Central Bank of India
02 апреля, 18:12

Time to Learn from the Facts: Global Week Ahead

Bond market economists and stock strategists alike consider the huge flow of macro data out in the first week of a month ??? particularly payrolls in the USA, inflation in Europe, and manufacturing PMIs everywhere ??? to be catalysts for changes to their quarterly and annual outlooks, on rates and on stock prices, respectively.

23 июня 2016, 21:09

Can India ETFs Continue to Shine After Rajan Exit?

Raghuram Rajan exit and new FDI rules that would allow companies like Apple to open own stores in India bring India ETFs in focus.

04 сентября 2015, 22:35

Infosys' New Finacle Suite to Tap Payment Bank Applicants

Infosys Limited (INFY) recently launched its Finacle Payments Bank and Finacle Small Finance Bank solutions. These products are aimed at capturing the booming Indian market of payment bank concept.

02 марта 2015, 00:03

Australia's Mining Bust Turns Towns Into Ghost Towns; Expect Interest Rate "Shock and Awe"

As Australia's mining boom turns to bust, Towns are Dying the Death of a Thousand Cuts as Miners Leave in Droves. Locals say the main street of Dalby resembles a ghost town these days – a sad indication of a mining boom ending too soon for some. Things have taken a turn for the worse since the glory days of the mining construction boom, with companies responding to falling commodity prices by pulling the plug on new projects and laying off workers across the Surat Basin. The increasing exodus of workers, investment and money from the mining towns has left houses empty and businesses struggling, with many of those left behind wondering what to do next. Di Reilly, owner of Mary’s Commercial Hotel on Dalby’s Cunningham St, said much had changed since 2013 when thirsty miners packed into the pub every Friday and Saturday night. “We used to open the old bar up and the whole place would be chock-a-block,” she said. Things were going so well that Ms Reilly began a revamp of the pub before the numbers tapered off, leaving her with a half-renovated bar and plummeting income. The old bar now sits unrenovated and empty, a dusty reminder of plans gone awry. “They were saying it was going to last 10 years but it hasn’t,” she said. “I was going to do the whole pub up, so I was banking on it that they would be here a little longer than they were, but it just stopped all of a sudden. It just got cut off.” The impact on her bottom line has been astonishing, with turnover last December down $100,000, slashed in half from the previous year. Down the road, electronics retailer Colin Fountain speaks of the boom in the past tense. “I’ve definitely noticed a slowdown. Sometimes when you look down the street you’d think you were in a ghost town,” he said. Further west in Chinchilla, the effects of the mining construction boom have mainly been felt in the real estate sector, where rents and house prices doubled from cashed-up workers arriving in the town. Long-term residents said many pensioners had been forced to leave because of high housing prices and now that prices had fallen some weren’t coming back. One real estate agent said “a hell of a lot” of property was on the market – about 400 houses were for rent or sale and buyers were scarce.Record Low Interest Rates On February 3, and in response to tumbling oil and mineral prices, and irrational deflation worries, Australia Cut Interest Rates to Record Low. Australia cut its benchmark interest rate to a record low of 2.25% Tuesday, joining a procession of central banks that have eased policy settings this year in response to the deflationary impact of tumbling oil prices. The 0.25-percentage-point cut represents a dramatic shift for the Reserve Bank of Australia—which ended 2014 with a message to financial markets that interest-rate stability was likely to feature again in 2015, to help underpin certainty for businesses and support the economy as a mining-investment boom fizzles out. The Australian dollar fell sharply on the announcement of a cut, dropping to a fresh 5½-year low, while the stock market surged to the highest level since May 2008. The Reserve Bank of Australia joins the Monetary Authority of Singapore, Reserve Bank of New Zealand, European Central Bank, Bank of Canada and the central banks of India, Denmark and Switzerland in either announcing substantial policy shifts or easing monetary settings—in some cases dramatically—since Jan. 1. Throughout last year, Australia’s central bank repeatedly stressed it would be appropriate for rates to remain stable for some time. It removed that reference on Tuesday, leaving open the door to more cuts. In Tuesday’s statement, Mr. Stevens said the jobless rate—currently 6.1%—would likely peak a little higher than had been anticipated. Definitions Needed I need a definition of "little" and also a definition what had been "anticipated". The statement made by Stevens can literally mean anything. Most likely, little really means little. And given that central bankers are totally clueless, it's highly likely what had been anticipated was far too low. Thus, vagueness aside, I will bet on the "over" line, "way over" in fact. With no recession in 23 years, and with wages and prices of goods dramatically out of line with the rest of the world, and with one of the world's biggest property bubbles, the upcoming recession in Australia will be a doozie. Expect Interest Rate "Shock and Awe"  Australia has room for 9 quarter point cuts before zero is hit. But cuts won't happen that way. Accompanied by some sort of shock-and-awe statement, I expect Australia to cut rates 100 basis points or more at some point. Addendum - "Houses and Holes" - Tweet from Steve Keen Shortly after finishing the above, I heard from Steve Keen who emailed ... "Good read mate--I've tweeted it. It's rather weird to watch my home country as an observer from England now. A colleague describes Australia's economic policies as 'Houses and Holes', and that about sums it up. Now all that's left is a property bubble and flogging our real estate to overseas borrowers--which coincidentally pretty much describes economic policy in the UK as well." Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.comMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

05 февраля 2015, 12:36

Australia Coming Apart at the Seams

With the huge spotlight on Europe, Greece, the US Dollar, Canada, Switzerland, and China, it's easy to lose track of major things outside of mainstream attention. Like what? Like Australia. Australian Government on Brink of Collapse  Conservatives swept into power into Australia in September of 2013 in the biggest Labour rout in history. In December of 2013 I wrote Australia's Alleged Conservatives Surrender to Unions; Currency Madness Everywhere. Shockingly, Australian conservatives may not last even one full term. Three days ago The Australian reported Queensland election 2015: Labor on brink of forming government. My friend Brisbane Bear, from down under reported ... Hey Mish, We have experienced the biggest political earthquake I have ever seen in my home state of Queensland. The government has lost power after one term. The Queensland Premier lost his seat. This after winning the biggest landslide win in history with a mandate to fix the financial mess created by Labor. They held 79 seats to 7. And now they lost. This sort of volatility is now the norm. People hate austerity. People know the party is over and are very surly and angry. These are good elections to lose as there are no easy answers, only very hard, unpopular decisions. We are in for one hell of a ride. Regards Brisbane BearI asked BB what this all meant. He replied ... Massive impact! Federal election is just under 2 years away. The Prime Minister Tony Abbottis in serious trouble and will battle to hold the top job. A leadership spill is rumored. Meaning of Liberal What follows may not make much sense unless one understands the meaning of "Liberal" in Australian politics. Liberals Believe: In the inalienable rights and freedoms of all peoples; and we work towards a lean government that minimises interference in our daily lives; and maximises individual and private sector initiative In government that nurtures and encourages its citizens through incentive, rather than putting limits on people through the punishing disincentives of burdensome taxes and the stifling structures of Labor's corporate state and bureaucratic red tape. In those most basic freedoms of parliamentary democracy - the freedom of thought, worship, speech and association. In short, we simply believe in individual freedom and free enterprise; and if you share this belief, then ours is the Party for you. Simply put, liberal means conservative to US readers. With that in mind, let's continue. Prime Minister Leadership is Terminal Please consider Tony Abbott Leadership Now ‘Terminal’. Former Victorian premier Jeff Kennett has unloaded on Tony Abbott’s “terminal” leadership, saying he must be dumped “as quickly as possible” or risk destroying the Coalition government. Liberal MPs Dennis Jensen and Warren Entsch last night publicly declared that the Prime Minister no longer had their support, while former Howard government cabinet minister Mal Brough vouched only “qualified support” for Mr Abbott and demanded he scrap the proposed $5 Medicare co-payment. Mr Kennett, who led Victoria between 1992 and 1999, said Mr Abbott had lost the support of both the Liberal Party base and the broader public. “I think sadly the realisation has dawned on most politicians that where the leadership of the party is now terminal. It needs to be resolved as quickly as possible so that the party can move on,” Mr Kennett told ABC Radio. “Now I say that sadly. I feel very sorry for Tony. He’s a man of very good values. But most of where we are at the moment as a government is self-inflicted. We are 12 weeks away from the 2015 budget and we haven’t passed the 2014 budget.Liberal MP Dennis Jensen Calls on Tony Abbott to Resign Yesterday, the Sydney Morning Herald reported Liberal MP Dennis Jensen Calls on Tony Abbott to Resign. Tony Abbott's leadership has been rocked by a political earthquake and is under imminent threat, with backbench MPs variously calling for the Prime Minister to resign, for a party room ballot next week and expressing doubt he can revive his political fortunes. A day after Mr Abbott used a National Press Club address to dig in and signal unhappy MPs would have to blast him out of office, backbench MPs were in open revolt at the direction of his government on Tuesday night. Liberal MP Dennis Jensen on Tuesday became the first MP to publicly call on Mr Abbott to step aside after weeks of leadership speculation and rising panic on the government backbench about the Coalition's dire position. Foreign Minister Julie Bishop ruled out directly challenging Mr Abbott for the leadership but has reserved the right to put up her hand if someone else moved to force him to declare the position vacant and hold a ballot. Other MPs join in criticism of Tony Abbott Queensland Liberal National Party backbencher Warren Entsch told Fairfax Media on Tuesday night that he supported a party room ballot as soon as next week when parliament sits for the first time in 2015. "It [the leadership] needs to be resolved," he said. Jensen added that he didn't believe there was anything Mr Abbott could now do to save his leadership, just a day after the Prime Minister gave a major speech at the National Press Club designed to regain support and buy him some time.Government in Treacherous Waters The Australian reports Government in Treacherous Waters.  The Abbott government is being destroyed before our eyes. The Liberal Party’s frustrations and divisions have cracked wide open. It has taken only 17 months for a sizeable section of the party to announce that Tony Abbott has failed as PM and needs to be liquidated. The internal chaos that ruined the former Labor government has now penetrated the Abbott government. While Abbott’s chances of staging a poll recovery were unlikely, the internal convulsion makes this virtually impossible. As Abbott fights, the debate is shifting to discussion about a new leadership team. Australia now stares down the gun barrel of a third partyroom assassination of a PM in five years. Is there anybody stupid enough to think our politics is not broken? US Version of Story On February 3, the Wall Street Journal reported Australia Cuts Interest Rates to Record Low. Australia cut its benchmark interest rate to a record low of 2.25% Tuesday, joining a procession of central banks that have eased policy settings this year in response to the deflationary impact of tumbling oil prices. The 0.25-percentage-point cut represents a dramatic shift for the Reserve Bank of Australia—which ended 2014 with a message to financial markets that interest-rate stability was likely to feature again in 2015, to help underpin certainty for businesses and support the economy as a mining-investment boom fizzles out. Gov. Glenn Stevens said the decision to come off the sidelines for the first time in 18 months was driven by concern that Australia’s resource-rich economy was facing another year of below-average growth. The Australian dollar fell sharply on the announcement of a cut, dropping to a fresh 5½-year low, while the stock market surged to the highest level since May 2008.No Mention of Massive Political Crisis There was not one mention in the Journal of massive, and unprecedented political turmoil. Instead we see this ... The Reserve Bank of Australia joins the Monetary Authority of Singapore, Reserve Bank of New Zealand, European Central Bank, Bank of Canada and the central banks of India, Denmark and Switzerland in either announcing substantial policy shifts or easing monetary settings—in some cases dramatically—since Jan. 1. Australia faces a slowing global economy, especially slowing demand of China for natural resources. A housing bust, baked in the cake is going to tremendously exacerbate Australia's woes. And icing on the ruins is the potential return of Labour. 2013 Flashback Mish Flashback May 2, 2013: Australia Manufacturing Collapses as Commodity Supercycle Stalls; Labor and Unions Wrecked Australia. Labor and Unions Wrecked Australia The labor party and unions wrecked Australia. This was invisible for years because a housing boom and China-fueled commodity boom masked the untenable nature of wage and property bubble growth. Now, it's payback time. On September 14, prime minister Julia Gillard, leader of the Australian Labor Party will be thrown out of office in a landslide. Unfortunately, it will take years for Australia to recover from the damage caused by Labor. Addendum - Comments from Steve Keen Steve Keen blames both parties. Via email, Keen says "The damage began under Labor with Hawke and Keating, was turbocharged by the Liberals under Howard, and simply maintained by Rudd/Gillard Labor. And unions have lost significant power all the way through--they've been bystanders, not active participants. It's instead been a series of distortions caused by a neoliberal philosophy that is shared by both parties." Hmm. Parties talk differently but act the same. Where have we seen that before? In the US, it's on war, bailouts, and spending that always goes up. Romneycare and Obamacare were the same. For political purposes people pretend differences exist when they don't, except on some social issues.2012 Flashback Mish Flashback September 4, 2012: By 2015 Hard Commodity Prices Will Collapse; Australia's Mining Boom Dies (and the Official Denials Start) I have been calling for a base metals bust for some time, fueled by a slowdown in China. Michael Pettis at China Financial Markets has been saying the same thing. Indeed, it is analysis from Pettis that influenced my views in the first place.In that post I quoted Australian prime minister (at that time) Julia Gillard who said "There is no question about whether we have a boom, the issue is whether we make it last. Let’s be clear, reports of the mining boom's death are exaggerated." I responded ... It is not up to Australia at all whether the boom is over or not. The boom is entirely dependent on what China does or doesn't do. Moreover, there is no question the boom is over. The real question is "How big is the bust?" Question of Faith Some put their faith in hyperinflation, commodity supercycles, and the belief China could expand forever. I put my faith elsewhere. Thanks once again to those who helped me reach the right conclusions. Michael Pettis and Steve Keen are in that group. I mentioned both Pettis and Keen above, and both of them recently in Financial Blogger Profile of "Mish" on Equities.Com. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

