Mario Draghi may have lied to Zero Hedge when saying there was no European "Plan B" (or Z), but he was right when he said that there has been a "vast amount of political capital that has been invested into the Euro." There is one problem: that political capital (like virtually every other form of capital in Europe) is evaporating at an unprecedented pace.
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.
The perfectly expected if completely irrational overnight ramp in various Yen carry pairs tried, and failed, and both the USDJPY and EURJPY were tumbling to overnight lows as we go to print. This is happening despite a rout in India in which Narendra Modi's opposition block is poised for the biggest Indian election win in 30 years, with his BJP party currently leading in 332 of 543 seat - an outcome that is seen as very pro business (and seemingly pro asset bubbles: the INR soared and the Sensex was up as much as 6% in intraday trading before paring virtually all gains following what many say was RBI intervention). And while the Nikkei (down 200 points) did not help the mood this move was mostly in response to yesterday's US selling, which means as usual the culprit for lack of algo risk-taking overnight has been the Yen carry, which moments ago hit intraday lows, and is increasingly flirting with the 101 level (after which double digits, and Abe's second resignation, come very quickly).
Italy’s central bank, the Banca d’Italia, has recently published an important document detailing the storage locations and composition of the country’s gold reserves. The document confirms that Italy’s gold is held across four vault locations, three of which are outside Italy. This is a significant announcement given that the Banca d’Italia is the world’s third largest official holder of gold after the U.S. and Germany. Italy officially holds 2,451.8 tonnes of gold, worth more than €72 billion (US$ 100 billion) at current market prices. In the detailed three page report focusing exclusively on its gold reserves (and only published in Italian), the Banca d’Italia reveals that 1,199.4 tonnes, or nearly half the total, is held in the Bank’s own vaults under its Palazzo Koch headquarters on Via Nazionale in Rome, while most of the other half is stored in the Federal Reserve Bank gold vault in New York. The report also states that smaller amounts are stored at the Bank of England in London, and at the vaults of the Swiss National Bank in Bern, Switzerland.
Obama won't be happy! "It would harm everybody, the Europeans and the Russians," warned Olli Rehn, the European Commissioner for Economic Affairs, adding that "any 'sensible' European Union citizen should oppose further sanctions on Russia because of the economic cost for Europe." As Merkel and Obama cozy'd up for discussions this morning, we can only imagine the promises being made if only she would support his crusade (which she clearly indicated she did not want to). Perhaps she should check in with her nation's CEOs (who have vociferously demanded no more sanctions) and, as Rehn acknowledges, the slowing Russian economy is already having a “negative impact” on Finland and Austria, and "that economic fallout probably will spread to Germany, Poland and the Baltic countries."
Following three consecutive days of missions by the Russian "Doomsday Plane", i.e. the Tupolev Tu-214SR communication relay aircraft, which as we reported first on Friday, has been circling in proximity to Finland, above the island of Valaam in Lake Ladoga, moments ago, deep in the Russian night, the plane which traditionally accompanies Putin took off from Moscow's Vnukovo airport and is once again making loops over Valaam island (flight can be tracked in real-time for the next several hours with FlightRadar24).
The last time the Russian "Doomsday Plane" was seen in the air doing its trademark loops at 27,000 feet telegraphing Vladimir Putin was somewhere nearby, was on March 31, just days after the formerly Ukrainian region was annexed by the Kremlin. Until today, when over the past 4 hours, the Tu-214 has been quietly circling in position just shy of Finland and the Baltics, where as it is known, NATO has been depositing hundreds of western soldiers in a "defensive" build up.
For most of Canada's existence, it has been regarded as the weak neighbor to the north by most Americans. Well, that has changed dramatically over the past decade or so. Back in the year 2000, middle class Canadians were earning much less than middle class Americans, but since then there has been a dramatic shift. At this point, middle class Canadians are actually earning more than middle class Americans are. The Canadian economy has been booming thanks to a rapidly growing oil industry, and meanwhile the U.S. middle class has been steadily shrinking. If current trends continue, a whole bunch of other countries are going to start passing us too. The era of the "great U.S. middle class" is rapidly coming to a bitter end.
- Putin Doesn't Rule Out Sending Troops (WSJ)
- Japan Cuts Economic View on Tax Rise (WSJ)
- No "harsh weather" in Chipotle restaurants where comp store sales rose 13.4% (PR)
- No sanctions for you: EU sanctions push on Russia falters amid big business lobbying (FT)
- Consumer Spending on Health Care Jumps as Obamacare Takes Hold (BBG)
- China Seen Cracking on Property Controls (BBG)
- Google, IBM results raise questions about other tech-sector companies (Reuters)
- California city evacuation lifted after military ordnance found (Reuters)
- For Obama, Standoff With Moscow Jumbles Plans at Home and Abroad (WSJ)
There is a reasonably quiet start to the week before we head into the highlights of the week including the start of US reporting season tomorrow, FOMC minutes on Wednesday and IMF meetings in Washington on Friday. On the schedule for today central bank officials from the ECB including Mersch, Weidmann and Constancio will be speaking. The Fed’s Bullard speaks today, and no doubt there will be interest in his comments from last week suggesting that the Fed will hike rates in early 2015.
Dr Faber discussed the importance of not owning gold stored in the U.S., the mystery of the Fed gold, why Singapore is safest for gold storage, the risks of bitcoin and how small countries should revert to national currencies. The must watch interview can be watched here ...
Yesterday we reported that in an attempt to unclog Europe's broken credit and monetary piping, European regulators are preparing to get their hands dirty by easing rules on, and unleashing, an asset class once labelled toxic sludge, i.e., all the worst of the worst debt that was the reason why Europe is in a 6 year-old depression, and hope and pray it somehow fixes itself. Today, the ECB reported the latest data on European credit creation in the private sector. Or rather lack thereof. Because at -2.2%, this was essentially an all time low private sector loan "growth" (rather, credit destruction). Which means Europe will have to throw all the toxic sludge it can find in its desperation to reignite yet another credit bubble, something Bernanke's cronies appear to have done far more admirably.
After warning of the potential for "dangerous risks of escalation" President Obama, absent his Congress, has signed an Executive Order authorizing further penalties on more Russian individuals and also a bank. "We’re imposing sanctions on more senior officials of the Russian government,” Obama said. “In addition, we are today sanctioning a number of other individuals with substantial resources and influence who provide material support to the Russian leadership, as well as a bank that provides material support to these individuals.” The list includes Bank Rossiya (Russia's 5th largest bank), and 20 more individuals including Billionaire Gennady Timchenko, and Duma Deputy Speaker Evgeny Bushmin.