This page has been archived and commenting is disabled.
Tunisia/Swiss banks/Gold – What’s Next?
The blow up in Egypt is going to create ripples all over the globe. It
will certainly be disruptive for equities and the dollar. It will
influence global bond yields and PM prices. The oil market could be
in for a short-term shock. It could have a significant affect on
European GDP prospects. So there is a lot of uncertainty. I will make only one forecast of the lasting impacts of what is unfolding. Swiss banks and the Swiss government are in for another pounding over the issue of banking secrecy.
I’m sure that you have heard about the Tunisian leader who looted the
vault for $60mm worth of gold as he headed (quickly) out the door. (ZH report) That story made a big stink. This story today from NZZ is going to smell worse:
From the article (my translation):
Last
Wednesday the Federal Council announced: Within seven days were reports
of "tens of millions of francs," received in Switzerland from the family
of the deposed ruler of Tunisia Ben Ali . All assets of the family must
be blocked and reported to the Department of Foreign Affairs (DFA). This action was taken by the Federal Council on Regulation by emergency law issued since last Wednesday.
So not only did Ben Ali (and his wife) attempt to steal a ton and a half
of gold, they were also attempting to pirate away tens of millions in
cash. As with the gold story the authorities in Switzerland moved
quickly to seize the ill gotten gains and make things right. Right?
Baloney! Ali had money in Swiss private accounts way before last Wednesday:
The banks and other financial institutions reported suspect funds from the Ben-Ali clan only after the overthrow of the ruler - but not in the long years before, when he was in power and committed the alleged crimes.
Daniel
Thelesklaf (first head of the unit for combating money laundering in
2000 and now director of the Basel Institute on Governance) said: “The reporting requirement in the Money Laundering Act has remained largely a dead letter. The case of Ben Ali is the best example of it”.
"There is a gap in the legislation on money laundering and potentates like Ali. Therefore, it is naive to believe that there is no other money in Switzerland of potentates or their accomplices."
Bingo! Ali had money in Switzerland for a long time and other Potentates (Kings) have money there too. This stinks. Once again Switzerland is where the bad guys go with hot money.
In the scheme of things the Tunisia story is not a big deal. The amounts
involved were small. Tunisia is yesterday’s news at this point. No one
really cares if the former leader tried to stash some cash in Swiss
vaults.
But the number of Swiss black accounts and the aggregate amounts in them from the “Potentates” of Egypt, Saudi Arabia, Jordan will prove to be staggeringly large.
There are some folks in Switzerland who are crapping in their pants over this. The question is, “What to do?”
Should they attempt to "get ahead" of the coming problem by disclosing
that some “Potentates” from other areas also have accounts as did Ali?
Or do they wait to see if the Potentate falls and then follow the
example set with Tunisia where they act after the fact?
If they get in front of the curve they will have violated banking
secrecy rules. To act first and make a public announcement regarding
other hot money would cause those poor leaders to fall. For these
reasons Swiss Inc. will not take any action until after the next
Potentate tumbles.
The Swiss are going to look just horrible as a result. Should we lose another government (we will) and in the carnage it is disclosed that other Potentates have used Swiss banks to stash cash (we will) there is going to be some broader backlash.
Switzerland has addressed the black account problem for Americans. They are doing the same thing for a few other EU countries. That leaves the rest of the world.
There is at least a trillion of foreign cash in Switzerland that is
watching this aspect of the Tunisia/Egypt story. Should we see the next
chapter, where the Swiss “out” some other Potentate based on “new”
information, the rest of those account holders are going to get very
nervous.
Should we get the headline that the Swiss have acted against another
leader I would recommend getting long physical gold, fast. If hot money
is not safe in a Swiss account it will go into physical gold.
»
- advertisements -
I'm not sure an end to Swiss banking secrecy---if it comes to pass---is gold positive.
There are fewer and fewer places for deposed despots to hide, with or without their gold. Remember it was the Shah who exiled himself to Egypt. I doubt Egypt qualifies today as a safehaven. Soon any decent country is going to be happy to turn over the Ben Ali's and Mubaraks. People are pretty easy to find today, unless one wants to go live with Osama and Ayman in Waziristan, where piles of gold might make a more comfortable seat than a cold stone floor, but not by much.
The world may take the same view to despots Israel took to escaped Nazis: hunt them down relentlessly. Suppose Ben Ali's gold is recovered? What would the new Tunisian government be likely to do with it? I think sell it. Same for Egypt if in fact Mubarak has gold squirreled away somewhere. Seize it and sell it. Buy some food if the new leaders are populists; build their own new palaces if not.
