Unlike Monday’s global PMI deterioration (which sent markets around the globe soaring), there was little in terms of macroeconomic data overnight (German IFO earlier missed on expectations and business climate but beat on current assessment) so the “market made the news.” These came most from the USDJPY which has continued to fall, sliding to 111.85 overnight, and dragging the Nikkei to a -0.4% drop.

Japan’s currency strengthened against all of its 16 major peers and gold rose for the first time in three days after the People’s Bank of China reduced the reference rate by more than some analysts forecast. 

Many are now wondering what if anything the BOJ – a critical member of the “global central bank put” team – can do any more at this point to push the next leg higher in the USDJPY.

“It’s beginning to feel like the BOJ is completely stuck,” said Tetsuo Seshimo, a portfolio manager at Saison Asset Management Co. in Tokyo. “The yen had been trading at historically low levels that implied an endless amount of easing, but now doubts are emerging. It’s difficult to imagine any scenarios where the BOJ can take action.”

Elsehwere in Asia, China’s Shanghai Composite (-0.8%) retreated from a monthly high, as financials were pressured on outflow fears after the PBoC weakened the reference rate by the most since early January. Furthermore, now that the PBOC has limited tracking data on offshore or CNH intervention, it will be virtually impossible to quantify just how much intervention the PBOC has engaged in even after the fact, something which will certainly confuse traders and raise suspicions that China’s capital outflow problem is greater than even the worst case scenario.

Emerging-market stocks retreated from a six-week high. BHP Billiton Ltd. led commodity producers lower after making a larger-than-expected cut to its dividend. Crude fell and industrial metals declined, with zinc slipping back after entering a bull market on Monday.

European strocks were weighted down by the previously reported first cut in BHP Billiton’s dividend in 15 years and a surprise loss posted by Standard Chartered Plc confirming that the global slowdown and tumbling prices for metals and oil are weighing on earnings. Britain’s referendum on its membership in the European Union is also raising currency-market risks across the continent, with the cost of options protecting against losses on the euro jumping.

Crude has generally drifted lower today although expect more headline-driven squeezes on headlines out of Houston where Saudi oil minister Ali al-Naimi will deliver the welcome and ministerial address to open day 2 of the IHS CERAWeek conference. In other oil data we also have API weekly inventory data today, with builds expected both nationally and at Cushing delivery hub in EIA data tomorrow.

But the biggest question on all traders’ minds will be whether the bear market short squeeze that sent the S&P higher by 130 points in 6 days, is finally over – with most global market rolling over and with US equity futures unable to find their  solid early morning footing, it may finally be time to cash out of the bear market rally which so many predicted, and which GSBank yesterday may have top-ticked with perfection.

Where markets stand now:

• S&P 500 futures down 0.1% to 1933
• Stoxx 600 down 0.3% to 330.9
• FTSE 100 down 0.5% to 6008
• DAX down 0.7% to 9506
• German 10Yr yield up less than 1bp to 0.18%
• Italian 10Yr yield up 2bps to 1.54%
• Spanish 10Yr yieldunchanged at 1.65%
• S&P GSCI Index down 1% to 297.7
• MSCI Asia Pacific down less than 0.1% to 121
• Nikkei 225 down 0.4% to 16052
• Hang Seng down 0.3% to 19415
• Shanghai Composite down 0.8% to 2903
• S&P/ASX 200 down 0.4% to 4980
• US 10-yr yield up 2bps to 1.78%
• Dollar Index down 0.01% to 97.37
• WTI Crude futures down 0.6% to $33.22
• Brent Futures down 1.8% to $34.05
• Gold spot up 0.9% to $1,219
• Silver spot up 0.3% to $15.23

