http://www.zerohedge.com/fullrss2.xml en The Great Greek Fudge http://www.zerohedge.com/news/2015-08-01/great-greek-fudge <p><em>Submitted by Pieter Cleppe of <a href="http://openeurope.org.uk/">Open Europe</a></em><a href="http://openeurope.org.uk/"></a></p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/07/alpha%20bank%20cleppe_0.jpg" width="600" height="330" /></p> <p><strong>The Great Greek Fudge</strong></p> <p><em><strong>A third Greek bailout involving loans from the European Stability Mechanism (ESM), the eurozone’s bailout scheme, is now being negotiated. The start was quite rocky, with haggling over the precise <a href="http://www.theguardian.com/business/2015/jul/24/greek-debt-crisis-talks-stall-hotel-choice">location </a>in Athens where negotiations need to take place and Greek officials once <a href="https://twitter.com/russian_market/status/626676565267623936">again withholding information </a>to creditors. Therefore, few still believe that it will be possible to conclude a deal in time for Greece to repay <a href="https://twitter.com/russian_market/status/626676565267623936">3.2 billion euro</a> to the ECB on 20 August. Several national Parliaments in the Eurozone would need to approve a final deal, which would necessitate calling their members back from recess around two&nbsp; weeks before the 20th, so it’s weird that French EU Commissioner Pierre Moscovici still <a href="http://www.ft.com/intl/fastft/351421/pierre-moscovici-deal-with-greece-not-too-late">seems </a>so confident that the deadline can be met.</strong></em></p> <p><strong>If indeed there is no deal, Greece is likely to request a second so-called “bridge loan” to allow it to pay the ECB, firmly within the Eurozone tradition of the creditor providing the debtor cash in order to pay back the creditor</strong>. France, which is most eager to keep Greece inside the Eurozone, is afraid that bilateral bridge loans from Eurozone countries wouldn’t be approved by the more critical member states, as this would risk France having to foot this bill on its own, perhaps with Italy. Not exactly a rosy prospect for socialist French President Hollande, who’s already struggling to contain the far right anti-euro formation Front National.</p> <p>The only European fund practically available to provide a bridge loan is the European Financial Stabilisation Mechanism (EFSM), a fund created in May 2010, which has been raising 60 billion euro on the markets, with the EU’s €1 trillion Budget as collateral. The EFSM belongs not just to Eurozone member states, but to all EU member states. How on earth did the UK, which isn’t part of the Eurozone, agree to bail it out in 2010, one may wonder? The reason is that the decision to create the EFSM was taking precisely at the time of the power vacuum in the UK. Labour had just lost the election and the Conservatives were still busy negotiating a coalition with the Lib Dems. Outgoing Labour Chancellor Alistair Darling <a href="http://researchbriefings.files.parliament.uk/documents/SN05973/SN05973.pdf">claimed</a> to have “consulted” likely new Chancellor George Osborne, but it remains muddy who precisely gave the expensive OK. In order to correct this, PM Cameron <a href="http://openeurope.org.uk/blog/will-the-eu-regret-dragging-the-uk-into-greek-bailout/#.VaZi-Cc0E94.twitter">secured</a> a declaration from other EU leaders in December 2010 that the fund wasn’t going to be used any longer, until it was used after all, in July 2015, to provide Greece with a first bridge loan. Then not only the UK, but also the Czech Republic and Poland protested heavily, only backing down when they secured special <a href="http://www.consilium.europa.eu/en/press/press-releases/2015/07/17-eurogroup-statement-greece/">guarantees</a> against possible losses and a commitment that it would be illegal in the future to provide loans to Eurozone countries with the EFSM without also providing such guarantees to non-euro states.</p> <p>EU Finance Ministers are currently busy implementing the legal change, through a “written procedure”, which <a href="https://twitter.com/ElodieLamer/status/626026190399213568">should</a> be finalized before the middle of August. The Council <a href="http://www.consilium.europa.eu/en/press/press-releases/2015/07/17-eurogroup-statement-greece/">declared</a> in July that an “agreement” on this legal change was needed “in any case before” Greece can request a second bridge loan. Another “written procedure” is needed for that, but it’s unlikely that Finance Ministers will manage to decide this in smoke-filled rooms. With Polish elections coming up on 25 October, local opposition parties may <a href="http://www.rp.pl/artykul/1216114.html?print=tak&amp;p=0">once again</a> rail against Polish PM Ewa Kopacz, who promised voters they wouldn’t be exposed to this. Also the UK may use this as an opportunity to extract concessions related to its own agenda for EU reform. Perhaps the French government’s sudden openness to this agenda and its welcome stance that “we need a fair treatment of the ‘out’ countries” may have been linked to the British approval for a first bridge loan.</p> <p>As always in the Eurozone, the safest bet is on another fudge, at least when it comes to the bridge loan.</p> <p><strong>More questionable is how the IMF’s </strong><a href="http://openeurope.org.uk/daily-shakeup/schaubles-proposals-to-restructure-commission-receive-mixed-response-in-germany/#section-2"><strong>statement</strong></a><strong> that it “cannot reach staff-level agreement [to participate to a third Greek bailout] at this stage” will play out, given that Greece no longer meets two of the four IMF criteria for a bailout: ability/willingness to implement reform and debt sustainability.</strong> It will only decide whether to take part in the bailout after Greece has “agreed on a comprehensive set of reforms” and after the Eurozone has “agreed on debt relief”, meaning it may even only join next year or not at all, of course. This is a problem, given that a number of Eurozone states, especially Germany and the Netherlands, have explicitly linked their willingness for a third Greek bailout to participation by the IMF. Former EU Commissioner for Monetary Affairs Olli Rehn has <a href="https://twitter.com/pietercleppe/status/621358142002216960">suggested</a> that many countries demand IMF involvement in bailouts because they don’t trust the Commission.</p> <p>It’s not entirely clear what will be sufficient for the IMF: its President, Christine Lagarde, has discussed a <a href="http://www.wsj.com/articles/grexit-favored-by-many-members-of-german-government-says-schauble-1436877063">write-down</a> on the value of the country’s debt but <a href="http://www.wsj.com/articles/imf-to-take-part-in-greek-bailout-if-it-includes-debt-restructuring-1437117045">ruled out</a> a straight “haircut”, while <a href="http://www.wsj.com/articles/imf-to-take-part-in-greek-bailout-if-it-includes-debt-restructuring-1437117045">mentioning</a> an extension of debt maturities, an extension of grace periods and a maximum reduction of interest rates. The IMF carries the legacy of its former Director Dominique Strauss-Kahn, who managed to overcome opposition within the fund against taking part in the first Greek bailout in 2010. The IMF only issues loans to countries when there is prospect for debt sustainability, which clearly wasn’t the case for Greece in 2010, but the interests of supposedly “systemic” banks were considered to be more important. Now the IMF, which has <a href="http://www.npr.org/2012/02/03/146327391/why-imf-loans-always-get-repaid">never taken</a> straight losses on loans it has issued, may be experiencing this in case of Grexit.</p> <p><strong>As opposed to the IMF, which has completely ruled out the idea of taking losses on its lending to Greece, and contrary to the picture painted by some, Germany has made some noices suggesting it may be open to cutting its losses in Greece</strong>. German Chancellor Merkel has not only been <a href="http://www.bloomberg.com/news/articles/2015-07-23/lagarde-push-for-greece-debt-relief-sets-up-showdown-with-merkel">open</a> to extending debt maturities and lowering interest rates, but her Finance Minister Wolfgang Schäuble has <a href="http://www.dw.com/en/grexit-could-be-the-best-way-forward-sch%C3%A4uble/a-18586852">said that</a> “if you think the best way for Greece” is debt relief, then “the best way forward” is to leave the euro, <a href="http://www.spiegel.de/wirtschaft/soziales/griechenland-wolfgang-schaeuble-fordert-erneut-grexit-auf-zeit-a-1043917.html">adding</a> <a href="http://www.handelsblatt.com/politik/deutschland/finanzkrise-in-griechenland-schuldenerlass-gegen-euro-austritt/11172754.html">that</a> “a real debt haircut isn’t compatible with the membership of the currency union”. So Germany is willing to accept debt relief, if there is Grexit.