en Did The Federal Reserve Make A Major Math Error When Reporting Its December Gold Withdrawals? <p>A month ago, <a href="">when we first observed the biggest monthly </a>gold repatriation from the NY Fed since 2001, when 47 tons of foreign-owned gold were withdrawn from the vault below 33 Liberty street which lowered the gold inside to just 6,029 tons, and which brought the 2014 YTD total withdrawal to 166.5 tons, we noted a math <em>anomaly</em> when accounting for the <a href="">previously reported 122 tons </a>of gold withdrawn by the Netherlands:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>net of the Netherlands withdrawals, there is some 44 tons of extra gold that has been also quietly redeemed (by another entity). The question is who: is it now the turn of Austria to reveal in a few weeks that it too, secretly, withdrew some 40+ tons of gold from "safe keeping" in the US? Or was it Belgium? Or did the Dutch simply decide to haul back some more. <strong>Or did Germany finally get over its "logistical complications" which prevented it from transporting more than just a laughable 5 tons in 2013? And most importantly, did Germany finally grow a pair and decide <a href="">not to let "diplomatic difficulties</a>" stand between it and its gold?</strong></p> </blockquote> <p>Ironically, less than three weeks later, our bolded speculation above was proven to be absolutely correct when <a href="">Germany confirmed </a>that not only had it resumed repatriating its gold from the NY Fed as originally announced two years ago, after the mere 5 tons of gold transported to Frankfurt in all of 2013, but had substantially picked up the pace, when on <a href="">January 19 the Bundesbank reported </a>that it had indeed "grown a pair" and repatriated 35 tonnes of gold from Paris and, more importantly, 85 tonnes of gold from the NY Fed in all of 2014.</p> <p>This is what <a href=";startpageAreaId=Teaserbereich&amp;startpageLinkName=2015_01_19_continues_transfers_of_gold+327534">Buba said</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The Bundesbank successfully continued and further stepped up its transfers of gold last year. <strong>In 2014, 120 tonnes of gold were transferred to Frankfurt am Main from storage locations abroad: 35 tonnes from Paris and 85 tonnes from New York. "Implementation of our new gold storage plan is proceeding smoothly. Operations are running very much according to schedule," said Carl-Ludwig Thiele, Member of the Executive Board of the Deutsche Bundesbank</strong>.</p> <p>&nbsp;</p> <p>The Bundesbank took advantage of the transfer from New York to have roughly 50 tonnes of gold melted down and recast according to the London Good Delivery standard, today's internationally recognised standard. "<strong>We also called on the expertise of the Bank for International Settlements for the spot checks that had to be carried out. As expected, there were no irregularities," </strong>said Mr Thiele.</p> <p>&nbsp;</p> <p>According to its new gold storage plan, unveiled in January 2013, the Bundesbank will be storing half of Germany’s gold reserves in its own vaults from 2020 onwards. This necessitates a phased transfer to Frankfurt am Main of 300 tonnes of gold from New York and all 374 tonnes of gold from Paris.</p> <p>&nbsp;</p> <p>Since the transfers began in 2013, the Bank has relocated a total of 157 tonnes of gold to Frankfurt am Main - 67 tonnes from Paris and 90 tonnes from New York. This is equivalent to roughly 23% of the total quantity to be transferred. The following table gives an overview of the gold that has been transferred to date.</p> <p>&nbsp;</p> <p><a href=""><img src="" width="563" height="335" /></a></p> <p>&nbsp;</p> <p>As at 31 December 2014, the Bundesbank's gold reserves were stored at the following locations.</p> <p>&nbsp;</p> <p><a href=""><img src="" width="563" height="239" /></a></p> </blockquote> <p>&nbsp;</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>The Bundesbank assures the identity and authenticity of German gold reserves throughout the transfer process - from when they are removed from warehouses abroad until they are stored in Frankfurt am Main.</strong> As soon as the gold was removed from the warehouse locations abroad, <strong>Bundesbank employees cross-checked the lists of bars belonging to the Bundesbank against the information on the bars removed</strong>. Finally, once they arrived in Frankfurt am Main, all the transferred gold bars were thoroughly and exhaustively inspected and verified by the Bundesbank. <strong>When all the inspections had been concluded, no irregularities came to light with regard to the authenticity, fineness and weight of the bars.</strong></p> </blockquote> <p>At the time we commented that there was "a curious amount of precautions and safeguards when transporting the "safe" and "untainted" gold held at the NY Fed to Frankfurt. Almost as if the Bundesbank, gasp, <em>did not trust the quality and content of the NY Fed-held gold, nor its well-meaning intentions."</em></p> <p>Judging by the latest disclosure by the NY Fed, Buba may have had good reason to be "<em>concerned"</em> about its gold at the Fed, because according to the Fed's latest update of "<a href="">earmarked gold" for December </a>there was yet another math <em>anomaly.</em></p> <p>Whereas in November, the cumulative total correctly hinted that there was more withdrawals than had been disclosed, the December 2014 total suggests that either the Fed just made an egregious error when keeping track of its entrusted physical gold, or someone is lying.</p> <p>As a reminder, based on purely public information, between just the Netherlands' 122 tons of repatriated gold and the Bundesbank's 85 tons, at least 207 tons of gold were quietly withdrawn from the NY Fed in all of 2014. This is what the NY Fed <em><strong>should </strong></em>have reported in its December earmarked gold update delivered yesterday. It also means that the NY Fed <em><strong>should </strong></em>have reported some 40.5 tons of gold withdrawn in December, after reporting 166.5 tons of withdrawals for 2014 through November, for the math to make sense. Instead, according to Federal Reserve data, only $14 billion in earmarked gold was withdrawn in December, bringing the total down to $8,170 billion, or 6,019 tons.</p> <p>Translated into actual metal, this means that the Fed reported only 10.3 tons of gold withdrawals in the last month of the year, suggesting that there is a <em>quite substantial hole</em> of 30 tons in publicly withdrawn gold that, at least for the time being, is unaccounted for by the Fed.</p> <p><a href=""><img src="" width="600" height="426" /></a></p> <p>&nbsp;</p> <p>So what happened: did an intern input the Fed's gold redemptions figures for December, supposedly a <em>different </em>intern than the one who works at the IMF and who caused a <a href="">stir earlier this week </a>when the IMF, <em>allegedly </em>erroneously, reported that the Dutch - after secretly repatriating 122 tons of gold - had also bought 10 tons of gold in the open market for the first time in nearly a decade.</p> <p>Or perhaps some "other" bank, central or commercial, decided to offset the redemptions by the Netherlands and Germany, and inexplicably added 30 tons of gold in December? The question then becomes: "who" deposited said gold, especially when one considers that even the adjoining <a href="">JPM vault which is allegedly connected to the NY Fed by a tunnel</a>,&nbsp;<em>only </em>contains some 740K ounces of gold, or <a href="">about 23 tonnes</a>.</p> <p>Or is it simply that when it comes to accurately reporting the flows of physical gold, classical math is incapable of keeping track of the New Normal gold moves, and the Fed has decided that even when dealing with physical gold there is a "settlement" period?</p> <p>We will find out the answer for sure next month, when unless the Fed revises its 2014 numbers, or plugs the outstanding repatriation "hole" with a late January withdrawal, then a key question will emerge, namely: <strong>how can central banks report 2014 inflows of 207 tons from the NY Fed, while said NY Fed only reports 177 tons of outflows. </strong></p> <p>And no, the <em>GAAP vs non-GAAP </em>excuse won't work this time.</p> <p><em>Source: <a href="">Selected Foreign Official Assets Held at Federal Reserve Banks</a></em><a href=""></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="350" height="346" alt="" src="" /> </div> </div> </div> Belgium Central Banks Federal Reserve GAAP Germany Netherlands New Normal Sat, 31 Jan 2015 18:28:50 +0000 Tyler Durden 501246 at The Future of Medicine? Forget Private Doctor Appointments, Group Medical Visits are Coming <p><a href=""><em>Submitted by Mike Krieger via Liberty Blitzkrieg blog</em></a>,</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong><em>According to the American Academy of Family Physicians, around 10 percent of family doctors already offer shared medical appointments,&nbsp;sessions that bring together a dozen or more patients with similar medical conditions to meet with a doctor for 90 minutes. With&nbsp;pressure from the government and insurers to&nbsp;bring down the cost of care&nbsp;while treating the&nbsp;increasing number of people&nbsp;with health insurance, patients can&nbsp;expect group visits to become more common.&nbsp;&ldquo;It&rsquo;s efficient.&nbsp;It&rsquo;s economical.</em></strong>&quot;</p> <p>&nbsp;</p> <p>&ndash; From the <em>Bloomberg</em> article:&nbsp;<a href="">Your Next Doctor&rsquo;s Visit Could Get Crowded</a></p> </blockquote> <p>Get ready, this is coming. While this trend was already happening before the passage of Obamacare, it&rsquo;s not hard to imagine that private medical consultations could soon be a thing of the past for your average American serf.