"In what has been the world's longest negotiation (we are only modestly joking: the Iran P5+1 nuclear "talks" started in 2013 and have yet to achieve anything) one whose "rolling deadline" has been breached time and time again, it appears that with today's latest deadline just hours away, the most likely outcome is another deadline extension even though, as Reuters puts it, "Iran and six world powers ramped up the pace on Tuesday in negotiations over a preliminary deal on Tehran's nuclear program, while officials cautioned that any agreement would likely be fragile and incomplete."
Tuesday, March 31, 2015
"We’ve written quite a bit lately about Austria’s Heta, the bad bank gone... well, bad, or as we’re fond of calling it, Austria’s Black Swan. Recapping, an outside audit identified a €7.6 billion hole in the vehicle’s balance sheet, prompting the institution of a debt moratorium. Unfortunately, Austria’s Carinthia province had guaranteed more than €10 billion in Heta debt, which is five times the state’s operating revenue meaning it is, for all intents and purposes, insolvent and unless Austria wants to go the unprecedented route of allowing a provincial bankruptcy, the sovereign will need to step in in one way or another. The next shoe to drop was the German lender DuesselHyp which itself faced insolvency thanks to around €350 million of Heta debt it held on its balance sheet.
While we wait to see which “well capitalized” bank will be the next to crumble under the weight of mountainous writedowns occasioned by the sudden souring of “riskless” assets, we get to read the DuesselHyp post-mortem, which shows that the bank was effectively AIG’d by Eurex. Here’s more via Bloomberg:
Eurex, Europe’s largest derivatives market, asked DuessHyp to post additional collateral as the German bank faced writing down its 348 million euros ($375 million) of bonds issued by Austria’s Heta, said the people.The hit to the bank’s capital from the Heta losses and the extra posting of margin forced the lender, laden with swaps, to seek a rescue, said the people.The Association of German Banks, or BdB, on March 15 said it would back DuessHyp, a lender to public entities, and a day later agreed to buy the company from U.S. private equity firm Lone Star Funds…
Apparently, DuessHyp had more than $13 billion in interest rate swaps on its book, a holdover from the bank’s “old” business model which, according to Fitch, involved underwriting “all sorts” of things:
“This is mostly a legacy from the past, because before the crisis they underwrote all sorts of assets from different countries and in different currencies and they used swaps to hedge the risks.”
"With stock markets weaker across the globe, today a 50-year market veteran warned King World News that a huge game-changer is about to strike. He also discussed the truth about what is really happening around the world.
Friday, March 27, 2015
"Late last year, when looking at a Goldcorp slideshow, we noticed something surprising: the gold miner had forecast that 2015 would be the year when gold production would peak among the mining industry.
To be sure Goldcorp was really just pitching its own balance sheet, and was more focused on its far more levered gold-mining competitors going out of business...
... and hence facilitating "peak production" this year as one after another producer is forced to file for bankruptcy, than actually making a statement on how much gold remains to be mined in the ground. Because the last thing even the most healthy gold miner, with the lowest production cost wants, is to face a world in which their primary commodity is running out.
Which may just be this world.
According to a report issued by Goldman's Eugene King looking at commodity scarcity, the chart below "shows that there are only 20 years of known mineable reserves of gold and diamonds."
Some futher observations on gold and scarcity in general from Goldman:
The combination of very low concentrations of metals in the Earth’s curst, and very few high-quality deposits, means some things are truly scarce. Perhaps unsurprisingly, these are the so-called precious metals (and diamonds), and that their value is derived from the fact they are rare.Their relatively scarcity, and the market’s belief that new discoveries will be limited, is what drives the price of these super rare commodities. Take diamonds as perhaps the most extreme example. A diamond has very little intrinsic value. Its value is determined by a belief that it is rare and, for a natural diamond, unique.Gold has been used as a measure of wealth for more than 4,000 years, as the ancient Egyptians soon worked out that gold was not only shiny and heavy, but rare.
Of course, this analysis is meaningless in a vacuum: if the "known reserves" of gold plunge in the coming decade, no matter how many gold futures and GLD short sales are conducted by the BIS, the price will have to go up, and it will go up high enough to where a new surge of gold miners will come online and find thousands of new tons of gold reserves around the globe.
Unless they don't, and Goldman is correct that "peak gold" may have arrived. This will be even more true if over the coming years the long overdue fiat economic panic finally washes over the globe, and a revulsion toward central bank policies forces a scramble into gold whose value (if not price since fiat currencies will be redundant) soars.