16 декабря 2014, 20:26

Gold Imports ‘Phenomenal’ In India - 571 Percent Surge To 150 Tonnes in November

Gold Imports ‘Phenomenal’ In India - 571 Percent Surge To 150 Tonnes in November India's gold imports were over a staggering 150 tonnes in November and have seen a "phenomenal" rise in India, according to India’s Trade Secretary, Rajeev Kher. A few weeks ago we said that the death of the Indian gold market was greatly exaggerated. The latest gold import data out of India confirms this. The import restrictions on gold that were imposed on Indians in August of 2013 were lifted at the end of last month. Despite the fact that the restrictions were still in place gold importation in November surged an incredible 571% relative to the same month last year at over 151.58 tonnes. This was an increase of 38 percent from 109.55 tonnes a month earlier, trade ministry data showed on Tuesday. The Indian government had recognised the socially destructive impact of the 80:20 scheme - which obliged importers to export 20% of it’s gold imports before bringing in another shipment – by pushing business into the hands of smugglers and thereby empowering criminality while losing out on the 10% duty currently charged on all gold imports. It had been assumed that, because demand was being met by these “informal” supplies, the relaxing of the 80:20 policy would not have a dramatic impact on gold imports into India. That remains to be seen. Smuggling networks are now well established and arguably could provide cheaper gold than government-sanctioned channels. The restrictions were put in place because the appetite of the growing Indian middle classes for gold was causing India to run large trade deficits. It is believed that it was also a misguided attempt at financial repression of gold in order to discourage Indians from buying physical gold. There were concurrent attempts to get Indians to open bank accounts and indeed to own digital and paper gold. This highlights once again how deeply Indians feel about gold in that demand for this single commodity or form of money - could skew the trade deficit in such a dramatic way. India officially imported $5.6 billion worth of gold in November. The trade deficit increased to $16.9 billion in the same period despite the cost of oil imports being low. This is putting pressure on the rupee which is currently valued at almost 63 to the dollar. The central bank appears happy enough at this level as it will help boost exports which have been booming. However, India’s trade secretary - Rajeev Kher - has said that any level below 62 rupees to the dollar would cause him to be a “little more concerned.”   Russia’s drastic rate hike of 6.5% up to 17% is likely to further unnerve the Indian government as it tries to balance insatiable public demand for gold with the need to rein in the deficit. If the rupee falls more, India will be forced to raise rates to discourage capital flight. However, taking the longer term view, it must be said that – as a country that imports between 25% and 33% of the global gold supply – India will be well placed when currency wars deepen and the inevitable world-wide monetary reset occurs. India’s imports are around the 1,000 metric tonne mark and global gold production is just under 3,000 metric tonnes. We believe that it will be eastern countries who will determine monetary policy when that time comes. As Russia’s foreign minister Lavrov has pointed out the seven countries led by the BRICS nations now have a larger combined GDP than the western G7. The old adage that “those who own the gold make the rules” will likely come to pass again. As it did in 1945, when the U.S. was the largest holder of gold in the world which enabled it to dictate the terms of the new Bretton Woods monetary system. This seems likely given the affinity that the people, governments and central banks of India, China and the East have for gold as a store of value. Essential Guide to  Storing Gold Bullion In Singapore MARKET UPDATE Today’s AM fix was USD 1,199.25, EUR 960.25 and GBP 763.95 per ounce. Yesterday’s AM fix was USD 1,210.75, EUR 974.53 and GBP 772.41 per ounce. Spot gold slid $30.40 or 2.49% to $1,191.70 per ounce yesterday and silver plummeted $0.87 or 5.12% to $16.14 per ounce despite no market moving news or developments.  Gold in USD - 5 Days (Thomson Reuters) Gold in Singapore was flat overnight in Asia prior to gold bouncing back from yesterday’s biggest drop this year and is over 2% higher today as buyers accumulate after yesterday’s dip. Traders await the policy statement from the U.S. Federal Reserve meeting tomorrow. Gold fell yesterday as U.S. manufacturing data beat estimates supporting the case for higher borrowing costs next year. Federal Reserve officials meet today and tomorrow to debate the possibility of rising U.S. interest rates, which have been near zero since 2008. Silver for immediate delivery rose 2.5% to $16.70 an ounce, after plunging by 5.1% yesterday. Platinum was little changed at $1,209.88 an ounce. Palladium added 0.3% to $800.38 an ounce. Holdings in gold-backed ETPs dropped 3 metric tons to 1,608.2 tons as of yesterday, Bloomberg data showed.  Silver in USD - 5 Days (Thomson Reuters) The world's second largest gold consumer surprised analysts and discarded a rule for traders to export 20% of all gold imports.  This change led to gold imports surging to 151.58 tonnes in November, an increase of 38% from 109.55 tonnes a month earlier, noted the trade ministry data yesterday. Indian gold imports had risen hugely and the government should examine the impact of last month's revision of the so-called 80:20 rule commented Trade Secretary Rajeev Kher. The global price of crude oil plummeted through $60 a barrel for the first time in five years with almost no signs producers are ready to tackle a glut. Brent futures slid as much 3.3% to its lowest since May 2009 in London. Crude oil fell about 45% this year as OPEC (Organization of Petroleum Exporting Countries) sought to defend market share amid a U.S. shale boom that’s exacerbating a global glut. The group, responsible for 40% of the world’s supply, will refrain from curbing output, U.A.E. Energy Minister Suhail al-Mazrouei said over the weekend. Get Breaking News and Updates On Gold Here    

15 февраля 2014, 05:20

20 Signs That The Global Economic Crisis Is Starting To Catch Fire

Submitted by Michael Snyder of The Economic Collapse blog, If you have been waiting for the "global economic crisis" to begin, just open up your eyes and look around.  I know that most Americans tend to ignore what happens in the rest of the world because they consider it to be "irrelevant" to their daily lives, but the truth is that the massive economic problems that are currently sweeping across Europe, Asia and South America are going to be affecting all of us here in the U.S. very soon.  Sadly, most of the big news organizations in this country seem to be more concerned about the fate of Justin Bieber's wax statue in Times Square than about the horrible financial nightmare that is gripping emerging markets all over the planet.  After a brief period of relative calm, we are beginning to see signs of global financial instability that are unlike anything that we have witnessed since the financial crisis of 2008.  As you will see below, the problems are not just isolated to a few countries.  This is truly a global phenomenon. Over the past few years, the Federal Reserve and other global central banks have inflated an unprecedented financial bubble with their reckless money printing.  Much of this "hot money" poured into emerging markets all over the world.  But now that the Federal Reserve has begun "tapering" quantitative easing, investors are taking this as a sign that the party is ending.  Money is being pulled out of emerging markets all over the globe at a staggering pace and this is creating a tremendous amount of financial instability.  In addition, the economic problems that have been steadily growing over the past few years in established economies throughout Europe and Asia just continue to escalate.  The following are 20 signs that the global economic crisis is starting to catch fire... #1 The unemployment rate in Greece has hit a brand new record high of 28 percent. #2 The youth unemployment rate in Greece has hit a brand new record high of 64.1 percent. #3 The percentage of bad loans in Italy is at an all-time record high. #4 Italian industrial output declined again in December, and the Italian government is on the verge of collapse. #5 The number of jobseekers in France has risen for 30 of the last 32 months, and at this point it has climbed to a new all-time record high. #6 The total number of business failures in France in 2013 was even higher than in any year during the last financial crisis. #7 It is being projected that housing prices in Spain will fall another 10 to 15 percent as their economic depression deepens. #8 The economic and political turmoil in Turkey is spinning out of control.  The government has resorted to blasting protesters with pepper spray and water cannons in a desperate attempt to restore order. #9 It is being estimated that the inflation rate in Argentina is now over 40 percent, and the peso is absolutely collapsing. #10 Gangs of armed bandits are roaming the streets in Venezuela as the economic chaos in that troubled nation continues to escalate. #11 China appears to be very serious about deleveraging.  The deflationary effects of this are going to be felt all over the planet. The following is an excerpt from Ambrose Evans-Pritchard's recent article entitled "World asleep as China tightens deflationary vice"... China's Xi Jinping has cast the die. After weighing up the unappetising choice before him for a year, he has picked the lesser of two poisons. The balance of evidence is that most powerful Chinese leader since Mao Zedong aims to prick China's $24 trillion credit bubble early in his 10-year term, rather than putting off the day of reckoning for yet another cycle. This may be well-advised for China, but the rest of the world seems remarkably nonchalant over the implications. #12 There was a significant debt default by a coal company in China last Friday... A high-yield investment product backed by a loan to a debt-ridden coal company failed to repay investors when it matured last Friday, state media reported on Wednesday, in the latest sign of financial stress in China's shadow bank sector. #13 Japan's Nikkei stock index has already fallen by 14 percent so far in 2014.  That is a massive decline in just a month and a half. #14 Ukraine continues to fall apart financially... The worsening political and economic circumstances in Ukraine has prompted the Fitch Ratings agency to downgrade Ukrainian debt from B to a pre–default level CCC. This is lower than Greece, and Fitch warns of future financial instability. #15 The unemployment rate in Australia has risen to the highest level in more than 10 years. #16 The central bank of India is in a panic over the way that Federal Reserve tapering is effecting their financial system. #17 The effects of Federal Reserve tapering are also being felt in Thailand... In the wake of the US Federal Reserve tapering, emerging economies with deteriorating macroeconomic figures or visible political instability are being punished by skittish markets. Thailand is drifting towards both these tendencies. #18 One of Ghana's most prominent economists says that the economy of Ghana will crash by June if something dramatic is not done. #19 Yet another banker has mysteriously died during the prime years of his life.  That makes five "suspicious banker deaths" in just the past two weeks alone. #20 The behavior of the U.S. stock market continues to parallel the behavior of the U.S. stock market in 1929. Yes, things don't look good right now, but it is important to keep in mind that this is just the beginning. This is just the leading edge of the next great financial storm. The next two years (2014 and 2015) are going to represent a major "turning point" for the global economy.  By the end of 2015, things are going to look far different than they do today. None of the problems that caused the last financial crisis have been fixed.  Global debt levels have grown by 30 percent since the last financial crisis, and the too big to fail banks in the United States are 37 percent larger than they were back then and their behavior has become even more reckless than before. As a result, we are going to get to go through another "2008-style crisis", but I believe that this next wave is going to be even worse than the previous one. So hold on tight and get ready.  We are going to be in for quite a bumpy ride.        

14 февраля 2014, 04:24

20 Signs That The Global Economic Crisis Is Starting To Catch Fire

Michael Snyder Activist Post If you have been waiting for the "global economic crisis" to begin, just open up your eyes and look around.  I know that most Americans tend to ignore what happens in the rest of the world because they consider it to be "irrelevant" to their daily lives, but the truth is that the massive economic problems that are currently sweeping across Europe, Asia and South America are going to be affecting all of us here in the U.S. very soon. Sadly, most of the big news organizations in this country seem to be more concerned about the fate of Justin Bieber's wax statue in Times Square than about the horrible financial nightmare that is gripping emerging markets all over the planet.  After a brief period of relative calm, we are beginning to see signs of global financial instability that are unlike anything that we have witnessed since the financial crisis of 2008.  As you will see below, the problems are not just isolated to a few countries.  This is truly a global phenomenon. Over the past few years, the Federal Reserve and other global central banks have inflated an unprecedented financial bubble with their reckless money printing.  Much of this "hot money" poured into emerging markets all over the world.  But now that the Federal Reserve has begun "tapering" quantitative easing, investors are taking this as a sign that the party is ending.  Money is being pulled out of emerging markets all over the globe at a staggering pace and this is creating a tremendous amount of financial instability.  In addition, the economic problems that have been steadily growing over the past few years in established economies throughout Europe and Asia just continue to escalate.   (adsbygoogle = window.adsbygoogle || []).push({});  The following are 20 signs that the global economic crisis is starting to catch fire... #1 The unemployment rate in Greece has hit a brand new record high of 28 percent. #2 The youth unemployment rate in Greece has hit a brand new record high of 64.1 percent. #3 The percentage of bad loans in Italy is at an all-time record high. #4 Italian industrial output declined again in December, and the Italian government is on the verge of collapse. #5 The number of jobseekers in France has risen for 30 of the last 32 months, and at this point it has climbed to a new all-time record high. #6 The total number of business failures in France in 2013 was even higher than in any year during the last financial crisis. #7 It is being projected that housing prices in Spain will fall another 10 to 15 percent as their economic depression deepens. #8 The economic and political turmoil in Turkey is spinning out of control.  The government has resorted to blasting protesters with pepper spray and water cannons in a desperate attempt to restore order. #9 It is being estimated that the inflation rate in Argentina is now over 40 percent, and the peso is absolutely collapsing. #10 Gangs of armed bandits are roaming the streets in Venezuela as the economic chaos in that troubled nation continues to escalate. #11 China appears to be very serious about deleveraging. The deflationary effects of this are going to be felt all over the planet. The following is an excerpt from Ambrose Evans-Pritchard's recent article entitled "World asleep as China tightens deflationary vice"... China's Xi Jinping has cast the die. After weighing up the unappetising choice before him for a year, he has picked the lesser of two poisons. The balance of evidence is that most powerful Chinese leader since Mao Zedong aims to prick China's $24 trillion credit bubble early in his 10-year term, rather than putting off the day of reckoning for yet another cycle. This may be well-advised for China, but the rest of the world seems remarkably nonchalant over the implications.#12 There was a significant debt default by a coal company in China last Friday... A high-yield investment product backed by a loan to a debt-ridden coal company failed to repay investors when it matured last Friday, state media reported on Wednesday, in the latest sign of financial stress in China's shadow bank sector.#13 Japan's Nikkei stock index has already fallen by 14 percent so far in 2014.  That is a massive decline in just a month and a half. #14 Ukraine continues to fall apart financially... The worsening political and economic circumstances in Ukraine has prompted the Fitch Ratings agency to downgrade Ukrainian debt from B to a pre–default level CCC. This is lower than Greece, and Fitch warns of future financial instability.#15 The unemployment rate in Australia has risen to the highest level in more than 10 years. #16 The central bank of India is in a panic over the way that Federal Reserve tapering is affecting their financial system. #17 The effects of Federal Reserve tapering are also being felt in Thailand... In the wake of the US Federal Reserve tapering, emerging economies with deteriorating macroeconomic figures or visible political instability are being punished by skittish markets. Thailand is drifting towards both these tendencies.#18 One of Ghana's most prominent economists says that the economy of Ghana will crash by June if something dramatic is not done. #19 Yet another banker has mysteriously died during the prime years of his life.  That makes five "suspicious banker deaths" in just the past two weeks alone. #20 The behavior of the U.S. stock market continues to parallel the behavior of the U.S. stock market in 1929. Yes, things don't look good right now, but it is important to keep in mind that this is just the beginning. This is just the leading edge of the next great financial storm. The next two years (2014 and 2015) are going to represent a major "turning point" for the global economy.  By the end of 2015, things are going to look far different than they do today. None of the problems that caused the last financial crisis have been fixed.  Global debt levels have grown by 30 percent since the last financial crisis, and the too big to fail banks in the United States are 37 percent larger than they were back then and their behavior has become even more reckless than before. As a result, we are going to get to go through another "2008-style crisis", but I believe that this next wave is going to be even worse than the previous one. So hold on tight and get ready.  We are going to be in for quite a bumpy ride. This article first appeared here at the Economic Collapse Blog.  Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. Follow him on Twitter here. 

