"There is no automatic adjustment of current account deficits and surpluses, they can get totally out of hand. There are effects from big countries to little ones, like Switzerland. The system is dangerously unanchored. It is every man for himself. And we do not know what the long-term consequences of this will be. And if countries get in serious trouble, think of the Russians at the moment, there is nobody at the center of the system who has the responsibility of providing liquidity to people who desperately need it. If we have a number of small countries or one big country which run into trouble, the resources of the International Monetary Fund to deal with this are very limited. The idea that all countries act in their own individual interest, that you just let the exchange rate float and the whole system will be fine: This all is a dangerous illusion."
There's an interesting initiative on the Swiss ballot, which imposes a barrier to currency debasement. It's a heroic measure, but there's a flaw.
‘Gold wars’ are intensifying with just 16 days left to polling day in the Swiss Gold Initiative. If the Swiss vote to revert to having 20% of currency reserves in gold, the Swiss National Bank will be forced to make huge purchases of gold bullion. Switzerland and its ‘Gold Initiative’ would contribute to driving the price of gold higher - likely in the short term and contributing to higher prices in the long term. Understanding the important recent past and what has led to the forthcoming Swiss Gold Initiative is important and why we look at it today. This context is all important and is essential reading for all who wish to understand the key issues in the debate, for all who invest in and own gold internationally and for all Swiss people.
Did someone finally inform the SEC that Bernie Madoff's business model has been adopted by every central bank in the "developed world?" Whatever the reason for today's record SEC award, which almost certainly has to do with HFT, a topic which this blog first brought to light back in 2009 when nobody had a clue what algo/high frequency trading is, congratulations to the lucky winner (unless of course it has to do with someone spilling the beans on US tax evaders in Swiss banks), and our condolences to the banks, because now that one can comfortably retire by informing the regulators of the pervasive crime that takes place within the US financial system on a daily basis, suddenly every disgruntled person laid off by the US banking sector is the next potential $30 million aware recipient.
Just like the US and the EU, Switzerland at the federal level is ruled by a group of elites who are more concerned with their own status, well-being, and international reputation than with the good of the country. The gold referendum, if it is successful, will be a slap in the face to those elites. The Swiss people appreciate the work their forefathers put into building up large gold reserves, a respected currency, and a strong, independent banking system. They do not want to see centuries of struggle squandered by a central bank. The results of the November referendum may be a bellwether, indicating just how strong popular movements can be in establishing central bank accountability and returning gold to a monetary role.
Canada is seen as the new banking safe haven and an “island of safety and stability” because of its perceived sound fiscal position, commodity wealth and solid economic performance. Now, anytime we see central bankers slapping each other on the back, we're going to be skeptical. As it turns out, Banque du Canada is actually the most pitifully capitalized central bank in the western world. They’re in such bad shape they actually make the Fed look healthy. Hong Kong’s Monetary Authority Exchange Fund is a good example of a strong balance sheet; their latest figures as of 30 June show a whopping capital reserve equal to nearly 22% of total assets. This is a massive margin of safety for the central bank. The US Federal Reserve, on the other hand, shows a capital reserve of just 1.27%. And Canada? A tiny 0.47%... as in less than one half of one percent. This isn’t safety and stability. It’s a rounding error.
Congratulations president Obama, because this is certainly one chart which goes from the bottom left to the upper right you can take full credit for.
- Moscow fights back after sanctions; battle rages near Ukraine crash site (Reuters)
- On Hold: Merkel Gives Putin a Blunt Message (WSJ)
- Argentina’s Default Clock Runs Out as Debt Talks Collapse (BBG)
- Argentina braces for market reaction to second default in 12 years (Reuters)
- Banco Espirito Santo Plunges After Posting 3.6 Billion-Euro Loss (BBG)
- Adidas Plunges After Cutting Forecast on Russia, Golf (BBG)
- GOP Says Lerner Emails Show Bias Against Conservatives (WSJ)
- Londoners Cashing in Flee to Suburbs as Home Rally Wanes (BBG)
- BNP Paribas Reports Record $5.79 Billion Quarterly Loss (WSJ)
- Swiss Banks Send U.S. Client Data Before Cascade of Settlements (BBG)
- Putin Sows Doubt Among Stock Bears Burned by 29% Rebound (BBG)
Today, we can finally end any debate on the topic of just where the world's illegal money comes to roost. The answer: ultra-luxury real estate, primarily in New York, courtesy of a report in New York magazine that catches up with what we first said in the summer of 2012, and which is titled, appropriately enough: "Stash Pad."
