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The End Of Fiat In One Chart

The End Of Fiat In One Chart

For the first time in 21 years, Germany has openly bought gold into its reserve holdings.

Source: Bloomberg

German reserves climbed to 108.34m oz in September from 108.25m a month earlier.

Source: Bloomberg

With ECB mutiny and Deutsche Bank’s rapid demise, fears are rising of a looming financial crisis, and with that, Germany has shown a renewed interest in gold.

As a reminder, September’s outright purchase of the precious metal comes after Germany’s central bank, the Bundesbank, repatriated 583 tonnes, or $31 billion worth, of gold in 2017, years ahead of schedule.

Which came after Germany’s stunning announcement in January 2013 that the Bundesbank would repatriate 674 tons of gold from the NY Fed and the French Central Bank (which was initially abandoned in 2014).

Of course, while Germany is now the latest to turn to gold as a safe haven store of value in its reserves, it is not the first as the de-dollarization shift has been accelerating in recent months

Source: Bloomberg

Germany’s shift comes after China’s acceleration in gold-buying as Peter Schiff recently noted this a “global gold rush on the part of central banks” in preparation for a dollar crash.

“The days that the dollar is a reserve currency are numbered and the smart central banks are trying to buy as much gold as they can before the number is up,” Schiff said. 

Remember, nothing lasts forever

And now that the always conservative Germans are back in the market buying gold, one wonders if the end of fiat is drawing closer.

Everyone Is a Russian Asset

Everyone Is a Russian Asset

America laughed at Hillary Clinton’s remarks about Tulsi Gabbard, but her ideas fit perfectly in the intellectual mainstream

Democratic presidential candidate Rep. Tulsi Gabbard reacts as she listens to a question from the audience during the Presidential Gun Sense Forum, in Des Moines, IowaElection 2020 Tulsi Gabbard, Des Moines, USA - 10 Aug 2019

Hillary Clinton, not long ago the nominee of the Democratic Party, had some choice words about the state of American politics Friday.

“I’m not making any predictions, but I think they’ve got their eye on somebody who is currently in the Democratic primary and are grooming her to be the third-party candidate,” Clinton said on a podcast with former Barack Obama aide David Plouffe. “She’s the favorite of the Russians.”

Clinton appeared to be talking about Hawaii congresswoman Tulsi Gabbard, a combat veteran. She wasn’t done, teeing off on former Green Party candidate Jill Stein:

“[Jill Stein’s] also a Russian asset… Yeah, she’s a Russian asset — I mean, totally. They know they can’t win without a third-party candidate.”

She went on to talk about Donald Trump:

“I don’t know what Putin has on him, whether it’s both personal and financial … I assume it is.”

Hillary Clinton is nuts. She’s also not far from the Democratic Party mainstream, which has been pushing the same line for years.

Less than a week before Clinton’s outburst, the New York Times — once a symbol of stodgy, hyper-cautious reporting  ran a feature called, “What, Exactly, is Tulsi Gabbard Up To?” The piece speculated about the “suspicious activity” surrounding Gabbard’s campaign, using quotes from the neoconservative think-tank, the Alliance For Securing Democracy, to speculate about Gabbard’s Russian support.

This was the second such article the Times had written. An August piece, “Tulsi Gabbard thinks we’re doomed,“ hit nearly all the same talking points, quoting Clint Watts, an ex-spook from the same think-tank, calling Gabbard “the Kremlin’s preferred Democrat” and a “useful agent of influence.” The Times article echoed earlier pieces by the Daily Beast and NBC.com that said many of the same things.

 …click on the above link to read the rest of the article…

Half The World’s Banks Won’t Survive The Next Crisis, McKinsey Finds

Half The World’s Banks Won’t Survive The Next Crisis, McKinsey Finds 

More than half of the world’s banks are at risk of collapse in the next global downturn if they don’t start preparing for late-cycle shocks, McKinsey & Company warned in its latest global banking outlook. 

The consultancy firm warned on Monday, in a 55-page report titled The last pit stop? Time for bold late-cycle moves, that 35% of banks globally are “subscale” and will have to merge or sell to larger firms if they want to survive the next crisis. 

