These are strange monetary times, with negative interest rates and central bankers deemed to be masters of the universe. So maybe we shouldn’t be surprised that politicians and central bankers are now waging a war on cash. That’s right, policy makers in Europe and the U.S. want to make it harder for the hoi polloi to hold actual currency.
Mario Draghi fired the latest salvo on Monday when he said the European Central Bank would like to ban €500 notes. A day later Harvard economist and Democratic Party favorite Larry Summers declared that it’s time to kill the $100 bill, which would mean goodbye to Ben Franklin. Alexander Hamilton may soon—and shamefully—be replaced on the $10 bill, but at least the 10-spots would exist for a while longer. Ol’ Ben would be banished from the currency the way dead white males like him are banned from the history books.
Limits on cash transactions have been spreading in Europe since the 2008 financial panic, ostensibly to crack down on crime and tax avoidance. Italy has made it illegal to pay cash for anything worth more than €1,000 ($1,116), while France cut its limit to €1,000 from €3,000 last year. British merchants accepting more than €15,000 in cash per transaction must first register with the tax authorities. Fines for violators can run into the thousands of euros. Germany’s Deputy Finance Minister Michael Meister recently proposed a €5,000 cap on cash transactions. Deutsche Bank CEO John Cryan predicted last month that cash won’t survive another decade.
The enemies of cash claim that only crooks and cranks need large-denomination bills. They want large transactions to be made electronically so government can follow them. Yet these are some of the same European politicians who blew a gasket when they learned that U.S. counterterrorist officials were monitoring money through the Swift global system. Criminals will find a way, large bills or not.
…click on the above link to read the rest of the article…
A protest by French farmers has taken place in Paris. Large crowds gathered to decry the low prices of agricultural produce. Prices are being driven down by the sanctions exchange with Russia, which has caused domestic produce to flood the French market.
The protest started near the Gare de Lyon railway station, but then moved to the Porte de Vincennes – one of the city gates in Paris.
There were police and fire brigades on the scene, ready to intervene, but it didn’t run to that.
It all started in mid/late 2014, when the first whispers of a Fed rate hike emerged, which in turn led to relentless increase in the value of the US dollar and the plunge in the price of oil and all commodities, unleashing the worst commodity bear market in history.
The immediate implication of these two concurrent events was missed by most, although we wrote about it and previewed the implications in November of that year in “How The Petrodollar Quietly Died, And Nobody Noticed.”
The conclusion was simple: Fed tightening and the resulting plunge in commodity prices, would lead (as it did) to the collapse of the great petrodollar cycle which had worked efficiently for 18 years and which led to petrodollar nations serving as a source of demand for $10 trillion in US assets, and when finished, would result in the Quantitative Tightening which has offset all central bank attempts to inject liquidity in the markets, a tightening which has since been unleashed by not only most emerging markets and petro-exporters but most notably China, and whose impact has been to not only pressure stocks lower but bring economic growth across the entire world to a grinding halt.
BALTIMORE – The Dow rose 126 points on Thursday – just shy of 1%. Not enough to reverse the market’s apparent downward bias [ed note: the rebound gathered pace on Friday].
Stocks are most likely headed down because the thing that sent them up has come to an end. Here is a chart that tells the tale:
Federal Reserve assets vs. the S&P 500 Index
As you can see, over the last six years or so, gains for the S&P 500 have closely tracked the ballooning of the Fed’s balance sheet under QE. After shelling out almost $4 trillion on bonds, the Fed’s QE is on pause. And stocks are struggling. Coincidence? We don’t think so.
Deep State Cronies in Action
We stuffed a few copies of the Hindustan Times in our bag before boarding the plane back from Mumbai. On the front page, French president Francois Hollande is receiving an awkward hug from India’s top man, Narendra Modi.
Over in the entertainment section is another note of interest. Actress Julie Gayet has put together a film production company. And lucky for her – she has backing from one of India’s biggest conglomerates, the Reliance group.
Nowhere does the paper mention that Ms. Gayet is Mr. Hollande’s main squeeze. She is the woman for whom he snuck away on a motor scooter from the presidential palace, where he lived with his then First Girlfriend, journalist Valerie Trierweiler.