The answer is unclear, but what is certain is that like the price of oil over the past decade and until last fall when price discovery finally became somwhat credible, what happens in the physical realm has absolutely zero marginal impact on the price of commodity which has about 100 ounces in deliverable paper contracts for every ounce in underlying. It will be only after the gold price distortions via the derivative market are eliminated that such trivial price-formation forces as supply and demand are once again relevant."
"I think the catalyst for this coming mania is going to be China. The Shanghai Gold Exchange is eventually going to become a real casino. It has to do with the fact that China today is the largest consumer of gold. China is pushing really, really hard for the Shanghai Gold Exchange to become the premier gold exchange in the world in terms of the turnover of physical gold.
"...On other subject, China is forming a bank to rebuild and refinance the world. China is sick of the US led IMF and World Bank and is slowly moving towards the point where it will own the world’s next reserve currency.
"German Gold Repatriation And China's Grand Strategy
Friday, March 20, 2015
"TOKYO/SYDNEY, (Reuters) - Japan signaled cautious approval of the China-led Asian Infrastructure Investment Bank (AIIB) on Friday and said for the first time that, if conditions were met, it could join the institution that the United States has warned against.
Australian Treasurer Joe Hockey said there was "a lot of merit" in the bank and the Sydney Morning Herald newspaper reported that Canberra could formally decide to sign up when the full cabinet meets on Monday.
Japan, Australia and the South Korea, all major U.S. allies, are the notable regional absentees from the AIIB. The United States, worried about China's growing diplomatic clout, has questioned whether the AIIB will have sufficient standards of governance and environmental and social safeguards.
But after Britain broke ranks with Western nations and said earlier this month that it would join the AIIB, other major EU members have followed suit.
Australia now appears close to joining, although no formal decision has been made, and South Korea may be as well..."
"Fresh from a well-publicized dollar dispute with Goldman’s Gary Cohn, recently retired Dallas Fed chief Richard Fisher made an appearance on CNBC Friday and spoke with Rick Santelli. There were quite a number of notable exchanges including the following zingers..
Santelli: “If you had to rate the US economy 0-10 where would you peg it?”Fisher: “We’re #1., we’re a 10. We’re the epicenter of growth and in the sweet spot.”Santelli: “Do you think any part of the stock market being high has anything to do with the committee you just left and if you didn’t grade the economy on a curve would you still give it a 10?”Fisher: “Well, what worries me is how totally lazy investors have gotten, totally dependent on the Federal Reserve and I find this to be a precarious situation.”Fisher: “Are we vulnerable in my personal opinion to a significant equity market correction? I believe we are.”
Then Santelli pulls out a Pavlov reference suggesting that the Fed has in fact conditioned retail investors to be lazy prompting Fisher to point out the irony in the fact that global financial markets are depending on a “diminutive woman” (Yellen) to play Atlas. “What worries me is that the people that watch this show are completely dependent on the Fed — look at the volatility. I could see a correction taking place of substantial magnitude.”
Of course this is all the market's fault and not the Fed's for ballooning their balance sheet into the trillions and effectively daring investors not to chase a central bank-underwritten rally in risk assets and so ultimately, Fisher thinks the "people who watch" CNBC need to stop being so complacent."
Prestigious Firm Successfully Forecasting Markets For 60 Years Just Issued A MAJOR ALERT On The Gold And Silver Space
"Today one of the prestigious firms that has been successfully forecasting markets for over 60 years just put out a MAJOR ALERT on the gold and silver space! This is an incredibly important report for anyone who is invested in or thinking about investing in physical gold and silver or the mining shares.
Thursday, March 19, 2015
Cash Dinosaur: France Limits Cash Transactions to €1,000, Puts Restrictions on Gold; Bitcoin End Coming?
"A few days ago I asked How Long Before Cash is Banned?
My question was in reference to reader CNA (Cards Not Appreciated) who commented ...
I've been in Italy for a month. It's quite amazing how many places ask you to pay cash. Even at hotels, they would like you to pay your €1000+ bills in cash. And people 'wonder' why these countries always get into trouble.
My belief is that cash is going the way of the dinosaur. Just today we see another step in that direction.
France to Limit Cash Transactions
Via translation from El Economista, please consider France Limits Cash Payments to 1,000 Euros
The French Government will limit cash payments to 1,000 euros, compared to 3,000 euros today, a move that will come into force in September to combat terrorist financing and money laundering, in an announcement from Finance Minister Michel Sapin.
For non-residents (mainly tourists) the limit will drop from 15,000 to 10,000 euros.
