Home » Posts tagged 'switzerland' (Page 2)

Tag Archives: switzerland

Preposterous Initiative

BALTIMORE – No whining and kvetching about the Deep State today. Instead, we sit at its feet, admire the cut of its jaw, and sing its praises. We are grateful to it… and not just as a source of amusement. In short, we delight in its incompetence.

o-gigantas-toy-karntif-750x400 Excavation of the “Giant of Cardiff” – but there are even more giant, more amusing and more far-reaching frauds on offer these days… Photo via paranormicstv.com

What brings this to mind is a small item in the news, which, like a pool ball careening across a felted table, knocked two or three others in their pockets before coming to rest. We had to go pluck each one out of its hole and examine it. And what a marvelous fraud each one is! Democracy! Central banking! Welfare statism!

We think of the Swiss as prudent, careful people. They have their feet on the ground and their heads screwed on straight. But they have undertaken a pathetic and preposterous initiative, one so hopelessly ill-conceived, it is worthy of American economists… or French intellectuals.

Specifically, next week the Swiss will vote on a proposal to give a “basic income” to all Swiss residents, whether they work or not: a guaranteed annual income of $30,000. You may have the same reaction we did: This is crazy!

If you can earn $30,000 a year without working, it will be hard for anyone earning less than $60,000 (about the same as $30,000 after taxes in many places) to get up in the morning and put on his overalls. Why bother?

The waiters will abandon us at our tables, our glasses unfilled and our dirty dishes still in front of us. The valet parkers will drive off in their own new cars. The burger flippers will leave their hot patties in midair as they head home.

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

Japan Prints Additional ¥10,000 Bills As People Scramble To Stash Away Cash

April 7, 2016

Japan Prints Additional ¥10,000 Bills As People Scramble To Stash Away Cash

Long before negative interest rates shifted from the monetary twilight zone into the mainstream (with some 30% of global government bonds now trading with a subzero yield), one organization wrote a report warning about the dangers of NIRP. The NY Fed. Back in 2012, NY Fed staffers wrote “If Interest Rates Go Negative . . . Or, Be Careful What You Wish For” it warned “if rates go negative, the U.S. Treasury Department’s Bureau of Engraving and Printing will likely be called upon to print a lot more currency as individuals and small businesses substitute cash for at least some of their bank balances.”

Then, last October, Bank of America looked at the savings rates across European nations which had implemented NIRP and found something disturbing: instead of achieving what what central banks had expected, it was leading to precisely the opposite outcome: “household savings rates have also risen. For Switzerland and Sweden this appears to have happened at the tail end of 2013 (before the oil price decline). As the BIS have highlighted, ultra-low rates may perversely be driving a greater propensity for consumers to save as retirement income becomes more uncertain.”

The evidence:

Which was to be expected by most people exhibiting common sense: NIRP by definition is deflationary, and as such as prompts consumers to delay consumption, and as a result to save as much as possible, if not in the banks where their savings may soon be taxed under NIRP regimes, then in cash.

And nowhere if the failure of NIRP – and unconventional monetary policy in general – more evident than what just happened in Japan, where according to Japan Times, the Finance Ministry plans to increase the number of ¥10,000 bills in circulation, amid signs that more people are hoarding cash.

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

Rothschild Humiliates Obama, Reveals That “America Is The Biggest Tax Haven In The World”

April 6, 2016

Rothschild Humiliates Obama, Reveals That “America Is The Biggest Tax Haven In The World”

In his speech yesterday, following the Treasury’s crack down on corporate tax inversions, Obama blamed “poorly designed” laws for allowing illicit money transfers worldwide. Since the speech came at a time when the entire world is still abuzz with the disclosure from the Panama Papers, Obama touched on that as well: “Tax avoidance is a big, global problem” he said on Tuesday, “a lot of it is legal, but that’s exactly the problem” because a lot of it is also illegal.

There is one major problem with that: of all the countries in the world, it is none other than the country of which Obama is president, the United States, that has become the world’s favorite offshore “tax haven” destination.

As Bloomberg, which first broke the story about Nevada’s use as a prominent tax haven early this year, writes, “Panama and the U.S. have at least one thing in common: Neither has agreed to new international standards to make it harder for tax evaders and money launderers to hide their money.”

