LendingTree, an online lending exchange that connects consumers with lenders, recently published a study on baby boomer finances that found boomers living in Houston, Texas; Little Rock, Arkansas; San Antonio, Texas; Dallas, Texas; Oklahoma City, Oklahoma; McAllen, Texas; Austin, Texas; Baton Rouge, Louisiana; Washington, D.C.; and Fresno, California are burdened with the most debt.
LendingTree researchers used anonymized credit report data of My LendingTree users born between 1946 and 1964 who live in the top 100 metropolitan areas, to determine that this generation owes a median total of $25,187 on non-mortgage debts.
Breakdown of the report:
Baby boomers in Houston are the most laden with non-mortgage debt, with a median balance of $31,626. On average, 42.9% of that is owed on auto loans and another 33.1% is on credit cards.
Little Rock, Ark. and San Antonio round out the top three, with median non-mortgage balances of $30,767 and $29,985, respectively.
Auto loans comprise the biggest section of boomer debt, averaging 38.5% of average debt across the 100 metros we reviewed.
Credit cards represented the next-largest slice of baby boomers’ debt balances, averaging 34.9% across the 100 metros.
As with our other generational debt studies, Texas rules the top of the list for median balances. Five of the six Texas metros we reviewed fall in the top 10 (El Paso comes in 36th on the list).
Where baby boomers carry the most debt (ex. mortgages)
Boomers in the top 10 cities owe on average $28,000 in non-mortgage debt, this is about 12% higher than the median total. The composition of this debt is split between auto and personal loans.
About 80% of the top ten cities are located in the South. Five are Texas cities: Houston, San Antonio, Dallas, McAllen, and Austin.
The study revealed that boomers dive deeper into debt when they have auto and personal loans. It suggests that these heavily indebted boomers are more likely to consolidate debt.
An in-depth breakdown of boomer debt balances by account type in the top ten cities:
Auto loans: The share of boomers’ debt owed on auto loans was the highest in McAllen, Texas. Here, the median debt balance is $29,351, and auto loans make up just over half (53.6%) of baby boomers’ outstanding balances.
Credit cards: Of the 10 cities where baby boomers have the highest median debt balances, Washington, D.C. is the only place where they have above-average credit card debts. An average 38.6% of the money Washington’s boomers owe was borrowed on credit card, compared with 34.9% across all 100 cities surveyed. The median debt total is $28,634 among Washington’s boomers.
Personal loans: In half of these 10 cities, the portion of boomers’ balances owed on personal loan debt was higher than the 17.0% average across all 100 cities. Boomers in Fresno, Baton Rouge, La. and Washington owed the most on these types of debt. In each city, boomers owed just under a fifth (about 19%) of their outstanding debt to personal loans, on average.
Student loans: The high balance boomers owe in these cities is unlikely to be due to student debt, which is unsurprising given that boomers are far past their college-age years. Still, some might still be repaying student debt for themselves or a child, since across all 100 cities student loans account for an average 7.7% of what boomers owe.
Average distribution of debt types for baby boomers:
Below are the full rankings of all 100 cities where baby boomers shoulder the most debt:
via ZeroHedge News http://bit.ly/2Xlcbtm Tyler Durden
Middlebury College officials cancelled a forum Wednesday that would have featured conservative Polish politician and academic Ryszard Legutko, saying they were concerned that they could not guarantee people’s safety as protestors organized.
Ryszard Legutko lived and suffered under communism for decades — and he fought with the Polish anti-communist movement to abolish it. But having now lived for three decades under a liberal democracy, he argues that western democracy has over time crept towards the same goals as communism, albeit without Soviet-style brutality. Both systems, says Legutko, reduce human nature to that of common man, who is led to believe himself liberated from the obligations of the past. Both the communist man and the liberal democratic man refuse to admit that there exists anything of value outside the political systems to which they pledged their loyalty. And both systems refuse to undertake any critical examination of their ideological prejudices.
