Last week we commented that based on TIC data, while "Belgium's" unprecedented Treasury buying spree continues, one country has been dumping US bonds at an unprecedented rate, and in March alone Russia sold a record $26 billion, or 20% of its holdings. So as Russia is selling a record amount of US paper, what is it buying? For the answer we go to Goldcore which tells us that "Russia Buys 900,000 Ounces Of Gold Worth $1.17 Billion In April."
On the surface, the economic atmosphere of the U.S. has appeared rather calm and uneventful. Stocks are up, employment isn’t great but jobs aren’t collapsing into the void (at least not openly), and the U.S. dollar seems to be going strong. Peel away the thin veneer, however, and a different financial horror show is revealed. With the Ukraine crisis now escalating to fever pitch, BRIC nations are openly discussing the probability of “de-dollarization” in international summits, and the ultimate dumping of the dollar as the world reserve currency. The U.S. is in desperate need of a benefactor to purchase its ever rising debt and keep the system running. Strangely, a buyer with apparently bottomless pockets has arrived to pick up the slack that the Fed and the BRICS are leaving behind. But, who is this buyer? At first glance, it appears to be the tiny nation of Belgium. Clearly, this is impossible, and someone, somewhere, is using Belgium as a proxy in order to prop up the U.S. But who?
The ECB, the Swiss National Bank (SNB) and the Riksbank of Sweden announced a new gold agreement this morning. They announced they have no plans to sell significant quantities of gold and reaffirmed the importance of gold bullion as a monetary reserve asset.
Just out from Bloomberg:
- Deutsche Bank preparing a capital increase, aims to raise EU8 billion through new shares by end of June, Handelsblatt says, citing unidentified people in the finance industry.
- Deutsche Bank likely to get new single investor
- Deutsche Bank new investor may hold 5%-8% of shares
- Deutsche Bank declined to comment: Handelsblatt
And the punchline: Bank’s new shares may be sold with 25%-30% discount. In other words, it is liquidity scramble time, and the bank is willing to give anyone with deep enough pockets a 30% discount to market price just to get some additional short-term funding.
The political situation in Belgium - as Europe heads into elections - could well be the writing on the wall for every European country. Economists and politicians love to juggle with figures in the trees so you can not see the forest. Economics is not always easy, but we have noticed that you can do it with an island of 100 people to make it understandable. Let's call this island "Rainbowland"... as we show below, you do not have to be a genius to realize that a country such as " Rainbowland" can not survive in reality.
Having unsuccessfully lobbied its slave-driving masters with one-day strikes and angry tongue-lashings, Thursday sees the fast food workers’ movement wants to broaden its reach as it pushes for a $15-an-hour wage (that restaurant companies say is unrealistic). In addition to 150 strikes across the US, NY Times reports, support protests will take place in 80 cities in more than 30 countries, from Dublin to Venice to Casablanca to Seoul to Panama City. "Fast food workers in many other parts of the world face the same corporate policies — low pay, no guaranteed hours and no benefits," warned one union leader but judging by the response from the restaurants association, "These are made-for-TV media moments - that’s pretty much it." Workers generally have the same message - "I don’t make enough money to take care of my kids," but as we have noted before (and as Motoman Robot below indicates) raising the minimum wage will have unintended consequences few strikers consider, "it would have consequences on hiring patterns for Main Street businesses across the country."
Russia Dumps 20% Of Its Treasury Holdings As Mystery "Belgium" Buyer Adds Another Whopping $40 BillionSubmitted by Tyler Durden on 05/15/2014 12:23 -0500
Moments ago the May TIC numbers did come out, and as expected, Russia indeed dumped a record $26 billion, or some 20% of all of its holdings, bringing its post-March total to just over $100 billion - the lowest since the Lehman crisis. But as shocking as this largely pre-telegraphed dump was, it pales in comparison with what we first observed, is the country that has quietly and quite rapidly become the third largest holder of US paper: Belgium.
Thank god for Germany, whose Q1 GDP printed at 0.8%, above the expected 0.7%, and higher than Q4's 0.4%, or else the Eurozone's very disappointing Q1 GDP, which printed at 0.2% or half the expected 0.4%, could have been flat or negative.
In this brave new centrally-planned world, where bad is good, very bad is very good, and everything is weather adjusted, Japan's blistering GDP report last night, printing at 5.9% on expectations of 4.3% was "bad" because it means less possibility for a boost in QE pushing futures lower, while the liquidity addicts were giddy with the GDP miss in Europe where everyone except Germany missed (as for the German beat, Goldman's crack theam of economic climatologists, said it was due to the weather), and the Eurozone as a whole came at 0.2%, half the forecast 0.4%, which in turn allowed futures to regain some of the lost ground.
Because we’ve reached a point in time at which $1 trillion no longer sounds like a lot of money, we thought we’d go through the exercise of assessing just what the Fed could have done with this money besides give it to Wall Street.
This week's compilation of things to ponder is a veritable smorgasbord of topics that caught our attention this past week. From "The Limits of Growth" to "Peak Profits" and "The Next Bailout", plenty to ponder this weekend.
Ask any European why their standard of living is so atrocious (after years of freeflowing debt-funded largesse) and the answer is well-known: austerity.Also ask any European if austerity means public debt should go up or down and the answer is also as clear: down. Which is why most Europeans will likely be confused to very confused when presented with the latest Eurostat data according to which not only did Eurozone debt rose remain just shy of all time record highs and certainly increasing from a year ago, but those PIIGS nations which are the first to blame austerity for everything, such as Greece (net of the debt wiped out as part of its 2012 bankruptcy of course), Portugal, Spain and Italy, all saw their public debt hit all time highs.
In the beginning it was banker suicides. Then about two weeks ago, suicides were replaced by outright murders after the execution-style killing of the CEO of a bank in otherwise sleepy (and tax evasive) Lichtenstein by a disgruntled client. Then on Friday news hit of another execution-type murder in just as sleepy, if not so tax evasive, Belgium, where in the city of Vise, a 37-year-old Director at BNP Paribas Fortis was murdered alongside his wife and a 9 year old nephew in a premeditated and orchestrated drive-by shooting.
The latest development out of NATO, which was already largely expected, must be part of the just announced elaborate de-escalation scheme. From VOA: "NATO members are sending navy ships to the Baltic Sea to increase the security of the alliance's eastern European allies in response to the Ukraine crisis. NATO's Maritime Command said Thursday it is sending four minesweepers and a support vessel to the Baltic Sea. The ships are from Norway, the Netherlands, Belgium and Estonia."
Yes, this is not meant to be ironic.