</p> <p>Some have questioned Schäuble’s claim that debt relief wouldn’t be legally banned within the eurozone, as for example Financial Times columnist Wolfgang Munchau, who recently <a href="http://www.ft.com/cms/s/0/e903ad46-3201-11e5-8873-775ba7c2ea3d.html#ixzz3h7ypXUKL">wrote</a>: “In its landmark&nbsp;<a href="http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:62012CJ0370">Pringle ruling</a>&nbsp;— relating to an Irish case in 2012 — the European Court of Justice (ECJ) said bailouts are fine, even under Article 125, as long as the purpose of the bailout is to render the fiscal position of the recipient country sustainable in the long run.”</p> <p>This sounds a bit like a stretch. The ESM is very much conceived as a “European IMF”, hence the ECJ’s use of the term “sustainable”, reminiscent of the IMF’s condition to provide cash. Just like the IMF, the ESM has been set up to issue “loans”, not to provide “transfers”. Obviously, a loan with an artificially low interest rate partly counts as a “transfer”, but even for the rather <a href="http://www.theguardian.com/law/2010/aug/10/european-court-justice-legal-political">politicized</a> judges of the European Court of Justice there is an end to stretching the meaning of words.</p> <p>Therefore, apart from the case where the ECJ would completely remove the meaning of the words of its previous rulings and the ESM Treaty, EU law doesn’t allow the “loans” made to Greece to just be forgiven, as much as proponents of a Eurozone transfer union like Mr. Munchau may regret this.</p> <p>After PM Tsipras <a href="http://openeurope.org.uk/daily-shakeup/schaubles-proposals-to-restructure-commission-receive-mixed-response-in-germany/">threatened</a> with an internal referendum in his own left-wing populist Syriza party, it looks like he has secured the necessary domestic support for a third Greek bailout.</p> <p><strong>Obstacles remain, but much of the protest in “creditor countries” seem to have been overcome</strong>. In Finland, where the coalition was at risk at some point, Foreign Minister Timo Soini has said that it “<a href="http://www.uusisuomi.fi/kotimaa/89878-timo-soini-astui-esiin-jokaiselle-perussuomalaiselle-vaikea-paikka#.VaeU9NbcVa4.twitter">would make no sense</a>” for his Eurosceptic Finns party to leave the Finnish coalition over this. In the Netherlands, the governing VVD party, which is skeptical to the Greek deal, has provided tacit consent for negotiations to start. In Germany, despite all the noice, Merkel enjoys a comfortable majority to get on with the third range of transfers.</p> <p><strong>The third bailout is </strong><a href="http://www.forbes.com/sites/francescoppola/2015/07/30/the-wheels-are-already-coming-off-the-greek-deal/2/"><strong>likely</strong></a><strong> not to be sufficient to cover all Greek funding needs in the next few years</strong>, also given that expecting 50 billion euro from privatizing Greek state assets looks a little <a href="http://greece.greekreporter.com/2015/07/28/austrian-railways-head-imf-privatization-targets-for-greece-unrealistic/">rosy</a>. This is a problem which can be solved near the end of the bailout period, once Greece has <a href="http://openeurope.org.uk/blog/what-happens-if-greece-does-not-pay-the-imf-on-time/">made it</a> through the difficult year 2015. In 2016 and 2017, the country needs to make debt repayments “only” <a href="http://openeurope.org.uk/blog/what-happens-if-greece-does-not-pay-the-imf-on-time/">amounting</a> to around 6 billion euro each year.</p> <p>The IMF may in the end just back down and join in, <a href="http://www.forbes.com/sites/francescoppola/2015/07/30/the-wheels-are-already-coming-off-the-greek-deal/3/">given how</a> it already bent its rules twice to agree to Greek bailouts. It would have been expected to provide between 10% and a third of the funding of the new bailout which may amount to 86 billion euro (and possibly more), so if the IMF wouldn’t back down, Germany and France would see their bill for the third bailout <a href="http://openeurope.org.uk/blog/how-could-the-third-greek-bailout-change-without-the-imf/">rise</a> with another 1.7 billion and 1.3 billion euro respectively. A lot will depend on how the IMF will calculate “debt sustainaibility”. Speaking in the Dutch Parliament, Eurogroup chief Jeroen Dijsselbloem <a href="https://twitter.com/OpenEurope/status/621680886183030785">said</a> on 16 July that the Eurozone already “agreed with the IMF to look at “debt service”, not merely at the debt to GDP levels”. In other words: because Greece’s interest burden as a percentage of GDP <a href="http://www.telegraph.co.uk/finance/economics/11372369/Three-myths-about-Greeces-enormous-debt-mountain.html">is even lower than</a> the one carried by Portugal, Italy, Ireland and Spain, one can ignore the fact that its debt to GDP is at the horrendous level of 180% now. This of course overlooks the difficulty to boost that GDP, given the tax hikes and the capital controls which will be hard to remove as a result of the talk about “Grexit”. Still, a fudge looks on the cards.</p> <p>It <a href="http://vocalinternational.com/?p=1907">isn’t a good idea</a> to let the bill of Eurozone taxpayers grow even bigger, to burden an economy already crippled by debt with even more debt and to intervene deeply into domestic Greek policy choices. Opting for <a href="http://www.zerohedge.com/news/2015-06-26/what-would-happen-case-grexit">Grexit</a> may have been the <a href="http://vocalinternational.com/capx.co/germany-is-not-to-blame-for-the-greek-crisis/">wisest</a> choice for everyone. The opportunity was there, given that many Greeks had already taken their savings out of banks anyway. Also, <a href="http://www.europeanleadershipnetwork.org/why-grexit-is-the-most-likely-outcome_2924.html">many of the reasons</a> to think Greece still may leave the Eurozone, like the difficulty to unwind capital controls, remain in place. We have come close, but Grexit seems to have been avoided for now. But it’s unlikely to have been referred “<a href="https://en.wiktionary.org/wiki/ad_kalendas_Graecas">ad kalendas Graecas</a>”- “until pigs can fly”.</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="897" height="494" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/alpha%20bank%20cleppe.jpg?1438455798" /> </div> </div> </div> http://www.zerohedge.com/news/2015-08-01/great-greek-fudge#comments Alistair Darling Creditors Czech Dominique Strauss-Kahn Eurozone Finland France Germany Greece Ireland Italy Netherlands Poland Portugal Sat, 01 Aug 2015 19:03:38 +0000 Tyler Durden 510933 at http://www.zerohedge.com "Asia Crisis, Tech Bubble Burst, Lehman"... And Today http://www.zerohedge.com/news/2015-08-01/asia-crisis-tech-bubble-burst-lehman-and-today <p>While over the past several months many have been focused - finally - on the <a href="http://www.zerohedge.com/news/2015-07-18/chinas-three-bubbles-and-what-could-cause-them-burst">bursting of China's 3 bubbles </a>(credit, housing and investment), in the context of its 4th burst bubble, the stock market which the politburo is desperately trying to patch up every single day, a far scarier picture has emerged within the entire Emerging Market space, where Brazil has rapidly become a "ground zero" case study for what has moved beyond mere recession and is an accelerated collapse into economic depression, as we <a href="http://www.zerohedge.com/news/2015-07-30/brazils-economy-slides-depression-and-now-olympians-will-be-swimming-feces">discussed previously</a>. </p> <p>Bank of America notes overnight that "capitulation is already visible in bond/bank/FX correlations and “forced selling” of crowded EM growth trades." Here is what BofA's Michael Hartnett has to say about the EM capitulation/collapse phase:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Despite muted asset returns, 2015 has seen the emergence of two big trends: the risk of a bubble in US health care &amp; technology; <strong>and the crash in EM/Resources/Commodities.</strong></p> <p>&nbsp;</p> <p>The journey from hubris to humiliation in EM has taken roughly 5 years. Back in late 2010, when Sepp Blatter announced that Russia &amp; Qatar would follow Brazil as hosts of the FIFA World Cup, both China &amp; India were on course for &gt;10% GDP growth, EM spreads were significantly lower, and the market cap of EM ($3.7 trillion on December 1st 2010) was twice the market cap of US banks, and exceeded the combined market cap of US tech &amp; health care. <strong>Today, the market cap of EM equities is the same, while the combined market cap of US tech, health care and banks is over $10 trillion.</strong></p> <p>&nbsp;</p> <p><strong>Note that the classic sign of crisis and capital flight, higher interest rates, falling currency, and falling bank stocks are now visible in Brazil (and elsewhere). </strong>Indeed, the correlation between Brazilian bond yields and Brazilian financials/BRL turned sharply negative during each of the past 3 systemic crises (Asia ‘98, Tech ‘02 &amp; Lehman ’08) and is doing so again today (Chart 3). </p> </blockquote> <p>In other words, while the S&amp;P continues to exist in its own inert bubble, where stocks no longer are able to discount anything and merely float on the sea of $22 trillion in liquidity created by central banks, for Brazil, the correlation between key assets classes reveals that the local situation is on par with the three greatest crises of the past two decades: the Asia Crisis, the bursting of the Tech bubble, and of course, Lehman.