Mr. Legutko is a Member of the European Parliament. He has served as the Republic of Poland’s Minister of Education, Secretary of State, and Deputy Speaker of the Senate. As a Member of the European Parliament, he chairs the Parliamentary Group of European Conservatives and Reformists and serves on the Foreign Affairs Committee. He has been an active participant in recent debates over Brexit in the European Parliament.
Under communist rule, Legutko served as editor of the illegal samizdat publication, Arka. After the collapse of the communist regime, he co-founded the Centre for Political Thought in Kraków. One of Poland’s foremost public intellectuals, Mr. Legutko is Professor of Philosophy at Jagiellonian University (Kraków, Poland). As a specialist in ancient philosophy and political theory, he has translated and written commentaries to Plato’s Phaedo (1995), Euthyphro (1998), and Apology(2003). He is the author of several books, including Plato’s Critique of Democracy (1990), Toleration (1997), A Treatise on Liberty (2007), An Essay on the Polish Soul (2008), and Socrates (2013).
He had been invited by the Alexander Hamilton Forum, a faculty-run program, and his talk had been cosponsored by the Department of Political Science and the Rohatyn Center for Global Affairs. But he drew opposition from faculty and students who argued that his views were “homophobic, racist, xenophobic, [and] misogynistic”; and the College administration canceled the lecture, writing (I quote here the Washington Free Beacon (Alex Griswold)):
In the interest of ensuring the safety of students, faculty, staff, and community members, the lecture by Ryszard Legutko scheduled for later today will not take place. This decision was not taken lightly. It was based on an assessment of our ability to respond effectively to potential security and safety risks for both the lecture and the event students had planned in response.
At least some of the organizers of the planned protest against Legutko say they weren’t trying to prevent Legutko from talking:
“In light of the recent announcement by the Middlebury College administration to cancel the Legutko event this afternoon, we are reiterating that it was never our intention to shut this event down, nor prevent the speaker from speaking,” Taite Shomo wrote.
The entire world’s ruling elites are silent because they’re terrified that even mild murmurings might limit the blood-soaked billions they want to reap from trade with China.
Imagine the reaction in the global Muslim community if a western nation imprisoned hundreds of thousands of Muslims solely for being Muslim and subjected them to torture, “re-education” that amounts to treating their religious faith as a pathological mental illness, forcefully separating parents and children, incarcerating the children in state-run orphanages, and on and on in a ruthlessly efficient Nazi-like systemic oppression.
The Muslim “street” would erupt in mass protests, burning flags and calling for the downfall of The Great Satan, and the Muslim nations would cancel energy and trade contracts and lodge diplomatic protests.
But the global Muslim community, and indeed, the entire global community, is strangely silent as China pursues a high-tech suppression of its ethnic Muslims. This silence might be the one thing Tehran, Moscow and Washington have in common: a complete and utter disregard for China’s Muslim-only gulags.
While America’s ruling elite greedily rubs its hands over the wealth that will flow from a “trade deal” with China, where is America’s vaunted concern with human rights? Nowhere to be found. Where are the canceled energy and trade contracts between China and Iran, Turkey, Pakistan, Egypt, Indonesia, Malaysia, Iraq, Syria, Saudi Arabia, the Persian Gulf States and other Muslim-majority nations?
The entire world’s ruling elites are silent because they’re terrified that even mild murmurings might limit the blood-soaked billions they want to reap from trade with China. That is the source of the world’s hypocritical silence about China’s Muslim-only gulags: the endless, insatiable, boundless greed of the ruling elites.
There’s a funny little thing called karma, or blowback if you prefer a secular label, and both China and its vast host of global ruling-elite enablers will eventually reap what they are sowing.
China employs vast armies of propagandists in the West whose favorite word is “debunked.” You can easily identify a Beijing-propaganda proxy by their use of “debunk” to counter any criticism of China’s Muslim-only gulags.
Meanwhile, the alarming reality has been covered in depth by what little remains of the global free press. If you look at only one article, start with this photo-essay:How China Turned a City into a Prison (New York Times)
Satellite images show expansion of ‘re-education’ centers in China’s Xinjiang region China has sharply expanded an internment program that initially targeted ethnic Uighur extremists but is now confining vast numbers of the largely Muslim minority group, including the secular, old and infirm, in camps across the country’s northwest.
