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Turkey Rules Out Capital Controls As Germany Says IMF Bailout “Would Be Helpful”

During this morning’s conference call organized by Citi, HSBC and other banks with “thousands”  of investors, Turkey’s Treasury and Finance Minister Berat Albayrak – the Jared Kushner of Turkey  – eased nerves when in an attempt to bolster confidence, said that capital controls were ruled out as a policy option for Turkey. As a reminder, capital controls are widely seen as the “worst case scenario” for Turkey as they could precipitate “self-fulfilling contagion”, and lead to broader capital flight from the EM space.

Albayrak also said that reining in inflation and narrowing the current-account deficit were policy priorities, although he provided no details on how we would do that absent raising interest rates – an outcome that Erdogan has decried as unlikely – with both an IMF bailout and capital controls off the table.

Discussing Turkey’s runaway inflation, Albayrak said the central bank alone wouldn’t be able to rein it in without tighter fiscal policy, although he has yet to provide any details on what options are on the table. In the meantime, GDP is set to slow further in the medium term from 7.4% expansion last year.

Still, after losing as much as a quarter of its value in the past few weeks after the U.S. sanctioned members of President Recep Tayyip Erdogan’s government, it continued to recover losses both before and after this morning conference call, rising to the highest level since last Friday, after Turkey cracked down on short sellers. Albayrak’s speech appears to have been successful, and the lira gained trading 4.0% stronger at 5.70 per dollar.

Meanwhile, as Albayrak was hoping to preserve some stability, a German government source told Reuters on Thursday that “the Federal Government believes that an IMF program could help Turkey.

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

“Whispers Of Capital Controls” As Turkish Lira Plunge Resumes

As widely expected , the beneficial boost to the Turkish Lira from yesterday’s emergency 3% hike in the late liquidity window rate by the Turkish Central Bank did not even last one full day, and on Thursday the Turkish Lira collapse resumed, with the currency reversing much of yesterday’s gains, sliding as much as 3.5% – the biggest decline across Emerging Markets – amid the previously discussed concerns that the rate hike will provide only temporary support.

The central bank acted after three weeks of turbulence in the currency market, with the lira rallying 2 percent by the end of Wednesday, although as of this morning those gains are now lost, and judging by the chart below, Erdogan’s demand that Turks not exchange their rapidly devaluing currency into dollars and other foreign currency has made them do just that.

Additionally, as Bloomberg’s Stephen Kirkland notes, the market is about to test president Erdogan’s vow not to intervene in monetary policy: “beyond fueling the debate over whether Turkey’s 300bp was enough, today’s lira about-face also tests the central bank’s tightening resolve, as well as Erdogan’s vow of allegiance to global principles of monetary policy.”

It’s still early going for Turkey’s topsy-turvy market and the next catalyst comes from Erdogan himself, as he kicks off his re-election campaign today. Key to stabilizing the lira will be his tone and whether he sticks to yesterday’s script, especially since his past comments involved blaming higher rates for inflation and accusing speculators of attacking the economy.

President Recep Tayyip Erdogan, who’s seeking re-election in a June 24 vote, didn’t specifically mention the rate increase in a televised speech Wednesday, but sought to reassure investors by pledging allegiance to global principles on monetary policy.  He’s due to kick off a campaign for re-election on Thursday, as polls suggest he may face a tougher challenge than in the past.

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

China Launches New Capital Controls: Puts $15,000 Annual Cap On Overseas ATM Withdrawals

Back in September 2015 – long before bitcoin became the “world’s biggest bubble in history”, and when it was still trading at just $200 – we explained not only that the primary purpose behind the use of the cryptocurrency was evading capital controls, but predicted that it would rise much, much higher as more Chinese, and not only, money launderers caught on to the real function of bitcoin and other cryptos, to wit:

… we would not be surprised to see another push higher in the value of bitcoin: it was earlier this summer when the digital currency, which can bypass capital controls and national borders with the click of a button, surged on Grexit concerns and fears a Drachma return would crush the savings of an entire nation. Since then, BTC has dropped (in no small part as a result of the previously documented “forking” with Bitcoin XT), however if a few hundred million Chinese decide that the time has come to use bitcoin as the capital controls bypassing currency of choice, and decide to invest even a tiny fraction of the $22 trillion in Chinese deposits in bitcoin (whose total market cap at last check was just over $3 billion), sit back and watch as we witness the second coming of the bitcoin bubble, one which could make the previous all time highs in the digital currency, seems like a low print.