Over the past several years, amid increased scrutiny by journalists, regulators and law enforcers, the global tax-haven landscape has shifted. In an effort to catch tax dodgers, almost 100 countries and other jurisdictions have agreed since 2014 to impose new disclosure requirements for bank accounts, trusts and some other investments held by international customers — standards issued by the Organization for Economic Cooperation and Development, a government-funded international policy group.

In short: while Obama is complaining about corporate tax avoidance and slamming Panama, he is encouraging it in the U.S.

Places like Switzerland and Bermuda are agreeing, at least in principle, to share bank account information with tax authorities in other countries. Only a handful of nations have declined to sign on. The most prominent is the U.S. The other ona is, of course, Panama, and we just saw what happened there.

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

Mises.org: And So It Begins…Negative Interest Rates Trickle Down in Japan

April 5, 2016

MISES.ORG: AND SO IT BEGINS… NEGATIVE INTEREST RATES TRICKLE DOWN IN JAPAN

The negative interest rates imposed by the Bank of Japan have begun to make their way into the Japanese banking system. Japanese trust banks have begun to impose negative interest rateson accounts held by institutional investors. It shouldn’t be surprising that Japanese banks are trying to pass on the costs imposed by the central bank’s policy of negative interest rates. It happened in Switzerland, it is happening in Japan, and it will happen in Europe. And as it becomes more widespread, investors will begun to withdraw their funds from the banking system.

Some people, such as Ben Bernanke, don’t think that will have much of an effect on the banking system.

It seems implausible, though, that modestly negative short-term rates would have large incremental effects on bank profitability or lending. Contrary to the simple story, most U.S. bank funding does not come from small depositors, but from wholesale funding markets, large institutional depositors, and foreign depositors, all of whom would presumably accept a marginally negative rate if the alternative were holding currency.

It’s actually the depositors at either end of the Bell curve who would be most likely to withdraw their funds. The depositor with $500 in the bank who is facing guaranteed losses might just pull out five $100 bills and stuff them under his mattress. Similarly, a large institutional depositor with $500 million or more in funds facing a negative interest rate of -0.10% (a cost of $500,000+ per year) might find it more worthwhile to build a safe room and hire armed guards, particularly if he thinks negative interest rates will be around for a long time. It is the depositors with in-between sums, too much to stuff under the mattress but too little to assume full responsibility for guarding their money, who will be affected the most.

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

“Unprecedented Leak” Exposes The Criminal Financial Dealings Of Some Of The World’s Wealthiest People

April 3, 2016

“Unprecedented Leak” Exposes The Criminal Financial Dealings Of Some Of The World’s Wealthiest People

An unprecedented leak of more than 11 million documents, called the “Panama Papers“, has revealed the hidden financial dealings of some of the world’s wealthiest people, as well as 12 current and former world leaders and 128 more politicians and public officials around the world.

More than 200,000 companies, foundations and trusts are contained in the leak of information which came from a little-known but powerful law firm based in Panama called Mossack Fonseca, whose files include the offshore holdings of drug dealers, Mafia members, corrupt politicians and tax evaders – and wrongdoing galore.

The law firm is one of the world’s top creators of shell companies, which can be legally used to hide the ownership of assets. The data includes emails, contracts, bank records, property deeds, passport copies and other sensitive information dating from 1977 to as recently as December 2015.

It allows a never-before-seen view inside the offshore world — providing a day-to-day, decade-by-decade look at how dark money flows through the global financial system, breeding crime and stripping national treasuries of tax revenues.

Here is the brief summary of how these documents have been revealed, via the Sueddeutsche Zeitung:

Over a year ago, an anonymous source contacted the Süddeutsche Zeitung (SZ) and submitted encrypted internal documents from Mossack Fonseca, a Panamanian law firm that sells anonymous offshore companies around the world. These shell firms enable their owners to cover up their business dealings, no matter how shady.

In the months that followed, the number of documents continued to grow far beyond the original leak. Ultimately, SZ acquired about 2.6 terabytes of data, making the leak the biggest that journalists had ever worked with. The source wanted neither financial compensation nor anything else in return, apart from a few security measures.