Up to one million people, or about 7% of the Muslim population in China’s Xinjiang region, have now been incarcerated in an expanding network of ‘political re-education’ camps, according to U.S. officials and United Nations experts.
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via ZeroHedge News http://bit.ly/2IFlO1O Tyler Durden
After the initial ban was thrown out, Mayor Bill De Blasio declared a public health emergency mandating that any unvaccinated children living in certain ZIP codes must receive the measles-mumps-rubella vaccine or their family could face heavy penalties.
While Rockland County officials said they aren’t going to go around arresting people with measles, they insist it’s about keeping the public safe.
“Failure to comply will result in $2,000 per violation per day,” said Rockland County Commissioner of Health Dr. Patricia Schnabel Ruppert.
New York’s measles outbreak has now spread to more than 20 states.
“Measles is a huge public health issue because it is so contagious,” said Dr. Alanna Levine.
In March, a New York man, unaware he was infected, drove to Michigan and ended up infecting 38 other people.
“My colleagues across the country are all worried that the measles are gonna hit their community,” Levine said.
“So as a country, we need to make sure that everybody gets vaccinated.”
via ZeroHedge News http://bit.ly/2IFQkc6 Tyler Durden
Since the February 2019 Hanoi Summit, media outlets have been awash with inaccurately interpreted satellite images of North Korean installations at locations such as the Sohae Satellite Launching Station and the Sanumdong Research and Development Facility. The United Nations Panel of Experts has also turned to satellite footage as a means of proving sanctions evasion but likewise engaged in misrepresentation when trying to pin violations onto the Democratic People’s Republic of Korea (DPRK). So where are North Korea’s sanctions violations generally occurring?
While much of the media coverage tends to be manipulated with the intention of aggravating tensions between North Korea and the outside world, real evidence of smuggling along the DPRK’s northern border can easily be identified even by members of the public. Disobedient Media has been able to pinpoint a number locations where cross-border smuggling was occurring using Google Earth. This kind of activity not only violates sanctions, but also poses a security risk to the DPRK since it reduces their ability to control who can enter and exit the country.
Image showing locations where cross-border smuggling was occurring, organized by years the crossing was most visible. Photo: Disobedient Media.
Combatting smuggling has recently become a priority for not only North Korea but also their neighbors as the United States and DPRK continue to negotiate denuclearization. On April 11, 2019, President Donald Trump thanked China and Russia for helping “more than people think” with combatting smuggling along the border with North Korea while meeting with South Korean President Moon Jae-in. Just days before on April 8, South China Morning Post revealed that a Chinese border patrol unit in Tonghua, Jilin province had contracted with China Mobile to build the country’s first 5G checkpoint at Yunfeng Reservoir along the border with North Korea.
Vehicles caught crossing the riverbed of the Yalu River just downstream of the Yunfeng Dam. Chinese border guards have recently targeted the Yunfeng Resevoir area using 5G technology. Photo: DigitalGlobe, detail added by Disobedient Media.
On March 22, Radio Free Asia reported that North Korea had arrested the commander of one of the country’s defense regiments in Hyesan, Ryanggang province. Residents reported confusion about the DPRK’s sudden decision to crack down on smuggling in the region which had previously occurred with what is said to be tacit government approval as smugglers befriended local officials. The push represents a new resolve from countries on both sides of the border to crack down on sanctions evasion as the peace process has gained traction.
Using satellite imagery made available through Google, it is possible to identify a large number areas where illegal border crossing is occurring on a pervasive scale. Authorities in China, Russia and North Korea will continue to have their work cut out for them.
One kind of smuggling occurs by using boats to cross North Korea’s border along the Yalu and Tumen Rivers. A selection of photos is provided below:
Another common method is vehicle and foot crossings across areas of the border where the riverbed has dried sufficiently or where enough ice has formed in the winter to allow for easy access. Examples of this kind of activity can be seen here:
The area south of the Yunfeng Dam is a hotbed for cross border smuggling. Satellite imagery appears to show that the dam may not have been opened to let out a significant amount of water since 2013. This has allowed the Yalu River’s bed to run dry, making it idea for border crossings but likely hurting water supplies downstream and causing environmental damage.