Mr. Hollande and his old squeeze Valerie Trierweiler (left) and her replacement Julie Gayet (right)
Reliance is owned by the Ambani family, which lives in Mumbai in the most expensive house ever built. It is 60-story skyscraper, put up at a cost of $1 billion, which now takes a staff of 600 to keep the furniture dusted. On Sunday, the two events were reported. On Monday, the paper added the connective tissue. It announced that India and France had inked “$15 billion in business deals.”
…click on the above link to read the rest of the article…
Thousands of people marched in 70 French cities, including Paris, to demand immediate action to stop France’s ongoing state of emergency and openly voice outrage over government plans to revoke the French citizenship of dual nationals, many of them Muslims, convicted of terrorism.
Up to 20,000 protesters – many of them members of human rights groups, political parties and trade unions – took part in a peaceful protest in Paris on Saturday, RTL reported the organizers as saying.
According to police estimates, some 5,500 people gathered in the heart of the French capital, between Place de la République and the Palais-Royal, holding banners that read: “State of emergency, police state” and “My France of liberties, where are you?”
“I am here to protest against the state of emergency and against the deprivation of nationality for dual nationals. That’s important because we saw a lot of drifts during the state of emergency, some rallies were prohibited, some people were arrested just for protesting peacefully. That shocks me,” one activist told RT’s Ruptly video agency.
“The state is allowing itself to take absolutely catastrophic decisions for the life and future of liberty of France,” Youssef Boussoumah, member of the Indigenes de la Republique party, said.
One woman at the Paris rally, referring to Islamic State, told RTL: “The state of emergency is until when? The end of Daesh? 10 years? Never?”
Another participant, Grenut Louise, a student, told Le Monde:”They impose this state of emergency on us by pure political calculation, the government has no other card to play, except for the security-related one.”
“It is cynical to play on our fears to impose this state of permanent exception when we already have laws and means to fight terrorism,” she added.
…click on the above link to read the rest of the article…
The simple fact of the matter is that gold is no longer money and hasn’t been treated that way in decades. It is a frustrating and often woeful outcome, but deference isn’t a reason to color judgement. As an investment, which is more like what gold has become, it isn’t all that straight, either. Gold behaves in many circumstances erratically; often violently so. In 2008, gold crashed three times; but it also came back (and then some) three times. The metal remains stuck in some orthodox limbo of duality, sometimes acting an investment while at others, more rarely, as almost reclaiming its former status.
The junction of that dyad format is wholesale collateral. It is a difficult and dense topic because it plumbs the very depths of the wholesale arrangement – factors like leasing, swaps and collateralized lending through binary bespoke arrangements.It is there that I think it helps to form the narrative, however, starting by reviewing what the BIS was up to in late 2009 and early 2010. I am going to borrow heavily from an article I wrote in April 2013 that describes the events in question but this is one of those times when you should read the whole thing.
Back in July 2010, the Wall Street Journal caused some commotion when it happened to notice in the annual report for the Bank for International Settlements the sudden appearance of gold swap operations to the tune of 346 tons. Subsequent investigation by media outlets, including the Financial Times, reported that the BIS had indeed swapped in 346 tons of gold holdings from ten European commercial banks. That was highly unusual in that gold swaps are typically conducted between and among central banks.
…click on the above link to read the rest of the article…
RBS has advised clients to brace for a “cataclysmic year” and a global deflationary crisis, warning that major stock markets could fall by a fifth and oil may plummet to $16 a barrel.
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Andrew Roberts, the bank’s research chief for European economics and rates, said that global trade and loans are contracting, a nasty cocktail for corporate balance sheets and equity earnings.
Lower oil prices could push leading economies into deflation. Just look at the latest inflation rates – calculated before oil fell below $30 a barrel. In the UK and France, inflation is running at an almost invisible 0.2 per cent per annum; Germany is at 0.3 per cent and the US at 0.5 per cent.