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

“Sweden Most At Risk Of Asset Bubble” Moody’s Warns, After Taking A Look At Swedish House Prices

March 16, 2016

“Sweden Most At Risk Of Asset Bubble” Moody’s Warns, After Taking A Look At Swedish House Prices

Last September, in the aftermath of Sweden going full NIRP, we warned that “Sweden Goes Full Krugman, Gets Massive Housing Bubble“, in which we showed the unprecedented surge in Swedish home prices, which have been the one asset class to “benefit” the from the Riksbank’s ultra loose monetary policy hoping to stimulate inflation, even as overall inflation has failed to materialize.

Since then things have only gone more surreal, and the chart below shows what has happened to Swedish home prices in recent months.

Today, six months after our most recent observations on the state of the Swedish housing bubble, Moody’s chimes in and warns that as a result of NIRP, the country is most at risk of an “ultimately unsustainable asset bubble”:

… the unintended consequences of the ultra-loose monetary policy are becoming increasingly apparent — in the form of rapidly rising house prices and persistently strong growth in mortgage credit”, adds Ms Muehlbronner. In Moody’s view, these trends will likely continue as interest rates will remain low, raising the risk of a house price bubble, with potentially adverse effects on financial stability as and when house prices reverse trends. In all three countries, households are highly leveraged, and while they also have high levels of financial assets, returns on these assets will be under increasing pressure if the negative interest and yield environment persists.

And adds:

Moody’s believes that the Riksbank will find it difficult to achieve its objective of significantly pushing up consumer price inflation in a deflationary global environment, while the sustained and strong growth in mortgage lending and house prices risks leading to an (ultimately unsustainable) asset bubble.

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

Secret Monetary Group Warns a Catastrophe Is Coming

March 10, 2016

Secret Monetary Group Warns a Catastrophe Is Coming

This is just the tip of the iceberg.

The Bank for International Settlements is nothing if not obscure. As the central bankers’ bank, it seems little-more than a back-door, private club for monetary elites to rub shoulders. And it’s located in Switzerland which has always carried a reputation for financial secrecy.

Then it has this going for it – John Keynes of “Keynesian economic theory” opposed its dissolution back in the 1940s. His was the kind of thinking that has largely influenced central banks to hijack our economies with manipulative monetary policies! So you’d probably think I hate these guys.

But you’ve got to give credit where credit is due. The Bank for International Settlements is one of the few financial institutions that warned of dangers to the global financial system as early as 2003.

So by time the financial crisis struck, they’d been warning about it for years. Its former chief economist, William White, even dared to challenge former Fed Chair Alan Greenspan about cheap money policies that helped start the crisis!

Once again, this group is on the right side of history.

It just warned about a “gathering storm” in the global economy as central banks seem to be running out of options. They’ve seen right through this “recovery” and warned that unprecedented debt levels would put the world economy in worse shape than before the 2008 crash.

Because like with any addiction, there is a point where increased stimulus just doesn’t work anymore.

Just this week, China reported a 25.4% year-over-year decline in exports, despite continued strong economic stimulus from the government. Now, they simply pledge more stimulus like every central bank in the world.

Then there’s Japan, whose economy remains in a coma after the most aggressive QE of all developed nations. Four of the last seven quarters have been negative, including the fourth quarter of 2015.

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

Why Helicopter Money Can’t Save Us: We’ve Already Been Doing It For 8 Years

March 7, 2016

Why Helicopter Money Can’t Save Us: We’ve Already Been Doing It For 8 Years

There’s a lot of talk going around these days about “helicopter money.”

For those unfamiliar, it’s billed as a kind of last Keynesian resort when ZIRP, NIRP, and QE have all failed to boost aggregate demand and juice inflation.

For instance, HSBC said the following late last month: “If central banks do not achieve their medium-term inflation targets through NIRP, they may have to adopt other policy measures: looser fiscal policy and even helicopter money are possible in scenarios beyond QE and negative rates.”

And here’s Citi’s Willem Buiter from Septemeber: “Helicopter money drops would be the best instrument to tackle a downturn in all DMs.”