05 января 2014, 17:37

The Future of Money is Here: Zero Trust Digital Currency Contracts

 BoomBustBTC contract Note: New subscriber content available below. I have created derivatives for Bitcoin that work exclusively on the Bitcoin network. They are capable of literally replacing the role of the large money center and investment banks. YES! This is a big thing. I will hopefully have a limited use beta example of the first product for the viewers of the show to experiment with. These products have been designed as zero trust contracts (meaning it was designed to eliminate the human judgment factor, thereby nearly completely automating the entire transaction). Currently, trust issues that the conventional OTC banking system products incur severely hamper free flowing capital markets. Greed begets inefficiencies. Digital zero trust contracts (as opposed to physical legal contracts) “theoretically” eliminate litigation and court involvement and expensive dispute resolution through means of the legal system. My BoomBust contracts allows anonymous parties to swap exposure in and out of Bitcoin from many widely traded currencies. (USD, EUR, YEN, CNY, etc.).   The state of the capitalist union today is ripe for Bitcoin activity to explode if knowledge of the platform spreads. Just to list of few catalysts: The lack of trust in the world’s reserve currency, the USD. The financial controls in the world’s most populous nations, India and China. The Pan-European sovereign debt crisis The confiscation of bank deposits in Cyprus (EU Bank Depositors: Your Mattress Is Starting To Look Awfully Attractive - Bank Risk, Reward & Compensation) and Ireland (As Forewarned, Irish Savers Have Just Been "Cyprus'd", And There's MUCH MORE "Cyprusing" To Come) and eventually anywhere banks are overleveraged and/or undercapitalized. The billions of the great “unbanked” of the world, in both 3rd world nations and even in the most developed nations on earth, ex. right here in the US. The paltry returns on loans and bank deposits as well as the unsubstantiated bubble returns on risk assets – all stemming from the Fed’s unprecedented 6 year global ZIRP real time experiment. I commented on this back in 2008 (A real life, real time example of the Great Global Macro Experiment)and it’s still running strong. Possible uses for the BoomBust contracts: Simple investment/speculation Those who want to gain exposure to a foreign or digital currency can easily enter into a swap to gain said exposure without actually having to purchase said currency (other than BTC, of course). Hedging The swap can be used as a simple hedge for any party that has large exposure to BTC, USD, EUR, etc., such as a retailer with low margins and high volume, ex. Chinese widget manufacturer or smartphone OEM, that accepts bitcoin but wants to hedge out the volatility and market risk. The BoomBust contracts can be layered, levered and/or compounded to make more complex hedges as well. Capital flight/mobility & Banking System Bail-in protection Parties who are domiciled in free flowing capital hostile states that have tight capital controls, ex. China, India, and now France with its 75% effective wealth confiscation scheme, etc. that have banned or limited BTC trading by banks and/or individuals can take advantage of the BoomBust contracts to gain multi-currency exposure without explicitly violating the law. Take note that the systems with the tightest capital controls have been the one’s exhibiting the most aggressive stance to bitcoin. Unfortunately, they don’t seem to understand what Bitcoin is and what it can do. I stand to educate the masses. See below… Cyprus banks closed on a Friday and announced confiscation of assets over the weekend. These BoomBust contracts could have been used to move monetary value outside of the Cyprus banking system assuming the participants had a store of Bitcoin (it is rumored that this is how some of the Russian money was removed over the weekend). Let’s assume a small businessman would like to purchase $1M euro worth of bitcoin, yet is concerned that the BTC volatility may cause more of a loss than the Cypriot capital controls. He buys the BTC then hedges his large BTC position into EUR. He proceeds to do that with a quarter of his monthly cashflows, building up a sizeable, fully hedged position in cyberspace (thus, effectively offshore) and outside of the fragile Cyprus banking system. The Cyprus banks pull the trigger to confiscate funds and the Russian bank depositor has significant funds mobile and ready to deliver anywhere in the internet connected world within minutes, even on a Sunday afternoon. Another example of dealing with a company with tight capital controls would be India. India has extremely tight capital controls that have (IMHO) hampered its economic progress relative to China, despite having similar populations and the advantage of a large indigenous English speaking population stemming from British occupation (easier to do business with the larger capitalist nations when more of your constituents speaks the native tongue). India has effectively outlawed trading in bitcoin, but Indians can still participate in the evolution of money by taking advantage of the liberalised remittances scheme of the Central Bank of India, a person can remit up to 75,000 USD offshore annually. These monies can end up in a Bitcoin friendly jurisdiction (amazingly enough, like the US), and be used to purchase BTC hedged, via BoomBust contracts, back into rupees or the currency of choice. indian BTC program This can also work the other way around, which would actually be quite advantageous to the Indian government and potentially make them rethink the real world practicality of capital controls. Even in a country that has capital controls and fears Bitcoin may threaten its banks, a decentralized near friction free currency exchange would be beneficial solely do to international remittances from expats in foreign workers. A real world example are Indians that I know who lose significant money because of PayPal and Western Union fees (not to mention bank wire fees). Indians can send BoomBust digital contract rupee locked BTC home on a deferred basis. The registered exchange or ATM in India however could only be one-way so that it only accepts BTC from the Indian general public in exchange for rupees and not the other way around. Spread Arbitrage On Dec 13th, the EUR/USD exchange rate was roughly .78x, thus if one were to have sold 1 BTC into EUR than purchased USD, a $10.66 spread could have been realized over buying the USD with EUR directly. arbitrage opp  Notice the differences in prices throughout the SAME MARKETS, contingent upon exchange. BTC markets  I am happy to discuss this with institutional and professional subscribers whenever possible. All paying subscribers (click here to subscribe) can download this introduction to our institutional level report on investing in cryptocurrencies:  Digital Currencies' Risks, Rewards & Returns - An Into Into Bitcoin Investing For Longer Term Horizon. There will be much more to follow in the upcoming days. Below is the brief summary as how we have computed the following ratios: Excess Risk Adjusted Return Excess Risk Adjusted Return is defined as returns over and above the required return on asset based on its risk characteristics. BITCOIN being a very volatile asset, the required return of the currency has been computed using the CAPM (Capital Asset Pricing Model) approach. CAPM equation requires a variable known as Return on Market Portfolio (a portfolio comprising of all risky assets, conventional as well as alternative assets like antiques, currencies, private equity investments, etc.). For equity investments, general Market Index shall suffice but in our case the investment is altogether different (Digital Currency) and the conventional market index will be a bad proxy. Best Proxy in our case shall be a diversified Currency Portfolio – comprising all global as well as digital currencies. As such there exists no known proxy/Index consisting all Currencies, We have approximated it by using MSCI – EM Currency Index. The Index comprises a basket of 25 emerging market currencies.  Excess Risk Adjusted Return = (Return on Asset) – (Required Return on asset based on its risk characteristics) Return on Asset (Ra) = Return on B ITCOIN for different periods like 3M, 6M 12M, etc. Required Return on Asset = RFR + ? * (Rm – Ra) RFR = Current US I year Treasury Yield Beta = Covariance of (Returns on Asset & Returns on comparable Index) divided by Variance of (Index Returns) Rm = Long term return on comparable Index, (in our case which is the Currency Index return comprising 25 Emerging Market currencies) What's so eery is that now even Ben Bernanke and I actually agree upon something...  “Digital currencies may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system.”  US Federal Reserve Chairman Ben Bernanke        

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21 октября 2013, 15:04

Are Wal-Mart’s Troubles in India Growing?

Wal-Mart's case has been forwarded to the Central Bank of India. Does that shift indicate a bigger problem for the retailer?

19 сентября 2013, 09:02

Learning from Lehman: Lessons for Emerging Markets from the Financial Crisis

Originally appeared at the Fung Global Institute By Liu Mingkang When the U.S. investment bank Lehman Brothers collapsed five years ago, emerging-market economies did not hold many of the toxic financial assets – mainly American subprime mortgages – that fueled the subsequent global financial crisis. But they were deeply affected by the drop in world trade, which recorded a peak-to-trough decline of at least 15 per cent, with trade finance also contracting sharply, owing to a shortage of dollar liquidity. Have policymakers responded appropriately since then? Soon after the crisis erupted, the G-20 countries embraced massive stimulus packages, unconventional monetary policies in the advanced economies, and major institutional efforts, such as the Dodd-Frank financial-reform legislation in the United States and the Basel III initiative to strengthen banking standards. China’s RMB4 trillion stimulus package, unveiled in November 2008, restored confidence in global commodity markets. Led by strong Chinese growth, emerging markets stabilized. Since 2009, quantitative easing (QE) by the U.S. Federal Reserve has resulted in record-low interest rates around the world. But, while the resulting surge in capital flows to emerging markets stimulated economic growth, it also inflated asset bubbles. Now, with the Fed publicly considering an end to its massive, open-ended purchases of long-term securities and foreign capital fleeing home from emerging markets, many fear that Asia’s economies could come crashing down, as they did in the late 1990’s. Leverage in some emerging markets’ household and corporate sectors has reached record levels. China’s annual economic growth has slowed to around 7.5 per cent, while Indonesia and India – and, outside Asia, Brazil and South Africa – are experiencing sharp downward pressure on their exchange rates. Moreover, there has been no major reform of the global financial architecture. China’s renminbi is internationalizing, but its share of global payments remains relatively small, with the dollar retaining its role as the world’s main reserve currency. And, while regulatory reform is progressing, its effectiveness in addressing the weaknesses exposed by the global financial crisis will depend not only on the new rules that emerge, but also on the consistency and quality of their implementation. There has been commendable progress on the Basel III capital requirements for banks, with 25 of 27 Basel Committee members having issued final rules. Likewise, the impact of regulatory changes resulting from major legislation and policy directives in the United States, Europe, and the United Kingdom on banking, insurance, financial-transaction taxes, anti-money laundering, and cyber-space is likely to be substantial. Although rules on shadow banking have yet to be formulated, another problem exposed by the crisis has abated: America’s external deficit has shrunk to a much more manageable 2-3 per cent of GDP, accompanied by drops in the surpluses run by Japan and China. Global trade rebalancing has arrived. Still, fiscal conditions in the advanced economies remain unsustainable, with many OECD members’ debt levels hovering around 100 per cent of GDP. Japan, which has one of the world’s highest debt/GDP ratios, currently well over 200 per cent, is engaging in a risky experiment with further monetary stimulus to try to target 2 per cent annual inflation. In many advanced economies, both monetary and fiscal policies have reached the limits of their effectiveness. The key questions now are whether global economic growth is self-sustaining without QE, whether emerging markets’ output will continue to rise strongly, albeit at a slower pace, and whether current global financial-reform efforts will be sufficient to prevent another crisis in emerging markets. Given the high degree of trade and financial globalization that now characterizes the world economy, there is no doubt that the slowdown in the advanced economies, which account for two-thirds of global GDP, will undermine emerging-country growth. Indeed, the threat to withdraw QE is already having an enormous impact on emerging economies’ asset markets. As real interest rates and risk premia begin to rise, the level of global trade and investment will decline. In the coming years, emerging markets will most likely struggle with implementation of global financial regulatory standards, which apply mostly to more sophisticated financial markets. They will also confront a rapidly changing external environment and a growing need to manage capital flows more effectively, which will require much closer coordination between central banks and financial regulators. Indeed, perhaps the most important lesson learned in the aftermath of the collapse of Lehman Brothers is that we can no longer afford to examine problems in terms of individual institutions and from regulatory “silos.” The global economy’s high degree of interconnectivity, interdependence, and complex feedback mechanisms imply that one weak hub can bring down the entire system. In other words, the world needs a systemic approach to deal with systemic risks and system failures. Unfortunately, there may be little hope of strengthening global financial governance as long as implementation and enforcement of rules remain at the national level. Like other emerging markets, China is committed to financial stability and playing its role in reforming the global financial system. China was one of the first countries to sign up to the Basel III standards, and further renminbi internationalization will be implemented in a prudent and pragmatic manner. Domestic financial reforms will focus on strengthening policy coordination and moving toward market determined interest rates and exchange-rate flexibility. All of these steps will contribute to sustainable domestic growth and a more stable global financial system. Other major emerging economies’ policymakers would be wise to act with the same purpose in mind.