The fight against cross border smuggling has only just begun as North Korea begins to take new steps to prove its determination to seek a peaceful resolution to their 66 year-old conflict with the US and South Korea.
via ZeroHedge News http://bit.ly/2UqAKmK Tyler Durden
Trade wars don’t appear to be as “good, and easy to win” as President Trump tweeted a year ago.
The disputes over tariffs forced American importers to pull forward growth in the second half of 2018, which supercharged the overall economy until October. But when the artificial growth was over, shipping rates across the world fell, as new evidence today from Drewry Maritime Research show the “tariff hangover” has cast a gloomy outlook over 2019 for U.S. west coast ports, reported The Loadstar.
In the first three months of 2019, west coast ports transpacific imports plunged 19% on the previous quarter and by 3% y/y.
“The west coast market was always likely to suffer the most from a tariff hangover, as shippers had prioritized that gateway as the quickest means to beat the deadline [for import duty hikes on Chinese imports],” said Drewry.
“Now that the sugar rush, caused by the threatened tariffs on Chinese goods, has passed, the market is readjusting to much slower volumes and prices,” it added.
According to Drewry, Asia-US west coast trade lanes in January experienced near-100% load factors on head-haul vessels, but in February utilization plummeted to 80% – the lowest in two years.
Weekly spot rates for 40′ containers for China to the U.S. West Coast plummeted 51% from its October 2018 high of 2852 to 1,267 by the end of March. In the last 14 days, the spot rate has rebounded to 1,586.
Drewry noted that the timing of the spot rate decline “could not have occurred at a more inopportune moment,” given that shippers are in the process of trying to secure rate increases on annual contract renewals that begin on May 1.
“Earlier in the year, it seemed the carriers might be able to secure some modest increase in revenue from their BCO [beneficial cargo owner] contracts, but those hopes now seem dashed,” suggested Drewry.
“The only discussion point that remains is to what extent the shipping lines can secure some agreement to a floating BAF [bunker adjustment factor] arrangement within those contracts, so that when, towards the end of 2019, the carriers start having to pay a premium for low-sulfur fuel oil, they can rely on some mechanism to kick in to automatically recover some of those additional costs,” it added.
Lars Jensen, the chief executive and partner at SeaIntelligence Consulting, told The Loadstar that shippers face severe headwinds in 2019, commenting: “There is clear cause for concern – precisely because the weakness is so widespread.”
The “tariff hangover” comes at a time when the International Monetary Fund (IMF) last week cut its global economic growth forecasts for 2019.
“This is a delicate moment for the global economy,” IMF chief economist Gita Gopinath said in a recent news conference.
More or less, the synchronized global slowdown has put developed and emerging economies into its most vulnerable spot since the financial crisis.
via ZeroHedge News http://bit.ly/2Xo0Lov Tyler Durden
The Mauna Loa volcano is picking up the pace when it comes to volcanic activity. Scientists have begun monitoring the Big Island volcano, just in case, it could erupt violently.
Mauna Loa is impressively close to Kilauea, the volcano which erupted for weeks last May. An eruption last year by Hawaii’s Kilauea volcano destroyed more than 700 homes from May through August. Kilauea’s current alert status is “Normal,” but the landscape around the volcano has been permanently altered, creating 250 acres of new land.
The Hawaii Volcano Observatory is closely monitoring Mauna Loa because conditions have risen to levels comparable to a more active period between 2014 and 2017, The Hawaii Tribune-Herald reported Sunday.
According to Tina Neal, the observatory’s scientist-in-charge.
“An eruption could be anywhere from months to years away,” Neal said.
“But we do know that it’s not days or weeks away.” Either way, Neal does not believe Hawaii is in immediate danger of another destructive volcanic eruption.