When one thinks of Switzerland, banking comes to mind easily but gold doesn’t as much. But, "it is said that the Swiss only love money... this is not true. They also love gold." A full two-thirds of the world’s gold goes through Switzerland and, in an average year, it refines grossly 70% of the world’s gold. Six of the gold refiners on the LBMA Good Delivery list make for 90% of global volume, and four of those are in Switzerland. Up until 1992, the Swiss franc’s 40% backing by gold was written in the country’s Constitution. When Switzerland became a member of the IMF it had to abandon this backing by gold. Today, Swiss citizens have asked for a referendum to be called in order to get back to that backing. As Gilles Labarthe wrote, "Switzerland is for gold what Bordeaux is to wine."
Overview of the price action in the foreign exchange market.
China's Epic Offshore Wealth Revealed: How Chinese Oligarchs Quietly Parked Up To $4 Trillion In The CaribbeanSubmitted by Tyler Durden on 01/21/2014 20:02 -0500
"Close relatives of China’s top leaders have held secretive offshore companies in tax havens that helped shroud the Communist elite’s wealth, a leaked cache of documents reveals" the ICIJ's latest offshore weawlth expose begins. In addition to the usual list of who, what, where, why and when, we learn that once again the two largest Swiss banks are about to be embroiled in yet another money laundering scandal, this time involving the parking of wealth belonging to China's aristocracy - including its princelings - in various Caribbean, mostly British Virgin Island, tax havens. What is notable, if not unexpected, is just how pervasive the parking of offshore capital has been, and confirms that it is not inflow of money that the PBOC has to be afraid of when its internationalizes the Yuan, it is the outflow that will be far more worrysome. But the biggest stunner is the sheer size of the wealth transfer: according to ICIJ estimate, up to $4 trillion in "untraced assets" may have left China since 2000. These are truly epic numbers.
Western central banks have tried to shake off the constraints of gold for a long time, which have created enormous difficulties for them. They have generally succeeded in managing opinion in the developed nations but been demonstrably unsuccessful in the lesser-developed world, particularly in Asia. It is the growing wealth earned by these nations that has fuelled demand for gold since the late 1960s. There is precious little bullion left in the West today to supply rapidly increasing Asian demand, and it is important to understand how little there is and the dangers this poses for financial stability.
Just as Friday ended with a last minute meltup, there continues to be nothing that can stop Bernanke's runaway liquidity train, and the overnight trading session has been one of a continuing slow melt up in risk assets, which as expected merely ape the Fed's balance sheet to their implied fair year end target of roughly 1900. The data in the past 48 hours was hot but not too hot, with China Non-mfg PMI rising from 55.4 to 56.3 a 14 month high (and entirely made up as all other China data) - hot but not too hot to concern the PBOC additionally over cutting additional liquidity - while the Eurozone Mfg PMI came as expected at 51.3 up from 51.1 prior driven by rising German PMI (up from 51.1 to 51.7 on 51.5 expected), declining French PMI (from 49.8 to 49.1, exp. 49.4), declining Italian PMI (from 50.8 to 50.7, exp. 51.0), Spain up (from 50.7 to 50.9, vs 51.0 expected), and finally the UK construction PMI up from 58.9 to 59.4.
Wealth has besotted people since time immemorial. It’s accrued, amassed, hidden, stolen and we would even die sometimes for it, or at least knock someone off more than likely to get what they have.