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18 сентября 2013, 16:40

Confusion behind big drop in Indian gold imports

Ahead of the festival season, India hiked gold import duties another 10-15% this week, raising jewelry import taxes alongside to give domestic jewelers a break. It's the latest in a series of hikes on gold taxes as the country tries to narrow its trade gap by stemming demand for the metal. Much has been made of the plummeting in gold imports in August, but this may have been due to a new central bank policy ordering 20% of imported gold be set aside for export, with the remainder going into jewelry. Don't beat yourself up for not being able to figure out what this means. Industry experts can't decipher the rule either, and imports/exports have both frozen in the meantime. Gold dipped below $1,300 per ounce overnight, but is now -0.6% at $1,302.Gold ETFs: GLD, IAU, SGOL, PHYS, AGOL, DGL, UBG, DGP, UGL, DZZ, GLL, DGZ, UGLD, DGLD, GLDI. Post your comment!

17 сентября 2013, 21:59

India Escalates Gold Capital Controls, Hikes Duty On Gold Jewerly Imports To 15%

Anyone following the Indian economy and capital markets has been witness to what is the worst case outcome for a modern-day central banker: on one hand forced to keep inflation down, on the other fighting a fierce capital outflow which recently shocked Rupee holders by send the currency to all time lows against the dollar and sending gold priced in INR to record highs. All of this is, of course, happening as India fights tooth and nail to keep its monthly trade deficit under control, not overpay for oil, and keep businesses running now that inflation expectations are becoming unanchored. And, as we have reported previously, the biggest scapegoat to the Indian central bank and government is, understandably, gold, which has been the source of much of the population's "wealth preservation" currency outflow. As a result, India has unleashed the most unprecedented series of gold "capital controls" ever seen in a modern nation, shy of confiscation (and even that may be imminent). Today, India added yet another more measure to its list of prohibitions that seek to minimize the size of the gold market available to citizens, yet which will only result in even more interest and demand in the yellow metal. As Reuters reports, India increased its import duty on gold jewellery from 10 percent to 15 percent, setting it higher than the duty on raw gold in a move to protect the domestic jewellery industry. Why is the government doing this? Simple: "To protect the interests of small artisans, the customs duty on articles of jewellery ... is being increased," the ministry said. Somehow we doubt the ministry actually cares about the small artisans as much as it cares about making gold imports even more prohibitive and which only serve to exacerbate the country's current account deficit, which in turn will inevitably result in even more USD-outflows, INR weakness, economic and market instability, more central bank intervention, the eventual selling of Treasury bonds, more gold purchases, and so on. More on today's latest capital control move from Reuters: The government has also curbed raw gold imports through measures including three duty hikes this year to a record 10 percent. The central bank has put tight restrictions on importers that have sharply curtailed supplies. India imported gold jewellery worth $137.57 million between April and July - a fraction of overall bullion imports, which were valued at $2.9 billion in July alone. The world's biggest buyer of bullion, India imported a record 162 tonnes in May, creating a headache for the government which is trying to rein in a wide current account deficit and support a weak rupee. Gold is the biggest non-essential item in India's import bill although jewellery is a tiny fraction of the purchases. The hike in the duty on jewellery was demanded by the domestic industry on concerns over imports of cheaper jewellery from Thailand, Malaysia and elsewhere. "This is a good move for the local industry and it will support the manufacturing sector," said Haresh Soni, chairman of the All India Gems and Jewellery Trade Federation. So while this latest escalation in the fight of one particular central bank with gold will merely lead to the next, we can now update our list of all capital control actions taken by India in 2013 alone, which now looks as follows. Jan 21 - The government raises the gold import duty by 2% to 6%. Jan 22 - The government more than doubles the duty on raw gold to 5%. Jan 30 - Finance Minister P. Chidambaram says there are no plans for additional taxes or curbs on gold imports. Feb 1 - The Reserve Bank of India (RBI) plans to introduce three or four gold-linked products in the next few months. Feb 6 - The RBI says it would consider imposing value and quantity restrictions on gold imports by banks. Feb 14 - The central bank relaxes rules on gold deposit schemes offered by banks by allowing lenders to offer the products with shorter maturities. Feb 20 - The Trade Ministry recommends suspending cheaper gold jewellery imports from Thailand. Feb 28 - India keeps its gold import duty unchanged in its annual national budget, defying industry expectations. Feb 28 - India proposes a transaction tax of 0.01% on nonagricultural futures contracts, including for precious metals. March 1 - The Finance Minister appeals to people not to buy so much gold. March 18 - The Reserve Bank of India says it is examining banks that sell gold coins and wealth management products to identify "systemic issues", with a view to closing any legal loopholes. April 2 - The Finance Ministry suggests it is unlikely to raise the import tax on gold further to avoid smuggling and would instead introduce inflation-indexed instruments. May 3 - The RBI restricts the import of gold on a consignment basis by banks. June 3 - The Finance Minister says India cannot afford high levels of gold imports and may review its import policy. June 5 - India hikes the gold import duty by a third, to 8%. June 21 - Reliance Capital halts gold sales and investments in its gold-backed funds. June 24 - India's biggest jewellers' association asks members to stop selling gold bars and coins, about 35% of their business. July 10 - India's jewellers announce they might continue a voluntary ban on sales of gold coins and bars for six months. July 22 - The RBI moves to tighten gold imports again, making them dependent on export volumes, but offers relief to domestic sellers by lifting restrictions on credit deals. July 31 - India hopes to contain gold imports well below the 845 tonnes that were shipped last year, the Finance Minister says. Aug 13 - India hikes the import duty on gold for a third time in 2013, to 10%. Duties for silver and platinum are also increased to 10%. The customs duty on gold ore bars, ore, and concentrate are increased to 8% from 6%. Aug 14 - India turns the screws on gold buying again, banning imports of coins and medallions and making domestic buyers pay cash. Aug 29 -  India considers plan to allow commercial banks to buy gold direct from ordinary citizens Sept 19 - India hikes import duty on gold jewerly to 15%         

17 сентября 2013, 17:54

Gold Is Not A Safe Haven? Tell That To People In Indonesia

Today’s AM fix was USD 1,317.25, EUR 985.74 and GBP 828.67 per ounce. Yesterday’s AM fix was USD 1,314.75, EUR 984.83 and GBP 825.17 per ounce.   Gold fell $13.70 or 1.04% yesterday, closing at $1,309.50/oz. Silver dropped $0.49 or 2.21%, closing at $21.70. At 2:55 EDT, Platinum fell $15.76 or 1.1% to $1,433.74 /oz, while palladium rose $5.50 or .8% to $702.00/oz. Gold inched up from its five week low, gaining on the weak U.S. dollar plus increased safe haven demand prior to the U.S. Fed's policy meeting which starts today.  Gold in Indonesian Rupiah, 2000 to Today - (GoldCore) Yesterday Goldman Sachs said that a ‘dovish’ taper would likely limit the downside to gold prices but said that a more hawkish taper than currently expected would likely precipitate a further decline in gold prices. Goldman Sachs have a habit of making big and loud market calls such as their call for oil to rise to $200 a barrel when oil had already surged from $50 a barrel in March 2007 to $140 a barrel in September 2008.  Soon after that call, oil fell from $140 a barrel to a low of $32.40 a barrel at the end of 2008. Their call should be seen as another contrarian buy signal.  The CHART OF THE DAY shows how the Indonesian rupiah, like all currencies has devalued consistently in recent years and remains close to record nominal highs in gold terms. There are concerns that Indonesia’s record current account deficit and consistently large trade deficits  may deter  foreign investors and add pressure on the rupiah, the worst-performing currency in Asia in recent months. The currency has weakened nearly 15% against the dollar since the start of June and 20% against gold since June 28th - from 12.235 million rupiah per ounce (12,235,000/oz) to 14.728 rupiah (14,728,000/oz) per ounce. This  compares with the 10% drop in India’s rupee leading the rupiah to be the worst performer in Asia during the period. The recent losses are simply a continuation of the devaluation seen in recent years.  Since 2000, the rupiah has fallen by nearly 600% against gold from 2.174 million rupiah per ounce in 2000 to over 14.755 million rupiah per ounce today.  The Bank Indonesia has embarked on its most aggressive tightening since 2005, joining Brazil and India in taking steps to support their currencies. The prospect of reduced U.S. monetary stimulus and QE may be prompting investors to sell government bonds internationally. Government debt has been supported by the Federal Reserve’s extremely radical debt monetisation programmes - electric money creation to buy government debt. Indonesia’s foreign-exchange reserves have declined as the central bank defended the rupiah, but the Indonesian Central Bank (BI) still has $92.6 billion foreign exchange reserves. Unlike many large debtor nations such as the U.S. which hold little or no foreign exchange reserves, Bank Indonesia (BI) said in August that the $92.6 billion will be enough to protect the rupiah from further devaluation and the consequences of that devaluation.  Cross Currency Table - (Bloomberg) Bondholders are demanding higher yields to hold its debt. According to Bloomberg, Indonesia sold $1.5 billion of dollar-denominated Islamic bonds this month at the highest yield since 2009, its reserves are near the lowest level in almost three years, and foreigners have pulled out $2.66 billion from local equities since the start of June.  The trade deficit widened to a record in July as an export slump extended to a 16th month, while the expanding middle class increased purchases of manufactured goods and fuel. However, Indonesia is solvent unlike the U.S. government and the Federal Reserve.  U.S. Public Debt, 1972 To 01/01/13 - (Bloomberg) The U.S. Federal Reserve is insolvent and has liabilities of over $3.2 trillion and yet has capital of just $60 billion. Therefore, it is leveraged by fifty to one, akin to a highly leveraged hedge fund.  The U.S. government's national debt is heading rapidly to $17 trillion and the off balance sheet liabilities are now estimated by respected economists at between $100 trillion and $200 trillion. The national finances of the UK, Japan and many European countries are akin to those of the U.S. and they are also either insolvent or close to insolvency. Therefore, the dollar and all currencies will continue to devalue and debase against finite and rare gold in the coming months and years.  Thinking of buying gold? Click here to download and read our free guide to buying gold.        

16 сентября 2013, 15:13

(Ir)Rational Overnight Exuberance On Summers Withdrawal Sends Futures To All Time Highs

