en 'Wealth' Creation In 1 Simple Chart <p>Explain...</p> <p>&nbsp;</p> <p><a href=""><img src="" width="600" height="338" /></a></p> <p>&nbsp;</p> <p><em>Chart: 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="898" height="506" alt="" src="" /> </div> </div> </div> Fri, 28 Nov 2014 17:27:43 +0000 Tyler Durden 498369 at Today's Dow - America In A Nutshell <p>All consumption... no production...</p> <p><em>Dow Jones Industrials points...</em></p> <p><a href=""><img src="" width="600" height="552" /></a></p> <p>&nbsp;</p> <p>*&nbsp; *&nbsp; *</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="704" height="648" alt="" src="" /> </div> </div> </div> Fri, 28 Nov 2014 16:59:33 +0000 Tyler Durden 498367 at As Japanese Bankruptcies Soar, Goldman Warns "Further Yen Depreciation Could Be A Net Burden" <p>It is no secret that one of the primary drivers of relentless S&amp;P 500 levitation over the past two years, ever since the start of Japan's mammoth QE, has been the use of the Yen as the carry currency of choice (once again as during the credit bubble of the early-2000s), whose shorting has directly resulted in E-mini levitation. One look at the intraday chart of any JPY pair and the S&amp;P500 is largely sufficient to confirm this. Those days, however, may be coming to an end, at least according to Goldman which overnight released a note saying that the Yen is "<strong>Almost at breakeven: Further yen depreciation could be a net burden."</strong></p> <p><em>Here are the highlights:</em></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The yen has depreciated quickly beyond ¥115/US$ from the ¥107/US$ level since the FOMC made the decision to terminate quantitative easing and the BOJ surprised with additional easing at the end of October. <strong>This has prompted concern over possible damage to Japan as a whole if the yen weakens further.</strong> </p> <p>&nbsp;</p> <p>Using industry input/output tables to investigate the costs and benefits of a weak yen, we find that the manufacturing sector still reaps forex translation gains under Japan’s current economic structure. <strong>However, in materials and nonmanufacturing industries that have limited opportunity to pass on forex-driven cost growth to exports, the costs of a weak yen far outweigh the benefits. According to our calculations, a 25% decline in the yen’s valueresults in a ¥4.1 tn net cost increase for Japanese industry as a whole since 2012 and a ¥10.5 bn increase in household sector import inducement</strong>. </p> <p>&nbsp;</p> <p>By contrast, the decline in commodity prices is a substantial relief. A 10% decline in commodity prices cancels out the increase in net cost borne by 14.5% yen depreciation. The 25% decline in commodity prices so far (oil price) offsets the net cost increase borne by 35% yen weakness. Calculating from the late 2012 rate of ¥78/US$, 35% depreciation works out to a rate of ¥120/US$. <strong>In other words, the combination of the oil price around US$80/bbl and the yen exchange rate of ¥120/US$ is just about at breakeven, netting out the benefit and cost of yen depreciation and oil price decline since Abenomics began.</strong> </p> <p>&nbsp;</p> <p>That said, our commodities research team sees limited scope for further decline in crude oil prices, while we expect the yen to depreciate further as the FRB and BOJ’s policies diverge. If further yen depreciation is not accompanied by real economic growth in the form of an export volume recovery and broad wage increases, and ends up merely producing forex translation gains, we believe it could very well place an increased burden on the Japanese economy as a whole. Needless to say, the cost burden will ease if the rapid decline in oil price over the last few days stabilizes at the low levels.</p> </blockquote> <p>Oddly enough, one can almost make the case that the collapse in crude price has been manufactured to allow Japan's QE to continue as long as possible. And yet, this is hardly comforting news to Japan's companies, which as shown in the chart below, are seeing a surge in bankruptcies unseen in recent history. This is how Goldman explains this:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>For the nonmanufacturing sector, yen depreciation means growth in net cost, increased burden for corporate and household sectors</strong> </p> <p>&nbsp;</p> <p>Nonmanufacturing industries export little. Most of the goods they produce are consumed domestically. Imported intermediate products used as raw materials in the nonmanufacturing sector amount to only ¥8.6 tn, but we estimate that depreciation-linked input cost is ¥40.3 tn as this includes electricity/gas used at retail stores and event spaces as well as fuel (oil) costs for transporting