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/07/Brazil%20correlattionjpg.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/07/Brazil%20correlattionjpg_0.jpg" width="600" height="365" /></a></p> <p>&nbsp;</p> <p>While it is naive to blame much of this on the strength of the US dollar, one thing is obvious, as BofA notes: "Structural inflection points in both EM/DM (Chart 6 &amp; Table 3) have tended to coincide with major geopolitical events and/or policy shifts that have started or ended a multi-year move in the US dollar, e.g. Bretton Woods ‘70s, LatAm debt crisis ‘80s, Asia crisis ‘90s, Lehman 200.8"</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/07/USD%20and%20DM%20vs%20EM.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/07/USD%20and%20DM%20vs%20EM_0.jpg" width="600" height="332" /></a></p> <p>So for those who are seeking the inflection point in deciding how and whether to invest in EM, "asset allocation to EM awaits an “event” (e.g. Fed hikes, China deval, bankruptcy/ default) to create narrative of US$ peak &amp; unambiguous EM value)."</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/07/Phases%20of%20EM.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/07/Phases%20of%20EM_0.jpg" width="600" height="166" /></a></p> <p>For the time being, the dominant narrative is that the US has a ways to go and will go even higher if and when the Fed starts its hiking cycle (even if riots break out among the BRIC nations which, like Brazil, are facing economic devastation). </p> <p>Unless, of course, the first rate hike is precisely the catalyst that ends the past year's dollar surge, as the market prices in the failure of the Fed's hiking cycle and begins trading in anticipation <em><strong>of the admission </strong></em>of such failure which will lead to an end of rate hikes once the US economy slides into all out recession (the plunge in globla trade is the biggest flashing red light in that regard) and corporate profitability moves beyond GAAP recession into all out depression, ultimately culminating with the launch of QE4 and monetary policy reverting back to square one. </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="843" height="513" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/Brazil%20correlattionjpg.jpg?1438453104" /> </div> </div> </div> http://www.zerohedge.com/news/2015-08-01/asia-crisis-tech-bubble-burst-lehman-and-today#comments Bank of America Bank of America Bond Brazil Central Banks China default GAAP India LatAm Lehman Monetary Policy Recession Sat, 01 Aug 2015 18:23:42 +0000 Tyler Durden 510923 at http://www.zerohedge.com The Latest Government Trust Fund To Go Bankrupt http://www.zerohedge.com/news/2015-08-01/latest-government-trust-fund-go-bankrupt <p><em>Submitted by <a href="http://www.sovereignman.com/trends/the-latest-government-trust-fund-to-go-bankrupt-17315/">Sovereign Man</a></em><a href="http://www.sovereignman.com/trends/the-latest-government-trust-fund-to-go-bankrupt-17315/"></a></p> <p><strong>The Latest Government Trust Fund To Go Bankrupt</strong></p> <p>On June 6, 1932, President Herbert Hoover imposed the first ever national gasoline tax in the United States, initially set at 1 cent per gallon.</p> <p>It was a major success for the federal government; the tax on gasoline alone was responsible for over 15% of their 1933 tax revenue.</p> <p>What’s curious is that the Senate Finance Committee issued a report the following year stating that the federal gasoline tax should be repealed. But that never happened.</p> <p>Instead it went up.</p> <p>Under President Eisenhower, the tax increased to 3 cents per gallon. Under Reagan, 9 cents.</p> <p>It’s risen steadily through the years to a level of 18.4 cents for every gallon of unleaded fuel, and 24.4 cents per gallon of diesel.</p> <p>All of this tax revenue is –supposed– to go to the Federal Highway Trust Fund, something established back in the 1950s to finance the care and maintenance of the nation’s highways.</p> <p>And now it, too, is insolvent.</p> <p>Earlier this week I told you about Social Security’s Disability Insurance Trust Fund (DI), which will become insolvent in a matter of months.</p> <p>The DI problem (just like the rest of Social Security) has been a long time coming.</p> <p>But rather than form some meaningful solution, Congress has instead opted to commit financial fraud by commingling DI monies together with the other Social Security funds.</p> <p>Now comes the Highway Trust Fund.</p> <p>The difference between DI and the Highway Trust fund is that this one won’t be insolvent in a matter of years or months. Their own data shows that it may very well be toast… today.</p> <p>Once again- Congress to the rescue.</p> <p>Having waited until almost quite literally the last minute, their solution is to… wait for it… kick the can down the road.</p> <p>Congress has now passed a 90-day stay of execution for the Highway Trust Fund, which only delays the inevitable.</p> <p>Over the next three months they’ll sit down to the task of figuring out who to steal from.</p> <p>They’re either going to raise taxes on you.</p> <p>Or they’ll raise taxes on someone else, the costs of which will ultimately be passed on to you.</p> <p>Or they’ll simply default on their obligations to the residents of the United States to maintain the federal highway system.</p> <p>None of this should come as a surprise. This is what happens when nations go bankrupt: one by one, its major institutions fall into insolvency.</p> <p>Today it’s the Highway Fund. Tomorrow it’ll be the Pension Benefit Guarantee Corporation (we’ll talk about that one soon) and the United States Postal Service.</p> <p>Then it’ll be Social Security and Medicare. Then the Federal Reserve. And eventually it’ll be the United States government itself.</p> <p>The signs are everywhere– every single one of these hallowed institutions is flat broke.</p> <p>It’s no longer some wild assertion to say that. Their own financial statements show that they’re insolvent. And it’s not hard to figure out what happens down the road.</p> <p>Bankrupt governments invariably resort to plundering the wealth of their citizens. Inflation. Higher taxes. Confiscation of assets. Indebting unborn generations. And defaulting on the benefits promises they made to voters.</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="600" height="313" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/can%20kicked.png?1438449727" /> </div> </div> </div> http://www.zerohedge.com/news/2015-08-01/latest-government-trust-fund-go-bankrupt#comments default Federal Reserve Medicare None Tax Revenue Sat, 01 Aug 2015 17:22:34 +0000 Tyler Durden 510919 at http://www.zerohedge.com Head Of Collapsed Mt.Gox Exchange Arrested With Half A Billion In Bitcoin Still Unaccounted http://www.zerohedge.com/news/2015-08-01/head-collapsed-mtgox-exchange-arrested-after-half-billion-bitcoin-still-unaccounted <p>Back in its 2013 heyday, when bitcoin soared from below $100 to over $1000 in the span of a few months (in no small part thanks to the collapse of the Cyprus banking system) there was only one real Bitcoin exchange: Magic: The Gathering Online Exchange, or Mt. Gox as it was better known, which had become the world's largest hub for trading the digital currency. And then, as mysteriously as it had appeared, Mt. Gox went dark, and filed for bankruptcy after nearly half a billion dollars worth of bitcoin "disappeared."</p> <p>We <a href="http://www.zerohedge.com/news/2014-02-28/mt-gox-files-bankruptcy-after-473-million-bitcoins-disappeared">wrote at the time</a>: </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>For a case study of a blistering rise and an absolutely epic fall of an exchange that i) was named after Magic: the Gathering and ii) transacted in a digital currency which many have speculated was conceived by the NSA nearly two decades ago and was used as a honeypot to trap the gullible, look no further than Mt.Gox which after halting withdrawals for the second (and final time) has finally done the honorable thing, and filed for bankruptcy. As the WSJ reports, "Bitcoin exchange Mt. Gox said Friday it was filing for bankruptcy protection after losing almost 750,000 of its customers' bitcoins, marking the collapse of a marketplace that once dominated trading in the virtual currency. The company said it also lost around 100,000 of its own bitcoins. Together, the lost bitcoins would be worth approximately $473 million at market prices charted by the CoinDesk bitcoin index, although the price of Mt. Gox bitcoin had fallen well below that index after it stopped bitcoin withdrawals in early February."