While the only market moving event of note had nothing to do with the economy (as usual), and everything to do with the Fed's potential propensity to print even more dollars and inject even more reserves into the stock market (now that Summers the wrongly perceived "hawk" is out) some other notable events did take place in the Monday trading session. Of note: while India's August inflation soared far higher than the expected 5.7%, rising to 6.1% from 5.79% (making life for the RBI even more miserable, as it is fighting inflation on one hand, and a lack of liquidity on the other), in Europe inflation decelerated to 1.3% from 1.6% in July driven by a drop in energy prices, while core inflation was a tiny 1.1%. In a continent with record negative loan growth this is to be expected. Additionally, as also reported, Merkel appears to be positioned stronger ahead of this weekend's Federal election following stronger results for her CDU/CSU, if weaker for her broader coalition. In Libya, oil protesters said they would continue stoppages at oil terminals until their demands are met in yet another startling outcome for US foreign intervention. Finally, some headline on Syria noted a Kerry statement "will not tolerate avoidance of a Syria deal", while Lavrov observed that it may be time to "force Syria opposition to peace talks." And one quote of the day so far: "Don't want market to become excessively exuberant" from the ECB's Mersch- just modestly so? So with those largely irrelevant factual news out of the way, we go back to the only story largely meaningless story that matters: the market's reaction to who may or may not be the new printer supervisor and do Wall Street's bidding. Market Re-Cap from RanSquawk Stock and credit markets gained ground overnight in Asia and Europe this morning as market participants reacted to press reports that Lawrence Summers called US President Obama and withdrew his name for the Fed chairman job. Given that this will now likely spur speculation that the more dovish Yellen will end up succeeding Bernanke resulted in an aggressive short squeeze which in turn saw USTs gain over 1 point and Bunds to open up over 50 ticks relative to Friday’s closing level. While basic materials led the move higher, oil & gas related stocks underperformed amid lower energy prices which were not only weighed down by reports of an agreement between the US and Russia over Syria handing over its chemical weapons, but also after French President's office reported that Britain and the US agreed to press for strong UN resolution on Syria with detailed and binding dates. In terms of EU related commentary, ahead of next week’s general election German Chancellor Merkel and her allies have scored a resounding win in the German state of Bavaria, securing an absolute majority of 101 of 180 parliamentary seats in Bavarian state elections. Elsewhere, economists at Deutsche Bank revised up Eurozone GDP growth from -0.7 to -0.4 (2013E) and from 0.8% to 1.1% (2014E) given the broad-based improvement in leading indicators, pointing to a sustainable recovery. Going forward, market participants will get to digest the release of the latest Empire Manufacturing report, as well as Industrial and Manufacturing production reports for the month of August. Overnight news bulletin from Ran and Bloomberg: Treasuries surge, led by 5Y and 7Y notes,  10Y yield approaches month’s low as Lawrence Summers withdraws candidacy to replace Bernanke after liberal and moderate Democrats began signaling concerns to White House. Summers exit is “huge” for risk-on trades, Pimco’s Bill Gross tweeted yesterday Former Treasury Secretary Geithner remains firm that he will not be considered for Fed chairmanship, WSJ reported in post on Twitter feed WTI and Brent crude prices under pressure following reports that France, Britain and US agree to press for strong UN resolution on Syria with detailed and binding dates, according to French President's office According to television exit polls, German Chancellor Merkel and her allies have scored a resounding win in the German state of Bavaria, ahead of next week’s general election Fed meeting begins tomorrow with decision, updated eco projections and Bernanke press conference Wednesday; many expect $10b-$15b tapering of asset purchases Republicans accused the Obama administration of ceding its leverage in Syria by backing off a threat of military action; House Intelligence Committee Chairman Mike Rogers said the U.S.-Russia deal will offer openings for American enemies in the region to increase their influence EU lawyers gave the U.K. victories in fights over financial regulation that will boost the country’s standing in a power struggle over the future of banks and securities trading in the 28-nation bloc EU attempts to centralize control of failing banks stumbled under a German-led attack that may imperil efforts to restore confidence in the euro zone’s financial system Sovereign yields slide. EU peripheral spreads widen. Asian and European stocks, U.S.  equity-index futures gain. WTI crude and gold fall, copper gains Asian Headlines Japanese markets were closed due to Respect for the Aged Day. PBOC governor Zhou said China's economic situation is stable and that China is to encourage financial innovation. Zhou added that China is to improve financial controls, deepen financial reform, promote deposit insurance and is to support setting up of banks. EU & UK Headlines According to television exit polls, German Chancellor Merkel and her allies have scored a resounding win in the German state of Bavaria, ahead of next week’s general election. ECB’s Praet said as long as inflation expectations are well anchored, the ECB has room to maneuver and there was a discussion of a rate cut at the last meeting. If tensions are increasing, we can always change the gap between our different interest rates. Praet added that the ECB has leeway to deal with Fed withdrawal. Economists at Deutsche Bank revised up Eurozone GDP growth from -0.7 to -0.4 (2013E) and from 0.8% to 1.1% (2014E) given the broad-based improvement in leading indicators, pointing to a sustainable recovery. S&P’s chief sovereign ratings officer Kraemer said France has yet to demonstrate it can consolidate spending, after the country revised its public deficit forecasts last week. US Headlines Lawrence Summers called US President Obama on Sunday and withdrew his name for the Fed chairman job, citing a possible acrimonious confirmation process. Summers had been seen as one of the front-runners for the position, and had been seen by many as leaning against extended quantitative easing. PIMCO's Bill Gross said Summers's exit makes Monday huge for risk on trade and that stocks should do very well. Gross added that Monday is also a huge day for yield curve trades. Equities Stock and credit markets gained ground overnight in Asia and Europe this morning as market participants reacted to press reports that Lawrence Summers called US President Obama and withdrew his name for the Fed chairman job. While basic materials led the move higher, oil & gas related stocks underperformed amid lower energy prices which were not only weighed down by reports of an agreement between the US and Russia over Syria handing over its chemical weapons, but also after French President's office reported that Britain and the US agreed to press for strong UN resolution on Syria with detailed and binding dates. FX EUR/USD and GBP/USD advanced overnight, with GBP/USD touching on highest level since mid-January, amid prospects of a more dovish candidate (Yellen) potentially taking over the helm at the Fed. At the same time, interest rate differential flows (USTs bid) had an adverse impact on USD/JPY, which not only fell below the 100DMA, but also the 50DMA line in the process as market participants were forced to square longs. Even though the rally by gold and silver was short lived following reports that Summers called US President Obama on Sunday and withdrew his name for the Fed chairman job, the bid tone by commodity related currencies remained intact. In turn, AUD/USD advanced to its highest level since late June and briefly traded above the technically important 100DMA line at 0.9377. Commodities UBS said Summers's withdrawal is short-term positive for Gold and that Fed chairman wont change longterm view on gold. - Hedge funds and money managers slashed bullish bets in futures and options of the U.S. gold markets for the first time in 5 weeks. Net longs in gold were cut by 16,466 lots, or 16%, to 84,929, its biggest weekly percentage loss since early August. Speculators also trimmed bullish bets in the silver and copper futures and options markets, according to the CFTC. US and Russia reach Syria weapons agreement. The US and Russia have managed to come to an agreement regarding Syrian President Bashar al-Assad to hand over chemical weapon stockpiles to the international community with a deadline of mid-2014 for their removal or destruction. (FT-More) - On the topic, Assad has said that agreeing to give up chemical weapons is a great victory for his country and Russia. “Syria as a state genuinely seeks to avert another war of lunacy on itself and countries in the region, contrary to the efforts of warmongers in the US who seek to inflame a regional war,”. - However the White House has insisted that US military strikes remained an option despite its deal with Russia to secure chemical weapon stockpiles through a United Nations resolution. CME has lowered Henry Hub natural gas index future initial margins for specs by 20.7% to USD 633.00 per contract from USD 798.00 . * * * DB's Jim Reid recaps the full weekend narrative: Well a highly anticipated week has started with a bang as late last night Summers pulled out of the race to be the next Fed Governor after what was becoming an increasingly difficult political battle for him to win. In a week where the FOMC will likely start to taper QE (more below), the market will at the margin see his withdrawal as one which prolongs unorthodox policy for longer - partly because it moves the more dovish Yellen up the favourites list for the new job. The market reaction has been unsurprisingly positive. On the equities side, S&P500 futures jumped as high as 1711 (+22pts) early in the Asian trading session but has since settled back at around 1707 (or +1.1%). The Hang Seng is (+1.1%) is up by a similar amount. The USD index is 0.5% lower this morning driven by moves in the AUDUSD (+1%), EURUSD (+0.5%) USDJPY (-0.5%). On the fixed income side, UST trading is closed in Japan today due to holidays, but treasury futures have traded up around 30 ticks (+0.8%). Given their underperformance in August, the EM space is probably where we will see outsized moves today. Indeed, the Asia ex-Japan IG index is quoted 10bp tighter this morning. Asian EM sovereign 5yr CDS is also quoted tighter across the board led by Indonesia, Thailand and Malaysia which are all 9-10bp lower. Indonesian USD bonds are 15bp better at the open while the IDR bonds are more than 25bp firmer this morning. EM currencies such as the ZAR and MXN are both trading stronger against the USD. So with Summers withdrawing from the Fed race, the two other top contenders mentioned by President Barack Obama for the Fed job are Janet Yellen and Donald Kohn, the Fed's current vice and previous Fed vice chairpersons respectively. A number of media reports suggest that it’s still possible that Obama could turn to other “dark horse” candidates such as former Treasury Secretary Timothy Geithner or former Fed Vice Chairman Roger Ferguson. Geithner though was quoted this morning reaffirming his disinterest in leading the Fed (WSJ). The Summers news has kicked off a hotly anticipated week. The unequivocal highlight is the two-day FOMC concluding on Wednesday. DB’s economists expect that the Fed will trim its mortgage purchases by $5 billion and its Treasury purchases by $10 billion, thereby reducing monthly buying to $35 billion apiece for a total of $70 billion. This seems broadly in line with market expectations. Indeed, a Reuters poll showed the consensus call is for asset purchases to be cut by $10 billion, which is less than earlier estimates after a disappointing August payrolls and last Friday’s weaker-than-expected retail sales (0.2% vs 0.5% expected) and consumer confidence survey (76.8 vs 82.0). Outside of the taper debate, we will also be looking out for Bernanke’s postmeeting comments particularly with respect to the Fed forward guidance given that the Fed will also be providing updated economic forecasts extending through to 2016. Outside of the Fed, there have been other market-positive stories over the weekend. The first of these was that the Syrian government will commit to a US-Russian agreement to eradicate its chemical weapons by the middle of 2014. The agreement, which was cautiously welcomed by the Obama administration, probably lessens the threat of a US military strike in Syria in the near term. However, the agreement does require the Assad government to provide a “comprehensive listing” of weapons within a week and if not complied with, Secretary of State John Kerry warned that “there’s no diminution of options” available to the United States. Nonetheless, the diplomatic breakthrough has seen crude oil trade 0.8% weaker this morning and is probably contributing the broad risk-on overnight. The other story of note is in Germany where Angela Merkel’s allies secured an absolute majority of 101 of 180 parliamentary seats in Bavarian state elections yesterday. The strong showing for the conservatives bodes well for Merkel heading into this weekend’s federal elections and provides some hope for investors that are looking for political continuity. However, the junior member of Merkel’s coalition, the pro-business Free Democrats won only 3% of the vote in Bavaria, leaving them short of the 5% threshold needed to enter parliament, which could have a bearing if repeated in this week’s national vote. Looking out over the rest of the week ahead, we have a full data docket in the US which will be give us a number of timely updates on the state of US housing and manufacturing. The data flow starts with today’s industrial production and Empire Fed manufacturing reports. This will be followed by Tuesday’s CPI and NAHB homebuilders index, Wednesday’s housing starts and permits and Thursday’s existing home sales and Philly Fed. In Europe, politics remains the focus in the last week of campaigning before German federal elections on Sunday 22nd. The important data releases are August's inflation and July's trade reports over the next two days. Germany’s ZEW survey is out on Tuesday and flash consumer confidence readings are released on Friday. In terms of the central banks, Draghi will be speaking at a SME conference in Berlin this morning and the Bank of England’s meeting minutes will be released on Wednesday. A quieter week is in store for Asia. Tokyo is closed today while Chinese markets are closed on Thursday and Friday due to the mid-Autumn festival (the Hong Kong Stock Exchange is shut on Friday only). In terms of data, Japan’s August trade data will be published on Thursday.        

12 сентября 2013, 07:29

A SmartKnowledgeU Exclusive Interview with World Bank Whistleblower Karen Hudes: "The World Will Reject Central Bankers"

Recently, courageous World Bank whistleblower Karen Hudes was gracious enough to grant SmartKnowledgeU a thought-provoking interview regarding her thoughts about where we stand and where we are heading in this global monetary crisis and currency war. As I’ve told people for nearly a decade now about the necessity of trading in paper currency for the real money of physical gold and physical silver, Ms. Hudes echoes my sentiments about massive global banking criminality and fraud when she states, “Don’t take us for our word. Look at the proof we are going to give you.”  With my persistent exhortation to convert rapidly devaluing paper currency into physical gold and silver money for a decade corroborated by a 460% rise in gold and a 500% rise in silver against the USD during this period, as well as recent massive inflation, sometimes as much as 100%, in food staples such as bread in Argentina and onions in India, the necessity of trading in paper for gold and silver bullion should be self-evident. Add to this discourse the recent free-fall of emerging market currencies like the Rupee, and the recent 5 to 0 vote by the Federal Deposit Insurance Corporation (FDIC) against insuring overseas deposits held in US banks, and everyone should have the proof they need that conversion of paper currencies into physical gold and physical silver will be their savior during these continuing highly immoral Central Banker driven currency wars. In fact, we wrote about these emerging currency wars more than 3 years ago in our article, “In the REAL World Series of Poker, the Stakes are Default of Sovereign Debt”. Despite gold and silver’s recent price consolidation after a few weeks of very rapid price recovery and our recent warnings in our writings that gold would experience a short-term bout of weakness (and it did, right on cue), when this current consolidation period ends, gold and silver will resume their price trajectory upward again.  Below are some of the key points of Part I of my  interview with Ms. Hudes: Regarding the "revolving door" of banker criminality at the global level: “The banks are all interconnected…there’s one big conglomerate…These bankers have a group of board members that migrate from one bank to another.” Regarding why so many people still are unaware of the underlying criminal actions of banking conglomerates: “The bankers have bought up all the media to keep people ignorant of their agenda… These central banks are nothing but crooks. They have no right to buy up all the media and trick all the citizenry…we have documented this. It’s not just that we are saying this and you may or may not believe us. We have documented this…These private groups have seized power that they’re not entitled to and they did it secretly…Anybody inside the world bank that saw money going in the wrong direction, that saw the accounting was not adding up, was getting fired.” Regarding if Central Bankers are concerned that awareness of their nefarious crimes against humanity are coming to the forefront of global consciousness: “We have fired these Central Bankers. And there is going to be more and more accountability…A lot of these [bankers] understand that there will be a day of reckoning” for them because more and more of the world’s citizens are awakening to what bankers really are up to these days, and they are not happy with what they are discovering about the banking industry. On why more and more people will be increasingly turning away from paper currencies and towards the use of sound money to store their wealth: “Paper has no intrinsic value. It is only valuable if people agree that it has value. Fiat currencies are now under siege and we have a limited amount of time to set up alternative monies. If we have permanent gold backwardation, international trade will simply stop and we will have a world depression that will make what happened in the 1930s and 2008 look like nothing.”  (Editor's note: Is it not ironic that even today people do not understand that Warren Buffet, who constantly claims gold has no intrinsic value, is a shill for the banking industry, as is his right hand man, Charlie Munger, who deliberately and deceptively stated a few years back that "gold is a great thing to sew onto your garments if you're a Jewish family in Vienna in 1939 but civilized people don't buy gold", thereby ensuring that all Berkeshire Hathaway minions would forever not buy a single ounce of physical gold as the bankers continued to precipitously devalue fiat currencies as a consequence of their currency wars.)   Regarding how the US has maintained its hegemony over global banking organizations: “Through secrecy, through buying up the media. The American citizens are learning what is being done in their name [by US bankers], and they are not happy about it.”   Furthermore, Ms. Hudes stated that the BRIC nations are moving further and further away from the Western banking system of control by setting up their own system where the net difference of imports over exports must be settled in gold and not in fiat currencies. She continues, “usually when there is a power transition between countries, the way they resolve this is through war…you can do this peacefully if you bring all the parties involved” together. If the Western Banking cartel tries to enforce their wealth destroying policies upon the rest of the world, this is when we are relegated to war. In conclusion, Ms. Hudes says that there are a lot of insiders at the World Bank disenchanted with the system that are helping her expose the misdeeds of the world’s top bankers and that as this misdeeds are being exposed, the world is beginning to reject Central Banking as a concept as they, for the first time, begin to fully understand the constant negative effect of Central Banking policies on their lives for the first time. Finally, here is the link to Karen Hudes's lodged complaints against global banking criminal activities. Stay tuned for more interesting topics in part 2 of this interview next week, when Ms. Hudes reveals that certain elements of the US military are now revolting against banker-driven wars and against the politicians that lobby for these unnecessary wars. Furthermore, in part 2, Ms. Hudes  discusses what Germany has done to retaliate against the US for the Central Bankers' refusal to return Germany's 300 tonnes of gold. (Republishing rights: this article may be republished only if it is republished in its entirety with all links and the author attribution below intact. All violations of these republishing terms will be considered a copyright violation.)       About the author: JS Kim is the founder and Managing Director of SmartKnowledgeU, a fiercely independent research & consulting firm with a focus on intelligent, dynamic investment strategies to avoid the wealth destruction of quantitative easing and Central Banks’ currency wars. Sign up for our free newsletter on our homepage to learn the best ways to buy gold and buy silver. Follow us on twitter @smartknowledgeu         