goods. Nonmanufacturing sector exports, meanwhile, amount to just ¥18.5 bn. A 25% decline in the yen’s value raises the input cost by ¥10.1 tn, but this far exceeds the additional export receipt of ¥4.6 tn, resulting in a net cost increase of ¥5.5 tn. This additional cost must be borne by the “domestic sector” in Japan—i.e., the corporate or household sector. </p> <p>&nbsp;</p> <p><strong>Keeping personnel costs in check is key for companies forced to bear increased costs due to yen depreciation. Personnel costs have a high weighting in the nonmanufacturing sector, and if the yen continues to weaken it will be difficult to continue raising wages unless sales rise commensurately with cost increases. </strong>Cost increases in the nonmanufacturing sector due to yen depreciation have an ultimate ripple effect on the household sector because the&nbsp; higher costs are passed on to retail prices and/or they prompt companies to rein in personnel costs (see Exhibit 2). </p> <p>&nbsp;</p> <p><a href=""><img src="" width="500" height="248" /></a></p> <p>&nbsp;</p> <p><strong>Costs of yen depreciation outweigh benefits for industry as a whole: Policies for addressing weak yen effect appear limited based on past experience </strong></p> <p>&nbsp;</p> <p>A similar calculation made using input/output tables for 2005 results in a “net export” figure of ¥16.3 tn for the manufacturing sector. Even after&nbsp; subtracting nonmanufacturing sector “net cost” of ¥14.9 bn, net exports of ¥1.4 tn remain, indicating that policies to offset the impact of a weak yen had a positive impact on the Japanese economy as a whole. The secular rise in crude oil prices from 2005 significantly raised the cost of intermediate inputs—mining, oil, and coal products—for both manufacturing and nonmanufacturing. For industry as a whole, input costs affected by yen depreciation increased to ¥86.6 bn in 2012 from ¥71.8 tn in 2005. Over the same period, exports of goods and services from Japan declined to ¥70.3 tn from ¥73.2 tn due to yen appreciation, the global financial crisis, and the March 2011 earthquake. The lack of growth in exports is due partly to the global demand cycle, but a larger structural factor is that Japanese companies have lost global&nbsp; market share due to the shift of production overseas and increased competition with foreign products. </p> <p>&nbsp;</p> <p>In 2012, the structure of the Japanese economy was that manufacturing sector had net export value of just ¥5.5 tn, which was insufficient to offset the nonmanufacturing sector’s net cost of ¥21.8 tn, resulting in net cost of ¥16.3 tn for Japanese industry as a whole. A 25% decline in the yen’s value raises industry’s net cost burden by ¥4.1 tn, which is equivalent to 0.8% of GDP. The impact of weak-yen policy measures based on experiences when Japan was a net exporter, has clearly diminished. </p> <p>&nbsp;</p> <p><strong>Bankruptcies precipitated by yen depreciation on the rise</strong> </p> <p>&nbsp;</p> <p>According to a recent bankruptcy survey by Tokyo Shoko Research, there were 214 bankruptcies due to the weak yen in January-September 2014, which is 2.4 times the 89 seen in January-September 2013. Far more of the bankruptcies were in the nonmanufacturing sector—81 in transport, 41 in wholesale trade, 19 in services, and 11 in retail—than in the manufacturing sector (44), which is consistent with our analysis based on the input/output tables. </p> <p>&nbsp;</p> <p>Surprisingly, the number of bankruptcies since 2013 due to yen depreciation far surpasses the number of bankruptcies in 2009-2011 due to yen appreciation. Presumably, in many cases in 2009-2011 the strong yen was not cited as the direct cause of bankruptcy because there were numerous other factors at work also, beginning with the sharp slowdown in the global economy and financing difficulties. Nevertheless, the 353 bankruptcies since&nbsp; 2013 attributed to the weak yen are 2.2 times greater than the 157 bankruptcies from 2009 to 2011 attributed to the strong yen (see Exhibit 3).</p> <p>&nbsp;</p> <p><a href=""><img src="" width="500" height="375" /></a></p> </blockquote> <p>And it is not just corporations that are approaching their weak-yen breaking point. So are households:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Household burden increases with weaker yen </strong></p> <p>&nbsp;</p> <p>Let us turn to the household sector. The input-output table has a matrix of “import induction value by final demand categories”. This shows the value of goods and services imports induced by final demand categories such as household consumption, private business investments, public fixed investment and exports (see Exhibit 4). </p> <p>&nbsp;</p> <p>Household sector final demand totaled ¥279 tn in 2012, with imports accounting for ¥41.9 tn, or 15.0%, of household consumption. This includes gasoline and mineral fuels (oil, coal) needed to generate electricity for households. Taking into account the decline in the yen’s value since 2012, household sector import value has risen ¥10.5 tn to ¥52.4 tn. The ¥10.5 tn rise is equivalent to 3.6% of 2012 household sector disposable income of ¥287 tn.