So what exactly is this “helicopter money” that is supposed to provide a lifeline when all of central banks’ other forays into unconventional policy have demonstrably failed? Well, here’s Buiter to explain how it works in theory (this is the China example, but it’s the same concept everywhere else):

Now whether it’s “fiscally, financially and macro-economically prudent in current circumstances,” (or any circumstances for that matter) is certainly questionable, but what’s not questionable is that it is indeed feasible.

How do we know? Because we’ve been doing it for 8 long years.

If you think about what Buiter says above, it’s simply deficit financing. The government prints one paper liability and buys it from itself with another paper liability that the government also prints.

Sound familiar? It’s called QE.

The first-best would be for the central government to issue bonds to fund this fiscal stimulus and for the PBOC to buy them and either hold them forever or cancel them, with the PBOC monetizing these Treasury bond purchases. Such a ‘helicopter money drop’ is fiscally, financially and macro-economically prudent in current circumstances, with inflation well below target and likely to fall further.

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

The Global Run On Physical Cash Has Begun: Why It Pays To Panic First

February 28, 2016

The Global Run On Physical Cash Has Begun: Why It Pays To Panic First

Back in August 2012, when negative interest rates were still merely viewed as sheer monetary lunacy instead of pervasive global monetary reality that has pushed over $6 trillion in global bonds into negative yield territory, the NY Fed mused hypothetically about negative rates and wrote “Be Careful What You Wish For” saying that “if rates go negative, the U.S. Treasury Department’s Bureau of Engraving and Printing will likely be called upon to print a lot more currency as individuals and small businesses substitute cash for at least some of their bank balances.”

Well, maybe not… especially if physical currency is gradually phased out in favor of some digital currency “equivalent” as so many “erudite economists” and corporate media have suggested recently, for the simple reason that in a world of negative rates, physical currency – just like physical gold – provides a convenient loophole to the financial repression of keeping one’s savings in digital form in a bank where said savings are taxed at -0.1%, or -1% or -10% or more per year by a central bank and government both hoping to force consumers to spend instead of save.

For now cash is still legal, and NIRP – while a reality for the banks – has yet to be fully passed on to depositors.

The bigger problem is that in all countries that have launched NIRP, instead of forcing spending precisely the opposite has happened: as we showed last October, when Bank of America looked at savings patterns in European nations with NIRP, instead of facilitating spending, what has happened is precisely the opposite: “as the BIS have highlighted, ultra-low rates may perversely be driving a greater propensity for consumers to save as retirement income becomes more uncertain.”

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

Demand For Big Bills Soars As NIRP-Fearing Japanese Stuff Safes With 10,000-Yen Notes

February 25, 2016

Demand For Big Bills Soars As NIRP-Fearing Japanese Stuff Safes With 10,000-Yen Notes

Earlier this week, we were amused but not at all surprised to learn that Japanese citizens are buying safes like they’re going out of style.

The reason: negative rates and the incipient fear of a cash ban. “Look no further than Japan’s hardware stores for a worrying new sign that consumers are hoarding cash–the opposite of what the Bank of Japan had hoped when it recently introduced negative interest rates,” WSJ wrote. “Signs are emerging of higher demand for safes—a place where the interest rate on cash is always zero, no matter what the central bank does.”

Put simply, the public has suddenly become aware of what it means when central banks adopt negative rates. The NIRP discussion escaped polite circles of Keynesian PhD economists long ago, and now it’s migrated from financial news networks to Main Street.

Although banks have thus far been able to largely avoid passing on negative rates to savers, there’s only so long their resilience can last. At some point, NIM will simply flatline and if that happens just as a global recession and the attendant writedowns a downturn would entail occurs, then banks are going to need to offset some of the pain. That could mean taxing deposits.

As we noted on Monday, circulation of the 1,000 franc note soared 17% last year in Switzerland in the wake of the SNB’s plunge into the NIRP Twilight Zone. As it turns out, demand for big bills is soaring in Japan as well.

“Demand for 10,000-yen bills is steadily rising in Japan, even as the nation’s population falls and the use of credit cards and other forms of electronic payment increases,” Bloomberg writes.