11 сентября 2013, 10:09

Blogs review: India in trouble?

Authors: David C. Saha What's at stake: The emerging economies are currently being watched with increased anxiety in the context of the possible harmful effects of monetary policy tightening in the US on their ability to serve as the world’s growth engine (see last week’s blog review). India is under particular scrutiny at present. With a reduced reform momentum ahead of the 2014 general elections, expected GDP growth slowed to around 4% for 2013 – down from an average of around 9-10% in previous years – a widening current account deficit of now 5% of GDP and increased controls for capital outflows by Indian individuals and firms, some commentators are afraid the “Hindu growth rate” of 3-4% during the 90’s may be about to return.    The growth slowdown Avantika Chilkoti at the FT’s Beyond BRICS comments that the downward revisions of growth forecasts – HSBC revised its 2013 forecast down to 4% from 5.5% and several leading indicators including business sentiment indices have also fallen – reflect that policy currently does not support growth. The Reserve Bank of India is more preoccupied with stabilizing the currency than supporting growth through lower rates. Structural reforms have been announced not been implemented. And government spending is unlikely to prop up demand as the focus is now on meeting the fiscal deficit target of 4.8 per cent of GDP. The only glimmer of hope for the short run is that the depreciating currency will further support exports – which were up by 12% in July compared to last year. Source: FT, Beyond BRICS Marco Annunziata writes that with the recent depreciation of the rupee versus the Dollar, India is a victim of deteriorating external circumstances – but not an innocent one. Its economic growth shrunk when economic reforms lost momentum. At the same time, its current account deficit widened rapidly to about 5%. A continuation of liberalisation policies in key sectors of the economy as well as upgrading crucial infrastructure (particularly with regard to power generation and distribution) and improving the business environment are needed to prevent the growth rate falling back to the 3-4% Hindu rate of growth of earlier decades Source: Marco Annunziata / VoxEU Tyler Cowen muses that the halving of growth rates is a big shift. India may be an economy moving across multiple equilibria in which the passage of time shows that it “deserves” increasingly inferior expectations.  The danger is that a weak response to the current crisis may lead to India sliding down to a yet inferior equilibrium in future. Ricardo Hausman  points out that for most emerging economies, much of the strong nominal GDP growth in the 2003-2011 period was not due to production increases, but due to terms-of-trade improvements, capital inflows and real exchange rate appreciation. It is reasonable to expect that terms-of-trade improvements  - export prices growing stronger than import prices – are not an everlasting process and will not continue. And the Balassa-Samuelson effect of countries with stronger real growth also experiencing a real appreciation should also not be counted upon too strongly: The same dynamics that inflated the dollar value of GDP growth in the good years for these countries will now work in the opposite direction: stable or lower export prices will reduce real growth and cause their currencies to stop appreciating or even weaken in real terms. No wonder the party is over. A Rupee Crisis? Simon Johnson retells the generic story of emerging market vulnerability: capital inflows during a time of growth and easy access to international financial markets let the currency appreciate and lead to the development of a current account deficit. As shifts in financial market sentiment are bound to occur, the decisive question is, how strongly leveraged a country is when sentiments turn negative.  India’s situation is made less severe by the rupee’s floating exchange rate and by the presence of ample foreign exchange reserves. But two dangers from the US are on the horizon:  the Fed’s fiscal policy tightening will push up interest rates in the US and attract capital out of emerging countries and when the next political fight over the US budget ceiling looms, the resultant flight to safety will further lead to capital outflows from emerging economies. Paul Krugman is not very alarmed by the depreciation of the rupee: Yes, the rupee and other emerging market currencies depreciated a lot in a short time in mid-2013. But this may just be a correction of a previous overshoot due to capital inflows during a time of market euphoria. More importantly, India is not in the situation of the South-East Asian countries in the 1997-1998 or Argentina in 2001 with huge external debt overhangs – in fact, India’s external debt is rather small, less than 20% of GDP. Unless he’s missing something, the depreciation will lead to a temporary spike in inflation but not much more. Ashok Rao replies to this that India’s heavy dependency on 90% imported oil may be what Krugman misses. A strong, inelastic import demand for oil reduces the attractiveness of rupee depreciation as increases in the price of imported oil need to be weighed against export growth. Devesh Kapur and Arvind Subramanian dispel some misdiagnoses of India’s current predicament. It is not a case of unsustainable public debt, a pure cyclical slowdown or a dangerous external debt level. Particularly the latter is important: That India’s external debt is actually relatively small means that allowing the currency to depreciate would improve the current account balance without creating debt service problems. In the short run, policy must have three goals: Increase growth, rebalance the current account and fight rising inflation. A loose monetary policy should achieve the first two aims, whilst a tightening of fiscal policy is required to keep inflation in check. As a reduction in government consumption is quite unlikely, a temporary import surcharge with a definite timetable for its phasing-out may be a more realistic third-best way of achieving this. Capital controls On  14th August,  the Reserve Bank of India introduced two measures to reduce the ability of Indians to take capital out of the country:  The limit on personal remittances was cut from $200,000 to $75,000 per year. And companies may now not spend more than their own book value on direct investments abroad, unless they have specific approval from the central bank. Previously they could spend up to four times their own net worth. Anant Kala writes that these moves have raised concern among investors that India may implement broad capital controls to stem the plunge of its currency and of share prices. Although most see the RBI’s steps as measures to halt the rupee’s glide, it will be important to reassure investors that no broad capital controls will be implemented as particularly at this time, foreign investors, who would be deterred from investing in India by the expectation of having their capital locked up in India, are required to finance the rising current account deficit.             The Economist's Free Exchange blog writes that the aim of these measures was apparently to deal with incipient signs of capital flight by India’s rich. If India should be unsuccessful at convincing  foreign investor that it has no intentions to implement capital controls that affect them, some real work has to be done to ensure India’s ability to finance its current account deficit. Measures such as an IMF loan or a dollar-denominated sovereign bond seem unlikely at present. Addressing the balance of payments by raising regulated prices on imported fuel and taxes on imported gold or eliminating a present ban on Indian iron ore exports would be sensible, but are controversial and take time. The current strategy of the government is to sit tight and hope for measures already taken to take effect. Keep your fingers crossed that they actually do. Ryan Avent discusses Helene Rey’s Jackson Hole paper that argued for the presence of a “global financial cycle” in which the prices of risky assets, such as equities and corporate bonds,  are correlated across the globe, regardless of exchange rate regimes. A monetary policy tightening in one country (i.e. the US) can translate into a capital flight from risky assets in India. Modest capital controls would only be the last resort, after linking the tightness of bank capital regulation to economic conditions, to help break this cycle. Capital controls can thus serve to maintain monetary policy independence – not unimportant at present, when a negative spillover from US monetary policy on Indian growth is to be expected and may indeed be one of the sources of India’s current problems.  Read more...

11 сентября 2013, 08:08

Secondary Sources Asia: India Central Bank Independence, End of the BRICs Party, China’s Local Debt

A round-up of economics news about Asia from across the Web.