&nbsp; </p> <p>&nbsp;</p> <p>In 2005, imports represented ¥32.8 tn of household final consumption. This figure rose ¥9.1 tn to ¥41.9 tn in 2012, and if we take the 25% decline in the yen’s value into account, the rise comes to ¥19.6 tn over seven years. Mining, oil, and coal products account for 50% of the rise since 2005, clearly showing how the rises in gasoline, kerosene and electricity prices due to yen depreciation increased households’ burden. </p> <p>&nbsp;</p> <p>Household final consumption was largely unchanged during this period, rising just barely from ¥277 tn in 2005 to ¥280 tn in 2012. This means that domestic consumption of goods and services declined to the same extent that import consumption value increased. Disposable income declined just slightly over this period, to ¥287 tn from ¥290 tn, meaning that the rise in import costs for households due to yen depreciation was borne directly by households, causing them to curb their spending. </p> <p>&nbsp;</p> <p>Food and fuel-related imports in the household sector totaled ¥22 tn in 2012, accounting for 54% of household sector imports of ¥41 tn. The recent decline in crude oil and other commodity prices is partially offsetting the impact of the weak yen, but not the rise in costs due to yen depreciation on the 46% of imports that are not food or fuel-related.</p> </blockquote> <p>Goldman's conclusion:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>If further yen weakness is not accompanied by real economic growth in the form of an export volume recovery and broad wage increases, and ends up merely producing forex translation gains, we believe it could very well place an increased burden on the Japanese economy as a whol</strong>e. Needless to say, the cost burden will ease if the recent rapid decline in oil price stabilizes at the low levels.</p> </blockquote> <p>Needless to say, none of this is preventing the momentum-chasing algos to push the USDJPY up some 100 pips in the overnight session to offset the tumble in energy companies and push the S&amp;P higher, and send it almost back to the highest level seen since 2007. And once the USDJPY trigger the 119 buy stops, all bets are off, if only for the Japanese economy. The Nikkei and the S&amp;P 500 on the other hand, well those will keep rising as more economic devastation rains on Japan's economy thanks to Abenomics. </p> <p>Then again, with <a href="">Paul Krugman now openly advising Abe</a>, it should come as no surprise that Japan's economy is in the late stages of a total and unprecedented collapse.</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="634" height="476" alt="" src="" /> </div> </div> </div> Abenomics Crude Crude Oil fixed Global Economy Japan Krugman Market Share Nikkei None Paul Krugman Quantitative Easing recovery Yen Fri, 28 Nov 2014 16:20:18 +0000 Tyler Durden 498366 at The Price Of Oil Exposes The True State Of The Economy <p><em>Submitted by <a href="">Raul Ilargi Meijer via The Automatice Earth blog</a>,</em></p> <p><center><a href="" target="new"><img border="0" src="" /></a><br /><span style="font-size:10px;">Jack Delano <b> Cafe at truck drivers&rsquo; service station on U.S. 1, Washington DC </b> Jun 1940 </span></center> </p><p>We should be glad the price of oil has fallen the way it has (losing another 6% today as we write this). Not because it makes the gas in our cars a bit cheaper, that&rsquo;s nothing compared to the other service the price slump provides. That is,<strong> it allows us to see how the economy is really doing, without the multilayered veil of propaganda, spin, fixed data and bailouts and handouts for the banking system.</strong></p> <p>It shows us the huge extent to which consumer spending is falling, how much poorer people have become as stock markets set records. It also shows us how desperate producing nations have become, who have seen a third of their often principal source of revenue fall away in a few months&rsquo; time. Nigeria was first in line to devalue its currency, others will follow suit.</p> <p>OPEC today decided not to cut production, but whatever decision they would have come to, nothing would have made one iota of difference. The fact that prices only started falling again after the decision was made public shows you how senseless financial markets have become, dumbed down by easy money for which no working neurons are required.