With the ECB's December meeting just one week away, Mario Draghi and co. are still debating how best to package a new round of easing measures. As Reuters reports, the central bank is considering a tiered system for the application of negative rates in an effort to mitigate the effect on banks. Translation: the ECB may be preparing to "overwhelm" with an even larger cut to the already negative depo rate that analysts were expecting.
"We have determined that applying a negative rate was a more transparent and fairer solution for our clientele. This decision on negative rates is costing us a lot of money -- pretty much the equivalent of our entire annual profit last year."
If you thought we'd seen the depths of NIRP, think again because as Deutsche Bank notes, the ECB, Riksbank, SNB, and Nationalbank will likely dive further into the monetary Twilight Zone in the months ahead. Only when rates become negative enough to spark a depositor revolt will we have reached the "real" lower bound, but at that point, it will be far too late...
For the past two weeks, the thinking probably went that if only the biggest short squeeze in history and the most "whiplashy" move since 2009 sends stocks high enough, the global economy will forget it is grinding toward recession with each passing day (and that the Fed are just looking for a 2-handle on the S&P and a 1-handle on the VIX before resuming with the rate hike rhetoric). Unfortunately, that's not how it worked out, and overnight we got abysmal economic data first from China, whose imports imploded, then the UK, which posted its first deflation CPI print since April, and finally from Germany, where the ZEW expectation surve tumbled from 12.1 to barely positive, printing at just 1.9 far below the 6.5 expected.
- Commodities in crisis as Asian shares tumble and shipper files for bankruptcy (Reuters)
- Global Rout Eases as S&P 500 Futures Advance With Oil, Glencore (BBG)
- Chinese Stocks Decline Most in a Month in Hong Kong on Economy (BBG)
- India cuts interest rates by more than expected (BBC)
- Glencore Rebounds as $50 Billion Plunge Is Seen as Excessive (BBG)
- How Congress May Have Saved Goldman Sachs From Itself (BBG)
In today's centrally planned world, the proliferation of NIRP means that nothing is sacred - not even a Swiss bank account...
In spite of all the attention the nation has received in recent years, SCMP reports that thousands of so-called "politically exposed persons”, or PEPs - a category that includes heads of state and other top officials - hold Swiss bank accounts, a Swiss foreign ministry official said. But, perhaps not for much longer as Bern aims to finalize a law aimed at simplifying the process of freezing and unblocking such funds.
Earlier today, the SNB which is perhaps the most transparent hedge fund of all central banks and actually lays out its financial statements in a respectable manner every quarter, released its results for the second quarter (and first half) of 2015. The result: another absolutely epic loss, amounting to €50.1 billion ($51.8 billion) of which €47.2 billion on currency positions - a whopping 7% of Swiss GDP - meaning that in Q2 the SNB lost another €20 billion. This happened despite the SNB having invested 17%, or $94 billion, in foreign - mostly US -stocks.
The one undeniable truth about the debt drama in Greece is that each of the conventional narratives - financial, political and historical - has some claim of legitimacy. These facts matter not only because contagion from Greek debt defaults may ripple in dangerous ways through the financial system, but because they are also true for many other members of the Eurozone. The Euro is a fatally-flawed monetary concept and what we now seeing playing out was eminently predictable from the start.
Switzerland is set to open its first Bitcoin bank, multiple sources tell Handelszeitung. Meanwhile, Xapo, the self-appointed "Fort Knox" of the crypto currency world, is relocating from Silicon Valley to Zurich.
Easy come (print), easy go! A trillion here... a trillion there... Sooner or later we're talking some real money!
"Greece is to allow money held abroad by its taxpayers to be declared without penalty and taxed at a discount rate, a move to help overcome a cash crunch threatening the country with bankruptcy," Reuters reports. This may sound like a good idea in principle, but we’re not entirely sure why this represents a compelling value proposition for those who are storing their euros in the safe confines of Swiss bank accounts.
Germany had lost the war, the Nazi industrialists agreed, but the struggle would continue along new lines. The Fourth Reich would be a financial, rather than a military imperium. The industrialists were to plan for a “postwar commercial campaign.” They should make “contacts and alliances” with foreign firms but ensure this was done without “attracting any suspicion.”... The State Department’s efforts on Schacht’s behalf worked. He was initially found guilty but was then acquitted, to the fury of the Soviet judge.
It is undoubtedly a huge red flag when in one of the countries considered to be a member of the “highest economic freedom in the world” club, commercial banks are suddenly refusing their customers access to their cash. This money doesn’t belong to the banks, and it doesn’t belong to the central bank either. If this can happen in prosperous Switzerland, based on some nebulous notion of the “collective good”, which its unelected central planners can arbitrarily determine and base decisions upon, it can probably happen anywhere. Consider yourself warned.
This is not a government of the people, for the people, by the people. It is a government that takes from the people. By any means necessary. And they grow bolder with each passing day.