Hong Kong

• How original: Syria prints new money as deficit grows (Reuters)- America is not Syria
• Former SNB head Hildebrand to become BlackRock vice chairman (FT)
• Osborne says Greece may have to quit euro (Reuters)
• Osborne Risks the Wrath of Merkel (FT)
• China second-quarter GDP growth may dip below 7 percent - government adviser (Reuters)
• Italian Borrowing Costs Surge at Auction of 1-Year Bills (Bloomberg)
• Greeks withdraw cash ahead of cliffhanger vote (Reuters)
• Merkel’s Choice Pits European Fate Against German Voter Interest (Bloomberg)
• Italy Tax Increases Backfire as Monti Tightens Belts (Bloomberg)
• Dimon says JPMorgan failed to rein in traders (Reuters)

All you can read.

What are capital controls? Simply, capital controls are policies which restrict the free flow of capital into, out of, through, and within a nation’s borders. They can take a variety of forms, including:

• Setting a fixed amount for bank withdrawals, or suspending them altogether
• Forcing citizens or banks to hold government debt
• Curtailing or suspending international bank transfers
• Curtailing or suspending foreign exchange transactions
• Criminalizing the purchase and ownership of precious metals
• Fixing an official exchange rate and criminalizing market-based transactions

Establishing capital controls is one of the worst forms of theft that a government can impose. It traps people’s hard earned savings and their future income within a nation’s borders. This trapped pool of capital allows the government to transfer wealth from the people to their own coffers through excessive taxation or rampant inflation… both of which soon follow.

All you need to know.

The end game of this global monetary crisis is the imposition of a 100% digital monetary system that would permanently end what little economic freedoms we still retain today. Educate. Resist. Fight Back. Win.

Global gold demand continues to surprise to the upside – especially sizeable demand from the Middle East and China. Confirmation of continuing huge demand in China came yesterday with data showing that Hong Kong shipped 101,768 kilograms of gold to mainland China in April, up 62% on the month - marking the second-highest monthly exports ever.  While demand from India continues it has fallen from the record levels recently but demand from other Asian countries is robust with reports of demand in Thailand, Vietnam, Malaysia and Indonesia. A new and potentially significant source of demand is that of demand from Iran. Iran imported a massive $1.2 billion worth of precious metals from Turkey in April alone. Turkish exports of gold, precious metals, pearls and coins to Iran rose to $1.2 billion in April from a tiny $7,500 a year earlier, according to figures released by the state statistics institute in Ankara yesterday. This is a massive increase in demand and suggests that there may be official involvement in the imports from the Central Bank of Iran.

A month ago we were delighted to counterpoint Charlie Munger's prior remarks about the level of "civilization" of a given consumer based on their sentiment vis-a-vis gold, by demonstrating that Chinese purchases of gold from Hong Kong rose to a record. To wit: "Imports from Hong Kong were 135,529 kilograms (135.53 metric tons) between January and March, from 19,729 kilograms in the year-earlier period, according to data from the Census and Statistics Department of the Hong Kong government. Shipments in March rose 59 percent from February, yesterday's data showed." We have just gotten the April update, and, lo and behold, the country which is now the biggest buyer of gold, having surpassed India, just set a new record: "Gold imports by mainland China from Hong Kong climbed 65 percent to a record in April, advancing for a third straight month as investors sought a hedge against financial-market turmoil and an economic slowdown. Shipments totaled 103,644.5 kilograms (103.6 metric tons) in the month from 62,913 kilograms in March, according to export data from the Census and Statistics Department of the Hong Kong government today. In the first four months, imports were 239,174 kilograms from 27,114 kilograms a year earlier, according to Bloomberg calculations. China doesn’t publish such figures." In other words: in the first four months of 2012 Chinese purchases have increased by an unprecedented 782% over 2011.

If the U.S. Federal Reserve were a hedge fund, its phones would be ringing off the hook with prospective investors wanting fresh allocations and Ben Bernanke would be zipping around the French Riviera in a gold-plated helicopter.  The Fed’s multibillion-dollar position in Treasuries is nicely in the money with the recent moves to record lows risk-free yields, after all.  But it’s policy outcomes, not returns, that the Fed is after.  By that measure, the current record low payouts in “Safe Haven” bonds (U.S., Germany, U.K, for example) are troublesome.  There is, of course, the worry that they portend a global recession.  This concern cannot be waved away with the notion that a worldwide flight to quality totally upends the bond market’s historical function as a weather-vane of economic expansion and contraction.  Beyond this concern, however, Nic Colas of ConvergEx sees two further worries.  The first is that the Fed has needlessly compromised its independence by pursuing bond purchases that, in hindsight, were unnecessary in the face of the current economic outlook and investment environment.  The second is that interest rates have been demoted to a supporting role in kick starting any global economic recovery. As with unfriendly aliens unpacking their bags at a landing site, the move to record low rates around the world is a truly menacing development. Historically, low interest rates have generally sparked economic recovery.  In the current environment, this gas-down-the-carb approach seems to have simply flooded the engine of growth.  Other factors are at play, as I have outlined here. The real answer is simply more time.

