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Another Bear Awakens

Bruce Krasting's picture




 

I talked with a Swiss banker from Geneva today. The conversation went like this:

BK – Are you guys still seeing boatloads of money coming in from outside the country?

Geneva – Yes, the money is still coming. In the past two weeks the Swiss National Bank (SNB) was forced to intervene in support of the 1.20 peg. The amounts were big, over EUR 20 billion was purchased.

BK – What is going on at the borders? Is money still coming in by car?

Geneva – Yes. The border guards can’t search every car. The latest development is that the Border Guards are now searching some of the cars that are leaving Switzerland.

BK – Why would border guards stop cars that are leaving Switzerland? What are they looking for?

 

Geneva – Mules. Professionals who smuggle money. It is very easy for a Swiss to go to a bank and withdraw a large amount of paper money. The mules bring the cash over the border to French and Italians who want Swiss Francs. The Mules also bring Euros into Germany for those who have private accounts in Switzerland who want cash to spend.

BK – Is the paper money coming in and out of the country being done in large amounts?

Geneva – Yes this is big, but compared to the bank transfers that go on, or the amounts held in Euro Swiss (rolling FX positions) is much much larger.

BK – Where is the money coming from?

Geneva – From all over the globe, but not the USA. If an American comes in, we just show them the door.

BK - Where does the most money come from, France or Italy?

.

Geneva - In the past few weeks we have seen more inflows from Russians than any other country.

BK – Russians? That’s surprising. What do you attribute this to?

Geneva – It’s politics and economics together. People are afraid.

 
 
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The following looks at the performance of the Russian Ruble versus the dollar the past few months. Not pretty at all:

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This ain't about Greece any more folks.

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Wed, 06/06/2012 - 05:09 | 2498604 Bolweevil
Bolweevil's picture

Record amounts of USD in the system without the corresponding velocity resulting in a shortage of physical cash? ctrl alt del

Tue, 06/05/2012 - 21:02 | 2498048 Cosimo de Medici
Cosimo de Medici's picture

Ruble=crude oil.  Put the two charts next to each other.

Tue, 06/05/2012 - 18:02 | 2497572 nmewn
nmewn's picture

Just smile & wave boys...smile & wave ;-)

Tue, 06/05/2012 - 17:42 | 2497497 Big Ben
Big Ben's picture

Considering that Russia is run by kleptocrats, is it so surprising that Russians might want to move their money out of the country? And considering the questions about whether the euro will even exist a couple of years from now, Switzerland might look like an attractive destination. It's no wonder that real estate on that little life raft is soaring in price.

The Ruble is probably also suffering from worries about a commodity collapse. Russian energy exports could suffer badly if a worldwide slowdown takes hold later this year.

I can't understand why gold, the safest haven of all, isn't doing better now. I guess most people still think of it as a commodity rather than a currency.

If I were the Swiss central bank, I would print francs and use them to buy gold, not euros. That way, if the euro disappears, they wouldn't be left with a vault full of worthless paper.

Tue, 06/05/2012 - 18:28 | 2497660 honestann
honestann's picture

Either the federal reserve is backing losses on HUGE paper-short positions, or obama is actively dumping those 8000 tons of gold that aren't in fort knox any more.  When you look at the huge quantity of physical gold being purchased monthly by china and russia (and others), it becomes obvious the current stall at roughly $1600/oz will eventually explode.  You can bet your butt that gold will skyrocket once the election is over.

PS:  A small part of the reason gold prices have been muted is the relative strength of the dollar due to the ongoing euro-collapse.

Tue, 06/05/2012 - 17:13 | 2497414 walküre
walküre's picture

Russians offloading their Rublettes in exchange for anything else including Euro, Dollar and PMs of course.

First currency that will implode - again - despite vast oil and gas reserves. That didn't help them in the last century and it doesn't help them now.

Done. Russian currency is done. Euro is on the verge. If Germany pulls the plug then the Euro is toast as well. USD and Yuan remain. The CBs might be able to buy enough time to allow for an orderly transition from Euro to DM in Germany and France to Franc. Nobody knows how much time is necessary or how quick dominos can fall. Nobody knows what panic truly means. It could affect the whole lot and wipe out all paper wealth across the globe.

I think they've lost control over the currencies and the paper money supply in general. They're all pretending (making a nice face to a bad game) that all is well and under control but behind closed doors they are all panicked and covering themselves.