A little over two years later, and several thousand percent higher, we were right on both counts: not only did bitcoin proceed to soar to meteoric highs, but the Chinese capital outflows were just getting started and only a series of draconian interventions by China in 2016 managed to briefly halt the hot money exodus which amount to roughly $1 trillion in Chinese reserve outflows.

 

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

“Most Draconian Measures Ever”: China Expands Bitcoin Crackdown Beyond Exchange Trading

“Most Draconian Measures Ever”: China Expands Bitcoin Crackdown Beyond Exchange Trading 

Last week bitcoin plunged over 40% from all time highs hit as recently as three weeks ago on news that China had ordered local exchanges to halt trading in the cryptocurrency. Since then, defying naysayers yet again, bitcoin staged a remarkable comeback, rising from under $3000 to $4000 in the last few days of trading, but China appears to be nowhere near done, and as the WSJ reports this morning, Beijing is moving toward a “broad clampdown on bitcoin trading, testing the resilience of the virtual currency as well as the idea its decentralized nature protects it from government interference” in what the paper dubs the “most draconian measures any government has taken to control bitcoin.

According to the WSJ, regulators have decided on a “comprehensive ban on channels for the buying or selling of the virtual currency in China” that goes beyond plans to shut commercial bitcoin exchanges. The still unofficial policy was communicated to several industry executives at a closed-door meeting in Beijing on Friday, “according to people who were at the meeting.”

The move is notable because until last week, many China bitcoin entrepreneurs thought authorities might shut down only commercial trading activity while tolerating peer-to-peer, or over-the-counter, bitcoin platforms, which enable buyers and sellers to find each other and trade directly. However, it now appears that this was only the beginning as two years after we first warned that bitcoin will be used largely to circumvent Chinese capital controls (and said it would soar as a result when its price was just $230), the government has decided to put a complete end to the use cryptocurrencies as a means of offshoring “hot money.”

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

China Losing Control? PBOC Imposes New Yuan Outflow Limits For First Time In Two Decades

China Losing Control? PBOC Imposes New Yuan Outflow Limits For First Time In Two Decades

Late last week, we reported that in its latest push to limit and/or halt capital outflows, China unveiled new capital controls meant to stem further capital flight disguised as outbound M&A by clamping down with tighter controls on Chinese companies seeking to invest overseas, intensifying efforts to slow a surge in capital fleeing offshore amid tepid growth and an uncertain economic outlook. Beijing was said to focus on “extra-large” foreign acquisitions valued at $10 billion or more per deal, property investments by state-owned firms above $1 billion and investments of $1 billion or more by any Chinese company in an overseas entity unrelated to the investor’s core business. The new controls would apply to deals yet to receive approval from China’s top economic planning agency.

It did not end there.

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One month after we noted a Bloomberg report that China was preparing to impose curbs on Bitcoin – which has in the recent past become a widely accepted mechanism to bypass capital controls – including policies restricting domestic bitcoin exchanges from moving the cryptocurrency to platforms outside the nation and imposing quotas on the amount of bitcoins that can be sent abroad, overnight we learned that China was taking a page out of the Indian demonetization playbook, and was curbing gold imports in another attempt to clamp down on capital leaving the country.

As the FT reported, some banks with licences have recently had difficulty obtaining approval to import gold, they said — a move tied to China’s attempts to stop a weakening renminbi by tightening outflows of dollars, the banks added.

To summarize, in just the past month, China has unveiled at least three distinct sets of “controls” aimed at curbing capital flight out of China, at a time when as Goldman calculated recently, the true extent of capital outflows if far greater than what is reported by the central bank.

