoff: We're Broke Now

The Treasury-Federal Reserve Naked Tango

Professor  Lawrence Kotlikoff  explains:
[W]hile Bernanke says [his money printing] is all to keep down interest rates, there is a darker subtext here. When the Treasury prints bonds and sells them to the public for cash and the Fed prints cash and uses it to buy the newly printed bonds back from the public, the Treasury ends up with the extra cash, the public ends up with the same cash it had initially, and the Fed ends up with the new bonds.
Yes, the Treasury pays interest and principal to the Fed on the bonds, but the Fed hands that interest and principal back to the Treasury as profits earned by a government corporation, namely the Fed. So, the outcome of this shell game is no different from having the Treasury simply print money and spend it as it likes.
The fact that the Fed and Treasury dance this financial pas de deux shows how much they want to keep the public in the dark about what they are doing. And what they are doing, these days, is printing, out of thin air, 29 cents of every $1 being spent by the federal government.


Here are a few links that Kotlikoff mentioned in his interview:
1.  TheInformAct.org
2.  ThePurpleHealthPlan.org
3.  Kotlikoff.net
4.  MaximizeMySocialSecurity.com

Wednesday, August 21, 2013

Mitch Feierstein's Planet Ponzi


Feierstein explains what how and why sovereign collapse will happen. He says it looks like Cyprus, where the banks will begin keeping depositors' assets and putting capital controls on people's money.

Thursday, August 8, 2013

from Robert Wenzel's Economic Policy Journal

No More Spills? New Technology Could Transform the Pipeline Sector

By James Stafford

The 2010 Kalamazoo spill and the 2013 Exxon leak in Arkansas are the most glaring incidents, but these are just the big leaks that are found right away and reported.

Most leaks are found eventually—but there is money to be saved and damage to be avoided by catching them at the smallest rupture. Right now, we rely on pigs in the pipeline to do this.

It's called "pigging". Pigs are inspection gauges that can perform various maintenance operations on a pipeline—from inspection to cleaning—without stopping the pipeline flow. The first "pigs" were used strictly for cleaning and they got their name from the squealing noise they emitted while travelling through the pipeline. The current generation of "smart pigs" can detect corrosion in the pipeline and are thus relied on for leak detection.

The Kalamazoo and Arkansas leaks were massive and caused by complete pipeline ruptures. These are rare incidents that account for less than 10% of leaks. But the small leaks--those that traditional pipeline detection systems don't catch—account for more than 90% of US pipeline leaks.

According to a recent report from the U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration ( PHMSA) , the majority of leaks are smaller but can persist for months or even years, and those that are even reported are generally done so by people who have stumbled upon them by accident.

The fact remains that current systems and technologies only detect 50% of leaks. We need new solutions if we want to avoid another Arkansas, or another Kalamazoo.

The "pigs" are the darlings of the regulators, who force operators who have had any problems to "pig" their lines at a massive cost of over $1,000 per kilometer.

Certainly, today's smart pigs are well advanced beyond their ancestors—the balls of rags wrapped with barbwire, but they have their shortcomings.

Pigs can spot general corrosion and identify potential areas of concern, but they cannot detect pinholes in pipelines as their spatial resolution is poor and they can only see corrosion that is 1-2 inches in size. This is significant because a small leak of 10 barrels per day from a liquid pipeline operated at a standard pressure would come from a hole much smaller than this.

They are also only deployable over tens of kilometers, not the thousands needed.

Even if all the pipelines in the world were "pigged" every year, a pipeline operator would still not be able to ensure that small leaks are being detected.

For the larger pipes, the industry relies on SCADA. SCADA is a basic infrastructure monitoring system, where remote hubs relay data back to central monitoring point, using fiber-optic cable or other communications equipment. But it is not enough on its own.

A case in point is this: A SCADA system was working normally on the Pegasus pipeline in Arkansas at the time of the rupture and helped Exxon verify that an accident had occurred. Pegasus did not, however, have a Computational Pipeline Monitoring (CPM) program in place on the pipe. It wasn't enough. Indeed, in late 2012, PHMSA issued a 17-page warning to Exxon about its insufficient pipeline leak detection.

Then we have Keystone XL, which is always in the spotlight, most recently when TransCanada said it would opt out of new pipeline leak detection systems and stick with traditional methods that many believe are not good enough.

The 90%+ of leaks are small and more of a concern for the miles and miles of aging pipelines that crisscross the US, while new pipelines, like Keystone XL will benefit from new technologies during their construction, such as better pipe metallurgy and better welding. This will mean less chance of leaks, but not a zero chance. The fact is that the leak detection systems that will be used by new pipelines like Keystone XL (assuming it gets the green light), are not really any better than the current fare.

There is new technology floating around out there—but it's new and relatively untested in the marketplace.

RealSens remote-sensing pipeline detection technology aims to pick up where SCADA and the pigs leave off, detecting leaks over an entire pipeline network.

According to Banica, Synodon's CEO, realSens can actually save companies money by detecting the leaks sooner and faster and thus reducing the amount of spilled product and the environmental damage. But it's a new technology that was only introduced into the market 12 months ago.

Still, some of the big operators remain skeptical of new pipeline leak detection systems, as their cost-saving applications are as yet unproven.

"The first hurdle is that operators might not be aware that it exists and what the capabilities are. The second hurdle is that they have a hard time believing it works and have to see proof through customer field tests, which are currently ongoing," Banica told Oilprice.com.

But the issue of pipeline leak detection will increasingly be on everyone's radar following the Quebec train disaster that killed at least 38 people, and counting. No pipeline failure has ever come close to this level of human carnage. This will help shape the transport debate.

What the Quebec tragedy demonstrates, says Banica, is that pipelines are a far better option than rail. "Whereas pipelines do not kill as many people as rail (or even truck transport, as more drivers die due to accidents), they do pose a bigger environmental risk than rail due to larger potential leaks and releases."
 

The above originally appeared at OilPrice.com.