</p> <p>&nbsp;</p> <p>The punchline: speaking to reporters at Tokyo District Court Friday after the bankruptcy filing, Mt. Gox owner Mark Karpelès said technical issues had opened the way for fraudulent withdrawals, and he apologized to customers.</p> <p>&nbsp;</p> <p><strong>"There was some weakness in the system, and the bitcoins have disappeared. I apologize for causing trouble."</strong></p> </blockquote> <p>In other words, oops sorry, several hundred million in Bitcoin is unaccounted for but blame the "system weakness." This promptly led to various artistic interpretations on the Mt. Gox logo, such as this one:</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/02/Mt%20Gox%20logo_0.png" width="496" height="194" /></p> <p>Some were confused if Karpeles was going to get away with nothing more than an excuse, even if - as many speculated - he had personally fabricated exchange data entries and embezzled millions of dollars for his own account. </p> <p>As a reminder, when it filed for bankruptcy in February 2014, Mt. Gox said 750,000 customer bitcoins and another 100,000 belonging to the exchange were stolen due to a software security flaw. The lost funds represented the equivalent of $480 million at the time of the bankruptcy filing. Mt. Gox also said more than $27 million was missing from its Japanese bank accounts. Karpeles, who had blamed hackers for the loss, later said he had recovered 200,000 of the lost bitcoins.</p> <p>Earlier today we got the answer when nearly 18 months after his infamous apology, Mark Karpeles was arrested in Tokyo. FT reports that Japanese police have arrested Mark Karpelès, the head of the bankrupt Japan-based bitcoin exchange Mt Gox. The arrest charge is that he made an illegal entry to the system in February 2013 and increased the balance of his account by $1 million. </p> <p>And yet, a year and a half after the exchange insolvency, nobody truly knows what happened:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The alleged crimes involved are hard to pin down, say police sources, because of the absence of a specific laws governing the virtual currency. <strong>Police have acknowledged privately that there technical elements of the alleged disappearance of nearly $500m that “are still not properly understood</strong>”. </p> <p>&nbsp;</p> <p>Asked by Mt Gox to look into the matter in March Last year, the Tokyo Metropolitan Police were not able to begin their investigation until three months later. Even then, say people close to the investigation, the two police departments in charge — the cyber crime unit and the white-collar crime unit — did not properly share information.</p> <p>&nbsp;</p> <p>The year long investigation, say legal experts, has culminated in an arrest that will allow police to hold Mr Karpelès without charge for 23 days. If he continues to deny any wrongdoing during that time, police may alter the charge, and hold him for another 23 days.</p> </blockquote> <p>While Karpeles may very well be guilty of embezzlement and massive fraud against his clients, could it be the still undetermined "crimes" relating to a virtual currency will become just the excuse to keep unsavory suspects detained and/or under arrest for an indefinite period of time? Because being held for <em>up to 46 days </em>without any charge seems a little <em>Guantanamoish</em>.</p> <p>As the FT adds, "the case has exposed both the complexities of crime relating to the bitcoin virtual currency, and the profound difficulties encountered by the Japanese police as they have attempted to investigate the Mt Gox."</p> <p>Seemingly the complexity was not <strong>as big </strong>as that encountered by US regulators and police who 7 years after the greatest criminal systemic collapse, and after the statute of limitations has now expired, have yet to arrest anyone for a multi-trillion systemic crime far greater than Karpeles' $500 million embezzlement.</p> <p>As for the former Mt. Gox head, today's arrest will hardly come as a surprise as it was expected for over two weeks: Japanese journalists had been encamped outside his Tokyo home for several days. Footage of him being led from his home to a police car showed Mr Karpelès wearing a T-shirt and a baseball cap.</p> <blockquote class="twitter-tweet" lang="en"><p dir="ltr" lang="en">Mt. Gox bitcoin firm head arrested - The Japan News <a href="http://t.co/t4xFsyCsNy">http://t.co/t4xFsyCsNy</a><br /> <a href="https://twitter.com/hashtag/mtgox?src=hash">#mtgox</a> <a href="https://twitter.com/hashtag/Bitcoin?src=hash">#Bitcoin</a> <a href="https://twitter.com/hashtag/%E3%83%93%E3%83%83%E3%83%88%E3%82%B3%E3%82%A4%E3%83%B3?src=hash">#??????</a> <a href="http://t.co/A2M8Lyz7px">pic.twitter.com/A2M8Lyz7px</a></p> <p>— The Japan News (@The_Japan_News) <a href="https://twitter.com/The_Japan_News/status/627450109467365376">August 1, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p>Mr Karpelès could, if found guilty, face up to five years in prison or a fine of as much as Y500,000<strong> which at today's exchange rate is just over $4000. </strong></p> <p>So let's do the math: steal $500 million which only you know where it is, spend 5 years in prison, and be fined $5000. Sounds like a pretty good deal...</p> <p>Anyone curious for more, there was an AMA this morning with a person representing to be Ashley Barr, the first Mt. Gox employee which gives more insight into Karpeles various pathologies. <a href="http://www.reddit.com/r/Bitcoin/comments/3fe92x/im_ashley_barr_aka_adam_turner_the_first_mtgox/">It can be found here</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="603" height="494" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/Karpeles.jpg?1438447388" /> </div> </div> </div> http://www.zerohedge.com/news/2015-08-01/head-collapsed-mtgox-exchange-arrested-after-half-billion-bitcoin-still-unaccounted#comments Bitcoin Japan Twitter Twitter Sat, 01 Aug 2015 16:49:10 +0000 Tyler Durden 510910 at http://www.zerohedge.com Greece May Miss ECB Payment As Germany Says Bailout Timeline Is Unrealistic http://www.zerohedge.com/news/2015-08-01/greece-may-miss-ecb-payment-germany-says-bailout-timeline-unrealistic <p>Greek PM Alexis Tsipras won a hard fought victory over party rivals on Thursday when Syriza’s central committee voted to postpone an emergency congress until after formal discussions on the country’s third bailout program are complete.&nbsp;</p> <p>Syriza has been grappling with bitter infighting since more than 30 MPs in Tsipras’ parliamentary coalition defected during a vote on the first set of bailout prior actions, forcing the PM to rely on opposition votes to clear the way for formal discussions with creditors. The party dispute was exacerbated by reports that ex-Energy Minister and incorrigible Grexit proponent Panayiotis Lafazanis (along with several Left Platform co-conspirators) planned to storm the Greek mint and seize the country’s currency reserves.&nbsp;</p> <p>Fed up, Tsipras told 200 members of Syriza’s central committee on Thursday that essentially, they could either hold a party referendum on the bailout on Sunday or wait until September to sort things out, leading us to note that "were Syriza to vote on whether or not Greece should follow through on the agreement with creditors, the market could be in for an event that is far more dramatic and important than the original referendum."&nbsp;</p> <p>Lafazanis refused to go along with the idea.<strong> "How many referenda are we going to hold? We’ve already done one and we won with 62 per cent of the vote", he said. </strong>Ultimately, the party approved a September congress. This gives Tsipras some "breathing space," <a href="http://www.ft.com/intl/cms/s/0/bef98f44-36ab-11e5-bdbb-35e55cbae175.html">FT notes</a>, "but Thursday’s highly charged debate signalled that the Left Platform, which supports an end to austerity and a 'Grexit' from the euro, would continue to oppose a fresh bailout."</p> <p>And the party’s radical leftists aren’t alone in their opposition to the third program for Athens. On Thursday, <a href="http://www.zerohedge.com/news/2015-07-30/lagarde-says-no-imf-aid-greece">FT reported</a> that according to "strictly confidential" minutes from the IMF’s Wednesday board meeting, the Fund will not support the new bailout until the debt relief issue is decided and until it’s clear that Greece "has the institutional and political capacity to implement economic reforms."</p> <p>Somehow, all of this must be worked out in the next three weeks. Greece must make a €3.2 billion payment to the ECB on August 20 and if the bailout isn’t in place by then, it's either tap the remainder of the funds in the EFSM (which would require still more discussions with the UK and other decidedly unwilling non-euro states) or risk losing ELA which would trigger the complete collapse of not only the Greek economy but the banking sector and then, in short order, the government. The question is whether Germany can be reasonably expected to take it on faith that i) the Greek political situation will not eventually result in Athens walking back its austerity promises, and ii) that the IMF will eventually hold up its end of the deal once Berlin approves some manner of debt re-profiling for the Greeks.