 

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

Looking Forward

Looking Forward

 

Since its inception, International Man has offered prognostications about what the future will bring – economically, politically and socially. The principle writers of the publication have been at this for decades. Each one began by studying world economics and politics in order to make the best choices as to where to live, where to invest, where to store wealth, etc. Over the years, each one got better at researching, better at reading the signs and, ultimately, better at predicting future events.

But, today, we’re approaching a worldwide crisis point and the study that we undertook decades ago has become important for literally hundreds of millions of people who, whether they realise it or not, will soon be impacted by events in a major way.

The foremost concern for readers of this publication is that the world’s leading governments have become decidedly fascist and are rapidly heading in a totalitarian direction. There are a number of facets to this development, all of them disturbing: The elimination of personal privacy, the creation of capital controls, confiscation of wealth, the conversion to electronic banking as the sole form of currency, international taxation standards and the creation of a police state. (There are many, many more facets, but these few tend to be at the core of concern.)

We can expect to see all of these concerns come closer to reality in the near future. The events that bring them about will increase in bothfrequency and magnitude as we get closer. (Historically, this is always the case, as governments that are in trouble race to get controls in place, as their continued ability to control events unravels.)

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

Governor Of Puerto Rico Set To Impose Capital Controls

Governor Of Puerto Rico Set To Impose Capital Controls 

Yesterday, in the latest plot twist surrounding the inevitable Puerto Rico default, we observed that after the commonwealth island’s Senate passed a surprising bill to impose a debt moratorium on any future debt repayment, its bonds – predictably – tumbled.

We also noted that the legislation addressed the Government Development Bank, or GDB, which is facing speculation that it’ll lapse into insolvency. The bank’s receivership process, liquidity and reserve requirements and payment obligations would be suspended indefinitely, according to an analyst’s read of the bill, which also seeks to split the entity into a “good bank” and “bad bank.”

Hedge funds holding debt in the GDB sued on Monday to stop the bank from returning deposits to local government agencies as it faces a growing cash shortage. The funds, which include affiliates of Brigade Capital Management, Claren Road Asset Management and Solus Alternative Asset Management, accused the bank of seeking to “prop up” local agencies at the expense of other creditors. The GDB has a $422 million debt-service payment due May 1.

The Government Development Bank serves the dual purpose of providing financial support to local governments and acting as a financial adviser to the commonwealth. The funds, which say they hold a “substantial amount” of almost $3.75 billion in the bank’s outstanding debt, blamed the entity’s deteriorating condition on a “hopeless conflict” between loyalties to Puerto Rico and to creditors.

Fast forward to today, when Puerto Rico Governor Alejandro García Padilla signed a measure into law Wednesday that would enable him to declare a moratorium on the commonwealth’s debt payments, mere hours after it cleared the Legislature amid concerns of securing enough support in the lower chamber and a full-court press by creditor lobbyists demanding changes to the bill.

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

US recession data shows it’s a very short road to capital controls

US recession data shows it’s a very short road to capital controls

That’s a direct quote from John Williams, the President of the San Francisco Federal Reserve Bank in a speech he gave a few weeks ago.

He could have just as easily been talking about propaganda. The Fed, the White House, Wall Street, the media have a vested interest in peddling a certain narrative about the economy.

The narrative goes something like this: “Everything’s awesome. Stop asking questions”.

But if you look at their own data, the numbers tell a different story.

My team and I were recently studying US manufacturing indices, something that has traditionally been a strong indicator of recession.

This is data collected by the Federal Reserve; they survey manufacturing businesses and ask if factory orders are growing, shrinking, or relatively unchanged.

You’d think that based on this “everything is awesome” narrative that all the numbers would be growing.

And yet, much of the data show that manufacturing is shrinking. Or to be even more clear, that the US is in a manufacturing recession.

In Texas, for example, just 4% of businesses report that they are growing. 38% are shrinking.

