Baltic Dry Index. 596 -02 Brent Crude 55.98
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
A large Bank is exactly the place where a vain and shallow person in authority, if he be a man of gravity and method, as such men often are, may do infinite evil in no long time, and before he is detected. If he is lucky enough to begin at a time of expansion in trade, he is nearly sure not to be found out till the time of contraction has arrived, and then very large figures will be required to reckon the evil he has done.
Walter Bagehot. Lombard Street. 1873
The big news from last week was
the Fed signalling that the next move in interest rates is higher. They tried
their hardest to ring a bell that the era of ZIRP and NIRP is about to end.
More on this later in the week. The bond
market said “Yeah right,” and went on its merry way. Stock traders though, got nervous. Few at
present think that the Fed is about to later this year pull the trigger on Wall
Street’s Great Vampire Squids. For now the prevailing view is that Wall Street
owns the Fedsters Lock, stock and barrel.
We open today with yet another growing banking scandal in Europe.
Banksters there can resist anything but temptation. Below, the latest news in
banking.
Andorra on the brink of Europe's next banking crisis
Tiny principality has been rocked by allegations of money laundering in its oversized banking sector
Andorra, the tiny Catalan principality nestling in the foothills of the Pyrenees between France and Spain, tends to conjure up images of scenic ski resorts, medieval churches and duty-free shopping.The country has for many years enjoyed the benefits of European borders without the restrictions of EU membership, allowing light-touch regulation that has brought in tourism and wealthy expats from its bordering countries.
However, in the last three weeks, the state has been gripped by a banking crisis that threatens to take it to the brink. Bankers have been thrown in jail, savers’ deposits have been restricted, and the country’s government is scrambling to convince powerful regulators thousands of miles away that the country is not a haven for tax evasion.
On Tuesday March 10, the US Treasury Department’s financial crime body, FinCEN, accused Banca Privada d’Andorra (BPA), the country’s fourth-largest bank, of money-laundering. The authority said “corrupt high–level managers and weak anti–money-laundering controls have made BPA an easy vehicle for third–party money-launderers”.
Three senior managers at the bank accepted bribes to help criminals in Russia, Venezuela and China, to funnel money through the Andorran system, according to FinCEN.
The next day, the state took charge of BPA, dismissing three directors. On the Friday, the bank’s chief executive, Joan Pau Miquel, was arrested and detained. Mr Miquel remains in a jail cell in La Comella, the country’s only prison, with a capacity of 145.
At BPA, the Andorran authorities have installed new management. After international banks cut off links, withdrawals were capped at €2,500 (£1,830) a week, a limit many people are maxing out.
Banco Madrid, the Spanish subsidiary of BPA acquired as part of an expansion spree in recent years, filed for administration on Wednesday.
----The
state’s banks have assets under management 17 times bigger than the economy,
and the sector accounts for a fifth of GDP – almost all of the rest is from
tourism.
Were its banks to get into trouble, Andorra, which is not a member of the eurozone but uses the single currency on an informal basis, would have no way of bailing them out.
In short, the country faces a catastrophe if its banks fall apart. The crisis is a classic example of how countries seeking to welcome financial services by promising a hands-off approach to regulation, can become dangerously vulnerable to them.
Andorra’s exposures to its banks provoke echoes of Iceland and Cyprus – both of which suffered painful economic crises when their lenders fell into trouble. But unlike Cyprus, which received a last-minute bail-out, Andorra has no central bank to act as a lender of last resort: if its banks go under, it goes under.
The crisis has now led Standard & Poor’s, one of the three major ratings agencies, to downgrade the value of the principality’s sovereign debt.
“The risk profile of Andorra’s financial sector, which is large relative to the size of the domestic economy, has increased beyond our expectations,” S&P said two weeks ago.
“The absence of a central bank or a lender of last resort in the Andorran financial system exacerbates the risks, in our opinion.” S&P said that the government, which runs on a budget of around €400m a year, would have almost no chance of supporting BPA, with assets of more than €3bn.