</p> <p>Somehow I doubt members of Congress will be having group visits any time soon&hellip;</p> <p><a href="">From <em>Bloomberg</em></a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>In a typical doctor&rsquo;s visit,&nbsp;you wait around for a while, get your vitals checked, and spend a few minutes alone in a room with a&nbsp;physician. It&rsquo;s&nbsp;private and&nbsp;short. Some doctors, frustrated by&nbsp;a relentless schedule of&nbsp;15-minute, one-on-one visits, are experimenting with appointments that are neither.</em></p> <p>&nbsp;</p> <p><em>According to the American Academy of Family Physicians, around 10 percent of family doctors already offer shared medical appointments,&nbsp;sessions that bring together a dozen or more patients with similar medical conditions to meet with a doctor for 90 minutes. With&nbsp;pressure from the government and insurers to&nbsp;<a data-web-url="" href="">bring down the cost of care</a>&nbsp;while treating the&nbsp;<a data-web-url="" href="">increasing number of people</a>&nbsp;with health insurance, patients can&nbsp;expect group visits to become more common.&nbsp;&ldquo;It&rsquo;s efficient.&nbsp;It&rsquo;s economical.&nbsp;It&rsquo;s high-quality care when it&rsquo;s done right,&rdquo; says Edward Noffsinger, a California psychologist who created the model in the 1990s at Kaiser Permanente, the state&rsquo;s largest health maintenance organization (HMO). </em></p> <p>&nbsp;</p> <p><em><strong>In a group visit, exams and tests are still conducted privately, but patients discuss&nbsp;their ailments&nbsp;in front of the group.</strong> The theory is that each patient can learn from the others&rsquo; experience, and doctors get to have a longer, more relaxed discussion instead of&nbsp;hopscotching to three or four&nbsp;exam rooms in an hour.&nbsp;&ldquo;You have one appointment with 10&nbsp;observers,&rdquo; says&nbsp;Marianne Sumego, an internist at the Cleveland Clinic.<strong> &ldquo;Patients are really getting the equivalent of 10 visits.&rdquo;</strong></em></p> </blockquote> <p>They&rsquo;ve already started with the hedonics. Incredible.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong>Here&rsquo;s what is clear: Seeing several patients at once can be good for&nbsp;harried doctors&rsquo; finances.</strong> <strong>In 90 minutes, a physician might be able to complete five or&nbsp;six one-on-one visits.</strong> A group visit could allow doctors to see double that number or more in the same time, and medical assistants or nurses can take care routine aspects of care&mdash;checking patients in, taking vital signs, writing refills of&nbsp;medication.</em></p> </blockquote> <p>Finally, the real reason for groups visits is revealed.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>Often it takes a fair amount of&nbsp;promotion by doctors to get patients interested in&nbsp;exploring&nbsp;group appointments, which require them to sign privacy agreements.&nbsp;&ldquo;Patients have a lifetime of expecting a one-on-one visit,&rdquo; says Noffsinger. &ldquo;<strong>We&rsquo;re asking them to do something entirely different.&rdquo;</strong></em></p> </blockquote> <p>Yeah they&rsquo;re &ldquo;asking&rdquo; you&nbsp;now, but I suspect they&rsquo;ll be &ldquo;telling&rdquo; you faster than you can say free healthcare.</p> <p><u><strong>Never forget, group doctors visits are what happens to&nbsp;a society with an increased standard of living. Keep telling yourself that.</strong></u></p> <p>*&nbsp; *&nbsp; *</p> <p>For other healthcare related articles, see:</p> <p><em><a href="" rel="bookmark" title="Permanent Link to Yep, You Guessed It – Obamacare Website Funneling Private Consumer Info to Private Companies">Yep, You Guessed It &ndash; Obamacare Website Funneling Private Consumer Info to Private Companies</a></em></p> <p><em><a href="" rel="bookmark" title="Permanent Link to Video of the Day – Obamacare Architect Credits “Lack of Transparency” and “Stupidity of the American People” for Passage of Healthcare Law">Video of the Day &ndash; Obamacare Architect Credits &ldquo;Lack of Transparency&rdquo; and &ldquo;Stupidity of the American People&rdquo; for Passage of Healthcare Law</a></em></p> <p><em><a href="" rel="bookmark" title="Permanent Link to ObamaFraud: GAO Study Finds Almost All Fake Applicants are Approved for Subsidized ObamaCare">ObamaFraud: GAO Study Finds Almost All Fake Applicants are Approved for Subsidized ObamaCare</a></em></p> <p><em><a href="" rel="bookmark" title="Permanent Link to Computer Security Expert Claims he Hacked the ObamaCare Website in 4 Minutes">Computer Security Expert Claims he Hacked the ObamaCare Website in 4 Minutes</a></em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="293" height="300" alt="" src="" /> </div> </div> </div> Obamacare Transparency Sat, 31 Jan 2015 17:44:59 +0000 Tyler Durden 501245 at Caught On Tape: Dijsselbloem To Varoufakis: "You Just Killed Troika" <p>Amid &#39;turmoiling&#39; stock markets on Friday, CNBC&#39;s Simon Hobbs summed up the status quo&#39;s thinking on the new Greek leadership when he noted, somewhat angrily and shocked, <strong><em>&quot;The Greeks are not even trying to reassure the markets,&quot;</em></strong> seeming to have entirely forgotten <em>(and who can blame him in this new normal the world has been force-fed for 6 years)</em> that political leaders are elected for the good of the people (by the people) not for the markets. Yesterday saw the clearest example yet of Europe&#39;s anger that the Greeks may choose their own path as opposed to following the EU&#39;s non-sovereign leadership&#39;s demands when the most uncomfortable moment ever caught on tape - the moment when <strong>Eurogroup chief Jeroen Dijsselbloem </strong><a href=""><em>(he of the &quot;template&quot; foot in mouth disease)</em></a> stood up at the end of the EU-Greece press conference,<strong> awkwardly shook hands with Greece&#39;s new finance minister, and whispered...&quot;you have just killed the Troika,&quot; to which Varoufakis responded... &quot;wow!&quot;</strong></p> <p>&nbsp;</p> <p><a href=""><em>As Keep Talking Greece reports</em></a>,</p> <p>The joint press conference was concluding, when Greek Finance Minister<strong> Yanis Varoufakis</strong> droped a last bombshell.&nbsp; <em><strong>&ldquo;&hellip;and with this if you want &ndash; and according to European Parliament &ndash; flimsily-constructed committee we have no aim to cooperate. Thank you.&rdquo;</strong></em> Varoufakis was referring to the famous Troika, the country&rsquo;s official creditors consisting of the European Union, the International Monetary Fund and the European Central Bank..</p> <p>After concluding with a &ldquo;Thank you&rdquo; Varoufakis gives the word to Eurogroup Chief <strong>Jeroen Dijsselbloem</strong>, who wants to hear the translation first. Then he takes off the ear phones, he stands up and sets to leave. An enforced-looking shaking of hands delays the&nbsp; departure of the Dutch FinMin.</p> <p>Dijsselbloem quickly whispers something to Varoufakis&rsquo; ear, he briefly replies back and the Eurogroup chief leaves the press conference hall as soon as it was possible.</p> <p><strong>Video: the Awkward Greek-Eurogroup Moment</strong></p> <p><iframe allowfullscreen="" frameborder="0" height="315" src="" width="560"></iframe></p> <p>&nbsp;</p> <p>The whole afternoon, Greek and international media were trying to find out <u><strong>&ldquo;What the hell did they two men said to each other!?&rdquo;</strong></u></p> <p><img alt="" src="" style="border-width: 0px; border-style: solid; width: 600px; height: 554px;" /></p> <p>&nbsp;</p> <p><em>Private Mega TV reported short before 9 pm on Friday.</em></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><u><strong>Eurogroup chief whispered to Greek FinMin&rsquo;s&nbsp; ear &ldquo;You just killed the Troika&rdquo; and that Varoufakis replied with a simple &ldquo;WOW!&rdquo;</strong></u></p> </blockquote> <p>&nbsp;</p> <p><img alt="" src="" style="height: 400px; width: 600px;" /></p> <p><strong>Dijsselbloem</strong><em>: Whisper&hellip;whisper&hellip;</em></p> <p><img alt="" src="" style="height: 400px; width: 600px;" /></p> <p><strong>Varoufakis:</strong> <em>Whisper&hellip;.</em></p> <p>&nbsp;</p> <p><img alt="" src="" style="height: 400px; width: 600px;" /></p> <p>Dijsselbloom slides his hand away</p> <p><img alt="" src="" style="height: 400px; width: 600px;" /></p> <p>Back remains Varoufakis with one palm open and the left hand stuck in his pocket &ndash; relaxed Greek style</p> <p><img alt="" src="" style="height: 400px; width: 600px;" /></p> <p>The two men talk for a couple of minutes with lips hidden from the cameras.</p> <p><img alt="" src="" style="height: 400px; width: 600px;" /></p> <p>Dijsselbloem leaves without turning back to watch his interlocutor.</p> <p><img alt="" src="" style="height: 400px; width: 600px;" /></p> <p>I don&rsquo;t quite understand why Dijsselbloem is sour. I&rsquo;m sure that Varoufakis told him the same things when they had their 2-hour face-to-face talks.</p> <p>Unless they were talking about <em>Gouda</em> and <em>Feta</em> and the Greek FinMin surprised him when he said at the press conference, that the <a href="" target="_blank">Greek government will not negotiate with the Troika.</a></p> <p><u><strong>And furthermore, why is he offended? He is chief of the Eurogroup, he does not represent the Troika&hellip;</strong></u></p> <p><u><strong>Most probably he was expecting a Yes-Man behavior like in the past with HOHOHO-jocker Jean-Claude Juncker, when he was Eurogroup head.</strong></u></p> <p><a href=""><img alt="juncker venizelos" class="alignnone size-full wp-image-32350" src="" style="width: 601px; height: 318px;" /></a></p> <p><strong><em>Juncker &ndash; FinMin Venizelos</em></strong></p> <p><a href=""><img alt="Juncker" class="alignnone size-full wp-image-15774" src="" style="width: 601px; height: 497px;" /></a></p> <p><strong><em>Juncker &ndash; Spanish FinMin</em></strong></p> <p>*&nbsp; *&nbsp; *</p> <p>Later that evening Yanis Varoufakis gave an excellent more in depth interview with BBC&#39;s Newsnight... to explain why Greece will not accept more debt from the EU...