The Philadelphia Fed’s Manufacturing Index has been in recession since September of last year.

The San Francisco Fed’s Total Factor Productivity is also reporting negative growth.

The New York Fed’s Empire State Manufacturing Index was at minus 16.6 for February. In fact, the last time the index was below -15 was in October 2008, ten months into the Great Recession.

The numbers are all pretty clear: there’s an obvious industrial and manufacturing downturn.

But that shouldn’t matter because Fox News, CNN, CNBC, and the White House tell us that consumer spending drives the US economy; industrial production is irrelevant.

 

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

Capital Controls Are Coming

Capital Controls Are Coming

The government declares a surprise bank holiday. It shuts all the banks. It imposes capital controls to stop citizens from taking their money out of the country. Cash-sniffing dogs, which make drug-sniffing dogs look friendly, show up at airports.

At that point, the government is free to help itself to as much of the country’s wealth as it wants. It’s an all-you-can-steal buffet.

This story has recently played out in Greece, Cyprus, Argentina, and Iceland. And those are only a few recent examples. It’s happened in scores of other countries throughout history. And I think it’s inevitable in the U.S.

I believe the U.S. dollar will lose its role as the world’s premier reserve currency. When that happens, capital controls are sure to follow.

This is why it’s crucial to your financial future to understand what capital controls are, how they are used, and what you can do to protect yourself.

Why Governments Impose Capital Controls

Think of the government as a thief trying to steal your wallet as you (understandably) try to run away. With capital controls, the thief is trying to block all the exits so you can’t reach safe ground.

A government only uses capital controls when it’s desperate…when it can no longer borrow, inflate the currency, tax, or steal money in one of the “normal” ways.

In most cases, governments use capital controls in severe crises. Think financial and banking collapses, wars, or chronic economic problems. In other cases, they’re just a way to control people. It’s much more difficult to leave a country when you can’t take your money with you.

Regardless of the initial catalyst, capital controls help a government trap money within its borders. This way, it has more money to confiscate.

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

The International War on Cash

The International War on Cash

Back in 2008, I began warning of increasing capital controls that we would see in the future, as a component in the decline of Western economies (Western in the broad sense, including Japan, Australia, etc.)

Along the way, it occurred to me that, at some point, governments might collectively attempt to eliminate paper currency in favour of an electronic currency – transferred from party to party solely through licensed banks. Sound farfetched? Well, maybe, but what if the U.S. and EU agreed on an overall plan, then suggested it to other governments? On the face of it, this smacks of conspiracy theory, yet certainly, all governments would benefit from this control and would be likely to get on board. In fact, it might prove to be the only way out of their present economic problems.

So, how would it play out? Here’s roughly how I saw Phase I:

  • Link the free movement of cash to terrorism (Create a consciousness that any movement of large sums suggests criminal activity.);
  • Establish upper limits on the amount of money that can be moved without reporting to some government investigatory agency;
  • Periodically lower those limits;
  • Accustom people to making all purchases, however small or large, through a bank card;
  • Create a consciousness that the mere possession of cash is suspect, since it’s no longer “necessary”.

When I first wrote on the subject, there was considerable criticism as to the possibility that such a programme would ever be attempted, let alone succeed. And, granted, it was so Orwellian that it was understandably seen as a crackpot idea. But since that time, the programme has been developing extremely rapidly. In the last six months alone, it has become so visible that it has even garnered a name – “the War on Cash”.

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

Greek Cash Ban Escalates: Imposes ‘Permanent’ Stricter “Capital Controls” On 3 Million Pensioners, Civil Servants

Greek Cash Ban Escalates: Imposes ‘Permanent’ Stricter “Capital Controls” On 3 Million Pensioners, Civil Servants

In a stunning move towards the elites’ endgame of ‘banning cash’, Greek authorities unveiled stricter capital controls for civil servants and pensioners this weekend. By drastically limiting cash withdrawals and forcing the more ‘controllable’ compulsory use of plastic money, Greek authorities hope to stop tax evasion through the use of ‘fake cash registers’.