Once the despots are gone, the masses might turn against the plutocrats, too, who are for the most part where they are simply because of access to bought-and-paid-for power. Might be some asset seizing here, too.
As for Swiss banks themselves...both UBS and CS have 3-4x Swiss GDP in assets (BAC has less than .2x US GDP in assets). Swiss banks have 25% of Swiss GDP in outstanding loans to emerging markets, mostly Eastern Europe. Many Hungarians and Poles have Swiss Franc mortgages. There are holes in that cheese.
As despots, monarchs and strongmen fall---if this trend continues---the emerging governments of their former countries also are going to want the stashed cash, which to a significant extent represent Swiss banks' "hidden reserves".
So our normally very situationally aware bruce once agains dips into the precient area of understanding. I think you know where this is going.
What about US government (or any other government very keen on human rights) collaboration with all these potentates???
Too easy to always attack tiny Switzerland
Saudi is next!!!
http://www.youtube.com/watch?v=6wHLoErB8Po
Switzerland is also where good guys go to
move their money away from the hands of
greedy attorneys, unlawful governments,
and and other unsavory characters.
Demonizing Switzerland for protecting money
that is deposited in its institutions is stupid
at best and criminal at worst. It's not the
Swiss government's job to make sure that anyone
that deposits funds are considered savory
characters by the international masses. What
a ridiculous commentary. I suppose Bruce favors
Patriot Act-style financial oversight of every
individual on a global basis so that funds are
always accounted for and the masses are happy
that they got someone... Ridiculous.
The time to stop this particular problem was before
Ben Ali boarded a plane.
No wonder Swiss banks don't take Americans
anymore--they're brainwashed.
I wouldn't trust the current incarnation of the Swiss banking system with my gold, silver or especially my CHOCOLATE. That little Swiss Miss is up to no good.
Dr Sandi
You're sooooooo anti-Swiss aren't you, why?
Huh? I don't know if you're just nuts or some kind of strange, freelance troll.
Some of my most neutral acquaintances are Swiss.
Dr Sandi
I didn't ask about your relations, I asked what's the chip on your shoulder with switzerland. here's your quote, explain:
"I wouldn't trust the current incarnation of the Swiss banking system with my gold, silver or especially my CHOCOLATE. That little Swiss Miss is up to no good"
Good one.
:D
Excellent point.
Which one? You and the trolls seem to intentionally miss Bruce's point. Here, I'll put it front of you again:
Okay. No, it won't.
If "hot money" leaves the Swiss banking system, it is sure to get out of Swiss francs...and into Euros. Nah, maybe not. British Pounds, of course...not.
Hmm. Let's see, where can I put my money that is not part of a giant asset bubble that is bound to explode? I know! Gold! Errrrmmm. Maybe not. Platinium perhaps? Molybdenum?
All the charts say that those assets are way overbought and in dire need of a correction. So, where can I put my money that is in a "beaten down" asset class with near-guaranteed returns and that is almost guaranteed to go up in value? Do I really need to tell you?
The time is not now, but I would say for you to save your ancient relic for some other time. That time has come and gone.
Sorry you were a victim of a massive spec trade and didn't even know it. When the press releases come out at the end of the quarter, you'll see that Soros and Paulson were net sellers of gold and silver.
You are the bag-holder. Welcome to the world.
________
When the 10-year note turns around, probably about 2.65% yield or so, I would buy USD until my eyes bled.
Just look at the chart, man. How else can I spell it out for you?
well this whole Egypt mess has been great entertainment, but tomorrow morning we should drag our chairs out to the edge of the highway, and watch our world leaders kicking the can down the road. I'm sure the IMF or someone will come up with enough money to make the poor in Eqypt leave the streets, (is that what happened in Greece?) Thank goodness we have a government which hands out free stuff before the tear gas becomes necessary.
Unfortunately for the gold bugs deflating the crisis meter will create a gap underneath which could gain momentum.
It feels like it's MY can they keep kicking down the road.
you've heard the expression, "share the wealth", but all you really see is universal poverty, and one beggar having a bigger cup than the other.
I am waiting quixotic. do you have a response to the link?
.
Yep,
First off it's a year old...
Secondly, US debt to GDP figure didn't include Social Security/Medicare liabilities.