11 сентября 2013, 03:19

Guest Post: Trying To Stay Sane In An Insane World - At World's End

Submitted by Jim Quinn of The Burning Platform blog, In the first three parts (Part 1, Part 2, Part 3) of this disheartening look back at a century of central banking, income taxing, military warring, energy depleting and political corrupting, I made a case for why we are in the midst of a financial, commercial, political, social and cultural collapse. In this final installment I’ll give my best estimate as to what happens next and it has a 100% probability of being wrong. There are so many variables involved that it is impossible to predict the exact path to our world’s end. Many people don’t want to hear about the intractable issues or the true reasons for our predicament. They want easy button solutions. They want someone or something to fix their problems. They pray for a technological miracle to save them from decades of irrational myopic decisions. As the domino-like collapse worsens, the feeble minded populace becomes more susceptible to the false promises of tyrants and psychopaths. There are a myriad of thugs, criminals, and autocrats in positions of power who are willing to exploit any means necessary to retain their wealth, power and control. The revelations of governmental malfeasance, un-Constitutional mass espionage of all citizens, and expansion of the Orwellian welfare/warfare surveillance state, from patriots like Julian Assange, Bradley Manning and Edward Snowden has proven beyond a doubt the corrupt establishment are zealously anxious to discard and stomp on the U.S. Constitution in their desire for authoritarian control over our society. Anyone who denies we are in the midst of an ongoing Crisis that will lead to a collapse of the system as we know it is either a card carrying member of the corrupt establishment, dependent upon the oligarchs for their living, or just one of the willfully ignorant ostriches who choose to put their heads in the sand and hum the Star Spangled Banner as they choose obliviousness to awareness. Thinking is hard. Feeling and believing a storyline is easy.   A moral society must be inhabited by an informed, educated, aware populace and   governed by honorable leaders who oversee based upon the nation’s founding principles of liberty, freedom and limited government of, by and for the people. A moral society requires trust, honor, property rights, simple just laws, and the freedom to succeed or fail on your own merits. There is one major problem in creating a true moral society where liberty, freedom, trust, honor and free markets are cherished – human beings. We are a deeply flawed species who are prone to falling prey to the depravities of lust, gluttony, greed, sloth, wrath, envy and pride. Men have always been captivated by the false idols of dominion, power and wealth. The foibles of human nature haven’t changed over the course of history. This is why we have 80 to 100 year cycles driven by the same human strengths and shortcomings revealed throughout recorded history. Empires rise and fall due to the humanness of their leaders and citizens. The great American Empire is no different. It was created a mere 224 years ago by courageous patriots who risked their wealth and their lives to create a Republic founded upon the principles of freedom, liberty, and the pursuit of happiness; took a dreadful wrong turn in 1913 with the creation of a privately held central bank to control its currency and introduction of an income tax; devolved into an empire after World War II, setting it on a course towards bankruptcy; sealed its fate in 1971 by unleashing power hungry psychopathic elitists to manipulate the monetary and fiscal policies of the nation to enrich themselves; and has now entered the final frenzied phase of pillaging, currency debasement, war mongering, and ransacking of civil liberties. Despite the frantic efforts of the financial elite, their politician puppets, and their media propaganda outlets, collapse of this aristocracy of the moneyed is a mathematical certainty. Faith in the system is rapidly diminishing, as the issuance of debt to create the appearance of growth has reached the point of diminishing returns. Increase in Real GDP per Dollar of Incremental Debt “At the root of America’s economic crisis lies a moral crisis: the decline of civic virtue among America’s political and economic elite. A society of markets, laws, and elections is not enough if the rich and powerful fail to behave with respect, honesty, and compassion toward the rest of society and toward the world.” – Jeffrey Sachs Five Stages of Collapse The day of reckoning for a century of putting our faith in the wrong people with wrong ideas and evil intentions is upon us. Dmitry Orlov provides a blueprint for the collapse in his book – The Five Stages of Collapse – Survivors’ Toolkit: Stage 1: Financial Collapse. Faith in “business as usual” is lost. The future is no longer assumed to resemble the past in any way that allows risk to be assessed and financial assets to be guaranteed. Financial institutions become insolvent; savings wiped out and access to capital is lost. Stage 2: Commercial Collapse. Faith that “the market shall provide” is lost. Money is devalued and/or becomes scarce, commodities are hoarded, import and retail chains break down and widespread shortages of survival necessities become the norm. Stage 3: Political Collapse. Faith that “the government will take care of you” is lost. As official attempts to mitigate widespread loss of access to commercial sources of survival necessities fail to make a difference, the political establishment loses legitimacy and relevance. Stage 4: Social Collapse. Faith that “your people will take care of you” is lost, as social institutions, be they charities or other groups that rush to fill the power vacuum, run out of resources or fail through internal conflict. Stage 5: Cultural Collapse. Faith in the goodness of humanity is lost. People lose their capacity for “kindness, generosity, consideration, affection, honesty, hospitality, compassion, charity.” Families disband and compete as individuals for scarce resources. The new motto becomes “May you die today so that I can die tomorrow.” The collapse is occurring in fits and starts. The stages of collapse do not necessarily have to occur in order.  You can recognize various elements of the first three stages in the United States today. Stage 1 commenced in September 2008 when this Crisis period was catalyzed by the disintegration of the worldwide financial system caused by Wall Street intentionally creating the largest control fraud in world history, with easy money provided by Greenspan/Bernanke, fraudulent mortgage products, fake appraisals, bribing rating agencies to provide AAA ratings to derivatives filled with feces, and having their puppets in the media and political arena provide the propaganda to herd the sheep into the slaughterhouse. The American people neglected their civic duty to elect leaders who would tell them the truth and represent current and future generations equally. They have neglected the increasing lawlessness of Wall Street, K Street and the corporate suite. The American people have lived in denial about their responsibility for their own financial well-being, willingly delegating it to a government of math challenged politicians who promised trillions more than they could ever deliver. The American people have delayed tackling the dire issues confronting our nation, including: $200 trillion of unfunded liabilities, the military industrial complex creating wars across the globe, militarization of our local police forces, domestic spying on every citizen, allowing mega-corporations and the financial elite to turn our nation from savings based production to debt based consumption, and allowing corporations, the military industrial complex, Wall Street, and shadowy billionaires to pick and control our elected officials. The civic fabric of the country is being torn at the points of extreme vulnerability. “At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where, during the Unraveling, America will have neglected, denied, or delayed needed action. Anger at “mistakes we made” will translate into calls for action, regardless of the heightened public risk. It is unlikely that the catalyst will worsen into a full-fledged catastrophe, since the nation will probably find a way to avert the initial danger and stabilize the situation for a while. Yet even if dire consequences are temporarily averted, America will have entered the Fourth Turning.”  - The Fourth Turning – Strauss & Howe – 1997 Our Brave New World controllers (bankers, politicians, corporate titans, media moguls, shadowy billionaires) were able to avert a full-fledged catastrophe in the fall of 2008 and spring of 2009 which would have put an end to their reign of destruction. To accept the rightful consequences of their foul actions was intolerable to these obscenely wealthy, despicable men. Their loathsome and vile solutions to a crisis they created have done nothing to relieve the pain and suffering of the average person, while further enriching them, as they continue to gorge on the dying carcass of a once thriving nation. Despite overwhelming public outrage, Congress did as they were instructed by their Wall Street masters and handed over $700 billion of taxpayer funds into Wall Street vaults, under the false threat of systematic collapse. The $800 billion of pork stimulus was injected directly into the veins of corporate campaign contributors. The $3 billion Cash for Clunkers scheme resulted in pumping taxpayer dollars into the government owned union car companies, while driving up the prices of used cars and hurting lower income folks. Ben Bernanke has peddled the false paradigm of quantitative easing (code for printing money and airlifting it to Wall Street) as benefitting Main Street. Nothing could be further from the truth. He bought $1.3 trillion of toxic mortgage backed securities from his Wall Street owners. He has pumped a total of $2.8 trillion into the hands of Wall Street since September 2008, and is singlehandedly generating $5 billion of risk free profits for these deadbeats by paying them .25% on their reserves. Drug dealer Ben continues to pump $2.8 billion per day into the veins of Wall Street addicts and any hint of tapering the heroin causes the addicts to flail about. Ben should be so proud. He should hang a Mission Accomplished banner whenever he gives a speech. Bank profits reached an all-time record in the 2nd quarter, at $42.2 billion, with 80% of those profits going to the 2% Too Big To Trust Wall Street Mega-Goliath Banks. It’s enough to make a soon to retire, and take a Wall Street job, central banker smile. “The money rate can, indeed, be kept artificially low only by continuous new injections of currency or bank credit in place of real savings. This can create the illusion of more capital just as the addition of water can create the illusion of more milk. But it is a policy of continuous inflation. It is obviously a process involving cumulative danger. The money rate will rise and a crisis will develop if the inflation is reversed, or merely brought to a halt, or even continued at a diminished rate. Cheap money policies, in short, eventually bring about far more violent oscillations in business  than those they are designed to remedy or prevent.” – Henry Hazlitt – 1946 Any serious minded person knew Wall Street had too much power, too much control, and too much influence in 2008 when they crashed our economic system. When something is too big to fail because it will create systematic collapse, you make it smaller. Instead we have allowed our sociopathic rulers to allow these parasitic institutions to get even larger. Just 12 mega-banks control 70% of all the banking assets in the country, with 90% controlled by the top 86 banks. There are approximately 8,000 financial institutions in this country. Wall Street will be congratulating themselves with record compensation of $127 billion and record bonuses of $23 billion for a job well done. It is dangerous work making journal entries relieving loan loss reserves, committing foreclosure fraud, marking your assets to unicorn, making deposits at the Fed, and counting on the Bernanke Put to keep stocks rising. During a supposed recovery from 2009 to 2011, average real income per household grew pitifully by 1.7%, but all the gains accrued to Bernanke’s minions. Top 1% incomes grew by 11.2% while bottom 99% incomes shrunk by 0.4%. Therefore, the top 1% captured 121% of the income gains in the first two years of the recovery. This warped trend has only accelerated since 2011. The median household income has fallen by $2,400 to $52,100 since the government proclaimed the end of the recession in 2009. Real wages for real people continue to fall. A record 23.1 million households (20% of all households) are receiving food stamps. After four years of “recovery” propaganda, we are left with 2.2 million less people employed (5 million less full time jobs) and 22 million more people on SNAP and SSDI. A record 90.5 million working age Americans are not working, with labor participation at a 35 year low. Ben’s money has not trickled down, but his inflation has fallen like a load of bricks on the heads of the middle class. Bernanke’s QE to infinity constitutes a transfer of purchasing power away from the middle class to the bankers, mega-corporations and .1%. This Cantillon effect means that newly created money is neither distributed evenly nor simultaneously among the population. Some users of money profit from rising prices, and others suffer from them. This results in a transfer of wealth (a hidden tax) from later receivers to earlier receivers of new money. This is why the largest banks and largest corporations are generating the highest profits in history, while the average person sinks further into debt as their real income declines and real living expenses (energy, food, clothing, healthcare, tuition) rise. Ben works for your owners. Real GDP (using the fake government inflation adjustment) since July 2009 is up by a wretched 5.6%. Revenue growth of the biggest corporations in the world is up by a pathetic 12%. One might wonder how corporate profits could be at record levels with such doleful economic performance. One needs to look no further than Ben’s balance sheet, which has increased by 174%. There appears to be a slight correlation between Ben’s money printing and the 162% increase in the S&P 500 index. With the top 1% owning 42.1% of all financial assets (top .1% own most of this) and the bottom 80% owning only 4.7% of all financial assets, one can clearly see who benefits from QE to infinity. The key take away from what the ruling class has done since 2008 is they have only temporarily delayed the endgame. Their self-serving exploits have guaranteed that round two of the financial collapse will be epic in proportion and intensity. This Fourth Turning Crisis is ongoing. The linear thinkers who control the levers of power keep promising a return to normalcy and resumption of growth. This is an impossibility – mathematically & socially. Fourth Turnings do not end without the existing social order being swept away in a tsunami of turmoil, violence, suffering and war. Orlov’s stages of collapse will likely occur during the remaining fifteen years of this Crisis. We are deep into Stage 1 as our national Detroitification progresses towards bankruptcy, with an added impetus from our trillion dollar wars of choice in the Middle East. Commercial collapse has begun, as faith in the fantasy of free market capitalism is waning. The race to the bottom with currency debasement around the globe is reaching a tipping point, and the true eternal currencies of gold and silver are being hoarded and shipped from the West to the Far East. Monetary Base (billions of USD) When the financial collapse reaches its crescendo, the just in time supply chain, that keeps cheese doodles and cheese whiz on your grocery store shelves, Chinese produced iGadgets in your local Wal-Mart Supercenter, and gasoline flowing out of gas station hoses into your leased Cadillac Escalade, will break down rapidly. The strain of $110 oil is already evident. The fireworks will really get going when ATM machines run dry and the EBT cards stop functioning. Within a week riots and panic will engulf the country. “At some point we are bound to hear, from across two oceans, the shocking words “Your money is no good here.” Fast forward to a week later: banks are closed, ATMs are out of cash, supermarket shelves are bare and gas stations are starting to run out of fuel. And then something happens: the government announces they have formed a crisis task force, and will nationalize, recapitalize and reopen banks, restoring confidence. The banks reopen, under heavy guard, and thousands of people get arrested for attempting to withdraw their savings. Banks close, riots begin. Next, the government decides that, to jump-start commerce, it will honor deposit guarantees and simply hand out cash. They print and arrange for the cash to be handed out. Now everyone has plenty of cash, but there is still no food in the supermarkets or gasoline at the gas stations because by now the international supply chains have broken down and the delivery pipelines are empty.”  – Dmitry Orlov – The Five Stages of Collapse We are witnessing the beginning stages of political collapse. The government and its leaders are being discredited on a daily basis. The mismanagement of fiscal policy, foreign policy and domestic policy, along with the revelations of the NSA conducting mass surveillance against all Americans has led critical thinking Americans to question the legitimacy of the politicians running the show on behalf of the bankers, corporations and arms dealers. The Gestapo like tactics used by the government in Boston was an early warning sign of what is to come. Government entitlement promises will vaporize, as they did in Detroit, with pension promises worth only ten cents on the dollar. Total social and cultural collapse could resemble the chaotic civil war scenarios playing out in Libya and Syria. The best case scenario would be for a collapse similar to the Soviet Union’s relatively peaceful disintegration into impotent republics. I don’t believe we’ll be this fortunate. The most powerful military empire in world history will not fade away. It will go out in a blaze of glory with a currency collapse, hyper-inflation, and war on a grand scale. “History offers even more sobering warnings: Armed confrontation usually occurs around the climax of Crisis. If there is confrontation, it is likely to lead to war. This could be any kind of war – class war, sectional war, war against global anarchists or terrorists, or superpower war. If there is war, it is likely to culminate in total war, fought until the losing side has been rendered nil – its will broken, territory taken, and leaders captured.” – The Fourth Turning – Strauss & Howe – 1997 In Whom Do You Trust? “Use of money concentrates trust in a single central authority – the central bank – and, over extended periods of time, central banks always tend to misbehave. Eventually the “print” button on the central banker’s emergency console becomes stuck in the depressed position, flooding the world with worthless notes. People trust that money will remain a store of value, and once the trust is violated a gigantic black hole appears at the very center of society, sucking in peoples’ savings and aspirations along with their sense of self-worth. When those who have become psychologically dependent on money as a yardstick, to be applied to everything and everyone, suddenly find themselves in a world where money means nothing, it is as if they have gone blind; they see shapes but can no longer resolve them into objects. The result is anomie – a sense of unreality – accompanied by deep depression. Money is an addiction – substance-less and unreal, and sets itself up for a severe and lengthy withdrawal.” – Dmitry Orlov – The Five Stages of Collapse Our modern world revolves around wealth, the appearance of wealth, the false creation of wealth through the issuance of debt, and trust in the bankers and politicians pulling the levers behind the curtain. The entire world economic system is dependent on trusting central bankers whose only response to any crisis is to create more debt. The death knell is ringing loud and clear, but people around the globe are desperately clinging to their normalcy biases and praying to the gods of cognitive dissonance. It seems the only things that matter to our controllers are stock market levels, the continued flow of debt to the plebs, continued doling out of hush money to those on the dole, and of course an endless supply of brown skinned enemies to attack. With every country in the world attempting to the same solution of debasing their currencies, we are rapidly approaching the tipping point. India is the canary in the coal mine. Government, Household, Financial & Non-Financial Debt (% of GDP) An exponential growth model built upon cheap plentiful energy and debt creation has its limits, and we’ve reached them. With the depletion of inexpensive, easily accessible energy resources, higher prices will continue to slow world economies. Demographics in the developed world are slowing the global economy as millions approach their old age with little savings due to over consuming during their peak earnings years. Bernanke has already quadrupled his balance sheet with no meaningful benefit to the economy or the financial well-being of the average middle class American. Financial manipulation that creates nothing has masked the rot consuming our economic system. The game has been rigged in favor of the owners, but even a rigged game eventually comes to an end. Americans and Europeans can no longer maintain a façade of wealth by buying knickknacks from China with money they don’t have. The US and Europe are finding that their credit is no longer good in the exporting Far East countries. This is a perilous development, as the West has depended upon foreigners to accommodate its never ending expansion of credit. Without that continual expansion of debt, the Ponzi scheme comes crashing down. As China, Japan and the rest of Asia have balked at buying U.S. Treasuries with negative real yields, the only recourse for Ben has been to monetize the debt through QE and inflation. The doubling of ten year Treasury rates in a matter of three months due to just talk of possibly slowing QE should send shivers down your spine. We are supposedly five years past the great crisis. Magazine covers proclaimed Bernanke a hero. If we are well past the crisis, why are the extreme emergency measures still in effect? If the economy is growing and jobs are being created, why do we need $85 billion of government debt to be monetized each and every month? Why are the EU, Japan, and China printing even faster than the Fed? The answer is simple. If the debt was not being monetized, it would have to be purchased out in the free market. Purchasers would require an interest rate far above the 2.9% being paid today. The debt levels in the U.S., Europe and Japan are so large that a rise in interest rates of just a few points would explode budget deficits and lead to a worldwide financial collapse. This is why Bernanke and the rest of his central banker brethren are trapped by their own ideology of bubble production. Just the slowing of debt creation will lead to collapse. Bernanke needs a Syrian crisis to postpone the taper talk. Those in control need an endless number of real or false flag crises to provide cover for their printing presses to keep rolling. There are a couple analogies that apply to our impending doom. The country is like a 224 year old oak tree that has been slowly rotting on the inside due to the insidious diseases of hubris, apathy, selfishness, dependence, delusion, and debasement. The old oak gives an outward appearance of health and stability. Winter has arrived and gale force winds are in the forecast. One gust of wind and the mighty aged oak will topple and come crashing to earth. I think an even more fitting analogy is the sandpile with grains of sand being added day after day. Seven out of ten Americans receive more in government benefits than they pay in taxes. Goliath corporations and the uber-wealthy use the tax code and legislation to syphon hundreds of billions from the national treasury every year. We spend $1 trillion per year on past, current and future wars of choice. Annual interest on the debt we’ve racked up in the last few decades already approaches $400 billion per year. The entire Federal budget totaled $400 billion in 1977. The sandpile grows ever higher, while its instability expands exponentially. One seemingly innocuous grain of sand will ultimately cause the pile to collapse catastrophically. Will it be an unintended consequence of a missile launch into Syria? Will it be a spike in oil prices? Will it be the collapse of one of the EU PIIGS? Will it be an assassination of a political figure or banker? No one knows. But that innocuous grain of sand will trigger the collapse of the entire pile. Worried people are looking for solutions. They often get angry at me because they don’t think I provide answers to the issues I raise about our corrupt failing system. They want easy answers to intractable problems. Sadly, I’ve come to the conclusion that our system and majority of citizens are too corrupted to change our course through the ballot box or instituting policies along the lines of those proposed by Ron Paul and many other thoughtful liberty minded people. We are experiencing the downside of a representative democracy.  Once a person is democratically elected a gulf is created between the electors and the person they elected, as the representative becomes corrupted and bought by moneyed interests. Elected officials become a class unto themselves. The political class grows to be puppets that resemble human beings but are nothing but cogs in a vast corporate run machine, pawns in an enormous game of chess played by powerful vindictive immoral men. There are no cures for our disease. It’s terminal. Anyone telling you they have the answers is either lying or trying to sell you something. More people and organizations are on the take than are playing by the rules. The producers are being overrun by the parasites. The barbarians are at the gate. An implosion of societal trust is underway. The next stage of this crisis, which I believe will materialize within the next twelve months will try the souls of the weary. “As the Crisis catalyzes, these fears will rush to the surface, jagged and exposed. Distrustful of some things, individuals will feel that their survival requires them to distrust more things. This behavior could cascade into a sudden downward spiral, an implosion of societal trust. This might result in a Great Devaluation, a severe drop in the market price of most financial and real assets. This devaluation could be a short but horrific panic, a free-falling price in a market with no buyers. Or it could be a series of downward ratchets linked to political events that sequentially knock the supports out from under the residual popular trust in the system. As assets devalue, trust will further disintegrate, which will cause assets to devalue further, and so on.” – The Fourth Turning – Strauss & Howe – 1997 As a nation we have squandered our inheritence, born of the blood of patriots. A freedom loving, liberty minded, self-responsible, courageous people have allowed ourselves to fall prey to selfishness, apathy, complacency and dependency. Once we allowed our human appetites of greed, power seeking, and control to override the moral responsibilty for our own lives and the lives of future unborn generations, collapse was inevitable. The danger now is what happens after the unavoidable collapse. Will the millions of dependency zombies beg for a strong dictator to protect them, provide for them and lead them into further bondage? Or will the spark of liberty and freedom reignite, allowing citizens to throw off the shackles of banker and corporate control? I believe most of the people in this country are good hearted. We are merely pawns in this game of Risk being played by those seeking power, wealth and world domination. We are all trapped in our own forms of normalcy bias. Have I cashed out my retirement funds, sold my suburban house and built a doomstead in the mountains? No I haven’t. Do I second guess myself sometimes? Yes I do. But even the aware have families to support, jobs to go to, bills to pay, laundry to do, lawns to mow, and lives to live. I can’t live in constant fear of what might happen. We only get 80 or so years on this earth, if we’re lucky. The best we can do is leave a positive legacy for our children and their children. A drastic change to our way of life is coming, but most of us are trapped in a cage of our own making. Each living generation will need to do their part during this Crisis if we are to survive the coming storm. Since no one knows the nature of how the next fifteen years will unfold, it would be wise to at least make basic preparations for food, water, heat and protection. This is easier for some than others, but you don’t have to star on Doomsday Preppers in order to stock up on items that can be purchased at Wal-Mart today, but won’t be available when the global supply chain breaks down. Make sure you have neighbors and family you can rely upon. A small community of like minded people with varied skills are more likely to succeed in our brave old world than rugged individualists. With no financial means to maintain our globalized world, living locally will take on a new meaning. After much turmoil, chaos, violence, and likely mass casualties the best outcome would be for the Great American Empire to break into regional republics, incapable of waging global war, led by law abiding moral liberty minded individuals, and willing to trade freely and honestly with their fellow republics. Daily life would revert back to a simpler Amish like time. Would that be so bad? This Fourth Turning could end with a whimper or a bang. There are enough nuclear arms to obliterate the world ten times over. There are enough hubristic egomaniacal psychopathic men in power, that the use of those weapons has a high likelihood of happening. It will be up to the people to not allow this horrific result. I love my country and despise my government. The Declaration of Independence clearly states that when a long train of abuses and usurpations lead toward despotism, it is our right and duty to throw off that government and provide new guards of liberty. My family comes first with my country a close second. I will fight with whatever means necessary to protect my family and do what I can to influence the future course of our country. Time is running out. Will we have the courage, fortitude and wisdom to make the right decisions over the next fifteen years? Will we choose glory or destruction? The fate of our nation hangs in the balance. Are you prepared? Are you ready to fight for your family and your rights? The Fourth Turning could spare modernity but mark the end of our nation. It could close the book on the political constitution, popular culture, and moral standing that the word America has come to signify. The nation has endured for three saecula; Rome lasted twelve, the Soviet Union only one. Fourth Turnings are critical thresholds for national survival. Each of the last three American Crises produced moments of extreme danger: In the Revolution, the very birth of the republic hung by a thread in more than one battle. In the Civil War, the union barely survived a four-year slaughter that in its own time was regarded as the most lethal war in history. In World War II, the nation destroyed an enemy of democracy that for a time was winning; had the enemy won, America might have itself been destroyed. In all likelihood, the next Crisis will present the nation with a threat and a consequence on a similar scale. – The Fourth Turning – Strauss & Howe – 1997     IT’S OUR CHOICE.        