</p> <p><iframe frameborder="0" height="315" src="" width="560"></iframe></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="338" height="347" alt="" src="" /> </div> </div> </div> Creditors European Central Bank European Union Greece International Monetary Fund New Normal Sat, 31 Jan 2015 16:58:45 +0000 Tyler Durden 501244 at Superpower Blunders: Czechoslovakia In 1938 <p><em>Submitted by Erico Matias Tavares of <a href="">Sinclair &amp; Co</a>.</em></p> <p><strong>Superpower Blunders: Czechoslovakia In 1938</strong></p> <div class="article-body"> <p>The Czechoslovakia crisis of 1938 marked a pivotal shift in the balance of power in Central Europe, putting the major world superpowers in a collision course. The policies of one superpower in particular made inevitable what was to come less than a year later - World War II.</p> <p><a href=""><img src="" width="600" height="344" /></a></p> <p>This episode provides important historical insights on geopolitics, appeasement strategies, buffer zones, ethnic tensions – and unintended consequences.</p> <p><strong>Background</strong></p> <p>Czechoslovakia was formed as a sovereign state in October 1918, and eventually became one of the most democratic, prosperous and best administered of all the nations that emerged out of the collapse of the Habsburg Empire after World War I.</p> <p>In 1930, the country had a population of 15 million, consisting of 6 million Czechs (40% of total), 4 million Slovaks (27%), 3.2 million Germans (21%), and the balance (12%) split between Hungarians, Polish, Ruthenians and foreigners. The large number of minorities arose from the need to give Czechoslovakia defensible and viable frontiers. This was a sensitive issue for the sizeable German speaking population, which had previously attempted to unite with German Austria.</p> <p>There were four main regions in the country (listed from west to east): Bohemia, Moravia, Slovakia and Ruthenia. The western regions were wealthier. The border districts of Bohemia and Moravia and the domestic portion of Silesia were inhabited primarily by German speakers, a region known as the Sudetenland (a name derived from the Sudetes Mountains, which run along the northern border).</p> <p>The Sudetens were unhappy with the state of the Czechoslovak union, and not just because of their longing to reunite with whom they perceived to be their cultural brethren. Their region had been the most industrialized of the Habsburg Empire, and suffered disproportionately from the curtailment of markets pursuant to the new territorial division; they were largely at the “giving end” of the country’s agrarian reforms; and the government was primarily controlled by the Czechs.</p> <p>Their discontentment became even more pronounced after the onset of the world depression in 1929. Hitler’s subsequent rise to power and the perception that his policies were restoring Germany to its former glory only added more fuel to the fire. And before long, tempers were boiling over.</p> <p><strong>The Sudeten Issue</strong></p> <p>Only a part of the Sudetens were Nazis, but these were noisy, organized and funded from Berlin. Accordingly, their numbers grew steadily. The Czechoslovak government became alarmed with this development, banning the Nazi Party in 1934. Under Konrad Henlein, however, it merely changed its name to the Sudeten German Party (“SdP”) and promptly became the agent for Hitler’s campaign in the country.</p> <p>As a result of Henlein’s insistent demands, the government progressively granted more autonomy to the Sudetens, including a proposal for full local administration by 1937. While he evidently could not state this publicly, Henlein’s real intent was to tear apart the Czechoslovak state. Therefore, he kept increasing his demands to the point where he and Hitler knew would became unacceptable, particularly as they undermined the country’s fortified security in the north against Nazi Germany.</p> <p>On 24 April 1938, the SdP issued the Karlsbader Programm, demanding full autonomy for the Sudetenland and the freedom to profess Nazi ideology. If Henlein’s demands were granted, the region would be able to finally align itself with Nazi Germany.</p> <p>Czechoslovakia's political crisis was now in full bloom. And the government found little help from its Western counterparts.</p> <p><strong>Choosing a Lesser Evil</strong></p> <p>Despite its internal struggles, Czechoslovakia featured impressive military capabilities. Its army consisted of 34 divisions, ranking amongst the better equipped in Europe; it had an excellent fortification system (provided the configuration of its borders remained intact); and it had alliances with France, the Soviet Union, as well as Romania and Yugoslavia under the Little Entente.</p> <p>After the Anschluss, Nazi Germany’s invasion of Austria, Bohemia was surrounded on three sides. However, Hitler could not safely invade this region as the Czechoslovaks could counter from their fortified base into Bavaria.</p> <p>As it turned out, Hitler relied on more than just political subversion to break any military stalemate, and from an unlikely source: his major Western European adversaries.</p> <p>Seemingly fearful that Czechoslovakia could never stand up to Nazi Germany after its invasion of Austria, not even if the Soviets came to its aid, the British government of Neville Chamberlain started putting pressure on key counterparts to reach a political compromise – and particularly on the Czechoslovaks to make concessions to Hitler in exchange for assurances of non-aggression. The idea was to turn the country into a neutral territory like Switzerland, with no significant military alliances and whose peace would be guaranteed by France and Nazi Germany.</p> <p>In addition to avoiding a direct military confrontation, there was an undertone to Chamberlain’s appeasement overtures towards the Nazis: creating a strong buffer zone against the Soviet Union. In Britain’s assessment of the balance of power in Central Europe, Hitler was perceived as a lesser evil than Stalin. And should Nazi Germany’s influence ever start to get out of bounds, even at the expense of the French, the Brits could counter it by closely aligning themselves with the English-speaking world – including the United States.</p> <p>The French, Germany’s fiercest adversaries over the previous hundred years, had similar concerns when looking out to the East. The fear of Bolshevism was pervasive in political circles, particularly amongst influential conservatives, who viewed the fall of Czechoslovakia as a way to undermine Stalin’s aspirations in Central Europe. Moreover, sitting behind the fortified Maginot line, the French government did not want to face Nazi Germany alone and increasingly took its lead from the British government.</p> <p>The Soviets were thus the only significant European power seeing Hitler’s pretensions with great consternation. Right after the Anschluss, they called for consultations to stop Nazi aggression and eliminate the prospect of a major confrontation. They were dismissed outright by the British, who in turn publicly stated that they would not come to the rescue of Czechoslovakia in case of an invasion.</p> <p>As we shall see, Britain’s role in this whole crisis proved decisive in many more ways than one.</p> <p><strong>The Munich Agreement</strong></p> <p>The Czechoslovaks resisted British and French pressure, and on 20 May 1938 a partial mobilization was under way in response to a possible Nazi German invasion. They were right to be cautious. Ten days later, Hitler signed a secret directive for war against Czechoslovakia to begin no later than 1 October of that year.</p> <p>A new mediator appointed by the British eventually persuaded the Czechoslovak government to agree on a plan acceptable to the Sudetens, in large part because it never wished to sever its ties with Western Europe. Accordingly, on 2 September, nearly all the demands of the Karlsbader Programm were granted.</p> <p>Intent on obstructing conciliation, however, the SdP held demonstrations that provoked police action on 7 September. The Sudetens broke off negotiations on 13 September, after which violence and disruption ensued. As Czechoslovak troops attempted to restore order, Henlein flew to Germany, and on 15 September issued a proclamation demanding the takeover of the Sudetenland by Germany.</p> <p>On the same day, Hitler met with Chamberlain and demanded the takeover of the Sudetenland under the threat of war, as he claimed that the Sudetens were being slaughtered. Despite an official British investigation confirming that Sudeten leaders had been behind the unrest, Chamberlain nevertheless referred the demand to the British and French governments, which was promptly accepted.</p> <p>The Czechoslovaks protested, arguing that Hitler's proposal would eventually leave them at his mercy. In response, Britain and France issued an ultimatum. Chamberlain contended that the Sudetens’ grievances were justified and believed that Hitler's intentions were limited. On 21 September, Czechoslovakia finally capitulated. The next day, however, Hitler added new demands, insisting that the claims of Poland and Hungary also be satisfied.</p> <p>The capitulation precipitated an outburst of national indignation. In demonstrations and rallies, both Czechs and Slovaks called for a strong military government to defend the integrity of the state. A new cabinet was installed, and on 23 September a decree of general mobilization was issued. The Soviet Union announced its willingness to come to Czechoslovakia’s assistance. The Czechoslovak President, however, refused to go to war without the support of the Western powers.