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

Citi: “We Have A Problem”

February 24, 2016

Citi: “We Have A Problem”

In his latest must read presentation, Citigroup’s Matt King continues to expose and mock the increasing helplessness and cluelessness of central bankers, something this website has done since 2009 knowing full well how it all ends (incidentally not in a deflationary whimper, quite the opposite).

Take Matt King’s September 2015 piece in which he warned that one of the most serious problems facing the world is that we may have hit its debt ceiling beyond which any debt creation is merely pushing on a string leading to slower growth and further deflation. Or his more recent report which explained why despite aggressive easing by the BOJ and ECB, asset prices continue to fall as a result of quantitative tightening by EM reserve managers and China, which are soaking up the same liquidity injected by DM central banks.

Overnight, he put it all together in a simple and elegant way that only Matt King can do in a presentation titled ominously “Don’t look down: You might find too many negatives.”

In it he first proceeds to lay out how things have dramatically changed in recent months compared to prior years: first, the “appalling” asset returns and the “rising dislocations” between asset prices in recent months and especially in 2016, or a broken market which is not just about Crude (with correlation regimes flipping back and forth), or China (as YTD bank returns in Japan and Switzerland are far worse than those in the China-exposed Eurozone), as appetite for risk has effectively disappeared. Worse, as the Japanese NIRP showed, incremental easing in the form of QE actually triggered ongoing weakness, sending both the Nikkei and the USDJPY plunging, suggesting that central bank grip on markets is almost gone.

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

Safes Sell Out In Japan, 1,000 Franc Note Demand Soars As NIRP Triggers Cash Hoarding

February 22, 2016

Safes Sell Out In Japan, 1,000 Franc Note Demand Soars As NIRP Triggers Cash Hoarding

Negative rates may not have found their way to bank deposits in most locales (yet), but that doesn’t mean the public isn’t starting to see the writing on the wall.

At first, NIRP was an anomaly. An obscure policy tool that most analysts and market watchers assumed would be implemented on a temporary basis in a kind of “let’s see if this is even possible” experiment with an idea that, from a common sense perspective, makes no sense.

But then a funny thing happened. Central banks from Denmark to Sweden to Switzerland went negative and stayed there. They even doubled down, taking rates even more negative and before you knew it, the public started to catch on.

When NIRP failed to resuscitate global growth and trade, the cash ban calls began. The thinking is simple (if crazy): if you do away with physical banknotes, the effective lower bound is thereby eliminated. You can make rates as negative as you like because the public has no recourse as people aren’t able to push back by eschewing their bank accounts the mattress.

If that seems far-fetched, consider that the ECB is seriously considering pulling the €500 euro note and the calls are growing louder for the Fed to drop the $100 bill. Of course officials are pitching the big bill bans as an attempt to fight crime – because only a criminal would pay with a $100. But the underlying push is for a cashless society wherein monetary authorities can effectively force citizens to spend and thereby boost the economy by simply making interest rates deeply negative.

Now that the cash ban calls have gotten sufficiently loud to be heard by the generally clueless masses and now that the likes of Jose Canseco are shouting about negative rates, savers are beginning to pull their money out of the banks.

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

Larry Summers Launches The War On Paper Money: “It’s Time To Kill The $100 Bill”

February 16, 2016

Larry Summers Launches The War On Paper Money: “It’s Time To Kill The $100 Bill”

Yesterday we reported that the ECB has begun contemplating the death of the €500 EURO note, a fate which is now virtually assured for the one banknote which not only makes up 30% of the total European paper currency in circulation by value, but provides the best, most cost-efficient alternative (in terms of sheer bulk and storage costs) to Europe’s tax on money known as NIRP.

That also explains why Mario Draghi is so intent on eradicating it first, then the €200 bill, then the €100 bill, and so on.

We also noted that according to a Bank of America analysis, the scrapping of the largest denominated European note “would be negative for the currency”, to which we said that BofA is right, unless of course, in this global race to the bottom, first the SNB “scraps” the CHF1000 bill, and then the Federal Reserve follows suit and listens to Harvard “scholar” and former Standard Chartered CEO Peter Sands who just last week said the US should ban the $100 note as it would “deter tax evasion, financial crime, terrorism and corruption.”