BPA may be put up for sale or into administration if it cannot recover. The real fear now is that the rest of the country’s banks have similar problems. Fitch put three Andorran banks – Credit Andorra, Andbank and MoraBanc – on negative watch last week, indicating it was likely to downgrade their debt.
More
US isolated as Australia and Russia join China's development bank
Countries add to list of names signing up after Washington rebuked UK earlier this month
America's opposition to China’s development bank appeared increasingly isolated on Sunday after Australia, Denmark, the Netherlands and Russia all said they plan to join.The Asian Infrastructure Investment Bank (AIIB), a rival to the World Bank and Asian Development Bank, institutions founded with American help, has now signed up many of America’s Western allies.
The UK angered Washington when it became the first major western country to join the Chinese-led bank, but a string of nations have since put their name to the $50bn organisation.
On Sunday, Australian prime minister Tony Abbott said the country, a key US ally, is signing a memorandum of understanding to join the AIIB to “allow Australia to participate as a prospective founding member”.
Meanwhile, China’s ministry of finance said Denmark had written to “announce its intention to apply to be a founding member”. It follows Russia and Netherlands saying on Saturday that they plan to join, while Brazil, South Korea, France, Germany and Italy have all expressed their interest.
More
Elsewhere, more on the downside of the disaster of unorthodox financial
policy.
The Essence Of QE: Taxing Savers, Subsidizing Debtors, Wrecking Markets
by Newsmax •
Quantitative easing (QE) — the
monetary elixir administered in huge doses by the Federal Reserve and now
copied by central banks the world over — is going to lower living standards for
generations to come, according to Scott Minerd, global chief investment officer
at Guggenheim Partners.
Improved economic growth in the
U.S. and elsewhere amounts to a “monetary illusion,” he wrote in an article for
the Financial Times.
“With politicians lacking the
willingness or ability to implement labor and tax reforms, monetary policy has
perversely morphed into a new orthodoxy where even central bankers admittedly
view it as their job to use their balance sheets as a tool to implement fiscal
policy,” he noted.
Minerd called attention to a Bank
of America Merrill Lynch research note that projected global economic growth
will fall in 2015 for the first time since 2009, the peak of the financial
crisis.
In his view, the kinds of risk
appropriate for a central bank include maintaining a nation’s banking system
and defense of the nation’s currency. However, critics say central banks have
now also usurped broader fiscal policy — long the domain of elected officials —
as well.
“The depressed returns available
on fixed-income securities, largely as a result of QE, are acting as a tax on
investors, including individual savers, pension funds and insurance companies,”
Minerd argued.
“Essentially, monetary
authorities around the globe are levying a tax on investors and providing a
subsidy to borrowers.”
According to Minerd, the
consequence of surrendering fiscal policy to non-elected officials at the Fed
and other central banks is still not fully understood by many.
While QE programs may prop up
financial markets, interest rates and currencies for the moment, in the long
run “pricing distortions created by the current global regimes of QE will lead
to a suboptimal allocation of capital and investment, which will result in
lower output and lower standards of living over time,” he predicted.
He noted U.S. stock prices are
setting record high, even as real median household incomes are 9 percent
beneath their 1999 highs. And he cited Bank of America Merrill Lynch’s
conclusion that QE and currency depreciations are not leading to higher global
output.
More
We close for the day with graphene news. Our new Carbon Age that will
eventually get the world out of the Great Nixonian Error of fiat money gets an
incremental step closer. Sadly we are still 5 to 10 years away.
Lightbulb moment as first mass-market graphene product goes live
Andrew Bounds, Enterprise Editor March 27,
2015 3:26 pm
The first mass market product made with the “miracle material” graphene
is about to go on sale: a lightbulb.