Almost certainly these annual rates will soon fall below zero and so, at the very least, we shall be experiencing ‘technical’ deflation. Technical deflation is a short period of gently falling prices that does no harm. The real thing works like a doomsday machine and engenders a downward spiral that is difficult to stop and brings about a 1930s style slump.
Referring to the risk of deflation, two American central bankers indicated their worries last week. James Bullard, the head of the St Louis Federal Reserve, said falling inflation expectations were “worrisome”, while Charles Evans of the Chicago Fed, said the situation was “troubling”.
In March 1969, while Buba was busy in the quicksand of its swaps and forward dollar interventions, Netherlands Bank (the Dutch central bank) had instructed commercial banks in Holland to pull back funds from the eurodollar market in order to bring up their liquidity positions which had dwindled dangerously during this increasing currency chaos. At the start of April that year, the Swiss National Bank (Swiss central bank) was suddenly refusing its own banks dollar swaps in order that they would have to unwind foreign funds positions in the eurodollar market. The Bank of Italy (the Italian central bank) had ordered some Italian banks to repatriate $800 million by the end of the second quarter of 1969. It also raised the premium on forward lire at which it offered dollar swaps to 4% from 2%, discouraging Italian banks from engaging in covered eurodollar placements.
The “rising dollar” of 1969 had somehow become anathema to global banking liquidity even in local terms.
The FOMC, which had perhaps the best vantage point with which to view the unfolding events, documented the whole affair though stubbornly and maddeningly refusing to understand it all in greater context of radical paradigm banking and money alterations. In other words, the FOMC meeting MOD’s for 1968 and 1969 give you an almost exact window into what was occurring as it occurred, but then, during the discussions that followed, degenerating into confusion and mystification as these economists struggled to only frame everything in their own traditional monetary understanding – a religious-like tendency that we can also appreciate very well at this moment.
At the April 1969 FOMC meeting, Charles A. Coombs, Special Manager of the System Open Market Account, reported that the bank liquidity issue then seemingly focused on Germany was indeed replicated in far more countries.
…click on the above link to read the rest of the article…
The finance ministers and representatives of central banks from the world’s ten largest “capitalist” economies gathered in Bonn, West Germany on November 20, 1968. The global financial system was then enthralled by a third major currency crisis of the past year or so and there was great angst and disagreement as to what to do about it. While sterling had become something of a recurring devaluation tendency and francs perpetually, it seemed, in disarray, this time it was the Deutsche mark that was the great object of conjecture and anger. What happened at that meeting, a discussion that lasted thirty-two hours, depends upon which source material you choose to dissect it. From the point of view of the Germans, it was a convivial exchange of ideas from among partners; the Americans and British, a sometimes testy and perhaps heated debate about clearly divergent merits; the French were just outraged.
The communique issued at the end of the “conference” only said, “The ministers and governors had a comprehensive and thorough exchange of views on the basic problems of balance-of-payments disequilibria and on the recent speculative capital movements.” In reality, none of them truly cared about the former except as may be controlled by the latter. These “speculative capital movements” became the target of focused energy which would not restore balance and stability but ultimately see the end of the global monetary system.
Some background is needed before jumping into West Germany’s financial energy. The gold exchange standard under the Bretton Woods framework had appeared to have lasted as far as this monetary conference, but it had ended in practicality long before. In the late 1950’s, central banks, the Federal Reserve primary among them, had rendered gold especially and increasingly irrelevant in settling the world’s trade finance.
…click on the above link to read the rest of the article…
Remember when showing ‘progress’ in Europe was as simple as pointing to your high stock market or low bond yields to “prove” everything is awesome.
Since 2012, when Mr Hollande came to power, more than 600,000 people have joined the ranks of the unemployed at a time when joblessness has decreased in most of the other large European economies.
Well for Francois Hollande, the days of hiding behing manipulated data are over and the open kimono reveals a nation whose stability is wracked by record unemployment. In a desperate-for-re-election speech today, The FT reports that socialist leader Hollande admitted his policies needed reform and that France is an economic “state of emergency.”