“A decade on from the global financial crisis, signs that the banking industry has entered the late phase of the economic cycle are clear: growth in volumes and top-line revenues is slowing, with loan growth of just 4% in 2018—the lowest in the past five years and a good 150 basis points (bps) below nominal GDP growth. Yield curves are also flattening. And, although valuations fluctuate, investor confidence in banks is weakening once again,” McKinsey said. 

Kausik Rajgopal, a senior partner at McKinsey, told Bloomberg that “we believe we’re in the late economic cycle and banks need to make bold moves now because they are not in great shape,” adding that, “in the late cycle, nobody can afford to rest on their laurels.”

The report warned that 60% of global banks are experiencing “returns below the cost of equity.” And even warned that when the next recession strikes, “negative interest rates could wreak further havoc.” 

McKinsey said fin-tech startups are rapidly evolving the industry, and legacy banks risk “becoming footnotes to history” if they don’t immediately invest in technology. For instance, the report said, Amazon and Ping An are two technology firms that are quickly acquiring market share from the traditional banking sector. 

 …click on the above link to read the rest of the article…

Dollar Liquidity Turmoil Returns With First Oversubscribed Term Repo In A Month, $99.9 Billion Liquidity Injection

Dollar Liquidity Turmoil Returns With First Oversubscribed Term Repo In A Month, $99.9 Billion Liquidity Injection

This was not supposed to happen.

After the Fed rolled out the big artillery in response to the sharp, sudden mid-September funding squeeze (which we now know had virtually nothing to do with last month’s tax payments or other one-time events such as the Treasury’s cash rebuild), including the return of both overnight and term repo operations, and culminated with the Fed’s relaunching of QE which would be used to permanently increase the balance sheet with $60BN in T-Bills every month in order to replenish reserves (because we live in a bizarro world where $1.4 trillion in bank cash is not enough for the smooth functioning of bank plumbing), moments ago we got the latest indication that the dollar funding shortage is again getting worse – despite the market having priced in the Fed’s rollout of the “kitchen sink” to ease funding conditions – when the Fed announced that it had its first oversubscribed Term Repo operation since the funding crisis erupted in September.

Specifically, while the Fed’s 2-week term repo operation was capped at $35 billion as has been the case for the past week, dealers submitted $52.2BN worth of securities ($39.9BN in TSYs, $12.3BN in MBS)…

… making today’s term operation 1.5x oversubscribed, which was the first overallotted operation since the second term repo at the start of the funding crisis on Sept 26.

Needless to say, if the funding shortage was getting better, this operation would not be oversubscribed. The only possible explanation, is someone really needed to lock in cash for Halloween (the maturity of the op is on Nov 5) which is when a “No Deal” Brexit may go live, and as a result one or more banks are bracing for the worst.

 …click on the above link to read the rest of the article…

Spain’s Catalonia Crisis Just Got a Lot Worse

Spain’s Catalonia Crisis Just Got a Lot Worse

Massive peaceful protests, along with days of violent clashes, demonstrate that the fight over this region’s independence movement affects the entire country and is far from over.

Catalan independence 2019
Catalan pro-independence protesters demonstrate outside the Catalan regional government building in Barcelona, October 21, 2019. (AP / Ben Curtis)

Now that the verdict’s out, it’s time to start getting along,” Spanish Prime Minister Pedro Sánchez said at a press conference on October 18, repeating the rhyme—“después de la sentencia, convivencia”—as if it were a magic spell. Around the same time, half a million Catalans were converging on Barcelona, which for the previous four days had seen its airport occupied and highways blocked while violent clashes between protesters and riot police were increasing in intensity each night. Sánchez insisted on framing these clashes as an internal Catalan problem. “What’s at stake is not the territorial makeup of our country, but the Catalans’ ability to get along with each other,” he’d said a few days earlier. One week of major protests, it appears, did not shake his government’s unwillingness to face reality: The Catalan crisis is something that affects the entire country, and it is far from over.

