Baltic Dry Index. 809 -02
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
Although the turmoil in the subprime mortgage
market has created severe financial problems for many individuals and families,
the implications of these developments for the housing market as a whole are
less clear…At this juncture, however, the impact on the broader economy and
financial markets of the problems in
the subprime market seems likely to be contained.
The Bernank, 28 March 2007.
This morning Europe’s woes grow. The Basel based
Bank for International Settlements has reported a sharp drop in European cross
border interbank lending, as the banksters pull out of Club Med’s weaker
nations prior to their exit from the existing euro. Watch what they do not what
they say. While in Germany, Chancellor
Merkel has made another U-Turn, this time backing away from earlier plans for a
European fiscal union. The Eurozone as we know it already has one foot in the
grave.
The Federal Reserve is not currently
forecasting a recession.
The
Bernank, 10 January 2008.
BIS records startling collapse of eurozone interbank loans
Cross-border lending is falling drastically across the western world as banks slash exposure to Europe and bend to tougher capital rules, according to data from the Bank for International Settlements.
Foreign
bank loans fell by $472bn (£311bn) in rich countries in the fourth quarter of
last year, contracting at an 8pc annual rate. The retrenchment was led by a
collapse of interbank loans in the eurozone, where lenders in the creditor
states continue to pull back from periphery countries.
Volumes
fell by $284bn across the eurozone, a 20pc rate of contraction. Belt-tightening
by banks is a key reason why the region remains stuck in recession for the
seventh quarter in a row.
The BIS
said in its quarterly report that the markets are “under the spell of monetary
easing”, convinced that central banks will keep the asset boom going despite
signs of “broad deceleration” in the US economy and fatigue in China.
Jaime
Caruana, the BIS’s managing director, said last month that the authorities
should refrain from further stimulus to keep growth alive, warning that
excessive liquidity is distorting the financial system without achieving much.
“If a medicine does not work as expected, it’s not necessarily because the
dosage was too low,” he said.
The BIS
was the only major watchdog to warn of a bubble before the Lehman crisis, and
it has once again begun to fret over junk bonds and frothy asset prices.
----The BIS said the eurozone’s share of the global interbank market has fallen from a record high of 55pc at the top of the EMU bubble in 2008 to just 38pc at the end of 2012, a sign of fragmentation as banks return to their home markets.
Cross-border
loans to emerging markets grew in the fourth quarter, rising to $2.4 trillion
from $2.2 trillion a year earlier, but much of the money went to economies
already near the end of their credit cycle. These loans now threaten to become
a worry as currencies tumble in South Africa, Brazil, Mexico, Turkey, and
across East Asia.
More
Merkel reins in plan to transfer powers to Brussels
BERLIN |(Reuters) - German Chancellor Angela Merkel has come out against handing the European Commission more powers, in the clearest sign yet that she is reining in her ambitions to create a "fiscal union" in which euro members cede control of their budgets to Brussels.
The comments, made in an interview with weekly Der Spiegel, come days after Merkel held talks with President Francois Hollande in Paris and the two unveiled joint proposals for the future shape of the euro area, including the creation of a permanent president of the Eurogroup forum of finance ministers.
Merkel spoke out strongly in favor of closer fiscal integration last year, but France and some other euro members have deep doubts about ceding sovereignty -- a step which would require politically sensitive changes to the EU treaty -- and Berlin appears to have realized that this resistance is too great to overcome for now.
With a German election looming in September and a new anti-euro party threatening to eat into support for her conservative bloc, Merkel may also be adjusting her message for voters at home, many of whom are leery about ceding national powers.
More
Meanwhile in Denmark, it’s back to the future
again. “Hybrid debt experiments” are to be used to meet Denmark’s struggling
banks stricter capital requirements. When the fail as they probably might,
Denmark’s depositors can expect to get legally “Cyprussed.”
The risk that the economy has entered a substantial
downturn appears to have diminished over the past month or so.