</p> <p>As all of this was unfolding, the British and French governments took steps to align public opinion with their ultimatum on Czechoslovakia. Accordingly, a war scare with Nazi Germany was built up by grossly exaggerating its military capabilities, reaching full panic mode by 28 September.</p> <p>On that day, Chamberlain reached out to Hitler for a conference. Hitler met the following day in Munich with the government heads of France, Italy and Britain; all signed what would be known as the Munich Agreement. The Czechoslovak government, which was neither invited nor consulted, capitulated on 30 September and agreed to abide by the agreement.</p> <p class="center"><strong><em><a href=""><img src="" width="600" height="314" /></a></em></strong></p> <p class="center"><strong><em>Czechoslovakia’s Borders After the Munich Agreement</em></strong></p> <p>The Munich Agreement stipulated that Czechoslovakia must cede the Sudeten territory to Germany, with its occupation completed by 10 October. An international commission would supervise a general vote to determine the final frontier. Hungary and Poland would also get lands and people. Britain and France promised to join in an international guarantee of the new frontiers against unprovoked aggression. Ominously, Germany and Italy decided not to join this guarantee until the Polish and Hungarian minority problems were settled.</p> <p><strong>A Plot to Assassinate Hitler</strong></p> <p>When Hitler signed the secret directive to invade Czechoslovakia, he set in motion a chain of events in his own country which might have changed the course of history. Unfortunately for his compatriots and the rest of the world, Hitler’s diabolic lucky charm was still with him during that time.</p> <p>In that directive, Hitler clearly stated his “unalterable decision to smash Czechoslovakia by military action in the near future”. In the case of war with Czechoslovakia, whether France intervened or not, all forces should be concentrated on the Czechoslovaks in order to achieve an “impressive success” in the first three days of the invasion. Only then could forces be transferred to the French frontier. All regular forces were to be withdrawn from East Prussia in order to speed up the defeat of the Czechoslovaks. No major provision was made for a war against the Soviets. The deployment of troops would begin on 28 September 1938.</p> <p>Several Nazi military leaders were in shock, alarmed by the prospect of a quick defeat by exposing so many flanks to foreign aggression. This was also shared by the entire Foreign Ministry, except for Ribbentrop, the Foreign Minister and a Nazi to the core. Hitler was isolated in his mountain retreat, cut off from any outside contacts by his inner circle. This group insisted that the Soviet Union, France and Britain would not fight and that the Czechoslovaks were bluffing.</p> <p>By August the dissenters were becoming desperate. They reached out to senior foreign allies in order to make Hitler realize the folly of his plan, to no avail. Finally, a conspiracy of major generals and important civil leaders was formed to pursue the three strategies: (i) make Hitler see the truth; (ii) to inform the British of their efforts and ask them to stand firm on the Czechoslovak issue and to tell the German government that Britain would fight if Hitler made war on Czechoslovakia; and (iii) to assassinate Hitler if he nevertheless issued the order to invade.</p> <p>Although many messages were sent to Britain in the first two weeks of September by senior German officials, the British refused to cooperate. Accordingly, a plan was made to assassinate Hitler as soon as the attack was ordered.</p> <p>This project was canceled at noon on 28 September when news reached Berlin that Chamberlain was going to Munich to yield to Hitler’s demands. The attack order was to have been given by Hitler at 2:00 P.M. that day.</p> <p><strong>An Alternative Reality…</strong></p> <p>Even if Hitler had survived that assassination attempt, a war against Czechoslovakia might not have been as quick as he had planned for.</p> <p>Germany had 22 partly trained divisions on the Czechoslovak frontier, while the Czechoslovaks had 17 first-line and several other divisions which were superior from every point of view except air support. In addition, they had excellent fortifications and higher morale. By the third week of September, Czechoslovakia had 1 million men and all its divisions under arms. The Germans increased their mobilization to 31 and ultimately to 36 divisions, but this likely still represented a smaller force.</p> <p>The Soviets had about 100 divisions. While these could not be used directly against Germany, because Poland and Romania would not allow them to pass over their territory, they would have been a threat to ensure the neutrality of Poland and Hungary, effectively isolating Germany. In any case, the Soviet Air Force could help Czechoslovakia directly; the Soviets could have likely overrun East Prussia across the Baltic States and from the Baltic Sea, since it had been almost completely denuded of regular German Army forces.</p> <p>France, which did not completely mobilize, had the Maginot Line fully manned on a war basis, plus more than 20 infantry divisions and 10 motorized divisions. They might have overrun Germany from the western side.</p> <p>In air power the Germans had a slight edge in average quality, but in numbers of planes it was far inferior: Germany had 1,500 planes; Czechoslovakia had less than 1,000; France and England together had over 1,000; the Soviet Union may have had around 5,000.</p> <p>These facts were known to the British government via their foreign diplomats and intelligence operators, and further reinforced by the messages sent by the plotting German generals in their attempts to avoid a military disaster.</p> <p><strong>… And What Actually Happened</strong></p> <p>On 5 October, five days after capitulating to the Munich Agreement, the President resigned, realizing that the fall of his country was inevitable. He was correct in his assessment.</p> <p>The Munich Agreement was violated on every point in favor of Nazi Germany, so that ultimately the German Army merely occupied all the places it wanted. Hungarians and Polish followed suit, and took over large parts of the territory. As a result, Czechoslovakia was shred to pieces. The only democracy in the region collapsed. The Soviet alliance was ended and the Communist Party outlawed. The anti-Nazi refugees from the Sudetenland were rounded up by the Prague government and handed over to the Nazis to be destroyed.</p> <p>The terms of trade were substantially skewed in favor of Nazi Germany, which absorbed all the resources it could to maintain its rapid militarization. The economy in what was left of the country promptly collapsed, and had to rely on British and French aid to remain minimally viable.</p> <p>Czechoslovakia had been a major manufacturer of machine guns, tanks and artillery to supply its once impressive army of 34 divisions. Many of these factories would continue producing Czechoslovak weapon designs, adding to the Nazis’ arsenal during World War II. Entire steel and chemical factories were moved out and reassembled in Austria.</p> <p class="center">***</p> <p>In the aftermath of the Czechoslovakia crisis, Nazi Germany reigned supreme in Central Europe. Chamberlain must have been pleased because this was exactly what he intended.</p> <p>And it would not be long before he realized that this had been a blunder of historical proportions.</p> </div> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="698" height="400" alt="" src="" /> </div> </div> </div> France Germany Hungary Italy Poland Romania Slovakia Switzerland Sat, 31 Jan 2015 16:25:54 +0000 Tyler Durden 501243 at Is the Dollar's Momentum Easing? Is Deeper Pullback in the Stock Market Likely? <p>The US dollar turned in a mixed performance in the last week of January. &nbsp;It slipped against the euro, yen, sterling and the Swedish krona, while rising against the other G10 currencies. The Swiss franc was the weakest of the majors, losing about 4.5% of its value against the dollar, encouraged by signs the Swiss National Bank may have intervened. &nbsp;</p> <p>&nbsp;</p> <p>The dollar also rose against most of emerging market currencies, except for a handful of eastern and central European currencies. &nbsp;The Russia ruble depreciated by nearly 10% following the S&amp;P's removal of its investment grade status, and a compromise struck with Greece to discuss further sanctions given the increase in hostilities in east Ukraine. &nbsp;</p> <p>&nbsp;</p> <p>In addition to technical factors, which we pointed out last week, an important consideration that has stalled the dollar's upside momentum are the doubts about a mid-year rate hike. &nbsp;The FOMC statement had upgraded its economic assessment, but did recognize the important of international developments. &nbsp;Whereas we regarded that as a prudent addition, many others viewed it as an escape clause of sorts. &nbsp;</p> <p>&nbsp;</p> <p>The implied yield of the December Fed funds futures contract fell 3.5 bp on the week to 41 bp. It finished 2014 at 71 bp. &nbsp;The same general pattern was evident in the December 2015 Eurodollar futures. &nbsp;The implied yields fell 5 bp on the week to 66.5 bp. &nbsp;It finished last year at 91.5 bp. &nbsp;</p> <p>&nbsp;</p> <p>Our fundamental views have not changed. &nbsp;We continue to think that a Fed hike in June is the most likely scenario. &nbsp;We would not place much emphasis on the sub-3% Q4 14 preliminary print on Fed policy for the middle of 2015. &nbsp;The preliminary estimate for GDP is subject to statistically significant revisions, especially as a third of the trade (December trade balance will be released next week) and inventory data is not yet available. &nbsp;Moreover, the 2.6% pace of expansion is probably closer to what the Fed views as trend