09 сентября 2013, 14:09

Spain – The Recession May Be Ending But The Crisis Continues

What follows is an interview I did over the summer with the Madrid based publication The Local. Let’s start with the basics: what are Spain’s current economic problems? Spain’s economic problems are a knock-on effect of the end of Spain’s property boom. The collapse of the property market led to a drop in incomes, depressed demand for goods and — slightly — lower wages. At the same time, apart from property prices haven’t come down. In addition over one adult in four isn’t working.  So consumption is steadily falling. On top of that we have a debt overhang — which means it is difficult for Spain to borrow. Larger companies are struggling to get credit so they are delaying payments to smaller suppliers, which means smaller companies are finding it harder to get money. It’s a vicious cycle. We are also seeing imbalances within Europe with the Germans doing ‘well’ and young Spaniards leaving the country to work elsewhere. And how has the Popular Party (PP) government led by Prime Minister Mariano Rajoy tackled these problems? One of the main objectives has been to avoid a financial rescue from the European Union. This was important for a number of reasons. National pride was definitely one factor. Also, it is unlikely any Spanish government could have survived a bailout. Then there is the fact that Europe would have had a greater say in how the Spanish economy operated if a bailout had taken place. The EU would have been telling Spain which taxes to raise or lower, for example, or how to go about pension reform. How do you rate the government’s attempts to cut spending? At the end of the day, this government is made up of ‘middle of the road politicians’ and they are basically economically liberal. Which means they would like to see less government. So if the deficit hasn’t come down very far it hasn’t been for want of trying. I would probably have to say their least recognized achievement has been their attempt to reform the public administration. This hasn’t been easy for the PP as some of the areas where the party has a lot of support are also places where there is not a lot of industry, and where government is a big employer. This being said Spain still had the biggest deficit in the EU last year (government spending exceeded tax revenue by 10.6 percent). In addition, reform of the financial sector still has a long way to go as well because while there is increased liquidity in the system, more recapitalization is constantly required as the high unemployment and low demand for products means more bad loans are created with each passing day. Recently, Spain’s Economy Minister Luis de Guindos asserted the recession may be over. He didn’t mention the crisis though. That’s an important distinction. Luis de Guindos is an intelligent man and recognizes that while the crisis is ongoing, recessions are a normal part of the business cycle. Spain’s second recession since the crisis began could well be over. And yes, we could well see two, or three, or even four quarters of weak economic growth but this is just part of the cycle. Indeed, Spain’s double-dip recession could eventually turn into a triple-dip one. This is because none of the underlying problems have been adequately addressed. We were told house prices would bottom out with the creation of a bad bank, but they are still falling. There is probably some way to go still, maybe two or three more years of falling prices. The organization charged with handling failed banks’ property assets, the “bad bank” Sareb, isn’t operating very well either. Sales are very low and the costs for potential buyers from Sareb is too expensive as the organization doesn’t have depositors and has to make deals with other banks to give mortgages which end up making interest costs too expensive to make the purchase attractive. And even while some of the old imbalances are adjusting new ones are being created since young people are now leaving Spain to work elsewhere in ever greater numbers. We don’t know exactly how many are leaving because Spain’s electoral roll doesn’t keep accurate track of where native Spaniards are living and working. What we do know is that last year Spain’s population fell for the first time in modern history, and that it will continue to fall as far ahead as the eye can see. A turning point of some kind has been passed. So you are not convinced by the spate of claims the crisis is over? I believe these predictions play to two audiences. The first issue is a confidence issue. Politicians would like to give the impression to the Spanish people that the crisis is ending  to encourage them to spend. At the same time, Prime Minister Rajoy is fighting for his political survival. One of the likely consequences of the current lack of government credibility, in my opinion, is that Spain could – in time – become effectively ungovernable in a way which has become common in other southern European countries. Fresh elections are unlikely in the short run, but when they do come there is unlikely to be a clear majority party, the outcome is likely to be fragmented, and indeed the Catalans want a vote on whether to leave. The (opposition socialist) PSOE party continues to have a huge credibility problem following the fiasco of the Zapatero government. They are currently  polling at very low levels (21.6 percent according to a July poll run by Metroscopia). It’s also very hard to imagine a political party in Spain making an alliance with Catalonia’s ruling CiU party given there is an independence referendum in the pipeline. So what does the term crisis actually mean after five years? My feeling is that it’s totally unrealistic to expect a ‘return to the old reality’. We are now in a change of paradigm process. We all need to change our expectations and find ways to live with the new situation, since whether we like it or not we will have to. There is no quick fix – these have all been tried and failed – and Spain is now condemned  to going through a painful long-term shift. The country will have to deal with its legacy debt. Personally, I think the International Monetary Fund could have played a more important role. It could have acted as a kind of  referee between Spain and the European Central Bank (ECB) and the EU, coaxing the country into adopting more fundamental changes. It could have pushed for the  ”front loading”  of the deep reforms the country needs (especially the much needed internal devaluation) coaxing the country into making changes at a time when the population was still receptive. But unfortunately even though the Fund is now trying to recover lost ground, most of the principal social actors turn a deaf ear. No one wants to hear more about harsh sacrifices, they only want “sweet words” about a looming recovery and regeneration. In addition I believe the IMF is now increasingly trying to distance instance from Europe because it has become tired of playing the part of public relations officer for what are effectively EU-lead programmes. It is clear from the Greek case – and the recent IMF “mea culpa” – that this way of doing things doesn’t work. Further, non-European members of the Fund like Brazil, China and India are now increasingly pressuring the organisation to stop molly coddling Europe’s leaders. Look, for example, at how little money is being offered to Egypt and how much has been spent on Greece. But what this means is that the organisation is now unlikely to play the role it once could have. To what extent is Spain responsible for its crisis, and to to what degree are international circumstances to blame? When the Euro was rolled out, the single currency idea clearly wasn’t thought through well enough. The EU leaders didn’t envisage the problems that have arisen. Another part of the problem lies in an idea that existed in Europe before the crisis — this was the idea that all countries all had equal levels of risk. And this clearly wasn’t true.  So to some extent the EU itself needs to assume responsibility. But on the Spanish side, it’s obvious the political parties were up to their necks in fomenting the boom by letting regional savings banks keep lending money, and by allowing builders to keep building. During the building boom, many Spaniards also became property speculators in their own right, buying more houses than they really needed.  As the saying goes,  ”When the music plays you have to dance”.