The
Bernank, 10 June 2008.
Hybrid Debt Experiments Unleashed in Denmark as FSA Helps Banks
By Frances Schwartzkopff
- Jun 3, 2013 6:23 AM GMT
Denmark’s financial
watchdog said banks facing stricter individual capital requirements will be
allowed to use new hybrid debt instruments to build their regulatory buffers. Lenders in the Scandinavian nation hit hardest by the global financial crisis will be free to use bonds that convert to equity at given triggers as well as debt that can absorb losses before a default, Ulrik Noedgaard, director general of the Financial Supervisory Authority, said in an interview.
The FSA’s decision puts an end to speculation among Danish banks they would have to fulfill lender-specific requirements using only equity. Systemically important financial institutions learned in March they may need to hold as much as 5 percentage points extra capital, a proposal lawmakers are still debating. Banks have argued pressure to build reserves is threatening to restrict lending as capital costs rise.
More
Elsewhere, there were rising concerns over China
and emerging market super star Turkey. Stay long physical precious metals. The
Great Disconnect looks like coming to an end over the summer.
China Swap Rate Climbs to Four-Month High on Tightening Concerns
By Andrea Wong - Jun 3, 2013 5:06 AM GMT
China’s one-year interest-rate swaps climbed to the highest level in more
than four months after a report showing a jump in new home prices fueled
speculation the central bank will reduce cash in the financial system. Property prices surged 6.9 percent in May from a year earlier to 10,180 yuan ($1,659) per square meter (10.76 square feet), SouFun Holdings Ltd. (SFUN), China’s biggest real estate website owner, said in a statement today after a survey of 100 cities. That’s the biggest increase since they reversed declines in December. The People’s Bank of China drained a net 17 billion yuan of funds last week, data compiled by Bloomberg show.
“Rising property prices are definitely a concern,” said Frances Cheung, a strategist at Credit Agricole CIB in Hong Kong. “People in the market think the central bank may have to drain liquidity to control prices.”
The one-year swap contract, the fixed cost needed to
receive the floating seven-day repurchase rate, climbed three basis points, or
0.03 percentage point, to 3.34 percent as of 10:45 a.m. in Shanghai, according
to data compiled by Bloomberg. That matched the level reached on Jan. 15.
More
Political chaos pushes Turkey to front of emerging market rout
Turkey's financial markets are braced for trouble this week after five days of anti-government protests across the country that left at least 79 people injured, gravely damaging the image of Europe’s rising star
The
political crisis comes at a highly sensitive moment as emerging markets across
the world face intense pressure, with a sudden exodus of capital flows from
those deemed most at risk from trade deficits and political risk.
The Turkish
lira fell to a 17-month low against the dollar last week while yields on
10-year Turkish bonds spiked 40 basis points. “We may see some further sell-off
in Turkish assets. The Istanbul 100 index may start trading [today] with a
sharp drop,” said Tufan Comert from Garanti Securities.
The moves
so far reflect the broader flight from emerging markets as hedge funds
liquidate their bond holdings on fears over a dollar rally and a withdrawal of
dollar-based liquidity as the US Federal Reserve prepares to slow its bond
purchases. Morgan Stanley called it a “mini sudden stop” in external funding
across the world.
Turkey
has been a stellar performer over the past decade and is expected to grow by
4pc this year and next, far outstripping Brazil or Russia, but imbalances are
rising. “Our risk indicator suggests that Turkey is one of the emerging markets
most vulnerable to an economic crisis,” said William Jackson from Capital
Economics.
The worry
for Turkey is that it could lose the benefit of the doubt and become lumped
together with South Africa, which has suffered the biggest currency rout this
year as clashes between miners and police cause a deep crisis of confidence.
More
"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people."
F.A. von Hayek
At the Comex silver depositories Friday final figures were: Registered 42.73 Moz,
Eligible 123.02 Moz, Total 165.75 Moz.