The activity of concern is an increase in earthquake activity. Earthquakes on Mauna Loa dropped to less than five per week in early 2018, but there have been up to 90 earthquakes weekly since August, with most considered mild at 2.0 or less on the Richter scale, Neal said.
The Kilauea eruption came shortly after a decrease in volcanic activity at Mauna Loa, but Neal said there is no “perfect correlation” between the volcanoes indicating one always becomes active as the other falls silent. But there was a 5.3 magnitude earthquake near Kilauea and Mauna Loa, according to the US Geological Survey (USGS). Kilauea is on the opposite side of the island to the epicenter of the earthquake, which happened Sunday.
The USGS said the earthquake’s epicenter was about eight miles (14km) northwest of the town Kalaoa. The tremor occurred at a depth of about eight miles, however, that’s not particularly deep for an earthquake of this magnitude. The USGS further said that the volcano has returned to “green normal.” which means the “volcanic activity has ceased and volcano has returned to noneruptive background state,” according to The Express.
The best way to prepare for a possible volcanic eruption is to have a “bug out bag” ready, full of essentials, and have a place you can get to in a hurry. Most volcanoes are unpredictable and a situation can change quickly. Being ready beforehand will give you the survivalists edge.
via ZeroHedge News http://bit.ly/2UHYZ4U Tyler Durden
It appears North Korea is set to resume its ICBM test at any moment.
According to the state-run KCNA news agency, on Wednesday, North Korean leader Kim Jong-un supervised a test-firing of a new tactical guided weapon, calling its development an “event of very weighty significance” in beefing up its military power.
The report did not specify exactly what the tested weapon was, although some military channels have suggested that it was “likely a cruise missile or SAM, or some other missile variant.“
#DPRK supervises test-fire of a new tactical guided weapon. Likely a cruise missile or SAM, or some other missile variant. https://t.co/Kbo3pAjLLT
“Saying that the completion of the development of the weapon system serves as an event of very weighty significance in increasing the combat power of the People’s Army, he noted that it is a very good thing that the field of national defense science has waged a dynamic struggle for attaining core research goals,” Kim was quoted as saying by the Korean Central News Agency.
“After watching the power of the new-type tactical guided weapon, he pointed out that our national defense scientists and workers in the field of the munitions industry performed another great work in increasing the country’s defense capabilities,” KCNA said, according to Yonhap.
Kim’s theatrical supervision of the weapon test came after he suggested a year-end deadline for denuclearization negotiations with the U.S. following the breakdown of his February summit with U.S. President Donald Trump.
On Wednesday, Pyongyang’s media reported that the North Korean leader visited an air force unit and reviewed a flight exercise in his first public inspection of military activities in five months.
The unexpected weapons test is a throwback to the volatile days of mid/late 2017 when North Korea would lob a test ICBM at some vague target in the Pacific (usually flying over Japan) just to be taken seriously by Trump. However, two summits later, and one lengthy attempt at restoring diplomatic relations seemingly in disarray, appears to have restarted the status quo.
via ZeroHedge News http://bit.ly/2DgWcoI Tyler Durden
In a stunning new poll, Americans indicated they are OK with a 70% marginal tax rate, indicating that since the hefty taxes would only apply to other people and not themselves, they are alright with the extremely high taxes.
“See, a lot of people think the proposed 70% tax rate is way too high,” said one woman in California.
“But what they don’t understand is that the 70% is only on really rich people—in other words, not me. Let’s crank it up to 90, 100, or 110% even. I don’t mind in the slightest.“
Americans all over the country suggested they are OK with a majority of the people voting to take a minority of the people’s money, as long as they are not part of that minority.
“I am a very generous person, so I believe everyone else needs to pay their fair share,” said Lyle Hartright of Maine.
“Everyone that isn’t me, I mean.”
“These are stunning results,” said one analyst.
“We always believed that Americans were generous, but we never knew how generous. To offer to raise taxes to 70% or more on other people just goes to show how much compassion people have.”