Grade = Fail
I checked again to be sure. My link includes total liabilites including private banking debt plus sovereign debt. Switzerland is still number three right after Iceland and Ireland in total debt, sovereign plus private banking debt. It doesn't matter if they are 73 and we are thirty something in sovereign debt if the private banking debt completely overwhelms gdp. Look at my link again and you will see that sovereign debt was included.
neither do the swiss account for potential future liabilities in their health and pension system. Granted it is better run than ours. I am talking real booked banking liabilities. In that situation the list of explosions started with Iceland, then Ireland. Switzerland is third on the list in terms of the size of the debt bomb. UK is fourth. This is why the UK has made extreme efforts to cut debt even if it means temporary recession. I suspect the UK will go before Switzerland if the banking crises continue, but the USA is further down the list for now.
"the UK has made extreme efforts to cut debt even if it means temporary recession"
Are you referring to UK Govt jawboning about a pitiful £7bn cut to the budget deficit or the UK banks cutting their debt levels?
Here's a link for all you guys about banking debt bombs. Iceland, Ireland, next is Switzerland.
www.forbes.com/forbes/2010/0208/debt-recession-worldwide-finances-global-debt-bomb.html
Enjoy persuing the list to see who goes next after Ireland. Hint. It is not the USA.
Bruce knows this. that is why he is not correcting me. That is why the end of secrecy could be the next big thing. It's also why the Swiss Banks desperately need all the money they can get from despots. I do remind you that I admire the swiss in many ways, but banking secrecy while insuring the success of swiss banking has now sown the seeds of its own destruction. I do detest all banking scumbags of any national origin. I have learned from colonel cooper that I don't have to bend over every pile of dung to check it out. His advice has been a real time saver.
It seems we are all missing the point here.
Switzerland sells a lot more "banking services," secret, ill-gotten or otherwise, than they do swatches and Toblerone bars. The real deal is that if the Swiss can't sell their brand of banking to the world, then their economy takes a massive hit.
Why not go to Singapore? Hell, just stay with the local bank in Dallas. It would make no difference, as long as everyone, US included, were on the same page.
:D
Good post as usual, Bruce. Appreciate it.
Lots of despots put money in Swiss accounts.
Yassir Arafat had 22 million socked away. Kim Jong Il probably has some stashed.
Forget the little people.
BICC used to have both CIA accounts and terrorist accounts, and they each knew it.
Lots of despots put money in Swiss accounts.
Yassir Arafat had 22 million socked away. Kim Jong Il probably has some stashed.
Forget the little people.
BICC used to have both CIA accounts and terrorist accounts, and they each knew it.
Thanks for the post, Bruce. It's too bad that the usual losers with nothing to say are dominating the comments once again.
As I see it, your main point is that if Switzerland is no longer a safe haven for hot money, hot money will go into gold. You may be right (my guess), or you may be wrong; time will tell. Pardon me if, while waiting to see how things shake out, I don't attack your sanity or your manhood.
The wealthiest people in the world will never show up on a Forbes list or even at DAVOS; I would imagine that these puppet masters either own the Swiss banks or have extremely well guarded vaults somewhere. BTW, whatever happened to Assange with his BAC or Swiss bank dump, or was this just another psyops campaign?
Hm...one wonders where do the Blankfeins' and Dimons' keep their ill gotten stash?
Probably in a secret numbered acct. at the NY Fed...
By that reasoning you don't buy anything in any market, then. I believe there are long term trends that even HFT's or traders cannot control. They can change the results on a day to day basis by a few percentage points, but that's all. If the dollar goes the way of the Weimar Republic, no trader can stop or influence that significantly.
The Swiss collaborated with and financed the nazis as well as had munition factories for them under the mountains. Our war time documents show that we were well aware of this. It's easy to find if you care to look. The Swiss also attempted to steal money from Jews and their descendents by denying knowledge of, and access to, the accounts of Jewish people. While I admire the Swiss in many ways, they are the finest example of banking scumbags that I know. Banking secrecy has been used to support despotism, fascism, and tax evasion by the plutocrats. Who was that American singer who was caught crossing the german border with three billion dollars in bearer bonds? Surely those weren't all his. The Swiss are at the top of the banking corruption pyramid.
Topcallingtroll by name and topcallingtroll by nature!!
You couldn't go back any further than WWII to try desperately to rake up some shit on Swiss banking could you?
How's US banking doing troll?
Smelling of roses! Your bankers rake in $Billions while their businesses lose $Trillions. See a problem troll?
Least the Swiss know how to run a banking system. The US seems to run on systemic fraud, theft and incompetence and its such a sack of shit Washington has to prop up its insolvency.
Nobody in the world is spending more time and money shining turds than the Americans. Makes ya proud dunnit?
The Swiss scumbag bankers are light years ahead of our American scumbag bankers. However what our bankers lack in sophistication and finesse they make up for it in pure zeal.