Gig is up, folks. Don't fall for the silence and the boring routine of "no news is good news". Shit is hitting the fan right now and we will be the last to actually get the memo.

Hyperinflation is like a bad flu. Comes out of nowhere and strikes fast and furious.

There's too much useless paper wealth backed by way too many liabilities and way too much debt.

Wed, 06/06/2012 - 05:14 | 2498608 Bolweevil
Bolweevil's picture

PIIGS out Russia out "flight to safety" gives Ponzi new lease on life. Years at least.

Tue, 06/05/2012 - 17:33 | 2497484 trebuchet
trebuchet's picture

got to love that mule - leveraged beyond ability but remaining bound to capitalism 

Tue, 06/05/2012 - 15:52 | 2497161 theTribster
theTribster's picture

I brought 5k francs home with me 2 years ago and decided not to convert them back to bucks, also had a few hundred Euro's too. I kept them primarily because i want to go back but if not I knew they'd be convertable to either dollars or gold in the future. I'll continue to hold them for now.

The Ruble is getting whacked because of oil being down do dramatically as well as the political situation, although I thought Putin was going to stabilize things so Russia could play in the big sandbox instead of the one where the cat shits, guess not. Russia is working the BRICS to accumulate enough Gold so they can release a currency backed by and elimiate the dollar as the reserve, basically ignore it and use their new currency for any transactions with the BRICS. This is smart if they pull it off correctly but that remains to be seen.

Tue, 06/05/2012 - 15:41 | 2497094 Andy Lewis
Andy Lewis's picture

The Russian currency really can't get no respect: It doesn't even have an agreed-on spelling.

Tue, 06/05/2012 - 17:58 | 2497564 Bruce Krasting
Bruce Krasting's picture

Thank you for noticing. I looked at several spots for an answer. Some had an "o" others not. I went with the WSJ version. Mistake??

bk

Tue, 06/05/2012 - 14:59 | 2496907 ebworthen
ebworthen's picture

Bullish for the end of paper and coin currency.

With the advent of "smart" phones and debit cards, look for the global banking Cabal to petition governments to go all digital to stop "cheating" while lobbying for the outlaw of precious metal transactions.

Tue, 06/05/2012 - 14:45 | 2496827 Templeton
Templeton's picture

Thanks for another good post, Bruce.  I think you're the best "outside" contributor to this site.  Consistently good analysis.

Tue, 06/05/2012 - 14:27 | 2496721 Stuck on Zero
Stuck on Zero's picture

Has paper money become toxic?  It seems no-one wants it within their borders. 

 

Tue, 06/05/2012 - 17:34 | 2497486 lakecity55
lakecity55's picture

I think if you have plenty of fiat in the hidden safe, it will help cushion when a holiday is declared, as a stopgap before going to PM and lead.

Stock up on freeze-dried, too.

Tue, 06/05/2012 - 14:44 | 2496817 Shizzmoney
Shizzmoney's picture

Paper money ain't the problem.  It's the electronic form that's the problem b/c:

A) People are worried onc SHTF, they won't get their shit out of the bank

B) Bitcoin, Money on poker sites, etc....give electronic currency soviergnity.  Governments HATE this, b/c they can't tax it (unless ur uber rich - then you can just pay a politican to not pay taxes, anyways). 

Tue, 06/05/2012 - 17:20 | 2497445 walküre
walküre's picture

Shit is hitting the fan right now. Fan is on "slow" speed though.

People are converting certain paper for other paper or into PMs. Rubel has no support. Russians are sitting on vast amounts of paper wealth and frantically trying to convert. They've bought real estate and companies and they spend like drunken sailors but apparently they're still sitting on too much freakin' paper. They've been through devaluation countless times and their currency blew up only 20 years ago. Still fresh in their minds that certain paper has no value.

Tue, 06/05/2012 - 17:36 | 2497492 lakecity55
lakecity55's picture

Anyone else having trouble taking delivery from sources like Provident, Apmex, etc?

Tue, 06/05/2012 - 19:09 | 2497777 lakecity55
lakecity55's picture

Also, you can go from fiat into cartons of cigs, bic lighters, food, ammo, booze-- toilet paper. That was big in Kosovo.

Medical supplies, anything you can barter with.

If nothing happens, you won't have to go to the store for 5 years.