growth in the US than the 4.8% growth in April-September period. &nbsp;</p> <p>&nbsp;</p> <p>In addition, the FOMC statement drew attention to the divergence between market-based measures of inflation expectations and surveys. &nbsp;The survey have shown much greater stability than the market-based measures, like the break-evens (comparing the TIPS yield to conventional bond yields). &nbsp;This was underscored ahead of the weekend as the University of Michigan's survey found the long-term (5-10 year) inflation expectation unchanged at 2.8%. &nbsp;</p> <p>&nbsp;</p> <p>Our dollar bullish outlook also remains intact, though the consolidation phase against the euro, yen and sterling may continue for a few more days. &nbsp;The euro has spent that last three sessions within the roughly $1.1225-$1.1435 trading range established on January 27. &nbsp;Last week we suggested potential toward $1.1460. &nbsp;</p> <p>&nbsp;</p> <p>The dollar has traded in a JPY117.20-JPY118.80 trading range for nearly two weeks. &nbsp;It has not closed above its 20-day moving average (~JPY118.20), which has capped upticks over this period. The decline in US Treasury yields and the heavier tone in equities (S&amp;P 500 -2.0% on the week) can see the dollar move lower against the yen. &nbsp;The key support of the broader range is JPY115.50. &nbsp;</p> <p>&nbsp;</p> <p>Sterling is interesting from a technical perspective. &nbsp;It has slipped below $1.50 four times over the past seven sessions. &nbsp; The RSI is neutral, but the MACDs are gentle trending higher since bottoming in the early January. &nbsp; &nbsp;The top end of the range comes is in the $1.5225-50 area. &nbsp;No inspiration is likely to come from the BOE meeting, which is most unlikely to change policy at this juncture. &nbsp;More incentives will come from the three PMI reports. &nbsp;The service and manufacturing PMIs are expected show modest improvement.&nbsp;</p> <p>&nbsp;</p> <p>The dollar-bloc currencies remain under pressure. &nbsp;After the Swiss franc, the New Zealand dollar (-2.4%), the Canadian dollar (-2.1%) and the Australian dollar (-1.7%) were the weakest of the major currencies. &nbsp; They have been crushed January. &nbsp;Encouraged by soft data and the surprise Bank of Canada rate cut, the Canadian dollar fell 8.4% against the US dollar in January. &nbsp;</p> <p>&nbsp;</p> <p>The New Zealand dollar, weighed down by the end of the RBNZ mini-tightening cycle, stepped up rhetoric about the over-valued currency, and falling commodity (including milk prices), lost 6.8% against the greenback. &nbsp;The Australian dollar fell almost 5% in January. &nbsp;Expectations have increased that the RBA will cut rates as early as next week. &nbsp;</p> <p>&nbsp;</p> <p>That said, the US dollar's advance to almost CAD1.28 before the weekend may have exhausted the near-term move. &nbsp;A consolidative phase would not be surprising. &nbsp;If such a phase does unfold, we see initial support for the US dollar in the CAD1.2540-80 area. &nbsp;</p> <p>&nbsp;</p> <p>The Australian dollar shed nearly three cents in the second half of last week. &nbsp; If the RBA does cut interest rates and suggest room for additional easing, the Australian dollar could spike lower, toward around $0.7640. &nbsp;However, the failure to cut and provide dovish guidance could see the Aussie back toward $0.7900. &nbsp;</p> <p>&nbsp;</p> <p>Before the weekend NYMEX's March crude oil futures contract briefly traded above its 20-day moving average (~$47.60) for the first time since the end of last September. &nbsp;It did not manage to close above it, though the June contract did. &nbsp;The day before prices set a new contract low. &nbsp;While the downside momentum has stalled, we would not want exaggerate the pre-weekend price action. &nbsp; Given the price action, it is surprising to see how much the RSI and MACD has have corrected. There is not compelling technical evidence that an important low is in place.</p> <p>&nbsp;</p> <p>The US 10-year US Treasury yield finished at new lows for the move near 1.66%. &nbsp;The next technical support is seen in the 1.57%-1.61% area from 2013. &nbsp;However, given the likely decline in CPI and some disappointing data (durable goods, GDP), the political storm in Europe, and the low international yields, investors should be prepared for the 10-year Treasury yield to fall to new record low. &nbsp;That means below the 2012 low near 1.38% recorded the same month that the euro zone's existential crisis had appeared to peak. &nbsp;</p> <p>&nbsp;</p> <p>The S&amp;P 500 lost about 2.7% in the last week of January, which is nearly the year-to-date loss. Support in the 1988 area has been tested. &nbsp;A break convincing break signal a move toward 1972 on the way to 1957. A break of that lower level would open the door to a move to &nbsp;1924 and the old gap from mid-October 2014 found roughly between 1905-1909. &nbsp;The technical tone is poor and the pre-weekend close on its lows warns of the risk of a gap lower opening on Monday. &nbsp;</p> <p>&nbsp;</p> <p>Observations from the speculative positioning in the futures market:</p> <p>&nbsp;</p> <p>1. &nbsp;The increased volatility in the foreign exchange market has not encouraged increased position taking in the currency futures. &nbsp;In the Commitment of Traders report for the week ending January 7, there was only one gross position adjustment more than 10k contracts, and it was to reduce risk. &nbsp;The gross short yen position was pared by 13.2k contracts to stand at 91.2k, the smallest in since the summer. &nbsp;Since early December when the dollar peaked against the yen in the spot market, the gross short yen position has been cut by 62k contracts.&nbsp;</p> <p>&nbsp;</p> <p>2. &nbsp;Of the remaining 13 gross currency positions we track, nine were adjusted by less than 5k contracts. &nbsp;The four that were adjusted by more than 5k contracts were accounted for by two currencies the Australian dollar and Mexican peso. &nbsp;The speculative gross long and short Australian dollar positions increased by 6.3k (to 16.1k contracts) and 8.6k (to 65k contracts) respectively. &nbsp;The speculative gross long peso position increased by 7.7k contracts to 26.7k. &nbsp;The gross short position rose by 6k contracts to 71.3k.&nbsp;</p> <p>&nbsp;</p> <p>3. &nbsp;Overall, bottom picking in the currency futures was evident. &nbsp; Only the euro saw a cut in the gross long position. &nbsp;It fell by 1.6k to 50.5k contracts. &nbsp;It remains the largest speculative gross long position. &nbsp;The increase in gross long positions, given the downtrend and net short position reflects anticipation of a pullback in the US dollar. &nbsp;</p> <p>&nbsp;</p> <p>4. &nbsp;US Treasury bears have been punished by the continued rally. &nbsp;The net short position fell to 108k contracts from 146k. &nbsp;It is the smallest net short position since early December. &nbsp;The gross short position was chopped by 67.3k contracts to 454.6k. &nbsp;The bulls took profits, trimming their longs by 29.6k contracts to 346.7k. &nbsp;</p> Aussie Australian Dollar BOE Bond Canadian Dollar Commitment of Traders CPI Crude Crude Oil EuroDollar Futures market Greece Investment Grade MACD New Zealand Price Action Swiss Franc Swiss National Bank Trade Balance Ukraine Volatility Yen Sat, 31 Jan 2015 15:13:19 +0000 Marc To Market 501242 at ECB Threatens Athens With Bank Funding Cutoff If No Deal In One Month: February 28 Is Now D-Day For Greece <p>As Deutsche Bank's George Saravelos politely puts it, "Developments since the Greek election on Sunday have moved very fast." And indeed, so far the new Tsipras cabinet, and here we focus on the words and deeds of the new finance minister Yanis Varoufakis, has shown that the market's greatest hope - that the status quo in Greece will continue - has been crushed into a pulp (and so have Greek stock and bond prices) especially following yesterday's most <a href="">recent comments by the finmin </a>in which he said that Greece "<strong>does not want the $7 billion</strong>" from the Troika agreement and that it wants to "rethink the whole program", culminating with an epic exchange with Eurogroup chief Jeroen Dijsselbloem in which Greece made it clear that the "constructive talks" are over. </p> <p>And suddenly the Eurozone is stunned, because what had until now been its greatest carrot when it comes to dealing with Greece, has become completely useless when the impoverished, insolvent nation itself says it no longer needs a bailout, seemingly blissfully unaware of the consequences. </p> <p>So earlier today the ECB's Erikki Liikanen, tired of pleasantries and dealing with what to Europe is a completely incomprehensible and illogical stance, one which is essentially a <em>massive defection </em>by Greece in the European "prisoner's dilemma", and which while leading to a Greek financial collapse and Grexit - <strong>both prerequisites to a subsequent Greek economic recovery unburdened by the shackles of the Euro - </strong>would also unleash a European depression, came out and directly threatened Greece that it now has 1 month until the end of February to reach a deal with the Troika, <strong>or else the ECB would cut off lending to Greek banks, in the process destroying the otherwise insolvent Greek banking sector. </strong></p> <p>And since only the ECB backstop has prevented a banking sector panic, the ECB is essentially betting the house, and the sanctity of the Eurozone (because after a Grexit all bets are off which peripheral leaves next) that the threat, and soon reality, of a bank run (at last check Greece had about €145 billion in deposits still left in its bank after JPM's latest estimate of €15 billion in outflows in January) will finally force Varoufakis and Tsipras to sit at the negotiating table with the understanding that not they but the Troika has all the leverage.