In terms of knowing how to run a banking system I suspect Bruce knows how potentially unstable the Swiss system is. It is over leveraged 60 to 1 and it's banking sector is multiples of its GDP. The USA comes off relatively well by comparison. A swiss bank run is a real possibility because the swiss have depended on secrecy for their advantage. If that changes to any degree then the swiss banking system is in trouble.
I meant thirty to one. That's a typo.
60/1 down to 30/1 anymore typos to come troll?
NY Fed is at 80/1, no that's not a typo, that's your f'n US Regulator hanging out on fumes there buddy boy. Swiss are sound, the US is f**ked, leave the guys alone troll. Don't throw stones in glass houses, the US is made of glass and we can all see through it
Yes, we musn't criticise anyone, unless we criticise everyone else while we're at it. So where is the mention of the Titanic's bulkhead design, fractional reserve banking, gerrymandering in Nantucket (1865-1869), Moses' slaughter of the Amalekites, etc.
60 to 1?
Got a link to back that up?
Did you know that the Swiss have more gold reserves than the EU & Japan, with a fraction of their runaway debts?
And that's not counting private Au deposits!
http://www.cnbc.com/id/33242464/The_World_s_Biggest_Gold_Reserves?slide=10
yep I just posted the link. look at the most recent comment by the troll. I don't know how to cut and paste links so I had to type it out but I think it is a good link.
Isn't it silly how transparent these morons are?
You need to stop forgiving one while condemning another. Shit stinks. Doesn't matter where it comes from. I at least am bright enough to look at two piles of shit and realize they smell. Are you? Or do you need to bend over and smell each one?
yep they both stink.
yep they both stink.
LOL, Troll.
"Once again Switzerland is where the bad guys go with hot money."
Kind of amusing to consider, since some of this stash has got to be FRN's.
What a strange concept... Money that is both hot and counterfeit.
"Switzerland has addressed the black account problem for Americans" - excuse me, but according to WikiPedia article on Bradley Birkenfeld, http://en.wikipedia.org/wiki/Brad_Birkenfeld:
"In an unprecedented move, the Swiss parliament voted to approve a deal between the Department of Justice and UBS in which UBS has agreed to turn over the names of 4,450 U.S. citizens who held secret and illegal bank accounts at UBS. However, the agreement with UBS was for only a small portion of the names of tax dodgers and the fine was low compared to the entire $20 billion dollar illegal program. Additionally, Senator Charles Grassley(R-Iowa), ranking Republican on the Finance Committee, wrote to the heads of the IRS and Treasury Department because he was concerned the IRS was "doing next to nothing" to expose the UBS account holders while waiting for the Swiss to deliver."
Nobody "really important" has ever been disclosed/caught/prosecuted/fined/penalized. Not politicians, no banksters, no private equity folks! The "agreement" was a PR attempt by the IRS, and a poor one at that. Yes, Bruce, there's likely a lot more than one trillion dolalrs stashed in Swiss vaults... and the owners of the bulk of these assets can sleep without fear tonight, and tomorrow, and every other night because nothing will ever be disclosed. While a few "HNW individuals" will get dragged (rightfully) through IRS, the really "big and important fish" that runs banks, private and public businesses, hedge funds and makes foreign and national policy will never be disclosed. After all, if a bunch of world leading businessmen and politicians get causght it can lead to that dreaded "instability" and "public outrage", and that's not good for anyone: not good for the tax evaders, not good for the Swiss, and most importantly that "instability" not good for the USA and other Western governments.
So what if Ben Ali stashed a few million in Switzerland? I wonder how many tens/hundreds of billions of dollars the Russian ruling clan has over there!
You're only half right. The disclosure stuff was minimal. But I promise you, every account in Switzerland with a US name has been closed. What wasn't disclosed was flushed out.
As you suggest there is a bunch of this money. I say that should this happen if will increase demand for physical.
You folks think I'm making a political statement. Not the case. I'm just trying to predict money flows.
I wonder if there is any possible connection to the apparent large redemptions of physical in GLD recently
admittedly, any physical redemptions from GLD would have to be large scale (minimum $13M),
http://fofoa.blogspot.com/2011/01/who-is-draining-gld.html
but I think you are right re: the increased pressure this will put on the Swiss and on those who fear their money might not be as safe there as before.
and if people start requesting enough physical gold from unallocated accounts, it could prompt the collapse of the paper gold market (COMEX) which would only add rocket fuel to the demadn (& price) for the real stuff, while perhaps causing a swift demise to the $US (depending on how much physical is actually left in Fort Knox)
interesting times...