On October 14, the Spanish Supreme Court announced its much-anticipated ruling on the case against 12 Catalan leaders for their role in the 2017 referendum on Catalan independence. Nine were sentenced to between 13 and 9 years in prison; three more were sentenced to 18 months. The charges included sedition, misappropriation of government funds, and civil disobedience. Oriol Junqueras, the former vice president of Catalonia, received the longest sentence, 13 years, while eight other former Catalan ministers received sentences of 10–12 years and two civil society leaders, known as “the Jordis,” received nine years—all close to the maximum permitted by law. (For perspective, earlier this year the Supreme Court sentenced each of five men found guilty of a violent gang-rape—the “wolf pack” case—to 15 years in prison.)

 …click on the above link to read the rest of the article…

Wood, the fuel of preindustrial societies, is half of EU renewable energy

Wood, the fuel of preindustrial societies, is half of EU renewable energy

Source: Ben Adler. Aug 25, 2014. Europe is burning our forests for “renewable” energy. 
Wait, what? grist.org

Preface: By far the largest so-called renewable fuel used in Europe is wood. In its various forms, from sticks to pellets to sawdust, wood (or to use its fashionable name, biomass) accounts for about half of Europe’s renewable-energy consumption.

Although Finland is the most heavily forested country in Europe, with 75% of their land covered in woods, they may not have enough biomass to replace coal when all coal plants are shut down by 2029.  Much of their land has no roads or navigable waterways, so imports would be cheaper than using their own forests (Karagiannopoulos 2019).

Vaclav Smil, in his 2013 book “Making the Modern World: Materials and Dematerialization” states: “Straw continues to be burned even in some affluent countries, most notably in Denmark where about 1.4 Mt of wheat straw (nearly a quarter of the total harvest) is used for house heating or even in centralized district heating and electricity generation.”

There are three articles about wood below. Some other wood energy reports:

2016:  Forests in southern states are disappearing to supply Europe with energy. In the past 60 years, the southern U.S. lost 33 million acres of forests even though biomass is not carbon neutral. Salon

2016: Japan is now turning to burning wood to generate electric power because of fewer nuclear power plants after Fukushima

***

1. The Economist. April 6, 2013. Wood: The fuel of the future. Environmental lunacy in Europe.

Which source of renewable energy is most important to the European Union? Solar power, perhaps? (Europe has three-quarters of the world’s total installed capacity of solar photovoltaic energy.) Or wind? (Germany trebled its wind-power capacity in the past decade.) The answer is neither.

By far the largest so-called renewable fuel used in Europe is wood.

 …click on the above link to read the rest of the article…

EIA’s Electric Power Monthly – September 2019 Edition with data for July

EIA’s Electric Power Monthly – September 2019 Edition with data for July

chart/
chart/

The EIA released the latest edition of their Electric Power Monthly on September 24th, with data for July 2019. The table above shows the percentage contribution of the main fuel sources to two decimal places for the last two months and the year 2019 to date.

chart/

The Table immediately above shows the absolute amounts of electricity generated in gigawatt-hours by the main sources for the last two months and the year to date. In July the absolute amount of electricity generated increased, as is usual for the month of July when compared to June for the period covered by the charts, January 2013 to date. Coal and Natural Gas between them, fueled 66.92% of US electricity generation in July. The contribution of zero carbon and carbon neutral sources declined from 37.86% in June to 32.25% in July.

The 12,055 GWh generated by Solar in July 2019 is a record, exceeding the previous record of 11,8549 GWh, set in the previous month, June 2019. It is possible that the output from solar in August could exceed the output in July as was the case in 2014 and 2015. While the percentage contribution from solar did not decline between the months of May and June it declined slightly in July 2019 as is customary when the total amount generated ramps up heading into the midsummer peak. The increase in production from solar has not continued to keep pace with the total increase in generation from June to July. However, as solar capacity continues to increase, in future years it can be expected that the contribution from solar will keep pace with the total and eventually increase going into the summer months.