Global Top news

• United Technologies Says Obstacles Scuttled Honeywell Talks: Walked away from preliminary talks about a merger due in part to concerns that a deal wouldn’t win approval from antitrust authorities; Honeywell said to have offered $108 a share last wk
• Valeant Says It Will Restate Earnings After Board Review: Philidor accounting review showed $58m in rev. recognized in 2014 should have been booked in subsequent periods; sees change reducing 2014 GAAP EPS by ~10c, increasing 2015 GAAP EPS by ~9c
• German Business Sentiment Falls as Turmoil and China Sow Concern: The IFO institute’s business climate index dropped to 105.7 in Feb. from 107.3 in Jan., median est. decline to 106.8
• Boeing CEO Muilenburg Named Chairman as McNerney Exits Board: CEO Dennis Muilenburg was named chairman, succeeding former CEO Jim McNerney, who is stepping down as a director
• Bill Gates Sides With Government in Apple Clash, FT Says: Gates has sided with the U.S. govt. in a dispute over Apple’s refusal to break into a terrorist’s iPhone, breaking ranks with the industry in a face-off with law enforcement, FT reported
• Fitbit Forecasts Miss Estimates on Global Rollout of New Devices: Sees 1Q adj. EPS breakeven to 2c vs est. 23c; sees 1Q rev. $420.0m-$440.0m, est. $484.6m
• Brookfield, Qube Consider Joining Forces in Bid for Asciano: Groups led by Brookfield Asset and Qube Holdings are considering joining forces to buy Asciano, 2 groups discussing joint offer of A$9.28 per share in cash
• J&J Must Pay $72 Million Over Talc Tied to Woman’s Cancer: Company faces about 1,200 more suits over talc products
• Goldman Sachs, HSBC Back Cameron Push to Keep Britain in the EU: 36 FTSE companies sign letter that backs remaining in bloc
• OPEC Doesn’t Know How It Can ‘Live Together’ With Shale Oil: Production freeze will be re-evaluated after 3-4 months
• Drug Spending Slowed in 2015 After Discounts, CVS Health Says: Drug costs for its plans grew 5% in 2015 vs 11.8% in 2014
• Syrian Cease-Fire to Begin Feb. 27, U.S. and Russia Announce

Looking at regional markets, we start in Asia equities failed to take the impetus from Wall Street gains, with sentiment in the region dampened on a reversal in energy and caution regarding China. ASX 200 (-0.4%) and Nikkei 225 (-0.4%) pared early gains as appetite for risk deteriorated amid a pull-back in energy, with the latter also pressured by JPY appreciation. Chinese markets underperformed with the Shanghai Comp (-0.8%) retreating from a monthly high, as financials were pressured on outflow fears after the PBoC weakened the reference rate by the most since early January, where continued similar action by the PBoC triggered widespread uncertainty and a global stock slump. 10yr JGBs initially tracked the gains in UST’s, with the dampened risk-off sentiment supporting safe-havens, while today’s 40yr auction saw increased demand as participants search for positive yields. However, heading into the European open gains were pared amid a sell-off in USTs. PBoC set the CNY mid-point at 6.5273 vs. last close. 6.5230 (Prey. mid-point 6.5165); this represents the biggest weakening of the reference rate by the PBoC in 6 weeks. (RTRS)

Asian top news

• Honda Shakes Up Ranks as Recalls Persist After CEO Switch: Chairman and eight other top Honda executives are retiring
• Top Macro Hedge Fund Sees Monetary Easing as Boon for Stocks: PruLev Global says more central bank easings may boost developed market indexes
• Noble Group Warns of Loss After Additional $1.2 Billion Charges: About half of $1.2 billion charge taken on long- term contracts
• Earliest Chinese Data Signal Slowdown Hasn’t Bottomed Out Yet: Private gauges of manufacturing and services fell to new lows, a reading of business confidence slipped, and interest in small and medium sized businesses deteriorated, the readings show.
• China Reform Said to Near Joining $43 Billion Syngenta Purchase: State-run fund in discussions to join ChemChina’s record deal
• Singapore Lawyers Warn of 1998-Like Pain as Debt Defaults Spread: ‘A while before any significant recovery’ Rajah & Tann Singapore says
• Kuroda Hints at Shift in Thinking on Monetary Policy’s Power: Unprecedented stimulus program failed to achieve Bank of Japan’s inflation target
• China’s New Securities Chief Said to Urge Strict Supervision: Liu Shiyu said to request checks on market manipulation after replacing Xiao Gang as CSRC chairman

European equities kicked off the session in a similar manner to Asian equities, opening with losses and being weighed on by the energy and material sectors although with much of the losses being pared throughout the morning (Euro Stoxx: -0.2%). The day has so far seen some retracement from much of yesterday’s moves, with risk off sentiment dictating play today. In terms of stock specific news, two of the most notable earnings of the day were particularly downbeat, with BHP Billiton (-3.0%) and Standard Chartered (-4.0%) both among the worst performers in Europe. 