In a turn towards pro-business policies (sacre bleu!), Hollande prescribed new measures which involve the creation of 500,000 vocational training schemes, additional subsidies for small companies and a programme to boost apprenticeships.
With 15 months before the presidential election, the sense of urgency is also political for the socialist leader, who has tied his decision to run for a second mandate to his ability to curb unemployment significantly this year.
“We have to act so that growth becomes more robust and job creation more abundant,” Mr Hollande said in an address to unions and business leaders. “Our country has been facing structural unemployment for too long and it needs to reform.”
Under the plan, which takes effect immediately, companies with fewer than 250 workers will receive a €2,000 payout for hiring youths and unemployed people for contracts lasting more than six months at salaries below 1.3 times the minimum wage. After two years, the subsidy will become permanent in the form of a decrease in social security charges. The tax breaks previously announced will become permanent beyond 2017, he said.
The new measures, which will cost about €2bn, are seen as aimed at this political goal.
…click on the above link to read the rest of the article…
Following an epic global stock rout, one which has wiped out trillions in market capitalization, it has rapidly become a consensus view (even by staunch Fed supporters such as the Nikkei Times) that the Fed committed a gross policy mistake by hiking rates on December 16, so much so that this week none other than former Fed president Kocherlakota openly mocked the Fed’s credibility when he pointed out the near record plunge in forward breakevens suggesting the market has called the Fed’s bluff on rising inflation.
As we pointed out in early December, conveniently we have a great historical primer of what happened the last time the Fed hiked at a time when it misread the US economy, which was also at or below stall speed, and the Fed incorrectly assumed it was growing.
We are talking of course, about the infamous RRR-hike of 1936-1937, which took place smack in the middle of the Great Recession.
Here is what happened then, as we described previously in June.
[No episode is more comparable to what is about to happen] than what happened in the US in 1937, smack in the middle of the Great Depression.
…click on the above link to read the rest of the article…
The Great War ended on the 11th hour of November 11th, 1918, when the signed armistice came into effect.
Though this peace would signal the end of the war, it would also help lead to a series of further destruction: this time the destruction of wealth and savings.
The world’s most famous hyperinflation event, which took place in Germany from 1921 and 1924, was a financial calamity that led millions of people to have their savings erased.
The Treaty of Versailles
Five years after the assassination of Archduke Franz Ferdinand, the Treaty of Versailles was signed, officially ending the state of war between Germany and the Allies.
The terms of the agreement, which were essentially forced upon Germany, made the country:
Accept blame for the war
Agree to pay £6.6 billion in reparations (equal to $442 billion in USD today)
Forfeit territory in Europe as well as its colonies
Forbid Germany to have submarines or an air force, as well as a limited army and navy
Accept the Rhineland, a strategic area bordering France and other countries, to be fully demilitarized.
“I believe that the campaign for securing out of Germany the general costs of the war was one of the most serious acts of political unwisdom for which our statesmen have ever been responsible.”
– John Maynard Keynes, representative of the British Treasury
Keynes believed the sums being asked of Germany in reparations were many times more than it was possible for Germany to pay. He thought that this could create large amounts of instability with the global financial system.
The Catalysts
1. Germany had suspended the Mark’s convertibility into gold at the beginning of war.
This created two separate versions of the same currency:
Goldmark: The Goldmark refers to the version on the gold standard, with 2790 Mark equal to 1 kg of pure gold. This meant: 1 USD = 4 Goldmarks, £1 = 20.43 Goldmarks
…click on the above link to read the rest of the article…
Another day, another fresh all-time record low in The Baltic Dry Index as Deutsche Bank’s “perfect storm” appears ever closer on the horizon. Plunging 4.7% overnight to 445 points, this is 20% lower than the previous record low in 1986 and as one strategist warns, “It’s a brutal start of the year, there’s just nowhere to hide on the market.”
“This looks like a ripple effect from what happened back in August,” adds Alexandre Baradez, chief market analyst at IG France, hopefully looking forward, “it might continue for a few weeks, but given China’s central bank fire power, it shouldn’t last for more than that.”