&nbsp;</p> <p>Now, <a href="http://www.focus.de/finanzen/news/staatsverschuldung/griechenland-krise-zeitplan-nicht-zu-halten-berlin-sieht-athen-hilfen-in-gefahr_id_4853359.html">according to Focus magazine</a>, there are questions as to whether the timetable for cementing the bailout agreement is realistic. German lawmakers may now have to postpone a Bundestag vote and Athens has already discussed the possibility of taking a second bridge loan from the EFSM, Focus says. Here’s more (Google translated):</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>The timetable for the negotiations on a third aid package in favor of Greece is to look for an internal assessment of the federal government any more. According to the already contemplated for mid-August special session of the German Bundestag must be moved, according to government sources in Berlin.</em></p> <p>&nbsp;</p> <p><strong><em>The objective pursued by the EU Commission scheduling is too closely knit, criticize experts.This was reported in its latest issue of FOCUS.</em></strong></p> <p>&nbsp;</p> <p><em>Accordingly, the negotiations should be completed before August 10.On August 11, the euro zone finance ministers would approve the results before the agreement of other euro countries ratified and approved by the Parliament in Athens.Also, the Bundestag must still approve.</em></p> <p>&nbsp;</p> <p><em>Due to delay Greece threatens a serious cash problem.The government in Athens must, at the latest on August 20, 3.2 billion euros, the European Central Bank to transfer (ECB), which should be possible without new loans from the third aid package barely.</em></p> <p>&nbsp;</p> <p><strong><em>Therefore already searched in circles of the EU Commission for ways to temporarily raise money from another pot. Speaking here a renewed bailout from the European Financial Stabilisation Mechanism is (EFSM)</em></strong></p> <p>&nbsp;</p> <p><em><strong>This is difficult, however, because the EU states will again require an indemnity outside the euro-zone in this case.</strong> As early as September Greece must further loans operate: The International Monetary Fund (IMF) then expected repayments totaling € 1.56 billion in four tranches.In addition, running on 4 September from short-term government bonds in the amount of 1.4 billion euros, which Greece must also refinance.</em></p> </blockquote> <p>And here’s the summary from Bloomberg:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em><strong>German parliament meeting that was considered for mid-August might have to be postponed as European Commission’s schedule for aid talks is "much too tight," </strong>Focus magazine reports, citing unidentified people in German govt.</em></p> <p>&nbsp;</p> <p><em>Greece has to pay EU3.2b to the ECB by Aug. 20, which it may not be able to do without third aid package.</em></p> </blockquote> <p>In other words, Greece will likely need <strong>yet another bridge loan</strong> from the EFSM and that will once again require the approval of non-euro countries that will, for the second time in a month, be asked to put their taxpayers at risk in order to keep the ill-fated EMU project alive and preserve the now thoroughly discredited notion that the currency union is "indissoluble."&nbsp;</p> <p>And make no mistake, Greece and its EMU "partners" had better hope things go smoothly after August because one more bridge loan and the EFSM is tapped out, which means Brussels will have to devise some other circular funding mechanism in the event the third program (which is itself nothing more than a dressed up ponzi scheme) isn't in place by September.&nbsp;</p> <p>Or, summarized in one picture:</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/07/Tsipras_0.png" width="572" height="325" /></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="572" height="325" alt="" src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/Tsipras_17.png?1438444421" /> </div> </div> </div> http://www.zerohedge.com/news/2015-08-01/greece-may-miss-ecb-payment-germany-says-bailout-timeline-unrealistic#comments Creditors European Central Bank Germany Google Greece International Monetary Fund Sat, 01 Aug 2015 16:00:45 +0000 Tyler Durden 510908 at http://www.zerohedge.com German Government Launches Investigation of Journalists for Treason http://www.zerohedge.com/news/2015-08-01/german-government-launches-investigation-journalists-treason <p><em><a href="http://libertyblitzkrieg.com/2015/07/31/history-is-repeating-german-government-launches-investigation-of-journalists-for-treason/">Submitted by Mike Krieger via Liberty Blitzkrieg blog</a>,</em></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>If it were up to the Federal Attorney General and the President of the German Domestic Security Agency, two of our reporters would soon be in prison for at least two years. Today, we were officially informed about investigations against our Markus Beckedahl, Andre Meister and an unknown“ party. The accusation: Treason.</em></p> </blockquote> <p>– From Netzpolitik.org: &nbsp;Suspicion of Treason“: Federal Attorney General Announces Investigation Against Us In Addition To Our Sources</p> <p>Widespread outrage across Germany is erupting following the revelation that the nation’s Attorney General has launched an investigation into treason charges for two journalists working for Netzpolitik.</p> <p>The charge is treason. The crime is journalism.</p> <p>We learn from <a href="http://www.theguardian.com/world/2015/jul/31/german-government-accuses-news-website-of-treason-over-leaks">The Guardian</a> that:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>Germany has opened a treason investigation into a news website a broadcaster said had reported on plans to increase state surveillance of online communications.</em></p> <p>&nbsp;</p> <p><em>German media said it was the first time in more than 50 years journalists had faced treason charges, and some denounced the move as an attack on the freedom of the press.</em></p> <p>&nbsp;</p> <p><em>“The federal prosecutor has started an investigation on suspicion of treason into the articles … published on the internet blog Netzpolitik.org,” a spokeswoman for the prosecutor’s office said.&nbsp;</em></p> <p>&nbsp;</p> <p><em>The public broadcaster ARD reported Netzpolitik.org had published an article on how the BfV was seeking extra funding to increase its online surveillance, and another about plans to set up a special unit to monitor social media, both based on leaked confidential documents.</em></p> <p>&nbsp;</p> <p><em>"This is an attack on the freedom of the press," Netzpolitik.org journalist Andre Meister, targeted by the investigation along with editor-in-chief Markus Beckedahl, said in a statement. "We’re not going to be intimidated by this."</em></p> </blockquote> <p>Cory Doctorow at <a href="http://boingboing.net/2015/07/31/german-prosecutors-give-spies.html">Boing Boing</a> accurately notes the shadiness and hypocrisy of it all:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong><em>The German prosecutors who dropped all action against the US and UK spy-agencies who trampled German law and put the whole nation, up to and including Chancellor Angela Merkel, under surveillance, have decided instead to open an investigation into the bloggers at Netzpolitik, who revealed the wrongdoing.</em></strong></p> <p>&nbsp;</p> <p><strong><em>Netzpolitik are an important source of independent news, analysis and campaigning for privacy and freedom in Germany. This is a genuinely shameful moment for the nation. We stand with Netzpolitik and its supporters around the world.</em></strong></p> </blockquote> <p>While this is horrible news, there is a silver lining. The main reason the German government feels a need to go overtly fascist, is because they are scared shitless. They are scared of the truth, of the light and of their own citizens. Such a corrupt and compromised government can’t last very long.</p> <p>Additionally, we should commend the bravery of the journalists involved. As reported <a href="https://firstlook.org/theintercept/2015/07/31/german-journalists-investigated-treason-publishing-surveillance-leaks/">by the Intercept</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>Asked if Netzpolitik would continue to report using materials gained from whistleblowers, Meister replied, "That’s our job, so of course we will continue to report about publicly relevant information, which obviously includes information from whistleblowers from state and private entities. As a matter of fact, just [yesterday] we have exposed the new ‘cyber strategy’ of the German Federal Military ‘Bundeswehr’ about offensive cyber attacks."