• Germany shifts, gives Spain more time on deficit (Reuters)
• Europe must prepare an emergency plan (FT)
• EU Spain reveals €100bn capital flight (FT)
• Spain’s Guindos says future of Euro at stake in Spain (Bloomberg)
• ECB, EU officials warn euro’s survival at risk (Reuters)
• China can ‘cope’ if Greece exits Euro, NDRC Researcher says (Bloomberg)
• Japan Warns Against Rising Yen (WSJ)
• Global stocks investors head for exits (FT)
• Hot Copper Shorts Burning Commodity Firms (Caixin)

Here we go again. Back in July 2011 we wrote an article entitled "The Real Banking Crisis" where we discussed the increasing instability of the Eurozone banks suffering from depositor bank runs. Since that time (and two LTRO infusions and numerous bailouts later), Eurozone banks, as represented by the Euro Stoxx Banks Index, have fallen more than 50% from their July 2011 levels and are now in the midst of yet another breakdown led by the abysmal situation currently unfolding in Greece and Spain.... Although the last eight months have not played out the way we would have expected for gold, they have played out the way we envisioned for the banks. The question now is how long this can go on for, and how long gold can remain under pressure in a banking crisis that has the potential to spread beyond Greece and Spain? So much now rests on the policy responses fashioned by the US Fed and ECB, and just as much also rests on what's left of European citizens' confidence in their local banking institutions. Neither of these things can be precisely measured or predicted, but we continue to firmly believe that depositors in Greece and Spain will choose gold over drachmas or pesetas if they have the foresight and are given the freedom to act accordingly. The number one reason we have always believed gold should be owned, and why we believe it will go higher, is people's growing distrust of the banking system - and we are now there. We will wait and see how the summer develops, and keep our attention firmly focused of the second phase of the bank run now spreading across southern Europe.

• Dublin in final push for EU treaty Yes vote (FT)
• Spain cries for help: is Berlin listening? (Reuters)
• Crisis draws squatters to Spain's empty buildings (Reuters)
• EU World Bank Chief Urges Euro Bonds (WSJ)
• but... EU: Current Plan Is Not To Let ESM Directly Recapitalize Banks (WSJ)
• Graff pulls Hong Kong IPO, latest victim of weak markets (Reuters) - was MS underwriter?
• EU Weighs Direct Aid to Banks as Antidote to Crisis (Bloomberg)
• Dewey's bankruptcy: Let the rumble begin (Dewey)
• More are cutting off Greek trade: Trade credit insurers balk at Greek risk (FT)
• Rosengren wants more Fed easing; Dudley, Fisher don't (Reuters)
• EU throws Spain two potential lifelines (Reuters)
• Fed's Bullard says more quantitative easing unlikely for now, warns on Europe (Reuters)

• Finally, even the NYT gets it: Most Aid to Athens Circles Back to Europe (NYT)... compare to ZH from February
• It took less than 2 weeks: Zuckerberg Drops Off Billionaires Index as Facebook Falls (Bloomberg)
• Morgan Stanley derivatives switch hits hold-up (FT)... MS prevented from having non-existant deposits backsto $52 trillion in derivatives
• Solyndra goes global: Spain Ejects Clean-Power Industry With Europe Precedent (Bloomberg)
• Investors may be stoking the volatility they fear (Reuters)... Zombie Catch 22
• Facebook shares plumb new depths, valuation questioned (Reuters) shouldnt this have been questioned before?
• Italian auction reinforces eurozone woes (FT)
• Visa Beats JPMorgan as Cards Wage War on Cash (Bloomberg)
• Sweden Escapes Recession as Growth Returned in First Quarter (Bloomberg)

A push by the ECB for the euro zone to stand behind banks suffering from bank runs is slowly gaining traction but the bloc has yet to build backstops to prevent, or cope with, a sudden collapse of confidence in banks and mass deposit withdrawals. Last week, European leaders discussed pan European means of supporting banks, measures the ECB hopes will include a bank resolution fund to deal with the fallout from the wind up or restructuring of a failing bank. But a wave of withdrawals by depositors - either for fear that their government is too weak to stand behind its banks or that their country will exit the euro and forcibly convert their savings into a vastly devalued national currency - would represent a crisis of completely new proportions. Greece’s exit and reversion to their national currency, the drachma, could precipitate electronic bank runs in other periphery nations. The risk is that even savers who may trust their bank as being safe, come to the conclusion that there is a risk that their euro deposits may, in the event of a sovereign crisis, be forcibly converted to drachmas, pesetas, liras, punts and escudos.

• Merkel Prepares to Strike Back Against Hollande (Spiegel)
• China to subsidise vehicle buyers in rural areas (Reuters) - what could possibly go wrong
• Bankia’s Writedowns Cast Doubts on Spain’s Bank Estimates (Bloomberg) - unpossible, they never lie
• Shares in Spain's Bankia plunge on bailout plan (AP) - oh so that's what happens when a bank is bailed out.
• SNB’s Jordan Says Capital Controls Among Possible Moves (Bloomberg)
• Greeks Furious Over Harsh Words from IMF and Germany (Spiegel)
• Tehran defiant on nuclear programme (FT)
• Finally they are getting it: Greece needs to go to the brink (Breaking Views) - of course, Citi said it a week ago, but it is the MSM...
• OTC derivatives frontloading raises stability concerns (IFRE)
• Wall Street Titans Outearned by Media Czars (Bloomberg)