Tue, 06/05/2012 - 18:21 | 2497644 TN Jed
TN Jed's picture

I'm still waiting on shipment confirmation from Tulving after 2 weeks!  This is my 6th order from them and have never had to wait more than 5 business days.  Today is the 10th.  Waiting on JM 100oz bars which they ran out of last week.....fuk.

Tue, 06/05/2012 - 19:01 | 2497754 lakecity55
lakecity55's picture

I won't say from which one, but it's usually 3 days. Been a week, "still processing."

The local dealer who I go to first is out, too. Just culls, so I got them.

But, I have terrible luck with PMs. They fall off the back of the truck when I'm taking them home, and when I go back, they are gone!

Damn scavengers!

Tue, 06/05/2012 - 18:26 | 2496605 Overdrawn
Overdrawn's picture

Worried About Your Current Investments?

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Tue, 06/05/2012 - 14:01 | 2496565 ZackAttack
ZackAttack's picture

Capital controls can't be far behind. The question is, how to implement it without freaking depositors everywhere.

I wonder what fraction of UBS's assets are from the US?

Tue, 06/05/2012 - 13:52 | 2496512 Dermasolarapate...
Dermasolarapaterraphatrima's picture

So let me get this straighjt...th emoney flows form Italy to Switzerland to Germany then back to Switzerland then to Austria and then down to greece where it then is driven back to Switzerland?

Sounds like they have a plan!

Actually, I always enjoy the info in your articles Bruce..thanks to ZH posting them here. They (like most ZH articles) make me think harder...which is a good thing to help dispel the cognitive illusions.

Tue, 06/05/2012 - 13:50 | 2496504 ZackAttack
ZackAttack's picture

I am going to start a money-changing kiosk operation in European airports, taking a 5% skim. I'll call it Green Box.

This will be a dry run for when US states start issuing their own scrip.

Who will help me kickstart Green Box?

 

Tue, 06/05/2012 - 13:38 | 2496453 cougar_w
cougar_w's picture

That "made in ussr" mural art is hella cool. I wish the taggers around here had that kind of talent, I'd let them tag City Hall.

Well actually everyone should tag City Hall, it's butt-ugly.

Tue, 06/05/2012 - 13:23 | 2496394 q99x2
q99x2's picture

If people would transfer money to the US they would fear that they would get it back. US is very unsafe haven and dangerous for investments since the banksters have taken over.

Tue, 06/05/2012 - 12:43 | 2496273 Bubbles and Busts
Bubbles and Busts's picture

Apparently the success of the Swiss central bank (SNB) in placing a currency floor against the euro provides support for NGDP targeting. Izabella Kaminska at FT Alphaville noted similar euro buying in a post on Why Switzerland is the new China. I can’t claim to know how reliable either the sources for Kaminska or Krasting are, but these two stories should at least make one skeptical about the so-called success. Concluding the SNB’s policy is a success may be premature.

A good follow up question: if the SNB is buying large amounts of euros to protect their policy, will NGDP proponents accept the weakness of expectational channels in monetary policy and note the lack of support from this outcome?

http://bubblesandbusts.blogspot.com/2012/06/swiss-struggle-to-maintain-currency.html

Tue, 06/05/2012 - 14:51 | 2496839 steve from virginia
steve from virginia's picture

The forces at play right now are outside of expectations, even those of finance where the promoters are central banks.

Swiss has other problem: massive euro position that it cannot close without effecting its own market for euros, it cannot buy and sell at the same time. When Greece exits (or Germany), what does Swiss do with its euros? How about China?

A: barf.

Comes a time when nobody will accept euros anywhere 'waiting to see' who uses them and who doesn't. The outcome of that particular waiting dynamic is everyone spurning the euro: the instant 'wealth gain' by repudiating foreign holders is € 2 trillion, about what some of these countries need to 'balance their books'.

Further: the EU is a ponzi. The last one out is the bag-holder. Who leaves the EU first? Greece, then Germany. With Germany out who is the bagholder? France ... who leaves the EU next. Who then becomes the bagholder? Netherlands ... there is no way on God's green Earth that Netherlands can satisfy the trillions in euro-denominated liabilities! With Netherlands out, who becomes the bagholder? Belgium ... this is how the game will be played, with the euro as radioactive, with everyone dumping it as fast as possible, not wanting any part of it. Everyone on the planet stuck with euros will want them changed into d-marks.