Also, starting next year, banks will have to notify authorities of any income or withdrawals of more than 10,000 euros per month.
Restrictions apply to suitcases with money or goods of value like gold.
Yesterday, Today, Tomorrow
Yesterday the French cash limit was 3,000 euros. Today the cash limit is 1,000 euros. Tomorrow (not in the literal sense as timing is uncertain), cash transactions will be restricted to 100 euros, then banned altogether.
The same applies everywhere, including the US..."
"The biggest issue facing the finacial system today is the US Dollar rally.
The Fed and other Central Banks are trying to maintain the illusion that they have everything in control by talking about interest rates, but the reality is that the US Dollar carry trade is ABOVE $9 trillion in size. That is almost as big as ALL of the money printing that occurred between 2009 and 2013.
And it's imploding as we write this.
Globally, the world is awash in borrowed money… most of it in US Dollars. The US Dollar carry trade is north of $9 trillion… literally than the economies of Germany and Japan COMBINED.
When you BORROW in US Dollars you are effectively SHORTING the US Dollar. So when the US Dollar rallies… you have to cover your SHORT or you blow up.
And the US Dollar has been rallying… HARD. Indeed, the move that began in July 2014 is already larger par in scope with that which occurred during the 2008 meltdown..."
"For each of the charts that I am about to share with you, I want you to focus on the last shaded gray bar on each chart which represents the last recession. As you will see, our economic problems are significantly worse than they were just before the financial crisis of 2008. That means that we are far less equipped to handle a major economic crisis than we were the last time.
#1 The National Debt
Just prior to the last recession, the U.S. national debt was a bit above 9 trillion dollars. Since that time, it has nearly doubled. So does that make us better off or worse off? The answer, of course, is obvious. And even though Barack Obama promises that “deficits are under control”, more than a trillion dollars was added to the national debt in fiscal year 2014. What we are doing to future generations by burdening them with so much debt is beyond criminal. And so what does Barack Obama want to do now? He wants to ramp up government spending and increase the debt even faster. This is something that I covered in my previous article entitled “Barack Obama Says That What America Really Needs Is Lots More Debt“.
#2 Total Debt
Over the past 40 years, the total amount of debt in the United States has skyrocketed to astronomical heights. We have become a “buy now, pay later” society with devastating consequences. Back in 1975, our total debt level was sitting at about 2.5 trillion dollars. Just prior to the last recession, it was sitting at about 50 trillion dollars, and today we are rapidly closing in on 60 trillion dollars.
#3 The Velocity Of Money
When an economy is healthy, money tends to change hands and circulate through the system quite rapidly. So it makes sense that the velocity of money fell dramatically during the last recession. But why has it kept going down since then?
#4 The Homeownership Rate
Were you aware that the rate of homeownership in the United States has fallen to a 20 year low? Traditionally, owning a home has been a sign that you belong to the middle class. And the last recession was really rough on the middle class, so it makes sense that the rate of homeownership declined during that time frame. But why has it continued to steadily decline ever since?
#5 The Employment Rate
Barack Obama loves to tell us how the unemployment rate is “going down”. But as I will explain later in this article, this decline is primarily based on accounting tricks. Posted below is a chart of the civilian employment-population ratio. Just prior to the last recession, approximately 63 percent of the working age population of the United States was employed. During the recession, this ratio fell to below 59 percent and it stayed there for several years. Just recently it has peeked back above 59 percent, but we are still very, very far from where we used to be, and now the next economic downturn is rapidly approaching.
"Renowned economist Laurence Kotlikoff recently testified at the U.S. Senate about the runaway U.S. budget. How bad is it? Kotlikoff says, “I told them the real (2014) deficit was $5 trillion, not the $500 billion or $300 billion or whatever it was announced to be this year. Almost all the liabilities of the government are being kept off the books by bogus accounting. . . . The government is 58% underfinanced . . . . Social Security is 33% underfinanced . . . . So, the entire government enterprise is in worse fiscal shape than Social Security is, but they are both in terrible shape.” So, how much is America on the hook for in the future? Kotlikoff contends, “If you take all the expenditures that the government is expected to make, as projected by the Congressional Budget Office (CBO), all the spending on defense, repairing the roads, paying for the Supreme Court Justices’ salaries, Social Security, Medicare, Medicaid, welfare, everything and take all those expenditures into the future . . . and compare that to all the taxes that are projected to come in, and the difference is $210 trillion. That’s the fiscal gap. That’s our true debt.”