Crooks and
Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Below, the BIS sees a bubble even if others wilfully don’t. When the “Final
Bubble” finally bursts, don’t say we didn’t warn about it beforehand. Below, the
BIS gets it on the record for the Fed, the BOE and the BOJ. Though we don’t
know when it all ends, we do know how the Final Bubble ends. Stay long physical
precious metals stored outside of the dangerous banks and MF Global’s. When the Final Bubble ends and we all get “Cyprussed,”
that physical unloved tangible asset, the “barbarous relic,” won’t be so
unloved or barbarous anymore.
"The paper standard is self-destructive."
Hans F. Sennholz
BIS
Quarterly Review, June 2013
1
Markets
under the spell of monetary easing
1
Risk
assets extended their rally as further monetary easing helped market participants
tune out signs of a global growth slowdown. The spate of negative economic news
between mid-March and mid-April did little to interrupt the rise of equity
prices in advanced economies. The growth jitters left more of a dent on commodity
prices while emerging mark et equities continued to underperform (Graph 1,
left-hand panel). Further policy easing, followed promptly by an improved US
outlook in early May, boosted market sentiment and lifted the main equity indices to new highs.
Major
central banks further eased their monetary stance from already accommodative
levels that had pushed nominal yields to record lows (Graph 1, centre panel).
In early May, the ECB cut its policy rate, and the Federal Reserve provided
forward guidance while reaffirming its commitment to further asset purchases.
The previous month, the Bank of Japan had surprised markets with its ambitious
new monetary easing framework. The announcement triggered sharp price movements
in the Japanese government bond (JGB) market as investors weighed the yield
implications of official purchases against future inflation expectations.
This new
phase of monetary policy accommodation in the major currency areas spilled over
to financial markets around the world. The prospect of low yields in core bond
markets contributed to investors searching for yield in lower-rated European
bonds and emerging market paper as well as in corporate debt. This drove
spreads even lower while issuance in riskier credit market segmentsstrengthened
(Graph 1, right-hand panel). Abundant liquidity and low volatility fostered an
environment favouring risk-taking and carry trade activity.
More
U.S. Economy Grinds To Halt As Nation Realizes Money Just A Symbolic, Mutually Shared Illusion
Feb 16, 2010
WASHINGTON—The U.S. economy ceased
to function this week after unexpected existential remarks by Federal Reserve
chairman Ben Bernanke shocked Americans into realizing that money is, in fact,
just a meaningless and intangible social construct.
What
began as a routine report before the Senate Finance Committee Tuesday ended
with Bernanke passionately disavowing the entire concept of currency, and
negating in an instant the very foundation of the world's largest economy.
"Though
raising interest rates is unlikely at the moment, the Fed will of course act
appropriately if we…if we…" said Bernanke, who then paused for a moment,
looked down at his prepared statement, and shook his head in utter disbelief.
"You know what? It doesn't matter. None of this—this so-called
'money'—really matters at all."
"It's
just an illusion," a wide-eyed Bernanke added as he removed bills from his
wallet and slowly spread them out before him. "Just look at it:
Meaningless pieces of paper with numbers printed on them. Worthless."
According
to witnesses, Finance Committee members sat in thunderstruck silence for
several moments until Sen. Orrin Hatch (R-UT) finally shouted out, "Oh my
God, he's right. It's all a mirage. All of it—the money, our whole economy—it's
all a lie!"
Screams
then filled the Senate Chamber as lawmakers and members of the press ran for
the exits, leaving in their wake aisles littered with the remains of torn
currency.
More
"Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood. For these few gold has been the asset of last resort."
Antony C. Sutton
The monthly Coppock Indicators finished May:
DJIA: +142 Up. NASDAQ: +144 Up. SP500: +177 Up. The Fed’s
Final Bubble continues. But hurricanes and tornadoes appear. Getting out first
beats getting out last.
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