Three weeks ago, when Turkey was scrambling to defend the lira ahead of local municipal elections, a potentially destabilizing event which saw significant selling of the currency (and which ended up badly for Erdogan’s ruling party, which lost historic control of the two most important cities, Ankara and Istanbul), we reported that the Turkish central bank had burnt through at least a third of its foreign reserves in March in an effort to stem a plunge in the lira, in a repeat of the crisis that engulfed the lira last summer and triggered a blast of inflation and the first recession in a decade, while “putting the country on path to a full-blown currency and funding crisis.”
And despite what was clear continued central bank defense of the Turkish lira since then, Turkey’s official reserves actually appeared to rise, in what was meant to telegraph confidence in the currency and give the impression that the currency was stable without continued central bank support.
There was just one problem: the central bank appears to have been if not lying, then grossly misrepresenting the true state of the country’s foreign reserves .
As it turns out, Turkey has been pulling a financial trick popularized by China’s central bank for the past several years, and according to the FT, the country’s central bank was propping up its foreign currency reserves with billions of dollars of short-term borrowed money, “raising fears among analysts and investors that the country is overstating its ability to defend itself in a fresh lira crisis.”
After tumbling from a recent high of $34 billion to $25 billion at the end of March, Turkey reported that the net foreign reserves held by the central bank stood at $28.1 billion in early April — a sum which the FT notes was already believed to be inadequate because of Turkey’s heavy need for dollars to cover debt and foreign trade. But what the Financial Times uncovered is that this total was “enhanced” by a surge in the use of swaps, or short-term borrowings, since March 25. Stripping those swaps out, the total is an alarmingly low $16 billion, an amount which could be depleted in just months, if not weeks, especially if the news of the CB’s plunging reserves creates a self-fulfilling prophecy in which lira holders rush to convert their currency before the central banks runs out of dollars.
The chart below shows two sets of numbers: Turkey’s true net foreign reserves, and the number that the central bank had used for public consumption, one that include the nominal amount of swaps.
Confirming the FT’s analysis, a former senior official at Turkey’s central bank, who did not wish to be named (as it would mean an instant prison sentence by the country’s executive president), said the extra dollars had been borrowed, not earned. “This is not an orthodox [approach to] central bank reserve build-up.”
To be sure, the Turkish currency market has been a fiasco for the past month: at the end of March, just days ahead of the elections, Turkey pulled another familiar Chinese trick, when in an attempt to crush speculators and lira shorts, it briefly pushed up its overnight swap rates to 1350%, a level which resulted in swift condemnation from the international finance community which was furious at the ridiculous tricks pulled by the Erdogan government.
Then, once the central bank realized it couldn’t keep swap rates at stratospheric levels for long, it decided to change its approach, and opted to lie about its reserve situation instead. Starting roughly around the time the overnight swap rate collapsed back to normal on March 28…
… the central bank’s use of swaps exploded, rising from virtually nothing to as much as $13bn by April 8, and a sharp increase from January 1 — March 25, when borrowing never exceeded $500m, according to the central bank’s own figures. And as one would expect, when adding the impact of the swaps, the bank’s reserve figures started to climb again… but as shown in the top chart, the real number excluding the borrowings, was far lower.
What exactly are these swaps? Stated simply, this is money that Turkey borrowed from the country’s commercial banks, which just so happens, are flush with dollars after individuals and companies flocked to hard currency as a haven.
For those following the fund flows, this circular arrangement was a delightfully Machiavellian construct by Erdogan: first, as a result of its collapsing reserves, the central bank prompted fears among the local population that its funding situation was unsustainable, forcing a surge in lira to dollar conversions among the local population (and foreign speculators). However, since the dollars that were received following the conversion were parked with the local banks, the central bank had easy access to use them – in the form of swaps – and as it received more dollars from the commercial banks, it not only could defend the lira further, using the people’s money against them, but also misrepresent the true level of its net foreign reserves!