</p> <p><a href="">Reuters explains</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>A deal on extending Greece's bailout deal must be found by the end of February or the European Central Bank will not be able to continue lending to its banks, ECB council member Erkki Liikanen said on Saturday. </strong>Europe's bailout programme for Greece, part of a 240-billion-euro ($270 billion) rescue package along with the International Monetary Fund, expires on Feb. 28 and a failure to renew it could leave Athens unable to meet its financing needs and cut its banks off from ECB liquidity support. </p> <p>&nbsp;</p> <p>Greece's new leftist government, which aims to ease the strict terms of the bailout that have imposed harsh austerity, opened talks with European partners on Friday by flatly refusing to extend the current programme or to cooperate with the international inspectors overseeing it. </p> <p>&nbsp;</p> <p><strong>"We (ECB) have our own legislation and we will act according to that... Now, Greece's programme extension will expire in the end of February so some kind of solution must be found, otherwise we can't continue lending," </strong>Liikanen, also the governor of Finland's central bank, told public broadcaster YLE. </p> <p>&nbsp;</p> <p>"I don't believe that one can hide from the realities in the economy," he said in an interview. </p> </blockquote> <p>And then another hint from the ECB, this time from Vitor Constancio. As <a href="">Bloomberg notes</a>, "at the moment, Greece has a special dispensation from the ECB because it’s complying with a bailout program. That means its debt can be used in central bank refinancing operations even though it is rated junk. <strong>“There will be no surprises if we find out that a country is below that rating and there’s no longer a program that that waiver disappears,” </strong>ECB Vice President Vitor Constancio said at an event in Cambridge, England, on Saturday."</p> <p>The question arose why when Greece already has undergone a Private Sector Involvement restructuring, i.e. a bankruptcy that however only impacted private entities and not official ones, such as the ECB, can't Greece have another debt haircut to which Liikanen responded that: "A significant debt restructuring has been carried out with private investors. The ECB cannot fund a state directly, which is what it would mean in this case."</p> <p>Odd: because that is precisely what the ECB is doing with QE, when it monetizes any of a number of Eurozone deficits. To this Liikanen also had a quick response:</p> <ul> <li><strong>LIIKANEN SAYS ECB ISN'T FINANCING EURO GOVERNMENTS' DEFICITS</strong></li> </ul> <p>Well, it is, but we'll let that slide for the time being. The bigger issue is that since the ECB directly holds tens of billions of Greek debt, any impairment on this debt would crush what the ECB has been saying from day one: that it can <em><strong>not </strong></em>suffer losses on the debt it has monetized or otherwise transferred over to its balance sheet. Such an impairment would immediately destroy Draghi's credibility, and promptly lead to furious screams from around the Eurozone as taxpayers suddenly realize all too well they are on the hook for funding the Eurozone's most insolvent members, first Greece and then everyone else who has already entered a toxic deflationary spiral. And since the ECB would finally be exposed for being Europe's "bad bank", the scramble to dump as much toxic exposure on Draghi would begin in earnest in the process launching the beginning of the end of the Eurozone. </p> <p>One can almost see why Greece does think it has all the leverage.</p> <p>That said, Greece now also has a countdown in which it can and will have to make a decision what to do with its leverage, and precisely 28 days until its very own D-Day which is now February 28, 2015 as per today's ECB threat. </p> <p>So with February now shaping up to be an even more volatile month for Europe, and thus the world, than January and December (both of which closed red) here is the full schedule of events and what the "known unknowns are" in the next 4 weeks, courtesy of Deutsche Bank.</p> <p><em>From George Saravelos' Update on Greece</em></p> <p>It is worth bearing in mind that the timing, scope and commitment to the policy changes announced by Greek ministers is highly uncertain, not least because the legislative agenda is likely to be directed by the leadership team of the new government rather than individual line ministries. This still leaves plenty of uncertainty on the new government’s intentions. On the more negative side, the breadth of statements was so wide and the speed with which they were made so quick, that we now consider an extension of the February 28th program expiry date as<em><strong> a key date </strong></em>within the negotiation process: <strong>Europe and the Troika are very likely to request an explicit commitment from the Greek government to close the current mission review and not reverse previous policy</strong>. The precise form such a commitment would take is unclear at this stage, but our underlying assumption is that uncertainty around the new government’s policy intentions is so high, that Europeans will request assurances before proceeding with more in-depth negotiations over the program in Q2.</p> <p>In turn, the above developments will likely have important implications for Greek bank financing at the ECB. Termination of the program on February 28th renders GGB-based collateral ineligible at Eurosystem refinancing operations, but still allows Greek banks to shift funding to Emerency Liquidity Assistance. <strong>However, ELA usage is under bi-weekly ECB review and is very likely to be on a rising trend over the next few weeks<span style="text-decoration: underline;">: to accommodate potential deposit flight</span>; to absorb foreigners’ refusal to roll-over t-bills that are maturing; and to absorb fresh government t-bill issuance to finance upcoming debt repayments to the IMF and other obligations</strong>. These large needs make it likely that the availability of ELA usage is itself linked to program extension above. </p> <p>All of the above then leaves three things that need to be clarified over the next few weeks. </p> <p><em><span style="text-decoration: underline;"><strong>First,</strong></span></em> under what conditions would the Troika be willing to extend the program and what form would this extension take? Our initial expectation was that a technical extension would have been offered to July followed by a successor ECCL program. Recent market developments and poor budget execution leave Greece’s ECCL eligibility an open question however, and it is possible that the Troika now only accepts program extension by a full year to coincide with the conclusion of the IMF program in March 2016. Such a large extension would be more difficult for the Greek government to manage domestically. </p> <p><em><span style="text-decoration: underline;"><strong>Second,</strong></span></em> does the ECB link Greek bank ELA provision to program extension as well? Given rising usage over the next few months, we would consider this an increasing possibility. </p> <p><em><span style="text-decoration: underline;"><strong>Third,</strong></span></em> what will the Greek government’s response to these conditions be? Public statements over the last 48-hours make it particularly difficult to envisage the government’s reaction function. On the one hand an offer of a one year extension and a written commitment to close the review would be particularly difficult for the government to manage domestically. On the other hand, the suspension of ECB financing of Greek banks would be exceptionally damaging to the economy. </p> <p>Here is an indicative timeline of key events that will likely provide answers to these questions: </p> <ul> <li><strong>Friday January </strong>30th – Eurogroup President Dijsselbloem meets with the Greek finance minister Varoufakis and Deputy PM Dragasakis in Athens. A press conference will follow, with the meeting likely setting the tone of negotiations to follow. </li> <li><strong>Sunday February 1st </strong>- Greek finance minister Varoufakis meets UK finance minister Osborne in London </li> <li><strong>Monday February 2nd</strong> – Greek finance minister Varoufakis meets French finance minister Sapin in Paris Tuesday </li> <li><strong>February 2nd </strong>- Greek finance minister Varoufakis meets Italian finance minister Padoan in Rome </li> <li><strong>Wednesday February 4th-5th</strong> – Bi-weekly ECB review of ELA </li> <li><strong>Wednesday February 4th</strong> – Likely t-bill auction to cover 1bn redemption on 6th </li> <li><strong>Thursday February 5th </strong>- Greek parliament opens, elects new speaker of the House </li> <li><strong>Saturday February 7-9th </strong>Government presents legislative agenda to parliament, vote of confidence midnight Monday 9th </li> <li><strong>Wednesday February 11th </strong>– Likely tbill auction to cover 1.4bn maturity on 13th </li> <li><strong>Thursday February 12th </strong>– European Council of EU Leaders, Tsipras likely to meet Merkel on sidelines </li> <li><strong>Friday February 13th </strong>– Voting for new Greek President begins, EC Commissioner Avramopoulos most likely candidate as per various media reports, originating from New Democracy. Likely completed by second round on the following day requiring 151 MP majority </li> <li><strong>Monday February 16th </strong>– Eurogroup where Greece likely to be top of agenda, conditions for extension of program to be made explicit by now </li> <li><strong>Wednesday February 18th-19th- - Bi-weekly ELA review </strong></li> <li><strong>Saturday February 28th </strong>– Current EFSF program expires</li> </ul> <p>In sum, developments and pressure on Greece have accelerated over the last few days, with a very large degree of uncertainty around both the Greek government’s and Troika’s position on how negotiations will proceed. We expect this to be ultimately resolved by a Troika request from the Greek side to commit to program completion and the broad contours of previously committed policy, particularly with regard to structural reform. In turn, program extension may itself be linked to ongoing ECB/ELA financing of Greek banks. The precise form this request takes and the Greek government’s reaction will ultimately determine the path Greece takes in coming weeks and months.