As KeepTakingGreece.com reports,

A shock-measure: civil servants and pensioners will be subject to stricter capital controls than the rest of the Greeks.They will be able to withdraw only €150 per week – with the cash withdrawal cap being €420 per week – that is a total of €600 per month. The rest of their wage or pension they will have to spend by using debit or credit card.

The news fell like a bombshell on Saturday evening and spoiled the weekend of millions of Greeks. It will probably spoil the rest of their lives too.

Greek media revealed, that the Finance Ministry plans to impose such a measure in order to combat tax evasion, but of course, not the tax evasion committed by the civil servants and pensioners as this is not possible as the state deducts their share on tax before they receive wages and pensions but the tax evasion committed by business owners.

According to the Finance Ministry plan, civil servants and pensioners will be able to withdraw in cash only part of their wages and pensions and the rest will have to remain in their bank deposit account. This remaining amount they will have to spend only through the compulsory use of debit or credit card.

“The measure will affect 2.65 million pensioners and 600,000 civil servants,” notes newspaper To Vima that revealed the shocking plan. 

The newspaper adds that with this measure, the compulsory use of plastic money, the business owner , whether a shop or a professional like doctor, plumber etc will not be able to evade taxes since all transactions will be recorded in the banking system.

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

Cash Withdrawal Limits and “Bank Holidays” Coming

Cash Withdrawal Limits and “Bank Holidays” Coming

  • Concerns that next crisis may be imminent
  • Bail-ins, withdrawal limits and negative interest rates may be imposed
  • FT proposes a ban on “barbarous relic” cash
  • Central banks would have people “completely under their control” – Bonner
  • Gold in safe jurisdictions will again protect wealth

Collapsing commodities prices, erratic market turmoil and the bursting of Chinese bubbles are leading to a crisis in confidence in the economic system across the globe. The long-expected crisis to which the global financial and systemic crisis in 2008 may have been a mere prelude may be upon us.

monopoly

Governments have no appetite for further bailouts. The EU states have passed legislation which will make the banks or rather unfortunate and unsuspecting depositors liable for the bank’s lending and speculative profligacy.

It is claimed that this is to “protect” the taxpayer. In reality it will likely lead to bail-ins – the confiscation of deposits. It is likely that that in a crisis within the banking system this bail-in mechanism would be imposed on an impromptu “bank holiday”  followed by limits on cash withdrawals as were applied in Cyprus and more recently to depositors in Greece.

As has been pointed out by many other analysts, the unelected powers-that-be have used all their conventional weaponry to stave off the consequences of their irresponsible ultra loose monetary policies and massive buildup of debt globally – the largest ever seen in the history of the world.

Global Debt Levels since 2000

The typical response to a crisis has been to slash rates from somewhere around 6% – the historic post war norm in the west – to between 0% and 1%. This has stored up an even crisis in the future – the question is not if we have another crisis but when.

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

 

 

China Loses All Control, Spends 600 Billion Yuan On Plunge Protection In August, Tightens Capital Controls

China Loses All Control, Spends 600 Billion Yuan On Plunge Protection In August, Tightens Capital Controls

Back on July 20, Caijing reporter Wang Xiaolu suggested that China Securities Finance – the state-owned plunge protection vehicle – may be set to exit the market. That sent futures plunging and ultimately led to Mr. Wang’s arrest late last month. Under duress, Wang would later “admit” that he “shouldn’t have released a report with a major negative impact on the market at such a sensitive time.”

Of course Wang wasn’t the last person to speculate about how long China would be willing to spend billions propping up the market, and indeed it certainly seems as though Beijing tried to scale back the manipulation two weeks ago only to see the SHCOMP crash 8%, a move which promptly triggered a global rout of epic proportions. One additional 8% decline and a dual policy rate cut later, and CSF was back in the market desperately trying to arrest the inexorable slide ahead of Xi Jinping’s lavish military parade on September 3.

