A cache of 2.5 million files of cash transfers, incorporation dates, and links between companies and individuals has cracked open the secrets of more than 120,000 offshore companies and trusts. The secret records obtained by the International Consortium of Investigative Journalists (ICIJ) lay bare the names behind covert companies used by people from American doctors to Russian executives and international arms dealers in more than 170 countries (as shown in the map below). One wonders how and why this sudden (and timely) leak of documents occurred. If we were a tinfoil-hat-wearing conspiracy theorist we might suspect that this is a staged coup to create a witch-hunt against all offshore capital (legitimate or illegitimate) - and an attempt, as with Cyprus, to push money out of banks and into circulation (pushing the velocity up) as all other monetary policy 'tricks' have failed. While 'offshore' is synonymous with 'tax cheat', there is nothing illegal in moving assets offshore. In fact, as Simon Black notes, given that there is going to come a time, likely soon, that retirement savings will be targeted; diversifying abroad is one of the sanest things you can do to protect yourself against the real criminals.
The overtly inflationary policy stance of the FOMC is especially significant when you consider that Fed Chairman Ben Bernanke is no longer in control of monetary policy.
Study: 28% Increase In Thyroid Problems In Babies Born After Fukushima in Alaska, California, Hawaii, Oregon and WashingtonSubmitted by George Washington on 04/02/2013 23:14 -0500
Is Fukushima Causing Health Problems In the United States?
There is "not a chance," that the Fed will be able to unwind its balance sheet in an orderly manner, "because everybody is front-running [them]," as the Fed is creating "serial bubbles," that are increasingly hard to manage since "we're getting in deeper and deeper every time." David Stockman has been vociferously honest in the last few days and his Bloomberg Radio interview with Tom Keene was extremely so. While Keene tries his best to remain upbeat and his permabullish self, Stockman just keeps coming with body blow after body blow to the thesis that this 'recovery' is sustainable. "They are using a rosy scenario forecast for the next ten years that would make the rosy scenario of the 1981 Reagan administration look like an ugly duckling," he exclaims, adding that the Keynesian Krugmanites' confidence is "disingenuous" - "the elephant in the room - the Fed," that are for now enabling rates to stay where they are. The full transcript below provides much food for thought but he warns, if the Fed ever pulled back, even modestly, "there would be a tremendous panic sell off in the bond market because it is entirely propped up... It's to late to go cold turkey."
By manipulating the price of money through sustained and historically low interest rates, Greenspan and Bernanke created an era of asset mis-pricing that inevitably would need to correct. And when market forces attempted to do so in 2008, Paulson et al hoodwinked the world into believing the repercussions would be so calamitous for all that the institutions responsible for the bad actions that instigated the problem needed to be rescued -- in full -- at all costs. David Stockman, former director of the OMB under President Reagan, lays out how we have devolved from a free market economy into a managed one that operates for the benefit of a privileged few.
The “Cyprus deal” as it has been widely referred to in the media may mark the next to last act in the the slow motion collapse of fractional-reserve banking that began with the implosion of the savings-and-loan industry in the U.S. in the late 1980s. The happy result will be that depositors, both insured and uninsured, in Europe and throughout the world will become much more cautious or even suspicious in dealing with fractional-reserve banks. They will be poised to grab their money and run at the slightest sign or rumor of instability. This will induce banks to radically alter the sources of the funds they raise to finance loans and investments, moving away from deposit and toward equity and bond financing.
Moments ago Cyprus banks reopened, under heavy guard, without signs of a stampede. However, since as was made clear yesterday, all bank branches will serve merely as glorified ATMs, allowing for a maximum €300 cash withdrawal and practically no outbound cash transactions allowed, there has been no stampede, and no lines as the bulk of services provided legally are merely what one can find at an automated teller machine. The question is whether the five shipping container full of ECB cash delivered last night into the country will be enough to cover the cash-strapped public's demands, and for how long.