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1200" height="833" alt="" src="" /> </div> </div> </div> Bad Bank Bank Run Bond Deutsche Bank European Central Bank Eurozone Greece International Monetary Fund Reality recovery Reuters Sat, 31 Jan 2015 14:40:54 +0000 Tyler Durden 501241 at Greeks Turn to Gold on Bank Bail-in and Drachma Risks <p>The Greek stock market is down over 36% year to date; the risk of global contagion in the event of a Greek exit is very real. Ordinarily such a crisis would require a massive coordinated effort from global stakeholders, perhaps directed by the IMF or some other pan-national financial body. But not in this case; the rhetoric is nationally-based and biased without unity of purpose across finance ministries. Recent official soundings from the UK and German governments saying that exposure to Greece is limited only underscores the depth of denial, ignorance and lack of consensus that exists within the euro area. A Greek exit from the euro would profoundly weaken the euro experiment and create a dangerous precedent for all future crises in the region.</p> <p>The European economy is the largest middle class economy in the world. With over 400 million relatively affluent consumers it represents a massive portion of the net global economy and as such a breakup of part of it would be felt across the world in credit spreads and capital decisions for years to come. This would not have been because of Greek exit, but rather because of the inability of the authorities to manage the crisis as risks initially built up, then as bail outs were designed and implemented and then as these efforts surely failed.</p> <p>We are witnesses to an epic failure of planning, statecraft and social justice. Regardless of where your politics lie, these elements are critical for a modern globally connected economy to function.</p> <p>Sadly, the geopolitical backdrop is one of suspicion and hostility in the form of a festering proxy war between western and Russian interests in Ukraine and regional crisis and humanitarian catastrophe in the middle east as Syria and Iraq descend into stateless anarchy. These factors reduce the odds of a successful solution in Greece being found in time.</p> <p>The share value of Greek banks cratered up to 30% Wednesday alone, before pulling back on Thursday as fears grew that the new government may not intend to soften their stance now that they are in office.</p> <p>In what is probably the worst performance for the sector on record, the four major banks – Bank of Piraeus, Alpha Bank, National Bank of Greece and Eurobank – all closed more than 25% lower. Athens stock exchange closed 6.4% lower.</p> <p>It marks an acceleration of the losses incurred over Monday and Tuesday in the immediate aftermath of the Syriza victory. From London’s Telegraph.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>Greece’s banks have lost almost 40pc of their value in the three days since Syriza ascended to power in Sunday’s election as the dual threats of a bank run and the loss of support from the European Central Bank threaten a liquidity squeeze.</em></p> </blockquote> <p><em>Forbes list five main causes for the collapse:</em></p> <ol> <li>Deposit flight has accelerated.</li> <li>ECB liquidity could be cut off.</li> <li>Potential public and private debt restructuring.</li> <li>Low profitability.</li> <li>Reliance on deferred tax assets – Forbes explains it as an over-reliance by Greek banks on liquidity from the state.</li> </ol> <p>Greek banks are hemorrhaging deposits. The telegraph reports, “Banks also risk a repeat of the deposit flight seen in 2012. Up to €8bn of private sector deposits has been pulled out of Greek banks since November, according to Moody’s”, adding that bank deposits have fallen 5% in the last two months.</p> <p>The Financial Times paints an even more dramatic picture of bank runs and capital flight.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>The real danger is that the Greeks themselves lose confidence. There are tentative signs that money is again being sent abroad, as it was in mid-2012. Nikolaos Panigirtzoglou at JPMorgan points out that €350m was sent from Greece to Luxembourg money funds since the start of last week. Extrapolating to all cash flight, he estimates as much as a 10th of Greek deposits may have left already this year. If a Greek bank panic develops it will strengthen the German hand, and make negotiations that much harder.</em></p> </blockquote> <p>In the event of any or all of these possibilities,&nbsp;<a href="">gold and silver bullion</a>&nbsp;will perform well as a currency of last resort.</p> <p>Greek coin and bullion dealers with whom GoldCore spoke, confirmed an increase in demand for gold coins and bars in recent weeks and since the election.</p> <p>GoldCore have Greek clients both in Greece and living in the UK and throughout the world. We have seen a definite upsurge in interest, inquiries and demand since the election last Sunday.</p> <p>Concerns about bank holidays and also a return to the drachma have returned and Greeks are looking for ways to prevent further destruction of their wealth.</p> <p>For Greeks, Storage in Switzerland remains a favoured way of owning gold.</p> <p>The comprehensive guide to bail-ins:&nbsp;<a href="">Protecting Your Savings in the Coming Bail-in Era</a></p> <p>PRICE UPDATE</p> <p>Today’s AM fix was USD 1,263.50, EUR 1,114.98 and GBP 837.42 per ounce.<br />Yesterday’s AM fix was USD 1.275.50, EUR 1,129.36 and GBP 842.25 per ounce.</p> <p>Gold and silver both fell yesterday. Gold dropped 2.13% or $27.30, closing at $1,257.60/oz. Silver fell 5.78% or $1.04 and closed at $16.95/oz.</p> Bank Run European Central Bank Global Economy Greece Iraq Middle East Switzerland Ukraine Sat, 31 Jan 2015 10:00:56 +0000 GoldCore 501240 at In Denmark You Are Now Paid To Take Out A Mortgage <p>With NIRP raging in the Eurozone and <a href="">over €1.5 trillion </a>in European government bonds trading with negative yields, many were wondering when any of this perverted bond generosity will spill over to other debtors, not just Europe's insolvent governments (who can only print negative interest debt because of the ECB's backstop that it will buy any piece of garbage for sale in the doomed monetary union). In fact just earlier today we, rhetorically, asked a logical - in as much as nothing is logical in the new normal - question:&nbsp; </p> <blockquote class="twitter-tweet" lang="en"><p>Who will offer the first negative rate mortgage</p> <p>— zerohedge (@zerohedge) <a href="">January 30, 2015</a></p></blockquote> <script src="//"></script><p>Little did we know that just minutes after our tweet, we would learn that at least one place is already paying homeowners to take out a mortgage. That's right - <strong>the negative rate mortgage is now a reality</strong>.</p> <p>Thanks of Mario Draghi's generosity with "other generations' slavery", and following 3 consecutive rate cuts by the Danish Central Bank, <strong>a local bank - Nordea Credit - is now offering a mortgage with a negative interest rate! </strong>This means, <a href="">according to</a>, that Nordea have had to pay instead of charging interest to to a handful of customers, says housing economist at Nordea Kredit, Lise Nytoft Bergmann for Finance.</p> <p>From DR, <a href=";tl=en&amp;js=y&amp;prev=_t&amp;hl=en&amp;ie=UTF-8&amp;;edit-text=">google-translated</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The interest rate has balanced around 0 in a level between minus 0.03 percent plus 0.03 percent. Most have paid a modest positive interest rate, <strong>but there are so few who have had a negative rate. It is quite an unusual situation, says Lise Nytoft Bergmann</strong>. </p> <p>&nbsp;</p> <p>It is residential customers who have chosen to stick with F1-loan that now benefit from the negative interest rate. F1 loan form has otherwise been strong returns in recent years in favor of fixed interest loan. </p> <p>&nbsp;</p> <p>Although interest rates are negative, it is not something that can be felt by customers as contributions and other costs continue to be paid. In turn, interest will be deducted from the contribution. </p> <p>&nbsp;</p> <p>Precisely because it is an unusual situation, Nordea Kredit's IT systems are not geared to the situation when the computers are only used to collect interest. </p> <p>&nbsp;</p> <p>Lise Nytoft Bergmann says that there is no cause for concern, and that the new situation can be handled, "but sometimes we have to use duct tape and paste."</p> </blockquote> <p>This is just the beginning: according the Danish media outlet, as a result of variable-refinancing, as recently as a week from now "a greater share of customers could have a negative rate."</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Mortgage Denmark is one of the mortgage banks, where F1 rate also is close to zero, and here you are very excited about the upcoming negotiations, says Christian Hilligsøe Heinig, chief economist of the Mortgage Denmark. </p> <p>&nbsp;</p> <p>We have an auction just around the corner and it is very exciting to see how interest rates are going. We can go and get negative interest rates, says Christian Hilligsøe Heinig to JP Financial.