Elsewhere, fixed income has seen a choppy session so far, with Bunds largely shrugging off the miss on expectation in German IFO German IFO Business Climate (105.7 vs. Exp. 106.8). Of note, as European participants arrived at their desks this morning, softness was seen in US 10yr T-notes due to two large sellers, one of 30k contracts and one of 5k contracts.

European top news

• BHP Cuts Dividend for First Time in 15 Years on Profit Drop: Cuts interim div. to 16c/shr from 62c y/y, payout had been forecast to drop to 31c; 1H underlying profit fell to $412m at its continuing operations from $4.9b yr earlier
• Standard Chartered Plunges on Surprise Annual Loss, Revenue Miss: 2015 pretax loss $1.5b, down from profit of $4.2b y/y; FY adj. pretax $834m, missed ests. of $1.37b; loan impairments almost double to $4b, highest ever
• Swiss Re Quarterly Profit Beats Estimates; Names New CEO: Christian Mumenthaler will take over as CEO as of July 1; 4Q net income $938m; est. $916m
• InterContinental to Pay Out $1.5b After Hotel Sales: Special div. will be paid in 2Q, takes funds returns since 2003 to $12b
• U.K. Bank Rules Won’t Revert to Pre-Crisis Days on ‘Brexit:’ Prudential Regulation Authority’s Andrew Bailey says there won’t be a “bonfire of regulations”
• Danone Forecasts Profitability to Improve on Yogurt Turnaround: 2015 LFL sales to rise 3% to 5% with “solid” margin advancement
• JPMorgan’s ‘London Whale’ Surfaces to Say ’12 Loss Not His Fault: Bruno Iksil comments on losses in former unit in letter

In FX, the USD/JPY has stolen the limelight with another move through 112.00 although in more orderly trade this time around, with some reluctance seen to push too aggressively towards the recent 110.99 lows. A busy morning for EUR/USD though, with some early calls that parity is still a view firmly held. Alongside a soft business climate index in the German IFO survey, we saw a push on 1.1000, with some large buy orders filled through the figure, though more seen through to 1.0950. Tight trade seen elsewhere, with AUD digging despite some fresh, but modest weakness in stocks. EUR/CHF now pushing lower also, dipping below 1.0950 to reflect the heavy risk and EUR tones. Oil prices steady, but coming off better levels — as with the related currencies.

In commodities, WTI and Brent futures fell throughout the European session with the commodities seeing continued volatility as participants wait to see what, if any, deal can be agreed regarding a freeze in global production. Additionally, participants will be keeping a keen eye out for the latest API crude inventory report.

The Bloomberg Commodities Index fell as much as 0.6 percent, weighed down by weaker oil and base metals prices. Oil traded near $33 a barrel after the International Energy Agency said a global surplus will persist into next year and limit any chance of a short-term price rebound. While supply and demand will be aligned next year, large accumulated stockpiles will slow the pace of recovery in prices, the IEA said in its medium-term report. April futures in New York slid 2.3 percent to $32.63.

Zinc retreated 1.2 percent to $1,759 a metric ton on the London Metal Exchange, falling from its highest close in four months. Copper, lead and nickel fell at least 0.5 percent. Gold led precious metals higher, gaining 0.9 percent to $1,219.03 an ounce as investor holdings in exchange-traded funds jump to the highest in almost a year.

On the US calendar attention will be focused on the February consumer confidence print where the consensus is for a near 1pt decline to 97.2. We’ll also get more housing market data with January existing home sales and the December S&P/Case-Shiller house price index, while the February Richmond Fed manufacturing activity index print is also expected. There’s nothing in the way of Fedspeak today however it’ll be worth keeping an eye on the BoE where Governor Carney is due to speak to lawmakers this morning (10am GMT) on the outlook for the UK economy and monetary policy. The ECB’s Nouy is also due to speak this afternoon at a DB conference I’ll be attending.

