Bank of England

The Bundesbank, Germany’s powerful central bank, announced very publicly this morning the further repatriation of some of it’s gold being held in foreign locations – namely in Paris and New York with the Bank of France and the Federal Reserve.

We’re getting back to normal, and though normal’s going to hurt – and far more than you realize yet - it’s hugely preferable to upside down; you hang upside-down long enough, it makes your brain explode. The price of oil was the first thing to go, central banks are the next. And then the whole edifice follows suit. The Fed has been setting up its yes-no narrative for months now, and that’s not without a reason. But everyone’s still convinced there won’t be a rate hike until well into this new year. And the Swiss central bank said, a few days before it did, that it wouldn’t. And then it did anyway. The financial sectors’ trust in central banks is gone forever. And none too soon. Now they’ll have to cover their own bets. If anything spells deflation, it’s got to be that. But not even one man in a thousand understands what deflation is.

"The first lesson is never trust a central banker when he or she makes a commitment or gives guidance..."

Over a decade ago, George Soros took on the Bank of England, and won. Less than two hours ago the Swiss National Bank took on virtually every single macro hedge fund, the vast majority of which were short the Swiss Franc and crushed them, when it announced, first, that it would go further into NIRP, pushing its interest rate on deposit balances even more negative from -0.25% to -0.75%, a move which in itself would have been unprecedented and, second, announcing that the 1.20 EURCHF floor it had instituted in September 2011, the day gold hit its all time nominal high, was no more. What happened next was truly shock and awe as algo after algo saw their EURCHF 1.1999 stops hit, and moments thereafter the EURCHF pair crashed to less then 0.75, margining out virtually every single long EURCHF position, before finally rebounding to a level just above 1.00, which is where it was trading just before the SNB instituted the currency floor over three years ago.

• U.S. Index Futures Decline on Commodities Slump, Growth Concerns (BBG)
• Al Qaeda claims French attack, derides Paris rally (Reuters)
• Charlie Hebdo With Muhammad Cover on Sale With Heavy Security Precautions (BBG)
• How an Obscure Tax Loophole Brought Down Obama's Treasury Nominee  (BBG)
• ECB’s bond plan is legal ‘in principle’ (FT)
• Charlie Hebdo fallout: Specter of fascist past haunts European nationalism (Reuters)
• DRW to acquire smaller rival Chopper Trading (FT)
• Oil fall could lead to capex collapse: DoubleLine's Gundlach (Reuters)

It will be even more disruptive if some among them decide that the only reason for the failure of their collective delusion of grandeur is that they have not been deluded enough and that even more wild-eyed palliatives are therefore needed. Disruption on such a scale is not what the budding entrepreneur wants to contend with as he contemplates whether to risk both his capital and his reputation in launching or expanding a business, in ordering new equipment, or hiring new staff and so fostering a meaningful recovery. Disruption on such a scale is not something we should wish to inflict upon a system we have been both unable and unwilling to fully repair. Either way – damned if they do, damned if they don’t – disruption seems to be what we will get in the months ahead.

Assume the news for next week has not already been written,  What should investors, or those monitoring the international political economy be watching?  Here is my list.  

• Global Debt Crisis II – Total Global Debt to GDP Ratio Over 300% - Risk of Bail-Ins in 2015 and Beyond - Currency and Gold Wars - $1 Quadrillion “Weapons of Mass Destruction” Derivatives - Cold War II and New World Order as China and Russia Flex Geopolitical Muscles - Enter The Dragon – Paradigm Shift of China Gold Demand - Forecast 2015: None. Forecast 2020: Gold $2,500/oz and Silver $150/oz

• Police Surround Paris Terror Suspects Near CDG Airport (BBG)
• ECB Said to Study Bond-Purchase Models Up to 500 Billion Euros (BBG)
• How OPEC Weaponized the Price of Oil Against U.S. Drillers (BBG)
• German Industrial Production Falls Amid Plunge in Energy Output (BBG)
• Car Loans See Rise In Missed Payments (WSJ)
• Jim O'Neill threatens he will replace BRICs with ICs (BBG)
• Oil heads for seventh weekly loss as supply glut drags (Reuters)
• Armed man takes hostage in kosher grocery in Paris (AFP)
• Janus Chairman Didn’t Know Details of Gross’s Investment (WSJ)
• Kaisa Bondholders Dream of White Knight as Default Becomes Real (BBG)

• French policewoman killed in shoot-out, hunt deepens for militant killers (Reuters)
• The Bold Charlie Hebdo Covers the Satirical Magazine Was Not Afraid to Run (BBG)
• Evans Says Fed Shouldn’t Rush Rate Rise as Inflation Undershoots (BBG)
• Oil holds above $51 as traders search for floor (Reuters)
• Gross Helps Fuel New Fund With His Own Cash (WSJ)
• ECB warns Greek funding access hinges on keeping bailout (Reuters)
• Greece Jolts QE Juggernaut as ECB Gauges Deflation Risk (BBG)
• Analysts Say There's No Telling How Low Oil Prices Could Go (BBG)
• Scientists find antibiotic that kills bugs without resistance (Reuters)

After subdued trading in the overnight session until a little after 8pm Eastern, algos went into overdrive just around the time the Fed's 2015 voting member and uberdove Charlie Evans told reporters that "raising rates would be a catastrophe", hinting that the first rate hike would likely be - as usual - pushed back from market expectations of a mid-2015 liftoff cycle into 2016 or beyond (but don't blame the US, it is the "international situation's" fault), in the process punking the latest generation of Eurodollar traders yet again. Whatever the thinking, S&P futures soared on the comments and were higher by just under 20 points at last check even as Crude has failed to pick up and the 10Y is barely changed at 2.00%.

• Twelve shot dead in Paris (Reuters)
• Eurozone Consumer Prices Fall for First Time Since 2009 (NYT)
• Euro's Drop is a Turning Point for Central Banks Reserves (BBG)
• How $50 Oil Changes Almost Everything (BBG)
• Mercedes-Benz Moving U.S. Headquarters to Atlanta (WSJ)
• Greek 10-Year Bond Yields Exceed 10% for First Time Since 2013 (BBG)
• How Even Dairy Farmers Get Squeezed by Rigging in the $5.3 Trillion Currency Market (BBG)
• AirAsia jet tail found underwater, black box may be close (Reuters)
• Italy Unemployment Rises to New High (Bloomberg)

At the start of the New Year, there are increasing signs that the recovery seen in property prices in many cities in western countries -- namely New York and other U.S. cities, and Dublin, London and other UK cities -- is beginning to peter out ... 

• Economists sceptical ECB bond-buying would revive eurozone (FT)
• Indonesia naval captain says may have located missing plane's tail section (Reuters)
• Oil hits five and a half year low under $55 (Reuters)
• Samaras Warns of Euro Exit Risk as Greek Campaign Starts (BBG)
• The death of active investing: Vanguard Sets Record Funds Inflow (WSJ) - thank you Fed
• Oil Downturn Has Many Wondering How Lone Star State Will Weather a Bust (WSJ)
• Hollande Says France Must Exceed 1% Economic Growth to Spur Jobs (BBG)

2014 may go down as the year when gold and silver conspiracy “theories” became conspiracy “facts” as banks globally were found to have conspired to rig the prices of gold, silver, currency and many other markets.