</em></p> <p>&nbsp;</p> <p><em>"If anything, all the support is showing that we must be doing the right thing, so we will continue what we do and maybe even step up the pace. … To paraphrase a Google engineer after yet another NSA leak: 'Fuck those guys!'"</em></p> </blockquote> <p>Bravo. These guys deserve our complete and total support.</p> <p>* &nbsp;* &nbsp;*</p> <p>For related articles, see:</p> <p><a href="http://libertyblitzkrieg.com/2014/09/25/standard-poors-warns-on-germany-as-anti-euro-political-party-soars-in-popularity/">Standard &amp; Poor’s Warns on Germany as Anti-Euro Political Party Soars in Popularity</a></p> <p><a href="http://libertyblitzkrieg.com/2014/06/19/video-of-the-day-end-the-fed-rallies-are-exploding-throughout-germany/">Video of the Day – "End the Fed" Rallies are Exploding Throughout Germany</a></p> <p><a href="http://libertyblitzkrieg.com/2013/06/07/martin-luther-king-everything-adolf-hitler-did-in-germany-was-legal/">Martin Luther King: "Everything Adolf Hitler did in Germany was Legal"</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="191" height="177" alt="" src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/Facism.png?1438440785" /> </div> </div> </div> http://www.zerohedge.com/news/2015-08-01/german-government-launches-investigation-journalists-treason#comments Germany Google Sat, 01 Aug 2015 15:14:00 +0000 Tyler Durden 510907 at http://www.zerohedge.com Chinese Company Replaces Humans With Robots, Production Skyrockets, Mistakes Disappear http://www.zerohedge.com/news/2015-08-01/chinese-company-replaces-humans-robots-production-skyrockets-mistakes-disappear <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>"I believe that anyone who has a job and works full time, they should be able to pay the things that sustain life: food, shelter and clothing. I can't even do that."</em></p> </blockquote> <p>That rather depressing quote is from 61-year old Rebecca Cornick. She’s a grandmother and a 9-year Wendy’s veteran who spoke to <a href="http://www.cbsnews.com/news/debate-over-minimum-wage-increase-heats-up/">CBS News</a>. Rebecca makes $9 an hour and her plight is representative of fast food workers across the country who are campaigning for higher pay.&nbsp;</p> <p>The fast food worker pay debate is part of a larger discussion as "states and cities across the country [wrestle] with the idea of raising the minimum wage," CBS <a href="http://www.cbsnews.com/news/debate-over-minimum-wage-increase-heats-up/">notes</a>, adding that "right now, 29 states have minimums above the federal $7.25 an hour [and] four cities, including Los Angeles, have doubled their minimum to $15."</p> <p>Proponents of raising the pay floor argue that it’s simply not possible to live on minimum wage and indeed, there’s <a href="http://www.zerohedge.com/news/2015-05-22/no-state-can-minimum-wage-worker-afford-one-bedroom-apartment">plenty of evidence</a> to suggest that they’re right. Opponents say forcing employers to pay more will simply mean that companies will fire people or stop hiring and indeed, as <a href="http://www.zerohedge.com/news/2015-07-31/economics-101-wal-mart-hikes-minimum-wages-prepares-fire-1000">we highlighted on Friday</a>, it looks as though WalMart’s move to implement an across-the-board pay raise for its low-paid workers may have contributed to a decision to layoff around 1,000 people at its home office in Bentonville.&nbsp;</p> <p>"The reality is that most business are not going to pay $15 dollars an hour and keep their doors open," one Burger King franchisee told CBS. "It just won't happen. The economics don't work in this industry. There is a limit to what you're going to pay for a hamburger."&nbsp;</p> <p>Yes, there’s only so much people will pay for a hamburger which is why Ronald McDonald has made an executive decision to hire more efficient employees at some locations:</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/07/LovinIt.png" width="514" height="334" /></p> <p>With all of that in mind, consider the following from TechRepublic who tells the story of Changying Precision Technology Company, which has replaced almost all of its human employees with robots to <a href="http://www.techrepublic.com/article/chinese-factory-replaces-90-of-humans-with-robots-production-soars/">great success</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong><em>In Dongguan City, located in the central Guangdong province of China, a technology company has set up a factory run almost exclusively by robots, and the results are fascinating.</em></strong></p> <p>&nbsp;</p> <p><em>The Changying Precision Technology Company factory in Dongguan has automated production lines that use robotic arms to produce parts for cell phones.&nbsp;</em></p> <p>&nbsp;</p> <p><em>The factory also has automated machining equipment, autonomous transport trucks, and other automated equipment in the warehouse.</em></p> <p>&nbsp;</p> <p><em>There are still people working at the factory, though. Three workers check and monitor each production line and there are other employees who monitor a computer control system.<strong> Previously, there were 650 employees at the factory. With the new robots, there's now only 60. Luo Weiqiang, general manager of the company, told the People's Daily that the number of employees could drop to 20 in the future.</strong></em></p> <p>&nbsp;</p> <p><em>The robots have produced almost three times as many pieces as were produced before. According to the People's Daily, <strong>production per person has increased from 8,000 pieces to 21,000 pieces. That's a 162.5% increase.</strong></em></p> <p>&nbsp;</p> <p><em>The increased production rate hasn't come at the cost of quality either.<strong> In fact, quality has improved. Before the robots, the product defect rate was 25%, now it is below 5%</strong>.</em></p> </blockquote> <p>So to anyone planning on picketing the local McDonald’s in an attempt to secure a 70% wage hike, be careful, because this "guy" is ready to work, doesn’t need breaks, and never makes a mistake:</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/07/Robot.png" width="402" height="424" /></p> <p>Let’s just hope he doesn’t become self aware.</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="402" height="240" alt="" src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/RobotTeaser.png?1438437164" /> </div> </div> </div> http://www.zerohedge.com/news/2015-08-01/chinese-company-replaces-humans-robots-production-skyrockets-mistakes-disappear#comments China Reality Sat, 01 Aug 2015 14:30:54 +0000 Tyler Durden 510899 at http://www.zerohedge.com Don't Exaggerate Significance of SNB's Loss http://www.zerohedge.com/news/2015-08-01/dont-exaggerate-significance-snbs-loss <p>&nbsp;</p> <p>The Swiss National Bank reported a record CHF50.1 bln loss. It has got the chins wagging, but the real implications are minor. &nbsp;The losses are not realized and are unlikely to be repeated. &nbsp;In fact, if the SNB's report had covered the month of July, the loss would likely have been smaller. &nbsp;</p> <p>&nbsp;</p> <p>More of the SNB's loss stemmed from the valuation of its foreign currency holdings in the face of franc appreciation, especially after the cap was abandoned in mid-January. &nbsp;Here in July the franc fell nearly 3% against the US dollar and about 1.3% against the euro. &nbsp;These two currencies account for nearly 3/4 of the SNB's reserves. &nbsp;The franc fell 2% against sterling and 1.5% against the yen. &nbsp;These four currencies together account for nearly 90% of the reserves. &nbsp;</p> <p>&nbsp;</p> <p>It addition to the currency valuation markdown, the SNB reported a CHF3.2 bln euro loss on its gold holdings. &nbsp; Gold lost another 5% in July in franc terms. &nbsp;These losses reduce the SNB's equity to CHF3.425 bln, which amounts to just shy of 6% of its assets.&nbsp;</p> <p>&nbsp;</p> <p>There are two implications, and they have nothing to do with the solvency of the Swiss National Bank. &nbsp;The first implication, and one that central banks are sensitive to is reputational risk. &nbsp;If the central bank losses money, doesn't it undermine its credibility to manage the country's economy? &nbsp;While it is difficult to show that the SNB's reputation has been harmed, its performance provides its critics with fodder.&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;Switzerland's parliamentary election will be held in mid-October. &nbsp;These losses allow for a politicalization of monetary policy that may not be particularly helpful. &nbsp;A couple of parliamentarians are pressing the SNB to adopt a new cap for the franc (euro floor) at CHF1.15. &nbsp; While this is highly unlikely to be implemented, it illustrates the frustration with the franc's appreciation.