To be sure, if and when this check kiting scheme was exposed, it would lead to even greater panic as a second wave of lira selling would ensue, as not only was the true level of reserves lower, but the central bank was in effect leveraging commercial banks’ own dollar holdings in its defense of the currency. In doing so, if and when this valiant defense – which most likely will culminate with another IMF bailout – fails, then the commercial banks would go down too, as bank clients, realizing all their dollar deposits had been quietly carted over to the central bank, would be, how should we say it… furious.
This also explains why, as the FT further note, “five other investors and analysts who have closely studied the bank’s activities in recent weeks spoke on condition of anonymity to the FT about their concerns over the reserves. Several of them were fearful of speaking out on the issue after Turkish regulators launched probes into JPMorgan last month over its advice to clients to sell the lira.”
Investors said they were worried about this practice of using one-week currency swaps, in which liras are exchanged for US dollars with local banks with an agreement to later reverse the transaction. They believe that this borrowing has flattered the central bank’s reserves data.
Some investors argue that the borrowed money should be stripped out of net foreign reserve data, leaving a remaining sum that is well below $20bn.
Responding to the FT, the central bank reluctantly confirmed that dollars borrowed in the first part of these transactions are added to the balance sheet. The obligation to later repay the dollars is recorded as an “off balance sheet item”, which is precisely why Turkey is doing this entire scheme to make its reserves appear far greater than they are in reality.
Naturally, the use of such reserve-masking swaps “sharpened fears that began to gather last month that the bank was burning through its hard currency to hold the lira steady in the run-up to local elections on March 31. The central bank declined to comment on whether it has intervened in this way.”
The impact of the swaps transactions is most vividly illustrated in the central bank’s daily balance sheet, which contains figures for foreign assets and liabilities that have been intensely scrutinised by analysts in recent weeks. Another way of representing the chart up top, net foreign assets — calculated by subtracting the bank’s foreign liabilities from its assets and converting into dollars — have risen and fallen in parallel with the amount borrowed through swaps. The net foreign assets figure — a proxy for how much assets Turkey has to continue defending the onslaught of lira sellers — slumped by $9.4bn between March 6 and March 22 to $19.5bn, the lowest level on a US dollar basis since 2007.
Where things get interesting is what happened next: by April 5, the net reserve figure had swelled to $23.6BN, boosted by an increase in swaps. However, excluding swaps, net foreign assets have stood at less than $11.5bn during the entire month of April, down from $28.7bn at the start of March on the same basis.
In other words, Turkey is officially misrepresenting its current reserves by as much as 100% just to give the impression that it can continue defending the lira, when in reality is it using the same dollars that the local populace had converted into dollars as part of their flight away from the lira.
The condemnation from the analyst community was brutal: Piotr Matys, an emerging market currency strategist at Rabobank, said the use of swaps seemed to be “some sort of window dressing” to create the impression of higher reserves.
Furthermore, it is very likely that Turkey was using these very swaps to support the lira. The central bank did not directly respond to an FT question about the use of funds, nor to a question about whether it used measures to prop up the currency since March 31 elections. However, it did say a variety of factors could account for the shifting total.
With little left in its defense, the central bank has demanded that analysts are wrong to focus on a net international reserves figure that is published once a week, and instead stressed that international reserve adequacy measures used the gross figure to test a country’s preparedness. And while Turkey’s gross foreign reserves stood at around $77BN in the first week of April, that number too is irrelevant considering the elephant in the room which we discussed last summer: Turkey has $177bn in short-term external debt coming due in the next 12 months; it has nowhere near the funds to repay it, virtually assuring some form of default is inevitable.
“There’s a general unease about what’s going on behind the scenes,” said Tim Ash, an emerging markets strategist at BlueBay Asset Management. A lack of transparency was undermining the bank’s already fragile credibility, he warned.
“The bottom line is that they don’t have enough, whether it’s net or gross,” Ash added. “Everyone in the market knows that Turkey doesn’t have enough foreign currency reserves to mount a sustained and credible defence of the lira.”
The only question is when will the price of the lira, which at the current level of 5.75 vs the dollar is wildly overvalued, start reflecting Turkey’s dismal situation.
via ZeroHedge News http://bit.ly/2DjoI9b Tyler Durden