Wednesday, March 11, 2015
"With the stock market at all time highs, corporations are in a mad rush to buyback more shares. Corporations just cannot get enough of their own shares, no matter how mispriced they are.
Big U.S. banks, including JPMorgan Chase & Co (JPM) and Citigroup Inc (C), are expected to win Federal Reserve backing on Wednesday to buy back more shares and increase their dividends in the coming year, but the approvals may be as much about the institutions’ financial engineering as any improvement in their health.
Much of the money for buybacks and higher dividends is coming from the banks issuing securities known as preferred shares. These shares are a type of equity that pays regular, relatively high dividends. To investors they look a lot like bonds that pay interest. But for regulators, preferred shares serve as a cushion against any future losses, in part because they never have to be repaid.
Critics of the strategy question how sustainable it is, as banks essentially take money from one set of investors and give it to another, and at an added cost.
"Today one of the greats in the business spoke with King World News about the big picture as currency wars continue to rage and what this means for gold. He also took a step back to look at the big picture for gold what is moving the metal of kings at this time.
"On the heels of the Dow plunging more than 330 points and the U.S. dollar surging, a legendary chairman & CEO overseeing more than $170 billion, who is one of the most respected men in the financial world, issued a dire warning to King World News about global financial markets.
Monday, March 9, 2015
"The Chinese do not plan to live in a world dominated by the U.S. dollar for much longer. Chinese leaders have been calling for the U.S. dollar to be replaced as the primary global reserve currency for a long time, but up until now they have never been very specific about what they would put in place of it. Many have assumed that the Chinese simply wanted some new international currency to be created. But what if that is not what the Chinese had in mind? What if they have always wanted their own currency to become the single most dominant currency on the entire planet? What you are about to see is rather startling, but it shouldn’t be a surprise. When it comes to economics and finance, the Chinese have always been playing chess while the western world has been playing checkers. Sadly, we have gotten to the point where checkmate is on the horizon.
On Wednesday, I came across an excellent article by Simon Black. What he had to say in that article just about floored me…
When I arrived to Bangkok the other day, coming down the motorway from the airport I saw a huge billboard—and it floored me.The billboard was from the Bank of China. It said: “RMB: New Choice; The World Currency”Given that the Bank of China is more than 70% owned by the government of the People’s Republic of China, I find this very significant.It means that China is literally advertising its currency overseas, and it’s making sure that everyone landing at one of the world’s busiest airports sees it. They know that the future belongs to them and they’re flaunting it.
This is the photograph of that billboard that he posted with his article…
Everyone knows that China is rising.
And most everyone has assumed that Chinese currency would soon play a larger role in international trade.
But things have moved so rapidly in recent years that now a very large chunk of the financial world actually expects the renminbi to replace the dollar as the primary reserve currency of the planet someday. The following comes from CNBC…
The tightly controlled Chinese yuan will eventually supersede the dollar as the top international reserve currency, according to a new poll of institutional investors.The survey of 200 institutional investors – 100 headquartered in mainland China and 100 outside of it – published by State Street and the Economist Intelligence Unit on Thursday found 53 percent of investors think the renminbi will surpass the U.S. dollar as the world’s major reserve currency.Optimism was higher within China, where 62 percent said they saw a redback world on the horizon, compared with 43 percent outside China.
And without a doubt we are starting to see the beginnings of a significant shift.
Just consider this excerpt from a recent Reuters report…
China’s yuan broke into the top five as a world payment currency in November, overtaking the Canadian dollar and the Australian dollar, global transaction services organization SWIFT said on Wednesday.
The U.S. dollar won’t be replaced overnight, but things are changing.
Of course the truth is that the Chinese have been preparing for this for a very long time. The Chinese refuse to tell the rest of the world exactly how much gold they have, but everyone knows that they have been accumulating enormous amounts of it. And even if they don’t explicitly back the renminbi with gold, the massive gold reserves that China is accumulating will still give the rest of the planet a great deal of confidence in Chinese currency.
But don’t just take my word for it. Consider what Alan Greenspan has had to say on the matter…
Alan Greenspan, who served at the helm of the Federal Reserve for nearly two decades, recently penned an op-ed for the Council on Foreign Relations discussing gold and its possible role in China, the world’s second-largest economy. He notes that if China converted only a “relatively modest part of its $4 trillion foreign exchange reserves into gold, the country’s currency could take on unexpected strength in today’s international financial system.”
