Switzerland

Bernanke and now Yellen have created an environment just like the Roaring Twenties. What came next wasn't pretty

Capital Economics "expects gold could hit $1,200 before the end of this year, rising to $1,400 by the end of 2016”

• Playboy to Drop Nudity as Internet Fills Demand (NYT)
• Stock futures fall on weak China trade data (Reuters)
• Any Hall is down 20% YTD (WSJ)
• Global Stocks Slide With Metals After Chinese Imports Tumble (BBG)
• Clinton's tack to the left to be on display in Democratic debate (Reuters)
• Switzerland Said to Impose 5% Leverage Ratio on Big Banks (BBG)
• AB InBev, SABMiller brew up $100 billion deal (Reuters)

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.

As part of a global investigation into how much physical gold central banks have stored at what location and how much is leased out, we submitted the local equivalent of a Freedom Of Information Act (FOIA) request at the central bank of Belgium (NBB) to obtain information about the amount of Belgian official gold reserves, the exact location of all gold bars, the type of gold accounts NBB holds at the Bank Of England (BOE) and how much is leased out and to whom. The outcome of this research was not what we had expected...

Forget Norway. Japan. Iceland. Switzerland. Or any of the other places around the world that are notorious for being painful on the wallet. Venezuela is now the most expensive country in the world, hands down. To give you an idea, the cost of a 15-minute taxi ride to the beach yesterday afternoon totaled an eye-popping $158.

Like other banks, Deutsche has been caught up in the Libor-rigging scandal, and faces another investigation in Switzerland for suspected price-fixing in the precious metal market.

Gillian Tett, ourselves and many others have warned that Deutsche and its massive derivative book has the potential to be a ”European Lehman Brothers”. Is Deutsche Bank, the largest holder of Warren Buffett’s “financial weapons of mass destruction” derivatives in trouble?

And now the real shocker: there is over US$100bn in gross financial exposure to Glencore. From BofA: "We estimate the financial system's exposure to Glencore at over US$100bn, and believe a significant majority is unsecured. The group's strong reputation meant that the buildup of these exposures went largely without comment. However, the recent widening in GLEN debt spreads indicates the exposure is now coming into investor focus."

Moves will be made to ban physical cash in the coming months.

The U.S. dollar is looking good worldwide and, in fact, so is gold - it’s just that, at present, the dollar is in the number one spot. But, unlike gold, the dollar is at risk. U.S. debt has placed it in a precarious position from which it will most certainly fall. The dollar is not a truly strong currency; it is essentially, “the best looking horse in the glue factory.” It will be the last to go, but it will indeed go. We may have a bit of time before that happens. Whether it’s measured in months or years, we can’t be certain. A gold mania is not imminent, but we believe it is inevitable.

The Western gold space has learned a great deal about the Chinese gold market and global gold flows, though we’re always left with loose ends. For example, the issue regarding PBOC gold purchases; how much gold do they truly have and where was it bought? Does the PBOC buy 400-ounce Good Delivery (GD) bars in London and covertly transports these gold bars to its gold vaults in China mainland, or are the Good Delivery gold bars shipped to Switzerland, refined into 1 Kg 9999 gold bars, sent forward to the Chinese mainland where they’re required to be sold through the SGE gold exchange and from where they can be bought (in clear sight) by the PBOC.

Neoliberal economics is blind to reality and serves to justify the destruction of the economic prospects of the Western World. It remains to be seen if Russia and China can develop a different economics or whether these rising superpowers will fall victim to the “junk economics” that has destroyed the West. With so many Chinese and Russian economists educated in the US tradition, the prospects of Russia and China might not be any better than ours. The entire world could go down the tubes together.

"...there’s an enormous and growing disconnect between the cash and physical markets for gold. This is exactly what we would expect to precede a major market-shaking event based on a physical gold shortage."