So in case anyone still harbored any doubts about the degree to which China most certainly has not wound down the plunge protection effort, Goldman has updated its analysis on the “national team’s” efforts on the way to concluding that China spent an additional CNY600 billion propping up the market in August.

Here’s Goldman:

In our note: China musings: How much has the government bought in the market? (Aug 5), we estimated potential government purchases in the stock market based on: (1) our top-down liquidity model; and (2) bottom-up analysis on fund flow changes in key investment channels based on public information released by relevant media sources.  

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

 

 

 

Third Greek Bailout Suddenly In Jeopardy: Creditors Warn Cash May Be Delayed If Elections Don’t Go As Desired

Third Greek Bailout Suddenly In Jeopardy: Creditors Warn Cash May Be Delayed If Elections Don’t Go As Desired

Just when everyone was convinced that the main “risk off” event of the summer, namely the Greek bailout, was safely tucked away and that having abdicated its sovereignty to its creditors  and Germany in particular, who now hold the Greek banking system hostage courtesy of draconian capital controls, that Greece would continue to receive its monthly cash allotment just so it could repay creditors from its first two bailouts and would notmake headlines for the foreseeable future , Market News just reported that suddenly even the Greek bailout is no longer on autopilot as a result of the upcoming elections in three weeks, whose outcome is anything but assured.

According to Market News, “Greece’s international creditors may delay the first review of the country’s bailout until November, multiple EU sources told MNI Tuesday, pushing talks on potential debt relief further down the road as Greece prepares for snap national elections on September 20.”

And just in case it was not clear that Greek sovereignty is now entirely conditional on the Greek people voting precisely as the Troika requires, and for a continuation of the austerity terms delineated in the 3rd Greek bailout, MNI reports that “officials will also stress that any new government that emerges from this month’s poll must meet the current bailout terms in order to release the E3 billion pending from the its first loan tranche and have already warned the interim government to continue with the implementation of prior actions set for September.

In other words more of the same: Greece pretending to reform, creditors pretending to inject funds into the Greek economy:

“Realistically speaking, the inspectors’ return to Greece might be delayed and the first assessment could take place in November instead of October. In such an event I don’t expect talks about another Greek debt relief to run simultaneously,” a top Commission source said.

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

 

 

Greek Stocks, Economy Collapse, Suffer Worst Declines In History

Greek Stocks, Economy Collapse, Suffer Worst Declines In History

The Athens Stock Exchange reopened on Monday and unsurprisingly, some folks were selling.

Trading was suspended five weeks ago after PM Alexis Tsipras’ dramatic midnight referendum call precipitated capital controls and a lengthy bank “holiday.” Shares opened lower by nearly 23% and the country’s banks traded limit-down, which makes sense because they are, after all, largely insolvent. Here’s NY Times:

The Athens Stock Exchange plunged 22.8 percent when it reopened on Monday after a five-week shutdown imposed by Greek authorities as part of efforts to prevent a financial collapse.

Bank stocks, which are particularly vulnerable as Greek lenders are set for new recapitalization in the coming months, took a battering, falling by as much as 30 percent.

Although foreign investors face no restrictions in the Athens exchange, local traders can only use existing cash holdings to buy shares; they are prohibited from tapping local bank deposits to buy shares as the authorities seek to prevent capital flight.

Asked about the harrowing decline, European Commission spokeswoman Mina Andreeva had no comment but did say that Brussels has “taken note” of the reopening. Amusingly, she also said the decision was made by “competent” Greek officials. A ban on short-selling was due to expire on Monday but will be extended, an unnamed official told Reuters.

Meanwhile, monthly PMI data from Markit confirmed that the Greek economy suffered an outright collapse in July. Last month marked the 11th consecutive month of contraction, but it was the depth of the downturn that was truly shocking as the index plummeted to 30.2 from 46.9 in June. It was the lowest print on record. New orders plunged to 17.9 from 43.2.

“July saw factory production in Greece contract sharply amid an unprecedented drop in new orders and difficulties in purchasing raw materials,” Markit said. Here’s more from the report:

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

 

 

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