Well, not even 24 hours later, and another Harvard “scholar” and Fed chairman wannabe, Larry Summers, has just released an oped in the left-leaning Amazon Washington Post, titled “It’s time to kill the $100 bill” in which he makes it clear that the pursuit of paper money is only just starting. Not surprisingly, just like in Europe, the argument is that killing the Benjamins would somehow eradicate crime, saying that “a moratorium on printing new high denomination notes would make the world a better place.”

Yes, for central bankers, as all this modest proposal will do is make it that much easier to unleash NIRP, because recall that of the $1.4 trillion in total U.S. currency in circulation, $1.1 trillion is in the form of $100 bills.

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

637 Rate Cuts And $12.3 Trillion In Global QE Later, World Shocked To Find “Quantitative Failure”

February 12, 2016

637 Rate Cuts And $12.3 Trillion In Global QE Later, World Shocked To Find “Quantitative Failure”

2016 is shaping up to be the year that everyone finally comes to terms with the fact that the monetary emperors truly have no clothes.

To be sure, it’s been a long time coming. For nearly 8 years, market participants and economists convinced themselves that the answer was always “more Keynes.” Global trade still stagnant? Cut rates. Economic growth still stuck in neutral? Buy more assets.

It was almost as if everyone lost sight of the fact that if printing fiat scrip and tinkering with the cost of money were the answers, there would never be any problems. That is, policy makers can always hit ctrl+P and/or move rates around. But in order to resuscitate anemic aggregate demand and revive inflation, you need to tackle the core problems facing the global economy – not paper over them (and we mean “paper over them” in the most literal sense of the term).

Well late last month, central banks officially lost control of the narrative. Kuroda’s move into negative territory reeked of desperation and given the surging JPY and tumbling Japanese stocks, it’s pretty clear that the half-life on central bank easing has fallen dramatically.

And so, as the market wakes up from the punchbowl party with a massive hangover, everyone is suddenly left to contemplate “quantitative failure.” Below, courtesy of BofA’s Michael Hartnett is a bullet point summary of 8 years spent chasing the dragon… and a list of the disappointing results.

* * *

From BofA

Whether the recent tipping point was the Fed hike, negative rates in Europe & Japan, or simply the growing market dislocations and macro misallocation of resources and wealth, the deflationary theme of “Quantitative Failure” is stalking the financial markets. A multi-year period of major policy intervention & “financial repression” is ending with weak economic growth & investors rebelling against QE.

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

This Is The NIRP “Doom Loop” That Threatens To Wipeout Banks And The Global Economy

February 12, 2016

This Is The NIRP “Doom Loop” That Threatens To Wipeout Banks And The Global Economy

Remember the vicious cycle that threatened the entire European banking sector in 2012?

It went something like this: over indebted sovereigns depended on domestic banks to buy their debt, but when yields on that debt spiked, the banks took a hit, inhibiting their ability to fund the sovereign, whose yields would then rise some more, further curtailing banks’ ability to help out, and so on and so forth.

Well don’t look now, but central bankers’ headlong plunge into NIRP-dom has created another “doom loop” whereby negative rates weaken banks whose profits are already crimped by the new regulatory regime, sharply lower revenue from trading, and billions in fines. Weak banks then pull back on lending, thus weakening the economy further and compelling policy makers to take rates even lower in a self-perpetuating death spiral. Meanwhile, bank stocks plunge raising questions about the entire sector’s viability and that, in turn, raises the specter of yet another financial market meltdown.

Below, find the diagram that illustrates this dynamic followed by a bit of color from WSJ:

From WSJ:

In a way, the move below zero was a gamble. The theory went like this: Banks would take a hit, but negative rates would get the economy moving. A stronger economy would, in turn, help the banks recover.

It appears that wager isn’t working.

The consequences are deeply worrying. Weak banks may now drag the economy down further. And with the economy weak and deflation—a damaging spiral of falling wages and prices—looming, central banks that have gone negative will be loath to turn around and raise rates.

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

Tag Archives: switzerland

Content

Post categories

Economic Links

Energy/Resource Links

Environmental Links

Geopolitical Links

Liberty Links

News Links

Other Links

Survival Skills

Post Archives by Category

Post navigation

Latest Posts