The graph below shows the absolute monthly production from the various sources since January 2013, as well as the total amount generated (right axis).

chart/

 …click on the above link to read the rest of the article…

Betrayal and Deception: Syria Is a Prime Example of US Foreign Policy

Betrayal and Deception: Syria Is a Prime Example of US Foreign Policy 

Trump announced the withdrawal of US troops who had been protecting the SDF (Syrian democratic forces) in the northeast of Syria, prompting Kurdish leadership and the Damascus governed to strike a deal allowing Syrian Arab Army to retake control of the border with Turkey after nearly six years.

With the US troops withdrawn numbering around 150 to 200 (out of the 2,000 to 3,000 illegally squatting in Syria), it is understood that Trump’s decision is for reasons other than those stated.

The primary impression Trump wishes to convey to his voters is that of keeping his electoral promises, including that of defeating ISIS in Syria, meaning that US troops can now come back home.

Although it is clear (at least to those not under the sway of the mainstream media) that ISIS has not been completely defeated and that the US never really fought against the Caliphate, the impression is nevertheless conveyed that the “Winner-in-Chief” has triumphed and is bringing home the boys.

Given that the deep state retains ultimate control of US foreign policy, Trump is allowed to do and say what he wants – provided it is only within the confines of his media playpen, safe in the knowledge that his motivations are purely electoral and not really aimed and upending the foreign-policy consensus of the US establishment.

If we look beyond Trump’s histrionics, we can see that the US deep state continues its illegal stay in Syria, with Trump in reality having no intention of opposing the military-industrial complex (indeed often appointing its members to serve in his administration), with these two parties finding a common point of agreement in the alleged threat posed by Iran.

US troops will only shift near Iraq, looking at disrupting any form of cooperation between Baghdad, Damascus and Tehran.

 …click on the above link to read the rest of the article…

Central Bank “Stimulus” is Really a Huge Redistribution Scheme

Central Bank “Stimulus” is Really a Huge Redistribution Scheme

When an economy turns from expansion to contraction there is an order of events. The first signs are an unexpected increase in inventories of unsold goods, both accompanied with and followed by business surveys indicating a general softening in demand. For monetarists, this is often confirmed by an inverting yield curve, which tells them that at the margin the short-term rates set by the central bank are becoming too high for business conditions.

That was the position for the US 10-year bond less the 2-year bond very briefly at the end of August, since when this measure, which is often taken to predict recessions, has turned mildly positive again. A generally negative sentiment, fueled mainly by the escalating tariff war between America and China, had earlier alerted investors to an international trade slowdown, expected to undermine the American economy in due course along with all the others. It stands to reason that backward-looking statistics have yet to reflect the global slowdown on the US economy, which is still buoyed up by consumer credit. The German economy, which is driven by production rather than consumption is perhaps a better guide and is already in recession.

After an initial hit, a small recovery in investor sentiment is understandable, with the negative outlook perhaps having got ahead of itself. But we must look beyond that. History shows the combination of a peak in the credit cycle and tariffs can be economically lethal. A brief return to a positive yield curve achieves little more than a sucker rally. It may be enough to put further monetary expansion on pause. But when that is over, and jobs begin to be threatened, there can be no doubt that central banks will ramp up the printing presses.

 …click on the above link to read the rest of the article…

Are The Rating Agencies Complicit In Another Massive Scandal: A WSJ Investigation Leads To Shocking Questions

Are The Rating Agencies Complicit In Another Massive Scandal: A WSJ Investigation Leads To Shocking Questions

Over the past two years, a key event many bears have cited as a potential catalyst for the next market crash, is the systematic downgrade of billions of lowest-rated investment grade bonds to junk as a result of debt leverage creeping ever high, coupled with the inevitable slowdown of the economy, which would lead to an avalanche of “fallen angels” – newly downgraded junk bonds which institutional managers have to sell as a result of limitations on their mandate, in the process sending prices across the corporate sector sharply lower.

As we discussed in July, the scope of this potential problem is massive, with the the lowest-rated, BBB sector now nearly 60% of all investment grade bonds, and more than double the size of the entire junk bond market in the US, and 3.4x bigger than the European junk bond universe.

Yet after waiting patiently for years for the inevitable downgrade avalanche which would unleash a zombie army of fallen angels and potentially spark the next crash, with the occasional exception of a few notable downgrades such as PG&E and Ford, this wholesale event has failed to materialize so far, something which the bulls have frequently paraded as an indication that the economy is far stronger than the bears suggest.