</p> <p>OPEC has become a theater piece, and the real world out there is getting colder. Oil producing nations can&rsquo;t afford to cut their output in some vague attempt, with very uncertain outcome, to raise prices. The only way to make up for their losses is to increase production when and where they can. And some can&rsquo;t even do that.</p> <p>Saudi Arabia increased production in 1986 to bring down prices. All it has to do today to achieve the same thing is to not cut production. But the Saudi&rsquo;s have lost a lot of clout, along with OPEC, it&rsquo;s not 1986 anymore. That is due to an extent to American shale oil, but the global financial crisis is a much more important factor.</p> <p>We are only now truly even just beginning to see how hard that crisis has already hit the Chinese export miracle, and its demand for resources, a major reason behind the oil crash. The US this year imported less oil from OPEC members than it has in 30 years, while Americans drive far less miles per capita and shale has its debt-financed temporary jump. Now, all oil producers, not just shale drillers, turn into Red Queens, trying ever harder just to make up for losses.</p> <p>The American shale industry, meanwhile, is a driverless truck, with brakes missing and fueled by on cheap speculative capital. The main question underlying <b>US shale is no longer about what&rsquo;s feasible to drill today, it&rsquo;s about what can still be financed tomorrow</b>. And the press are really only now waking up to the Ponzi character of the industry.</p> <p>In a <a href="" target="new"><span style="font-size:13px;color: #FF2222;font-weight:bold">pretty solid piece</span></a> last week, the Financial Times&rsquo; John Dizard concluded with:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><i>Even long-time energy industry people cannot remember an overinvestment cycle lasting as long as the one in unconventional US resources. It is not just the hydrocarbon engineers who have created this bubble; there are the financial engineers who came up with new ways to pay for it. </i></p> </blockquote> <p>While Reuters on November 10 (h/t Yves at NC) talked about <a href="" target="new"><span style="font-size:13px;color: #FF2222;font-weight:bold">giant equity fund KKR&rsquo;s shale troubles</span></a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><i>KKR, which led the acquisition of oil and gas producer Samson for $7.2 billion in 2011 and has already sold almost half its acreage to cope with lower energy prices, plans to sell its North Dakota Bakken oil deposit worth less than $500 million as part of an ongoing downsizing plan. </i></p> <p>&nbsp;</p> <p><i>Samson&rsquo;s bonds are trading around 70 cents on the dollar, indicating that KKR and its partners&rsquo; equity in the company would probably be wiped out were the whole company to be sold now. Samson&rsquo;s financial woes underscore how private equity&rsquo;s love affair with North America&rsquo;s shale revolution comes with risks. The stakes are especially high for <b>KKR, which saw a $45 billion bet on natural gas prices go sour</b> when Texas power utility Energy Future Holdings filed for bankruptcy this year.</i></p> </blockquote> <p>And today, Tracy Alloway at FT mentions <a href="" target="new"><span style="font-size:13px;color: #FF2222;font-weight:bold">major banks and their energy-related losses</span></a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><i>Banks including Barclays and Wells Fargo are facing potentially heavy losses on an $850 million loan made to two oil and gas companies, in a sign of how the dramatic slide in the price of oil is beginning to reverberate through the wider economy. [..] if Barclays and Wells attempted to syndicate the $850m loan now, it could go for as little as 60 cents on the dollar.</i></p> </blockquote> <p>That&rsquo;s just one loan. At 60 cents on the dollar, a $340 million loss. Who knows how many similar, and bigger, loans are out there? Put together, these stories slowly seeping out of the juncture of energy and finance gives the good and willing listener an inkling of an idea of the losses being incurred throughout the global economy, and by the large financiers. There&rsquo;s a bloodbath brewing in the shadows. Countries can see their revenues cut by a third and move on, perhaps with new leaders, but many companies can&rsquo;t lose that much income and keep on going, certainly not when they&rsquo;re heavily leveraged.</p> <p>The Saudi&rsquo;s refuse to cut output and say: let America cut. But American oil producers can&rsquo;t cut even if they would want to, it would blow their debt laden enterprises out of the water, and out of existence. Besides, that energy independence thing plays a big role of course. But with prices continuing to fall, much of that industry will go belly up because credit gets withdrawn.