- What bread... What circuses... JPMorgan Chase Faces Full-Court Press of Federal Investigations (NYT)
- European Regulators to Charge Banks Over Derivatives (WSJ) ... but forgive us if we don't hold our breath
- Cyprus readies capital controls to avert bank run (Reuters)
- Damage ripples through Cypriot economy (FT)
- G4S readies guards as Cypriot banks prepare to open (Reuters)
- Global pool of triple A status shrinks 60% (FT)
- Customers Flee Wal-Mart Empty Shelves for Target, Costco (BBG)
- BOE Says U.K. Banks Have Capital Shortfall of $38 Billion (BBG)
- U.K. Banks Facing Capital Shortfall (WSJ)
- Cyprus Details Bank Revamp (WSJ)
- Kazumasa Iwata Joins Kuroda Naysayers as BOJ to Meet (BBG)
- BRICS Nations Need More Time for New Bank, Russia Says (BBG)
With stocks holding near all-time highs, exhibiting similar fear-and-greed driven ebbs and flows (more flow than ebb for now), we thought these three charts would provide some interesting analogs. As Citi's Tom Fitzpatrick notes, the current charts for Gold, The USD Index, and USDJPY have some intriguing similarities to (respectively) 2006/7, 1996/7, and 2000/1. If history rhymes, it appears it is time to buy Gold, buy the USD, and prepare for a hiatus in JPY's collapse. With the USD, it is perhaps worth noting that both the (similar) 1981 and 1997 periods followed housing/credit/banking crises. In both instances the Fed eased rates and kept them too low for too long….in the 70’s period leading to a stagflationary environment.
Importantly, Cypriots and other Eurozone citizens who own gold saw the value of their holdings rise 2% in euro terms.
The demise of gold and the "death of the gold bull market" is "greatly exaggerated" says Mr. O’Byrne.
He said that while the risk from Cyprus has abated, in the light of capital controls in EU country and the treatment of Cyprus, there are now huge question marks over the future of the European Union itself.
Rather than sitting nervously and passively and awaiting the coming financial dislocations and expropriations, investors and savers need to be prepared for the uncertain financial scenarios that seem increasingly likely.
Hoping for the best, but preparing for less benign scenarios remains prudent.
Fukushima Still Pumping Out Massive Amounts of Radiation
When the market briefly surged yesterday, following the cryptic note from the ECB that it would "provide liquidity within existing rules" we urged to ignore the kneejerk algorithmic exuberance (although with only algos left trading that was obviously self-defeating) which interpreted this as an indication the ECB would provide unconditional liquidity now and forever, and that this was hardly a bullish sign because "the last thing the ECB wants is to appear weak, and fold letting every other broke deadbeat country to demand the same equitable treatment and diluting Germany's political might." Today, Reuters has picked up on this coming out with its own analysis that the "The European Central Bank is prepared to cut off funding to Cyprus and let the Mediterranean island succumb to financial meltdown if it has to, confident it has unlimited firepower to protect the rest of the euro zone."
The Eurogroup agreed on Monday night to allow Cyprus to change the make up of its controversial deposit tax and President Nicos Anastasiades is now proposing that bank customers with deposits under 20,000 euros should not be taxed at all, while keeping the levy the same for the remaining depositors. However, what’s happened over the past few days and what’s likely to happen in the days and weeks to come has little to do with numbers. It is much more about perceptions. Even if capital flight from Cyprus as a result of this decision is less severe than many fear, even if Cypriot banks survive this real stress test, even if the island’s economy is not set back many years, even if savers in Greece, Spain, Portugal and Italy don’t panic, the idea of a deposit tax and the way it was adopted has released something poisonous in the air. It is difficult to see how these citizens will be able to trust the system - be it their governments, banks or eurozone partners - in the weeks to come. Belief in countries where the economy is contracting and unemployment growing is already vitreous and planting fears about a possible deposits grab in the future could shatter it completely.
French government study: cost would be over three times GDP. Financially, France would cease to exist as we know it