But Deutsche’s “perfect storm” looms…
The improvement in dry bulk rates we expected into year-end has not materialized. And based on conversations we’ve had with several industry contacts, we believe a number of dry bulk companies are contemplating asset sales to raise liquidity, lower daily cash burn, and reduce capital commitments. The glut of “for sale” tonnage has negative implications for asset and equity values. More critically, it can easily lead to breaches in loan-to-value covenants at many dry bulk companies, shortening the cash runway and likely necessitating additional dilutive actions.
Dry bulk companies generally have enough cash for the next 1yr or so, but most are not well positioned for another leg down in asset values
The majority of publically listed dry bulk companies have already taken painful measures to adapt to the market- some have filed Chapter 11, others have issued equity at deep discounts, and most have tried to delay/defer/cancel newbuilding deliveries.
The additional cushion, however, is likely not enough if asset values take another leg down; especially given the majority of publically listed dry bulk companies are already near max allowable LTV levels.
…click on the above link to read the rest of the article…
One of the reactors at France’s Flamanville Nuclear Power Plant has been shut down due to technical failure. No radiation leak has been reported, with the plant operator saying that the incident has had no impact on the environment or safety.
Employees of the nuclear power plant in Flamanville discovered a technical problem at the reactor number two on Tuesday at around 6:15pm. The pressurized water reactor was switched from the faulty main transformer to a backup, but on Wednesday the Electricite de France S.A. (EDF) decided to fully stop work of the reactor.
A preliminary diagnosis will be carried before proceeding to do maintenance work on the unit. No restart date has been announced, as the electric company is still examining the fault.
“This event has no impact on plant safety, or the environment”, EDF emphasized.
Flamanville Nuclear Power Plant is located at Flamanville, Manche houses two pressurized water reactors (PWRs) that produce 1.3 GWe each. The reactors, amounting to some 4 percent of France’s total nuclear generation, went into service in 1986 and 1987. A third, a €10.5 billion ($11.48bn) Areva European Pressurized Reactor, with a capacity of 1,650 MWe is currently being constructed on site.
France has 58 nuclear reactors operated by EDF with total capacity of 63.2 GWe. The country derives two thirds of its electricity from nuclear generation.
Washington removed Dominique Strauss-Kahn as the leading contender for the French presidency and as director of the IMF by framing him on phony charges of raping a New York hotel maid. The obviously false charge was proven to be totally fabricated and had to be dropped. In the meantime Strass-Kahn had been forced to resign from the IMF and to drop out of the French election. Washington regarded Strauss-Kahn as insufficiently compliant with Washington’s agendas and moved him aside.
Washington got its vassal, Hollande, elected President of France, and replaced Strauss-Kahn at the IMF with the “rhymes-with-witch” Christine LaGarde.
LaGarde serves only the One Percent. She overturned the decision by the IMF’s professional staff that the Greek debt had to be written down to a sum that the country could afford to service. Instead, LaGarde enabled the One Percent to loot the Greek nation and the Greek people, forcing many young Greek women into prostitution in order to have money for food.
As Stephen Lendman points out below, LaGarde’s crimes have caught up with her. When she was French finance minister she ruled against the interest of France in order to benefit the tycoon Bernard Tapie. Corrupt prosecutors tried to cover it up, but the French judicial system has ruled that she must stand trial. http://www.wsj.com/articles/imf-chief-lagarde-ordered-to-stand-trial-in-france-1450373023 Despite the judicial order that she stand trial, she has not had to resign as IMF director. The One Percent protects its own. The IMF’s executive board “continues to express its confidence in the Managing Director’s ability to effectively carry out her duties.”
No such expression of confidence was given to Strauss-Kahn when he was arrested on obviously false charges.
IMF Chief Lagarde to Stand Trial
by Stephen Lendman
Charges are unrelated to her greatest crimes – representing the US-controlled IMF and Western monied interests at the expense of beneficial social change.
…click on the above link to read the rest of the article…
Federal Reserve assets vs. the S&P 500 Index
Mr. Hollande and his old squeeze Valerie Trierweiler (left) and her replacement Julie Gayet (right)