&nbsp;</p> <p>&nbsp;</p> <p>The SNB appears to have been given a free pass on its effort to stem the rise of the franc. &nbsp;In 2013, Switzerland's current account surplus was 10.7% of GDP. &nbsp;Last &nbsp;year, it fell back to 7%. &nbsp;The OECD expects its to be 10.1% of GDP this year and 10.5% next year. &nbsp; Countries with such substantial surpluses often come under international pressure to reduce the imbalance. &nbsp;</p> <p>&nbsp;</p> <p>However, a closer inspection of the Swiss current account composition suggests that it is not particularly sensitive to currency appreciation. &nbsp;There are three main drivers of the Swiss current account surplus and trade is not one of them. &nbsp;</p> <p>&nbsp;</p> <p>First, the largest contributor is from investment income. &nbsp;These are mostly coupon and dividends on foreign portfolio investment. &nbsp;In this context we note Japan is evolving in the same direction. &nbsp;Its investment income often overwhelms the trade balance on the current account. &nbsp;</p> <p>&nbsp;</p> <p>Second, financial services are important but are not driven by currency fluctuations. &nbsp;Third, officials point to what is called "merchanting." &nbsp;It is the sales of goods that do not cross Swiss borders. &nbsp;This arises primarily from the commodity trading businesses that are located in Switzerland. &nbsp;This activity can account for 1/4-1/3 of the Swiss current account surplus.&nbsp;</p> <p>&nbsp;</p> <p>The other implication of the SNB's loss is that it may be unable to make its customary payout to the federal government and cantons. &nbsp;Some cantons depend on payment from the SNB to reach their fiscal targets. &nbsp;The failure to make a payment in 2013 due to the fall in gold saw criticism heaped on the central bank.&nbsp;</p> <p>&nbsp;</p> <p>The record loss of the SNB is embarrassing, and it gives its critics fresh ammunition ahead of the national election. &nbsp;It could squeeze the finances of a few cantons, but it already has distributed CHF1 bln earlier this year based on last year's profits. &nbsp;Its losses, largely an accounting function and not realized, is of little economic or financial consequence.&nbsp;</p> <div class="field field-type-filefield field-field-image-blog"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_blog" width="320" height="240" alt="" src="http://www.zerohedge.com/sites/default/files/images/user113905/imageroot/Swiss-National-Bank.jpg?1438438066" /> </div> </div> </div> http://www.zerohedge.com/news/2015-08-01/dont-exaggerate-significance-snbs-loss#comments Central Banks Japan Monetary Policy Swiss National Bank Switzerland Trade Balance Yen Sat, 01 Aug 2015 14:07:51 +0000 Marc To Market 510898 at http://www.zerohedge.com Near-Term Dollar Outlook http://www.zerohedge.com/news/2015-08-01/near-term-dollar-outlook <p>The unexpectedly record low increase in Q2 US Employment Cost Index unwound the some of the dollar's weekly gains and neutralized the near-term technical outlook. &nbsp;Next week's nonfarm payrolls are still critical, and the weakness may put even greater burden on the jobs data to demonstrate that slack is indeed being absorbed. &nbsp;</p> <p>&nbsp;</p> <p>The Dollar Index was poised to challenge the three-month high set on July 21 near 98.15, but the sell-off following the ECI report reversed the gains scored on the back of the FOMC statement and Q2 GDP (and upward revision in Q1). &nbsp; The five-day moving average barely crossed below the 20-day average for the first time since late-June. &nbsp;It did not close below 96.40 (a retreacement objective and 100-day moving average), but instead finished the week and month near the middle of the 96.00-98.00 trading range. &nbsp;</p> <p>&nbsp;</p> <p>The euro's five-day moving crossed above the 20-day average a day before the FOMC statement. &nbsp;After the Q2 GDP data and a threat that the Greek government would collapse saw the euro briefly trade below $1.09. &nbsp;It rebounded with the help of month-end demand and signs that the Greek government will survive until at least September. &nbsp;Before the weekend, nearly covered the entire week's range. &nbsp; Both the RSI and MACDs are consistent with a further push higher in the euro, but how fast it reversed the pre-weekend gains, and the relatively soft close suggests the bears are still in control. &nbsp;Initial support is seen near $1.0950. &nbsp;It may require greater confidence of a September rate hike before the $1.08 level can be breached. &nbsp; &nbsp;&nbsp;</p> <p>&nbsp;</p> <p>The dollar was pushing above JPY124.50, the upper end of its range since mid-June and was stopped cold by the disappointing ECI. &nbsp;The fact that Japan's CPI excluding food and energy rose to 0.6% also discourage ideas that the BOJ the needs to provide additional stimulus. Support for the dollar is seen in the JPY123.00-JPY123.30 area. &nbsp; A break that could signal a move into the JPY122.00-JPY122.50 &nbsp;band.&nbsp;</p> <p>&nbsp;</p> <p>Since the middle of July, sterling has tried and failed to rise above $1.5700 a handful of times. &nbsp;The technical indicators suggest the bulls may have been luck next week. &nbsp;The BOE meeting is expected to see 2-3 hawkish dissents to what is anticipated to be a majority decision to keep policy on hold. &nbsp;The minutes and the inflation report, with an update in macro-forecasts will be announced at the same time. &nbsp; Before the weekend, sterling traded on both sides of Thursday's range. &nbsp;Even though it finished the week at its highest close in two week, it was still neutral. &nbsp;A move above $1.57 would encourage a run toward $1.5800. &nbsp; Support is seen in the $1.5540-$1.5560.&nbsp;</p> <p>&nbsp;</p> <p>The Australian dollar nearly posted a potential key reversal before the weekend by making fresh multi-year lows (~$0.7235) before rallying to new highs for the week (almost $0.7370), but like sterling, the close was neutral. &nbsp;The 20-day moving average is found near $0.7380, and the Aussie has not closed above this average since June 25. &nbsp;It also roughly corresponds with the top end of a near-term down channel. &nbsp; There is a bullish divergence in the RSI, and the MACDs are turning higher. &nbsp;The market may be poised test the downtrend line drawn off May, June and July highs. It is found near comes in near $0.7420 by the end of next week. &nbsp;If the RBA cuts rates next week, especially given that it would surprise participants, the modestly positive technical developments would likely be negated. &nbsp;</p> <p>&nbsp;</p> <p>News that the Canadian economy unexpectedly contracted in May sent the Canadian dollar lower. &nbsp;This was partly masked by US dollar weakness. &nbsp;The greenback failed to take out the July 24 multi-year high just above CAD1.3100. &nbsp;The US dollar closed on its highs, however, and additional near-term gains are likely. &nbsp; The next important technical target is some distance away at CAD1.3450. &nbsp;Support is seen near CAD1.2940. &nbsp;</p> <p>&nbsp;</p> <p>The September light crude futures contract has fallen for seven consecutive weeks. &nbsp;It has consistently recorded lower highs and lower lows. &nbsp;The MACDs are trying to turn, but the RSI has drifted lower. &nbsp;Initial support is seen near $46.70 and then $45. &nbsp; Resistance is seen near $50.&nbsp;</p> <p>&nbsp;</p> <p>The fact that the US 10-year yield was little changed on the week masks the 12 bp increase seen in the first four sessions last week. &nbsp;Yields reversed lower on Thursday, and the weak ECI on Friday, pushed the 10-year yield below 2.20% for the first time since July 7-9, which itself was the first time since the beginning of June. &nbsp; Although the 2.0% level is more significant, yields may find support near 2.08%-2.14%. &nbsp; The 2.30% area likely represents the near-term cap.&nbsp;</p> <p>&nbsp;</p> <p>The S&amp;P 500 flirted with the 200-day moving average at the start of the week. &nbsp;By the end of the week, it was about 2.5% above the lows set on Monday. Nevertheless, the close before the weekend was poor, on session lows. &nbsp; &nbsp;Over the past three months, buying interest has dried up near 2130. &nbsp;The S&amp;P 500 has been in a broad 2040-2135 range since early February. &nbsp;It is not clear what is going to drive it out of that range.&nbsp;</p> <p>&nbsp;</p> <p>Observations based on the speculative positioning in the futures market: &nbsp;</p> <p>&nbsp;</p> <p>1. &nbsp;There were no significant (more than 10k contracts) adjustments to gross speculative currency positioning in the CFTC reporting week ending July 28. &nbsp;The run-up to the FOMC meeting may have deterred activity. &nbsp;</p> <p>&nbsp;</p> <p>2. &nbsp;A clear pattern was speculators to reduce short euro, yen and sterling positions, and expand the short position in the other currencies. &nbsp;Similarly, speculators cut gross long Australian and Canadian dollar futures.