Meanwhile, the Chinese have also been accumulating a tremendous amount of U.S. debt. At this point, the Chinese own approximately 1.3 trillion dollars worth of our debt, and that gives them a lot of power over our currency and over our financial system.
Someday if the Chinese wanted to undermine confidence in the U.S. dollar and in the U.S. financial system, they have a lot of ammunition at their disposal.
And it isn’t just all of that debt that gives China leverage. In recent years, the Chinese have been buying up real estate, businesses and energy assets all over the United States at a staggering pace. For a small taste of what has been taking place, check out the YouTube video posted below…"
"On Friday, we learned that the official “unemployment rate” has fallen to 5.5 percent. Since an unemployment rate of 5 percent is considered to be “full employment” by many economists, many in the mainstream media took this as a sign that the U.S. economy has almost fully “recovered” since the last recession. In fact, according to the Wall Street Journal, some Federal Reserve officials believe that “the U.S. economy is already at full employment“. But how can this possibly be? It certainly does not square with reality. Personally, I know people that have been struggling with unemployment for years and that still cannot find a decent job. And I get emails from readers all the time that are heartbroken because they are suffering through extended periods of unemployment. So what in the world is going on? How can the government be telling us that we are nearly at “full employment” when so many people can’t find work? Could it be possible that the government numbers are misleading?
It is my contention that the official “unemployment rate” has become so politicized and so manipulated that it is essentially meaningless at this point. The following are 10 reasons why…
#1 Since February 2008, the size of the U.S. population has grown by 16.8 million people, but the number of full-time jobs has actually decreased by 140,000.
#2 The percentage of working age Americans that have a job right now is still about the same as it was during the depths of the last recession. Posted below is a chart that shows how the employment-population ratio has changed since the beginning of the decade. Does this look like a full-blown “employment recovery” to you?…
#3 The primary reason for the decline in the official “unemployment rate” is the fact that the government now considers millions upon millions of long-term unemployed workers to “no longer be in the labor force”. Just check out the following numbers…
The number of Americans participating in the labor force has been on a decline for the past few years. Nearly 33 percent of the Americans above age 16 are not part of the workforce, the highest number since 1978. The Bureau of Labor Statistics (BLS) report issued recently has found 92,898,000 Americans above age 16 not a part of the labor force of the country as on February 2015.When President Obama took over the office in January 2009, nearly 80,529,000 Americans were not a part of the labor force. The number has increase by nearly 12 million over the last few years.
#4 Over the past couple of years, the labor force participation rate in this country has been hovering near mutli-decade lows…
The labor force participation rate hovered between 62.9 percent and 62.7 percent in the eleven months from April 2014 through February, and has been 62.9 percent or lower in 13 of the 17 months since October 2013.Prior to that, the last time the rate was below 63 percent was 37 years ago, in March 1978 when it was 62.8 percent, the same rate it was in February.
#5 When you add the number of “officially unemployed” Americans (8.7 million) to the number of Americans “not in the labor force” (92.9 million), you get a grand total of101.6 million working age Americans that do not have a job right now. Does that sound like “full employment” to you?
#6 The quality of our jobs continues to decline. Right now, only 44 percent of U.S. adults are employed for 30 or more hours each week.
#7 Millions upon millions of Americans have been forced to take part-time jobs because that is all they can find, and wages for American workers are at depressingly low levels. The following numbers come directly from the Social Security Administration…
-39 percent of American workers make less than $20,000 a year.
-52 percent of American workers make less than $30,000 a year.
-63 percent of American workers make less than $40,000 a year.
-72 percent of American workers make less than $50,000 a year.
#8 The average duration of unemployment for an unemployed worker is still about twice as long as it was just prior to the last recession.
#9 Most Americans feel as though the Obama administration has done little to nothing to help the middle class. Just consider the following poll numbers…
According to a new poll by the Pew Research Center, Americans see government policies under the Obama administration as having mostly benefited wealthy people, large corporations and financial institutions.Seventy-two percent of respondents said government policies have done little or nothing to help the middle class, and 65 percent said they have done nothing to help the poor. Sixty-eight percent said the policies have done nothing to help small businesses.Meanwhile, 45 percent said the policies have done a “great deal” to help large banks and financial institutions, 38 percent say they have helped large corporations, and 36 percent say they have helped the wealthy.
#10 If the unemployment rate was calculated honestly, we would all be talking about the horrific “unemployment crisis” that we were currently enduring. According to John Williams of shadowstats.com, the real unemployment rate in the United States right now is above 23 percent.
Our politicians and the mainstream media are attempting to convince us that everything is just fine..."