This is also laughable idea. If Germany repudiates all EU responsibilities denominated in euros, it will also repudiate them denominated in d-marks.

What about people with euros in German accounts? Won't they be entitled to d-marks? NO! The Germans will convert non-citizen currency accounts to domicle states' currencies. If you are Greek with a German account you will be shunted into drachmas. Everyone else in the ex-eurozone will be frantically bidding for dollars. Gold is good but nobody buys groceries with gold.

What will happen in Swiss and China? They will get screwed.

Tue, 06/05/2012 - 16:12 | 2497233 eddiebe
eddiebe's picture

I seriously doubt it. The bankers know what they are doing and they will get paid (in aggregate ) more than they lent.

Tue, 06/05/2012 - 15:36 | 2497064 Judge Arrow
Judge Arrow's picture

This seems clear as you have laid it out - but, the ponzi needs a catalyst to blow up - and it must be treachery, of the kind that will make the intrique of the Hapsburgs seem quaint - someone will turn on the other roaches, out of sight - to see it occur will be like witnessing an illusionist - but things are in motion now and the eye is diverted - the timing is perfect for the scheme to hatch - watch the frog in the corner, especially.

Tue, 06/05/2012 - 20:46 | 2498017 tom a taxpayer
tom a taxpayer's picture

17 potential perps for "someone will turn on the other roaches": 17 eurozone countries. How about Greece in the den with a sledgehammer to the wallsafe?

Tue, 06/05/2012 - 20:46 | 2498016 tom a taxpayer
tom a taxpayer's picture

17 potential perps for "someone will turn on the other roaches": 17 eurozone countries. How about Greece in the den with a sledgehammer to the wallsafe?

Tue, 06/05/2012 - 15:21 | 2497007 Kayman
Kayman's picture

Who will buy Euros ?  Bernanke with your credit card.

Tue, 06/05/2012 - 12:41 | 2496269 Joe A
Joe A's picture

The EU can solve its problems by invading Switzerland (and get troubles with the rest of the world's dictators and criminals).

Tue, 06/05/2012 - 12:41 | 2496268 Lokking4AnEdge
Lokking4AnEdge's picture

Why collect taxes if you can issue bonds at close to zero interest rates like Germany and the US?

Abolish all US income tax for one year...just borrow what the government spends and wait to see the economy explode.....

Tue, 06/05/2012 - 16:34 | 2497302 hooligan2009
hooligan2009's picture

great point...why should anyone pay taxes when the Fed can just print the money? Is it because the Fed just wants the banks to get freebies? PLUS, whats the difference between banknotes and government bonds when the Fed makes rates along the curve zero? I will answer that....nothing. One last point, all Government, State and Local debt is consumer debt. We have to deal with it, since we got the poltiicans we deserved.

Tue, 06/05/2012 - 13:20 | 2496386 sessinpo
sessinpo's picture

Lokking4AnEdge                       2496268

Why collect taxes if you can issue bonds at close to zero interest rates like Germany and the US?

Abolish all US income tax for one year...just borrow what the government spends and wait to see the economy explode....

 

Comment:

For two reasons.

1) Issuing bonds at artificially low rates only delays the inevitable. Let's solve our solution by piling on more debt - it won't hurt, after all it is 0%, right? Well, eventually, those rates go up and the cost of that debt incurred goes up as some European nations are finding out right now.

2) Why would a government give up its power of taxation over its people? Answer this and maybe you'll understand why government always becomes corrupted no matter what system is in place.

Tue, 06/05/2012 - 16:20 | 2497257 FeralSerf
FeralSerf's picture

<<. . . eventually, those rates go up and the cost of that debt incurred goes up. . .>>

No! - those rates do not go up because they cannot go up.  There's no way the people can be taxed enough to pay the interest on the debt if the rates go up to a level that's not below zero real.

We now have a central planned economy, not much different than what existed in the Soviet Union except, and it is a big except, productivity is a order of magnitude greater.  Agricultural productivity, especially wheat thanks to the "Green Revolution" of about 30 years ago, has had a huge increase.  People die of diabetes and obesity instead of hunger now.  Hunger causes revolutions.  Obesity does not.

Government, if it has the power to print money, can always stealth tax the people that have cash and it does.