But is it? And instead of the economy being stronger, are we just reliving the past where rating agencies pretended everything was ok until the very end, only to admit they were wrong all along, and then slash their rating retrospectively, too late however as the next financial crisis is already raging.

 …click on the above link to read the rest of the article…

The West Fades. The Center Quietly Returns: The New Silk Road

The West Fades. The Center Quietly Returns: The New Silk Road

An image from the workshop on desalination and mineral extraction from seawater organized by Sharif University in Teheran this week. In the photo, you can see people from Oman (3), Iran (3), South Africa (1), India (1), and Bangladesh (1). It was not only a multi-ethnical group but also a Eurasia-centered one. It gave me some impression of the shifting balance of power in the world, from the West to the Center, and inspired this post.  

If you think about that, it is funny that we tend to define ourselves as “Westerners.” Most civilizations and cultures in history have tended to see themselves as the center of the world, just think of China: it is supposed to be “the Middle Kingdom”. This idea that we are on an edge is something that we’ve probably inherited from the ancient Greeks, when everything west of them was seen as a land of mystery, peopled with savages, monsters, and Gods. 

But the fact that we call ourselves Westerners doesn’t mean we think we are a periphery of the world, not at all. Most Westerners seem to cherish the idea that we are the real center, the most advanced, enlightened, and powerful area of the world. The rest of is, well, it is mostly inhabited by turban-wearing barbarians, savage tribes, or, at best, ancient and decadent empires on their way to dissolution. These Non-Westerners need our guidance if they have to attain the nirvana as defined here: democracy and economic liberism.

But the world is vast and things change. Empires are born, reach their pinnacle of greatness and then collapse while still claiming that they will last forever. That may be the destiny of that great world empire, the “Western Empire,” that started with the British and continues with the Americans.

 …click on the above link to read the rest of the article…

Energy vs DNA

Energy vs DNA

Rembrandt van Rijn Landscape With the Rest on the Flight into Egypt 1647

Hmm, energy. Is it a good idea I be drawn back into the subject? We used to do so much on the topic, Nicole Foss and I, in the first years of The Automatic Earth, and before that at the brilliant Oil Drum, where we had all those equally brilliant oil professionals to guide us on. So why revisit it? Well, for one thing, because a friend asked.

And for another because things -may have – changed over the past 15 years or so. Not that I think the peak oil idea, which is that we reached the peak in 2005 or so, changed. Yeah, unconventional oil, shale, fracking etc., came about, but that has nothing to do with peak oil. Just look at the EROEI (energy return) you get from shale. You go from 100:1 to, if you’re lucky, 5:1. You can’t build a complex society on that.

It’s not an accident that shale oil firms are going broke all over; even ultra low interest rates can’t save them. But all that still doesn’t come close to scratching the surface of our energy -or oil, for that matter.- conundrum.

I’ve never understood what the idea behind the Extinction Rebellion is. Or, you know, that they know what they’re talking about. Do they know the physics?

The general idea, yeah, but not how they aim to reach their goals. Far as I can tell, it’s about less CO2 -and methane, supposedly- emissions, but I don’t get how they want to achieve that. I’ve read some but not all of their theories, and it’s not obvious. It feels like they want less of various things, only to replace them with something else. Like they think once oil is gone, you can put wind and solar in its staid, and off we go. Tell me how wrong I am. Please do.

 …click on the above link to read the rest of the article…

Start thinking about silver before it becomes popular again

Start thinking about silver before it becomes popular again

In 663 BC, King Ashurbanipal of the Assyrian Empire invaded Egypt and sacked the city of Waset (located in modern day Luxor on the Nile River).

Ashurbanipal vanquished the city, purportedly seizing more than 75 metric tons of silver for his personal collection.

At the time in the ancient world, the prevailing ratio between gold and silver was 1:2. In other words, 75 metric tons (= 75,000 kilograms) of silver was worth 37,500 kilograms of gold, equal to $1.76 billion in today’s money.