</p> </blockquote> <p>And just like that, first in Denmark, and soon everywhere else in Europe, a situation has now emerged where savers who pay the bank to hold their cash courtesy of negative deposit rates, <strong>are directly funding the <em><span style="text-decoration: underline;">negative interest</span></em> rate paid to those who wish to take out debt. </strong>In fact, the more debt the greater the saver-subsidized windfall.</p> <p>That all this will end in blood and a lot of tears is clear to anyone but the most tenured economists, however in the meantime, we can't wait to take advantage of the humorous opportunities that Europe (and soon Japan and the US) will provide in the coming months, as spending profligacy will be directly subsidized and funded by the insolvent monetary system, while responsible behavior and well-paid labor will be punished, first with negative rates and soon thereafter: with threats, both theoretical and practical, of bodily harm. </p> <p><em>h/t @<a href="">AndreasBay</a></em><a href=""></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="620" height="349" alt="" src="" /> </div> </div> </div> Bond Duct Tape Eurozone fixed Japan New Normal Reality Sat, 31 Jan 2015 04:44:09 +0000 Tyler Durden 501226 at Meet Loretta Lynch – Obama’s Attorney General Nominee Who Might Be Even Worse than Eric Holder <p><a href=""><em>Submitted by Mike Krieger via Liberty Blitzkrieg blog</em></a>,</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong><em>On matters of policy, Ms. Lynch called capital punishment &ldquo;an effective penalty&rdquo; and said she disagreed with Mr. Obama&rsquo;s statements that marijuana was no more harmful than alcohol. She called the National Security Agency&rsquo;s collection of American phone records &ldquo;certainly constitutional, and effective.&rdquo;</em></strong></p> <p>&nbsp;</p> <p>&ndash; From the New York Times article:&nbsp;<a href=";action=click&amp;pgtype=Homepage&amp;module=first-column-region&amp;region=top-news&amp;WT.nav=top-news&amp;_r=0">Criticism of Holder Dominates Hearing on Loretta Lynch, Attorney General&rsquo;s Possible Successor</a></p> </blockquote> <p>Eric Holder made a career out of protecting and coddling financial oligarchs (his <a href="">1999 memo essentially invented &ldquo;Too Big to Jail&rdquo;</a>). This was such a lucrative decision for Mr. Holder, that it&nbsp;allowed him to climb all the way to the top of his profession. The dividends that supporting this man ultimately paid to Wall Street criminals were&nbsp;priceless. Not only were they bailed out despite wrecking the U.S. economy, they have since funneled&nbsp;<strong><a href="">all of the wealth gains since 2008</a></strong>&nbsp;to themselves, while remaining above the law. This truly remarkable heist is&nbsp;what both Barack Obama and Eric Holder will be remembered for by history. Congratulations guys.</p> <p>When Eric Holder announced his resignation, many of us breathed a sigh of relief thinking it can&rsquo;t get much worse, but not so fast. The authoritarian streak and rampant cronyism of the Obama administration is a well oiled machine. You didn&rsquo;t think you&rsquo;d get off that easily did you? Enter Loretta Lynch.</p> <p>I&rsquo;ve touched upon&nbsp;Mrs. Lynch&rsquo;s record previously, in the post,&nbsp;<strong><a href="">Wall Street Journal Reports Obama&rsquo;s Attorney General Nominee Has Been Involved in $904 Million in Asset Forfeitures</a></strong>. Here&rsquo;s an excerpt:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong><em>As a prosecutor Ms. Lynch has also been aggressive in pursuing civil asset forfeiture, which has become a form of policing for profit. She recently announced that her office had collected more than $904 million in criminal and civil actions in fiscal 2013, according to the Brooklyn Daily Eagle.&nbsp;Liberals and conservatives have begun to question forfeiture as an abuse of due process that can punish the innocent.</em></strong></p> </blockquote> <p>Naturally, that was just the tip of the iceberg. What we have learned from her ongoing confirmation hearing is that she&rsquo;s a lover of NSA spying and the death penalty, while disagreeing with the statement that&nbsp;&ldquo;marijuana is&nbsp;no more harmful than alcohol.&rdquo;</p> <p>I wonder if she has much personal experience to base this opinion on, or if it&rsquo;s just more of the same we &ldquo;know what&rsquo;s best for you plebs, despite the fact that we have no idea what we are talking about.&rdquo;</p> <p>Meet the new Attorney General, same as the old. From <a href=";action=click&amp;pgtype=Homepage&amp;module=first-column-region&amp;region=top-news&amp;WT.nav=top-news&amp;_r=0">the <em>New York Times</em></a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong>Ms. Lynch had steeled herself for tough questioning from a new Republican-controlled Judiciary Committee, particularly on her views of President Obama&rsquo;s immigration policy. But the questioning was mostly cordial,</strong> and, most important, the Republicans on the committee who hold the key to Ms. Lynch&rsquo;s confirmation &mdash; she needs three of their votes to proceed to a vote by the full Senate &mdash; showed little opposition.</em></p> </blockquote> <p>Of course it was cordial. Other than perhaps immigration, she&nbsp;basically espouses complete and total neo-con principals.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>On the issue of immigration, Ms. Lynch said she found it &ldquo;reasonable&rdquo; that the Justice Department had concluded it was lawful for Mr. Obama to unilaterally ease the threat of deportation for millions of unauthorized immigrants. Mr. Holder similarly endorsed that view.</em></p> <p>&nbsp;</p> <p><em>Democrats see some Republicans, such as Senators Lindsey Graham of South Carolina, Orrin G. Hatch of Utah and Jeff Flake of Arizona, as possible confirmation votes. Mr. Flake said he had made no decision on Ms. Lynch but had come away with a favorable impression and expected that she would be confirmed.</em></p> <p>&nbsp;</p> <p><strong><em>On matters of policy, Ms. Lynch called capital punishment &ldquo;an effective penalty&rdquo; and said she disagreed with Mr. Obama&rsquo;s statements that marijuana was no more harmful than alcohol. She called the National Security Agency&rsquo;s collection of American phone records &ldquo;certainly constitutional, and effective.&rdquo;</em></strong></p> <p>&nbsp;</p> <p><em>Senator Sheldon Whitehouse, a Rhode Island Democrat on the panel, said she had given &ldquo;a flawless performance.&rdquo; Senator Richard Blumenthal, Democrat of Connecticut, called her testimony &ldquo;among the most accomplished and impressive that I&rsquo;ve seen as a member of this committee.&rdquo;</em></p> </blockquote> <p>Oh, but there&rsquo;s more. As if you needed proof that Ms. Lynch shares Eric Holder&rsquo;s financial oligarch coddling tendencies, the<a href=""><em> International Business Times</em> reports</a> that:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p dir="ltr"><em>WASHINGTON &mdash; In advance of her nomination hearing, Loretta Lynch did what every cabinet nominee is required to do: fill out a questionnaire listing all her media interviews so lawmakers can evaluate her candor. But the questionnaire U.S. attorney general nominee Lynch submitted to the Senate Judiciary Committee has a notable omission. <strong>Lynch failed to include an interview in which she defended the controversial settlement she orchestrated with the bank HSBC.</strong></em></p> <p dir="ltr">&nbsp;</p> <p dir="ltr"><em>The bank was accused of knowingly allowing Mexican drug cartels to launder money and of allowing violations of economic sanctions against countries including Iran, Libya, Sudan and Cuba. Lynch, then the U.S. Attorney for the Eastern District of New York, <strong>allowed the bank to avoid prosecution in 2012 by paying a $1.9 billion fine and submitting to a monitor for five years to oversee compliance. Critics slammed the deal as an example of the Obama administration&rsquo;s pattern of going easy on the financial industry.</strong>&nbsp;In the&nbsp;<a href="" rel="nofollow" target="_blank">Dec. 11, 2012, interview she did with CBS News</a>, Lynch endorsed the settlement and dismissed criticism of the deal as &ldquo;shortsighted.&rdquo;</em></p> <p dir="ltr">&nbsp;</p> <p dir="ltr"><em>Lynch&rsquo;s boss at the time of the HSBC deal,<a href="" rel="nofollow" target="_blank">&nbsp;Assistant Attorney General Lanny Breuer</a>, who was then head of the Department of Justice&rsquo;s criminal prosecution division, resigned after&nbsp;<a href="" rel="nofollow" target="_blank">a scathing Frontline piece</a>&nbsp;that highlighted Justice&rsquo;s failure to try any of the banks tied to the recession and the risky trades that led to it.&nbsp;It was during a discussion of HSBC before the Senate Judiciary Committee that Attorney General Holder famously said some banks &mdash; although not HSBC specifically &mdash;&nbsp;<a href="" rel="nofollow" target="_blank">were too big to prosecute</a>.&nbsp;</em></p> </blockquote> <p><strong>Well there you have it. This woman, like Eric Holder, will be an unmitigated disaster for freedom in America.</strong></p> <p><strong>That&rsquo;s what &ldquo;liberal&rdquo; looks like in today&rsquo;s America.</strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="300" height="165" alt="" src="" /> </div> </div> </div> Barack Obama Cronyism Department of Justice Iran national security New York Times Nomination Obama Administration President Obama Recession Richard Blumenthal Sheldon Whitehouse South Carolina Testimony Wall Street Journal Sat, 31 Jan 2015 03:20:17 +0000 Tyler Durden 501235 at One Of These Things Is Not Like The Other <p>"Reality" is not "perception"</p> <p>&nbsp;</p> <p><a href=""><img src="" width="600" height="314" /></a></p> <p>&nbsp;</p> <p><em>Charts: Bloomberg</em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="962" height="504" alt="" src="" /> </div> </div> </div> Reality Sat, 31 Jan 2015 02:40:57 +0000 Tyler Durden 501234 at