</p> <p>&nbsp;</p> <p>3. &nbsp;The divergence of monetary policy, which we argue is the key driver, also benefits sterling, where the BOE is also expected to raise rates. &nbsp;The net short sterling position is the smallest since last November. &nbsp;We would not be surprised if it turned positive in the coming weeks. &nbsp;The net position in the Swiss franc is moving in the opposite direction. &nbsp;Speculators have been net long francs since mid-March. &nbsp;It is on the verge of turning short. &nbsp;</p> <p>&nbsp;</p> <p>4. The net short Canadian dollar position (56.1k contracts) is the largest since March 2014. &nbsp;It is likely to grow further. &nbsp;The net short Mexican peso position continues to grow, setting a new record each time it does. &nbsp;</p> <p>&nbsp;</p> <p>5. &nbsp;Speculators turned to a net long US 10-year Treasury futures position in the previous reporting week and grew it further over the past week to stand at 65.6k contracts. &nbsp;The bulls added 31.9k contracts, lifting the gross long position to 491.5k contracts. &nbsp;The bears covered 6.3k short contracts, leaving 425.9k.</p> <p>&nbsp;</p> <p>6. Bulls and bears added to gross positioning the light sweet crude oil futures. &nbsp;The gross longs rose by 11.6k contracts to 476k. &nbsp;The gross shorts increased 21.9k contracts to 232.6. &nbsp;This resulted in a 10.3k contract reduction in the net long position, leaving 243.4k contracts. &nbsp;</p> <div class="field field-type-filefield field-field-image-blog"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_blog" width="400" height="269" alt="" src="http://www.zerohedge.com/sites/default/files/images/user113905/imageroot/cat%20reading.jpg?1438437562" /> </div> </div> </div> http://www.zerohedge.com/news/2015-08-01/near-term-dollar-outlook#comments Aussie Australian Dollar BOE Canadian Dollar CPI Crude Crude Oil Futures market Monetary Policy Swiss Franc Technical Indicators Yen Sat, 01 Aug 2015 13:59:29 +0000 Marc To Market 510897 at http://www.zerohedge.com Osama bin Laden Sister, Stepmother Killed In Private Jet Crash http://www.zerohedge.com/news/2015-08-01/osama-bin-laden-sister-stepmother-killed-private-jet-crash <p>Last October, when we first read about the crash of a business jet on take off in Russia's Vnukovo airport, we didn't think much about it, until a few hours later it was revealed that the <a href="http://www.zerohedge.com/news/2014-10-20/anti-petrodollar-ceo-french-energy-giant-total-dies-freak-plane-crash-moscow">main passenger on the plane was none </a>other than Christophe de Margerie, CEO of Europe's second largest oil producer, Total. Margerie had risen quickly to prominence in geopolitical circles three months earlier when in July 2014 he uttered the heretical phrase: "<strong>There is no reason to pay for oil in dollars</strong>", suggesting that the Petrodollar's reign at the top of global reserve currencies was coming to an end. </p> <p>Three months later the CEO died on takeoff. </p> <p>Likewise yesterday morning when we read reports that a 2010 Embraer Phenom 300 private jet, with a Saudi Registration HZ-IBN, crashed at a car auction site in Hampshire, we didn't think much of it. </p> <blockquote class="twitter-tweet" lang="en"><p dir="ltr" lang="en">Aircraft involved in <a href="https://twitter.com/hashtag/Blackbushe?src=hash">#Blackbushe</a> accident was a 2010 Embraer EMB-505 Phenom 300, Saudi registration HZ-IBN <a href="http://t.co/k1CiRmbGWD">pic.twitter.com/k1CiRmbGWD</a></p> <p>— AviationSafety (@AviationSafety) <a href="https://twitter.com/AviationSafety/status/627177473424408577">July 31, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p>The jet was attempting to land at Blackbushe Airport near London when it crashed on to dozens of cars and burst into flames on Friday afternoon. </p> <p>As <a href="http://www.rt.com/uk/311278-plane-crash-hampshire-aircraft/">reported by RT</a>, Daphne Knowles, 70, told local reporters he was in a field with cattle when he heard an aircraft “coming very, very fast from behind me.” “Two people said they thought it had to swerve to miss another aircraft as it went in, but I didn’t see that myself and can’t confirm, then there was a huge black cloud of smoke which went up.” Knowles said it appeared the aircraft “tried to land at Blackbushe having travelled northwards.”</p> <blockquote class="twitter-tweet" lang="en"><p dir="ltr" lang="en">Small plane crashed into car auction at Blackbushe airport <a href="http://t.co/lxHLF76WIf">pic.twitter.com/lxHLF76WIf</a></p> <p>— Nathan Greenwood (@NathanGFilm) <a href="https://twitter.com/NathanGFilm/status/627126194660614144">July 31, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p>Just like one year ago, the reason for the importance of the crash was made apparent only hours later.&nbsp;</p> <blockquote class="twitter-tweet" lang="en"><p dir="ltr" lang="en">Very sad people died please remember that and im not interested in selling rights its not right please no more offers <a href="http://t.co/7UafZDqNdH">pic.twitter.com/7UafZDqNdH</a></p> <p>— Tubman Thomas (@tubman89) <a href="https://twitter.com/tubman89/status/627137371969036288">July 31, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet" lang="en"> <p dir="ltr" lang="en">URGENT: Light aircraft crash at car auction at Blackbushe Airport, firefighters at the scene (video by <a href="https://twitter.com/tubman89">@tubman89</a>)<br /> <a href="https://t.co/dSDLhaY85o">https://t.co/dSDLhaY85o</a></p> <p>— RT UK (@RTUKnews) <a href="https://twitter.com/RTUKnews/status/627141664855883779">July 31, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p>Shortly after the crash, reports in UK media outlets, including the Daily Mail and Mirror, alleged that the $11 million jet was owned by Jeddah-based Salem Aviation, a company named after Osama bin Laden’s elder cousin, who himself was an amateur pilot and died in a plane crash. Among the other casualties: Osama bin Laden's sister and stepmother. </p> <p>And indeed, the <a href="http://www.ft.com/intl/cms/s/0/50a6d104-3832-11e5-8613-07d16aad2152.html#axzz3hZJkmr1w">FT itself confirmed </a>that on board the plane at the time of the crash were relatives of none other than al-Qaeda founder, Osama bin Laden. "<strong>Saudi ambassador to the UK, Prince Mohammed bin Nawaf Al Saud, offered his condolences to the large and wealthy Bin Laden family, who own a major construction company in Saudi Arabia."</strong></p> <p>The statement, translated by the BBC, said: “His Royal Highness Prince Mohammed bin Nawaf Al Saud&thinsp;.&thinsp;.&thinsp;.<strong>&thinsp;has paid his condolences to the family and relatives of Mohammed bin Laden at Blackbushe Airport in Britain for the great loss they have suffered as a result of the crash of the plane that was carrying the family</strong>.”</p> <p>The Saudi Embassy in London also confirmed the identities of the two notable passengers:</p> <blockquote class="twitter-tweet" lang="en"><p dir="ltr" lang="en"><a href="https://twitter.com/hashtag/Saudi?src=hash">#Saudi</a> Emb in London confirms Osama Bin <a href="https://twitter.com/hashtag/Laden?src=hash">#Laden</a> stepmother &amp; his sister among 4 dead in plane crash in Blackbushe<br /> <a href="https://t.co/QBnpsSxcfY">https://t.co/QBnpsSxcfY</a></p> <p>— SaadAbedine (@SaadAbedine) <a href="https://twitter.com/SaadAbedine/status/627259056961404928">July 31, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p>The Phenom was reportedly returning from Milan and was attempting to land when it crashed. Blackbushe Airport issued a statement that the plane had crashed at the end of the runway while landing.</p> <blockquote class="twitter-tweet" lang="en"><p dir="ltr" lang="en">Sister &amp; stepmother of Osama Bin Laden reportedly killed in UK plane crash. <a href="http://t.co/Qtr3YlaDVh">http://t.co/Qtr3YlaDVh</a> <a href="http://t.co/qY5BGxhIG5">pic.twitter.com/qY5BGxhIG5</a></p> <p>— Jim Roberts (@nycjim) <a href="https://twitter.com/nycjim/status/627347967016615936">August 1, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p>What is especially curious is that the jet’s registration number, HZ-IBN, was used by Osama bin Laden’s father, Mohammed. who was also a victim of an aircraft accident, and used the same ID when he crashed in a small Beechcraft plane in 1967. </p> <p>The family is believed to have retained the number, and now there have been two fatal airplane crashes with the identical registration number, resulting in the death of even more family members of Osama bin Laden whose official death took place, according to the US government in 2011 when he was killed by US special forces in Pakistan's Abbottabad. Many members of the special forces team subsequently died under strange circumstances themselves.</p> <p>We are confident many will be curious to learn the reasons for the crash and the contents of the black box, whose unsealing we hope will be less of a tainted political farce than what happened one year ago with the "black box" discovery of the tragic MH-17 flight over east Ukraine.</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="900" height="500" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/saudi%20explosion.jpg?1438436406" /> </div> </div> </div> http://www.zerohedge.com/news/2015-08-01/osama-bin-laden-sister-stepmother-killed-private-jet-crash#comments None Private Jet Saudi Arabia Twitter Twitter Ukraine Sat, 01 Aug 2015 13:40:39 +0000 Tyler Durden 510896 at http://www.zerohedge.com