</p> <p>The amount of money lost in the &lsquo;overinvestment cycle&rsquo; will be stupendous, and you don&rsquo;t need to ask who&rsquo;s going to end up paying. Pointing to past oil bubbles risks missing the point that the kind of leverage and cheap credit heaped upon shale oil and gas, as Dizard also says, is unprecedented. As Wolf Richter wrote earlier this year, the industry has bled over $100 billion in losses for three years running.</p> <p>Not because they weren&rsquo;t selling, but because the costs were &ndash; and are &ndash; so formidable. There&rsquo;s more debt going into the ground then there&rsquo;s oil coming out. Shale was a losing proposition even at $100. But that remained hidden behind the wagers backed by 0.5% loans that fed the land speculation it was based on from the start. WTI fell below $70 today. You can let your 3-year old do the math from there.</p> <p><strong>I wonder how many people will scratch their heads as they&rsquo;re filling up their tanks this week and wonder how much of a mixed blessing that cheap gas is. They should. They should ask themselves how and why and how much the plummeting gas price is a reflection of the real state of the global economy, and what that says about their futures.</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="558" height="472" alt="" src="" /> </div> </div> </div> Barclays fixed Global Economy KKR Natural Gas OPEC Private Equity Reuters Saudi Arabia Wells Fargo Fri, 28 Nov 2014 15:57:26 +0000 Tyler Durden 498365 at About Those Eyeball-Based Valuations: "Half Of Twitter Accounts Created In 2013 Have Already Been Deleted" <p>Still paying a #Div/0 valuation for Facebook or Twitter based on expectations of exponential growth in eyeballs, or rather "<em>eyeballs</em>"? Then perhaps read this first.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>... many of the “users” on social media sites aren’t real people at all – they’re celebrity staff tweeting on behalf of their employer, or PRs promoting a company, or even fake accounts for people that don’t exist at all.<strong> In fact, half of all Twitter accounts created in 2013 have already been deleted.</strong></p> <p>&nbsp;</p> <p>These fake accounts are often created by unscrupulous firms that will beef up your follower count in return for cold hard cash.</p> <p>&nbsp;</p> <p>“Twitter is in the centre of public interest and politicians or companies are often ranked by number of followers or re-tweets or the like – so, there is a whole “web optimisation” industry offering services to make you look better on Twitter – <strong>everybody can buy 10,000 followers for $5</strong>,” Pfeffer said.</p> </blockquote> <p><em>Source: <a href="">Forbes</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="552" height="350" alt="" src="" /> </div> </div> </div> Twitter Twitter Fri, 28 Nov 2014 15:44:20 +0000 Tyler Durden 498364 at The US Consumer Is So Exuberant, Best Buy's Website Just Died <p>Apple-esque marketing gimmick or spend-more-than-you-can-afford US consumer in full rampage...?</p> <p>&nbsp;</p> <p><a href=""><img src="" width="600" height="224" /></a></p> Best Buy Fri, 28 Nov 2014 15:10:25 +0000 Tyler Durden 498363 at Can QE Prop Up Asset Prices Forever? <p><em>Submitted by <a href="">Chris Hunter via Acting man blog</a>,</em></p> <h3><u><strong>Popular Myths and a Shrinking Work Force</strong></u></h3> <p>It&rsquo;s not just voters who buy into popular myths. Many investors do too. Few have wider appeal than the myth that central banks can create economic growth via the printing press.</p> <p><strong>What central bankers and their supporters seem to forget is that growth comes from living, breathing human beings.</strong></p> <p>It often sounds a lot more complicated than it really is. But genuine economic growth comes from two things: the number of workers in the labor force and the productivity of those workers.</p> <p>&nbsp;</p> <p style="text-align: center;"><img alt="1124-MI-blog" class="aligncenter wp-image-34487 size-full" height="313" src="" width="600" /></p> <p>&nbsp;</p> <p>That&rsquo;s a problem for the US. Because according to a recent report in&nbsp;<em>The Economist</em>, its potential labor force is set to grow at less than one-third the 0.9% rate we saw between 2003 and 2013.</p> <p>Making things worse, many of America&rsquo;s boomers &ndash; the first of whom qualified for Social Security in 2008 &ndash; are opting out of the labor force. Instead of looking for jobs, they are choosing to live on benefits.</p> <p>This helps explain why the percentage of working-age adults looking for jobs in the US has fallen to below 63% from about 66% when the global financial crisis struck.