Tue, 06/05/2012 - 15:23 | 2497022 Clycntct
Clycntct's picture

Is this multiple choice?

I'm going for gang bang#2.

Tue, 06/05/2012 - 12:25 | 2496219 the grateful un...
the grateful unemployed's picture

any chance the Russians will be invited into the EU? the BSA, Bernanke States of America are already there in quasi mode. bet on the EU getting bigger not smaller, (isn't this how real Ponzi works? bring in the new suckers to pay off the first investors?)

and I'm still all in on Cartel/Canadian/USD, or the AMERO dollar. how are we going to compete? oh sure I can hear you red clicking this, crying one global government, blah blah. didn't say I liked it, but its clear that neither of the two backwaters running for POTUS has anything to say about anything on macroeconomic matters.

Tue, 06/05/2012 - 17:44 | 2497516 lakecity55
lakecity55's picture

I have though for several years now the "Amero" was waiting in the wings for after the second thrilling chapter  of "2008 The Crash."

Three less currencies for the banksters to worry about.

Get yer new Ameros! (worth only 40% of the old dollar).

Tue, 06/05/2012 - 12:38 | 2496258 the tower
the tower's picture

Sorry to say I agree.

 

2001 - everyone knew what was going on, question was how long it would last

2007 - everyone was backing off, knowing the game ended

2012 - everyone is taking positions, ready for the new round

 

if you are thinking the end is coming then you're in for a big surprise, the end was 4 years ago 

Tue, 06/05/2012 - 13:19 | 2496381 NEOSERF
NEOSERF's picture

What has been impressive if I have to admit in a grudging way is that after individuals defaulting on houses, corporations defaulting on loans, banks defaulting on loans, countrys defaulting on bonds EVERY DAY, banks runs etc...this thing still hasn't fallen off the table...it is absolutely terrible worldwide and the DOW just made a new 3 year high 2 months ago...staggering success of misdirection, rumormongering, lying on loan values and collateral, moving bad loans into another bank and then pretending no one is on the hook for it, faking housing, employment and inflation statistics...just brilliant because without it, I don't think there is any question 2009-10 would have been worse than 1929...

Tue, 06/05/2012 - 14:56 | 2496891 the grateful un...
the grateful unemployed's picture

a coupla reasons why 2009 was worse than 29, (history as tragedy first, and farce the second time). maybe 29 wasn't that bad, (certainly was for rural poor, which we have fewer of this time. there is more openess and transparency (hard to believe) now than there was in 29, which offset some of the damage. in 29 things just stopped,, but the private sector was more flexible in 2009.  also we have the people's store, Walmart, which has been squeezing profit margins. 2009 didn't seem as bad because things were in place that helped us deal with it, so the real economy kept above water. in 29 there was no money, period. so 2009 was probably worse, and will be worse for a couple decades at least. housing is a black hole, and by the time people realize it they're screwed, the whole country holding an underwater mortgage. 

the dow high is as phony as it comes, but that money is a conduit to consumers dipping into the 401ks. so it has a positive effect. in 29 there were no retirement plans to tap into, you couldn't sell your future for a meal. so now things are really worse, they just don't seem that way.

Tue, 06/05/2012 - 20:10 | 2497927 lotsoffun
lotsoffun's picture

mr. grateful is correct and it is by design.  they knew they had milked the social security to zero, so they invented the 401k.  it also helped the corporations enormously, because they no longer had to create real pensions.  although there was a concept of 'matching' it was really much less than they had been contributing to pension contributions.  it also removed the role of responsible pension investment advisors and allowed you - the financial genius armed with information from the likes of cramer to invest your own money.  and profit!

so please.  do the citizen thing.  shut up, enjoy, invest as cramer tells you.

 

Tue, 06/05/2012 - 19:27 | 2497831 Savyindallas
Savyindallas's picture

GOOD ANALYSIS

Tue, 06/05/2012 - 14:00 | 2496559 Doubleguns
Doubleguns's picture

Even a dead body flops around for a while at times. This one seems to be more like the proverbial chicken running around, now measured in years not minutes. It's absolutly amazing but we know its just a matter of time that continues to stretch on and on.

Tue, 06/05/2012 - 12:25 | 2496218 onlooker
onlooker's picture

""No biggie, & thanks mate for all your efforts on our behalf""

DOUBLE DOWN on that  +++++++++++++++++++++++++

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