The invention is
a dimmable LED lightbulb that can cut energy costs by at least 10 per cent and
last for several years. Its developers at Manchester University say it is
within months of going on sale.
The bulb copies
the classic design of the inventor Thomas Edison, but its filament has a
coating of graphene, an atom-thick layer of carbon that is stronger than steel
and conducts heat and electricity efficiently.
Current dimmable
LED bulbs cost £15 or more, but the price of the new bulb will be lower.
Its maker,
Graphene Lighting, is a spin-off company from Manchester University and an
unnamed commercial partner. Prof Colin Bailey, a director, said: “People are
amazed at just how quickly we have managed to take it to market. Sometimes it
takes 20 years to get a new discovery out there.”
Graphene was
first isolated at the university in 2004. Sir Andre Geim and Sir Kostya
Novoselov won the Nobel Prize for their work.
Prof Bailey said
the business, backed by Canadian investors after a fundraising by Industrial
Alliance, a financial group in Quebec, was proof that the UK could make money
from graphene. Graphene Lighting was likely to be floated on the Canadian stock
market, he added.
More
"Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium."
Murray N. Rothbard
At the Comex silver
depositories Friday final figures were: Registered 70.57 Moz, Eligible 105.90
Moz, Total 176.47 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
No Crooks today as we enter Holy Week. Today an
update on market closures over Easter. Note there will be no LIR update on
April 3rd, Good Friday. There will be an update on Monday April 6th.
When do markets close for Good Friday?
Published: Mar 27, 2015 5:44 p.m. ET
NEW YORK (MarketWatch)—Most major markets in Europe and the U.S. will be
closed on Good Friday, which falls on April 3, with exchanges in the U.K. and
on the Continent set to remain closed on Easter Monday as well. Here’s a guide
to what’s happening:All major U.S. stock exchanges, including the New York Stock Exchange and Nasdaq, will be closed on Good Friday. Trade reopens on Monday, April 6.
But what about the jobs report? Good Friday isn’t a federal holiday. And since April 6 is the first Friday of the month, that means the March jobs report will be released as scheduled at 8:30 a.m. Eastern. See: What happens when jobs report is released on Good Friday.
There will still be an immediate market reaction, since electronic trading of the Chicago Mercantile Exchange’s equity index futures, and its interest-rate and forex futures, will be up and running. But you better get your orders in quickly, as electronic trade closes early at 9:15 a.m. for stock-index futures, while interest-rate and forex product futures trading closes at 11:15 a.m. Eastern.
Sifma, the securities industry trade group, has recommended a noon Eastern close for U.S. bond markets on Good Friday.
Major U.S. commodity markets will be closed on Good Friday.
Elsewhere, the Toronto Stock Exchange will also be closed.
All Western European exchanges, including those in London, Paris and Frankfurt, are closed Good Friday and April 6, the Monday after Easter.
Several Asian and Pacific region exchanges will also be closed. Singapore is closed Good Friday, while Hong Kong is scheduled to be shut Good Friday, Easter Monday (which is the day following the Ching Ming Festival), and on Tuesday, April 7. Australia, New Zealand and South Africa will be closed on Good Friday and April 6.
http://www.marketwatch.com/story/when-do-markets-close-for-good-friday-2015-03-27
This date in science: Biggest earthquake in North America
What’s now known as the Good Friday Earthquake in Alaska
caused extensive property damage and natural changes, but few deaths.
The earthquake shook the land for nearly four minutes and caused many natural changes. The Latouche Island area, for example, moved to the southeast by nearly 60 feet (nearly 20 meters), according to the Alaska Earthquake Information Center (AEIC). USGS now estimates the March 27, 1964 earthquake and tsunami caused $311 million in damages across the state of Alaska.
More
"We are in a world of irredeemable paper money - a state of affairs unprecedented in history."
John Exter
The monthly Coppock Indicators finished February
DJIA: +120 Down. NASDAQ: +213 Down. SP500: +169 Down.
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