</p> <p>And it&rsquo;s not just Americans who are getting older on average.</p> <p>From&nbsp;<em>The Economist</em>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;[T]he ratio of workers to retirees is now plunging in most developed countries and soon will in many emerging markets. Japan is already liquidating the foreign assets its people acquired during their high-saving years; China and South Korea are starting to do so and Germany will soon.&rdquo;</p> </blockquote> <p>Fewer workers in the labor force. More retirees to support for those with jobs. Foreign retirees cashing out of their US stocks and bonds. Janet Yellen et al. better hope investors are gullible enough to believe the magic of QE can continue to levitate financial assets forever.</p> <p>Otherwise, stock and bond investors will start to reconsider the prices they&rsquo;re willing to pay to own their pieces of paper.<strong> </strong></p> <p style="text-align: center;"><img alt="workers per retiree" class="aligncenter wp-image-34486" height="463" src="" width="600" /></p> <p style="text-align: center;">Past and projected workers per retiree of selected countries &ndash; via <a href="" id="yui_3_16_0_1_1417093721303_7467" rel="nofollow" target="_blank"></a>.</p> <p>&nbsp;</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="582" height="364" alt="" src="" /> </div> </div> </div> Bond Central Banks China Germany Janet Yellen Japan The Economist Fri, 28 Nov 2014 14:52:59 +0000 Tyler Durden 498362 at Netherlands, Germany Have Euro Disaster Plan - Possible Return to Guilder and Mark <p><strong><a href="">Netherlands, Germany Have Euro Disaster Plan - Possible Return to Guilder and Mark</a></strong></p> <p>The Dutch and German governments were preparing emergency plans for a return to their national currencies at the height of the euro crisis it has emerged. These plans remain in place.</p> <p><img src="" width="250" /></p> <p><em><strong><br /> German Gold Deutsche Mark - (Special Edition)</strong></em></p> <p>The Dutch finance ministry prepared for a scenario in which the Netherlands could return to its former currency - the guilder. They hosted meetings with a team of legal, economic and foreign affairs experts to discuss the possibility of returning to the Dutch guilder in early 2012.&nbsp;</p> <p>The Dutch finance minister during the period has confirmed that Germany also discussed such scenarios.</p> <p> At the time the Euro was in crisis, Greece was on the verge of leaving or being pushed out of the Euro and the debt crisis was hitting Spain and Italy hard. The Greek prime minister Georgios Papandreou and his Italian counterpart Silvio Berlusconi had resigned and there were concerns that the eurozone debt crisis was spinning out of control - leading to contagion and the risk of a systemic collapse.</p> <p>A TV documentary broke the story last Tuesday. The rumours were confirmed on Thursday by the current Dutch minister of finance, Jeroen Dijsselbloem, and the current President of the Eurogroup of finance ministers in a television interview which was covered by <a href=""><span style="text-decoration: underline;">EU Observer</span></a> and <a href=""><span style="text-decoration: underline;">Bloomberg</span></a>.</p> <p>“It is true that [the ministry of] finance and the then government had also prepared themselves for the worst scenario”, said Dijsselbloem.</p> <p>“Government leaders, including the Dutch government, have always said: we want to keep that eurozone together. But [the Dutch government] also looked at: what if that fails. And it prepared for that.”</p> <p>While Dijsselbloem said there was no need to be “secretive” about the plans now, such discussions were shrouded in secrecy at the time to avoid spreading panic on the financial markets.</p> <p>When asked about Germany, Dijsselbloem said he couldn’t say whether that country’s government had made similar preparations.</p> <p><a href=""><img src="" width="500" /></a></p> <p><em><strong>German Silver Deutsche Mark - (1951-1974)</strong></em></p> <p>However, Jan Kees de Jager, finance minister from February 2010 to November 2012, acknowledged that a team of legal experts, economists and foreign affairs specialists often met at his ministry on Fridays to discuss possible scenarios.</p> <p>“The fact that in Europe multiple scenarios were discussed was something some countries found rather scary. They did not do that at all, strikingly enough”, said De Jager in the TV documentary.</p> <p>“We were one of the few countries, together with Germany. We even had a team together that discussed scenarios, Germany-Netherlands.”