That 1:2 gold/silver ratio had held for thousands of years across Persia, Mesopotamia, and Ancient Egypt, possibly since as early as 3,000 BC.

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But over time it has changed periodically.

By the time of Alexander the Great in the 300s BC, the Gold/Silver ratio had shifted to 1:13. Mining techniques had advanced at that point, so the ancients were able to produce higher volumes of silver than ever before.

Under Julius Caesar in Ancient Rome, one ounce of gold was worth 12 ounces of silver. In the time of Mohammed and the early days of the Islamic Caliphate in the 600s, the ratio was 1:16.

Even in the early history of the United States, the Mint and Coinage Act of 1792 established a gold/silver ratio 1:15.

(According to the law, one US dollar is defined as 1.604 grams of pure gold, or 24.1 grams of pure silver. So those pieces of paper in your wallet are not technically US dollars, but ‘Federal Reserve Notes’.)

In our modern times, the ratio average is around 55 ounces of silver per ounce of gold.

 …click on the above link to read the rest of the article…

Prying Open the Overton Window

Prying Open the Overton Window

If you’re truly interested in finding solutions to humanity’s pressing problems, then start helping us pry open the Overton Window.

The Overton Window describes the spectrum of concepts, policies and approaches that can be publicly discussed without being ridiculed or marginalized as “too radical,” “unworkable,” “crazy,” etc. The narrower the Overton Window, the greater the impoverishment of public dialog and the fewer the solutions available.

Those holding power in a socio-economic-political system that’s unraveling devote their remaining energy to closing the Overton Window so that only “approved” narratives and policies that support the status quo are “allowed” into the public sphere.

Everything outside this narrow band of status-quo-supportive narratives is immediately disparaged as “fake news,” “Kremlin talking points,” or other highly charged accusations designed to close the Overton Window–a process Noam Chomsky and Edward Herman called manufacturing consent: if no “outside” ideas are allowed, people accept the status quo as “all there is and all there can possibly be.

This narrow Overton Window benefits those in power who are “legally looting” the system.

There is another source of a narrow Overton Window: the cultural, social and political elites have no new ideas and so they cling to doing more of what’s failed, relying on the past successes of now-failing strategies to cement their power.

Michael Grant described how this failure of imagination and devotion to the past leads inevitably to decline and collapse in his excellent account The Fall of the Roman Empire, a short book I have been recommending since 2009:

There was no room at all, in these ways of thinking, for the novel, apocalyptic situation which had now arisen, a situation which needed solutions as radical as itself. (The Status Quo) attitude is a complacent acceptance of things as they are, without a single new idea.

 …click on the above link to read the rest of the article…

Blain’s Morning Porridge – October 21st 2019

Blain’s Morning Porridge  – October 21st 2019 

“If you wake up on a Casper mattress, work out with a Peloton before breakfast, Uber to your desk at a WeWork, order DoorDash for lunch, take a Lyft home, and get dinner through Postmates, you’ve interacted with seven companies that will collectively lose nearly $14 billion this year.”

It’s a big week for markets with the ECB meeting, some critical Q3 stock numbers and a host of things to worry about in terms of economic releases and the continuing slowing of the Chinese economy. Its all critical stuff for the bond market – which I reckon is a ticking time-bomb. But more about that later… For stock markets, the quote this morning sums it up – the mood is changing: forget the disruptive tech unicorns and focus on fundamentals. But, first up we really can’t ignore the Brexit mess in the UK.  Saturday’s SNAFU gives investors another chance to load up on Sterling.  At some point Brexit will be fixed.  It might be messy. 

Brexxxxxxiiiiitttt….. 

I am sure foreign readers are wondering how the Mother of All Parliaments is making such a Horlicks of the Brexit negotiations.  It really doesn’t look good does it?   On the other hand, it does show the vibrancy of our political process, and the fact individuals can force it to change. It’s just a shame so many of these individuals seen to be self-seeking egotistical numpties of the worst kind – but even Oliver Letwin has a mother that probably loves him.  

The reason Brexit is so messy is simple. It boils down to weak government – which is a recent thing here in the UK. 

 …click on the above link to read the rest of the article…

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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