</p> <p>When the EU Observer requested confirmation from Germany, the German ministry of finance did not officially deny that it had drawn up similar plans, stating simply:<br /> “We and our partners in the euro zone, including the Netherlands, were and still are determined to do everything possible to prevent a breakup of the eurozone.”&nbsp;</p> <p>This is quite a revelation. At that time the German finance minister Wolfgang Schauble had said that the Euro could survive without Greece. Whether it could survive without the Dutch is another matter entirely.</p> <p>A Euro without Holland and especially Germany is currently inconceivable. De Jager also states that other countries found the prospect of a Euro break-up frightening.&nbsp;<br /> So much so that they buried their heads in the sand rather than deal with the situation facing them. It appears that no emergency contingency plans were made in the unfortunately named PIIGS nations - Portugal, Ireland, Italy, Greece and Spain.</p> <p>One has to wonder if the plans would have been made public had a TV documentary not forced the Dutch government to confirm the claim.</p> <p>It is interesting to note that it is these two countries, Germany and Netherlands, whose citizens have also been at the forefront of the gold repatriation movement currently sweeping across Europe - France's second largest party entered the fray this week.</p> <p>In a climate with a lack of faith in fiat currencies, any return to a purely fiat guilder or mark would be risky in the absence of the confidence that gold backing provides.<br /> Despite the implication that secrecy is no longer necessary because Europe is over the worst we believe the Dutch repatriation of 20% of it's sovereign gold from the U.S. indicates that the Dutch are still, wisely, preparing for the worst - whether that be a euro crisis or indeed a dollar crisis and an international monetary crisis.</p> <p> Their stated reason for returning their 122 tonnes of <span style="text-decoration: underline;"><a href="">gold to Netherland’s</a>&nbsp;soil</span> was to instil public confidence in the Dutch central bank.</p> <p>The prospect of a Euro-break up is a frightening one. It would appear that most Eurozone nations are ill-prepared and indeed unprepared for.&nbsp;</p> <p>As always we recommend investors act as their own central bank by taking delivery of bullion or keeping gold and silver in secure, allocated and segregated vaults in safer jurisdictions such as Switzerland and Singapore.</p> <p><a href=""><img src="" /></a></p> <p>For investors and savers currently using the euro, it begs the important question do you have a euro failure contingency plan?&nbsp;</p> <p>Indeed, for investors and savers internationally using other fiat currencies, it begs the important question do you have a currency failure contingency plan?&nbsp;</p> <p>While the risks in peripheral European nations of reversion to their national currencies and currency devaluations have diminished – some risks still remain.</p> <p>The risk is that individual national governments may elect to take this route rather than suffer deflationary economic collapse and Depressions. Alternatively, it could happen through contagion or a systemic event like the collapse of a large European bank, a la Lehman Brothers, that leads to a domino effect jettisoning a member state out of the monetary union.</p> <p>It could also come about should the German people and politicians decide that the European monetary project is not worth saving or they decide that it cannot be saved and elect to return to the Deutsche mark.<br /> All significantly indebted nations, so called PIIGS and non PIIGS such as Japan, the UK and the U.S. are at risk of currency devaluations.</p> <p> Competitive currency devaluations or the debasement of currencies for competitive advantage and <a href=""><span style="text-decoration: underline;">currency wars</span></a> poses real risks to the long term stability and prosperity of all democracies in the world and to the finances and savings of people in all countries.</p> <p><em><strong>Get Breaking News and Updates On Gold Markets <a href=""><span style="text-decoration: underline;">Here</span></a></strong></em></p> <p><span style="text-decoration: underline;"><a href=""></a></span></p> Eurozone Germany Greece Ireland Italy Japan Lehman Lehman Brothers Netherlands Portugal Silvio Berlusconi Switzerland Fri, 28 Nov 2014 14:43:41 +0000 GoldCore 498361 at Copper & Crude Crash To 4 Year Lows <p>With all eyes focused on the malls around America, we thought a glimpse at two of the most important commodities to the world economy would provide food for thought...</p> <p>&nbsp;</p> <p>Copper...</p> <p><a href=""><img height="322" src="" width="600" /></a></p> <p>&nbsp;</p> <p>And Crude...</p> <p><a href=""><img height="319" src="" width="600" /></a></p> <p>&nbsp;</p> <p>are at 4-year lows...</p> <p>But you can still get a bargain stock at record highs...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 317px;" /></a></p> <p>&nbsp;</p> <p>&nbsp;</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="716" height="384" alt="" src="" /> </div> </div> </div> Copper Crude Fri, 28 Nov 2014 14:28:41 +0000 Tyler Durden 498360 at As It Turns Out Deflation Is Good After All <p>Earlier today, in typical German fashion, the chief of the Bundesbank poured cold water on Europe's latest round of demands that Germany carry the weight of the rebound from the triple-dip on its shoulders, as usual, when Buba President Jens Weidmann Friday rejected calls for a German stimulus plan, <strong>saying only structural reforms and more competitiveness would kick-start eurozone economies</strong>. “Calls for a public fiscal stimulus plan in Germany to boost the Eurozone economy are amiss,” said Mr. Weidmann in a speech for an economic summit hosted by the German newspaper Süddeutsche Zeitung. He is, of course, right: the longer Europe's insolvent, uncompetitive governments kick the can and force Germany to do all the hard work, the longer Europe will be unable to get out of a hole that gets deeper with every passing day. In short: Mr. Weidmann refuses to "get to work" for a bunch of corrupt, clueless politicians. </p> <p><a href=""><img src="" width="500" height="333" /></a></p> <p>He then proceeded to do something shocking: he was logical. Quoted by the WSJ, <a href="">he said</a>: "<strong>Investment rates that are above the growth potential of a developed economy aren't likely to boost prosperity—this applies to both public and private investments</strong>." </p> <p>More: </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The German government shares Mr. Weidmann’s view. It says public investment can’t solve the eurozone’s growth problem as structural reforms are needed. The International Monetary Fund and neighboring countries France and Italy have called on Germany to boost public investment. But Berlin has pledged only €10 billion ($12.5 billion) in additional public investment over three years starting in 2016, hoping this would spur private investment worth €50 billion.</p> <p>&nbsp;</p> <p>Mr. Weidmann stressed that it is also wrong to believe central bank monetary policy would be able to solve the bloc’s economic problems.</p> <p>&nbsp;</p> <p><strong>“It is an illusion to believe that monetary policy means can raise economies’ growth potential permanently, or create lasting jobs</strong>,” Mr. Weidmann said. “<strong>In the end, this can only be achieved by structural reforms, because growth and employment occur in innovative companies and competitive products, and well-educated and highly motivated employees</strong>.”</p> </blockquote> <p>Therein lies the rub: Europe is allergic to structural reforms, and as <a href="">we have shown in the past</a>, it blames its woeful fate on evil, evil "austerity" (somewhat paradoxical for a continent where record debt gets recorder with every passing quarter), when in reality what is causing the ongoing European depression is crime, corruption, cronyism and capital misallocation. </p> <p>But none of that is news. What was news, and what was truly notable in Weidmann's statement is his open jab at the stupidity of Keynesian economics itself. To wit from Bloomberg: ECB Governing Council member Jens Weidmann says at event in Berlin that consumer prices in euro area “are strongly influenced by the energy prices, which are at the moment experiencing a positive supply shock.”</p> <p>The punchline:&nbsp; <strong>"There’s a stimulant effect coming from the energy prices - it’s like a mini stimulus package."</strong></p> <p>But wait a minute, isn't deflation under Keynesian voodoonomics, the biggest bogeyman imaginable? </p> <p>It turns out deflation is only bad when it impacts... the S&amp;P 500. Otherwise deflation for such things as energy prices and other input costs is suddenly bullish? So, by that logic, Japan with its soaring energy costs as a result of its currency devastation must be smack in the middle of the biggest depression ever. Which, of course, it is, as we warned would happen in early 2013. </p> <p>For now, however, we are more focused on the official transformation of the German Central Bank into the central bank of "Austrian" economics.</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="1280" height="853" alt="" src="" /> </div> </div> </div> Consumer Prices Corruption Cronyism Eurozone France Germany International Monetary Fund Italy Japan Keynesian economics Monetary Policy Newspaper None Reality Fri, 28 Nov 2014 14:19:49 +0000 Tyler Durden 498359 at