Bulletin Headline Summary from Bloomberg and RanSquawk

• European equities take the impetus from the weak lead in Asian bourses amid weakness in energy and material names, while BHP Billiton and Standard Chartered are among the worst performers on the back of poor earnings.
• EUR takes a hit following soft German IFO readings alongside bearish calls from the likes of BNP Paribas and Deutsche Bank citing ECB action next month.
• Looking ahead, highlights include US S&P/Case Shiller index, Existing Home Sales as well as comments from Fed’s Kashkari, Fischer and BoE’s Haldane
• Treasuries lower with global equity markets and oil; week’s U.S. auctions begin today with $26b 2Y notes, WI yield 0.775%, compares with 0.86% awarded in Jan., lowest 2Y auction stop since November.
• The yen gained and gold climbed after China cut the yuan’s fixing by the most in six weeks, spurring demand for havens. European stocks and emerging markets fell while oil declined with copper
• Britain’s referendum on its membership in the European Union isn’t just a threat to the pound. It’s raising currency- market risks across the continent
• Mark Carney said the Bank of England isn’t making a judgment on the consequences of Britain’s referendum on its European Union membership
• Chief executive officers from HSBC Holdings Plc to Goldman Sachs International were among the business leaders to endorse Prime Minister David Cameron’s campaign to keep Britain in the European Union
• German business confidence fell for a third month in a sign that companies in Europe’s largest economy are growing more concerned as slowing global growth roils financial markets
• BlackRock Inc., the world’s biggest money manager, is warning bond investors they’re not prepared for the Federal Reserve to raise interest rates
• Microsoft co-founder Bill Gates has sided with the U.S. government in a dispute over Apple’s refusal to break into a terrorist’s iPhone, breaking ranks with the industry in a face-off with law enforcement, the Financial Times reported
• The U.S. and Russia announced that a partial cease-fire in Syria will start Feb. 27, reviving hopes for a solution to a five-year war that’s killed 260,000 people and created a refugee crisis straining Europe’s borders
• $18.75b IG corporates priced yesterday (YTD volume $244.25b) and no HY priced (YTD volume $11.125b)
• Sovereign 10Y bond yields mostly steady; European, Asian markets drop; U.S. equity- index futures lower. Crude oil and copper fall, gold rises

US Event Calendar

• 8:30am: Fed’s Fischer speaks in Houston
• 9:00am: S&P/Case-Shiller US HPI m/m, Dec. (prior 0.87%)
  • S&P/CaseShiller 20-City Index NSA, Dec., est. 183.07 (prior 182.86)
  • S&P/CS 20 City m/m SA, Dec., est. 0.85% (prior 0.94%)
  • S&P/CS Composite-20 y/y, Dec., est. 5.8% (prior 5.83%)
  • S&P/Case-Shiller US HPI NSA, Dec. (prior 175.71)
  • S&P/Case-Shiller US HPI y/y, Dec. (prior 5.35%)
• 10:00am: Consumer Confidence Index, Feb., est. 97.2 (prior 98.1)
• 10:00am: Richmond Fed Mfg Index, Feb., est. 2 (prior 2)
• 10:00am: Existing Home Sales, Jan., est. 5.32m (prior 5.46m); Existing Home Sales m/m, Jan., est. -2.5% (prior 14.7%)
• 1:00pm: U.S. to sell $26b 2Y notes

 

DB’s Jim Reid completes the overnight wrap

While Sterling had a day to forget yesterday, it was EM and commodity sensitive currencies which ranked among the day’s best performers after Oil and industrial metals climbed sharply higher. Indeed it was the Russian Ruble (+2.27%), Brazilian Real (+1.98%), Colombian Peso (+1.40%), South African Rand (+1.37%), Chilean Peso (+1.28%) and Australian Dollar (+1.11%) which benefited, as Oil surged higher with the new WTI April contract finishing up +5.17% on the day at $33.39/bbl (we should highlight that this contract had closed at $31.75/bbl on Friday, while the old March contract which expired yesterday rallied 6.2% to $31.48/bbl). The focus appeared to be on some supportive commentary out of the IEA, with the agency forecasting for US shale-oil production to fall by 600k barrels a day in 2016 and 200k barrels a day in 2017 and also suggesting that oil prices should come under upward pressure from next year. It’s worth reminding that we’ve seen a number of temporary bounces like this so far this year and in reality Oil has been in a late $20s to mid $30s range since early January. That said, overall sentiment feels improved and that’s helping risk assets.

That was evidenced yesterday where we saw equity markets globally kick the week off on the front foot. In Europe a rally for commodity sensitive names helped the Stoxx 600 close up +1.67% while the peripherals were more impressive with the IBEX and FTSE MIB +2.35% and +3.52% respectively. That helped the S&P 500 get off to a strong start with the index holding onto gains impressively as the session wore on, eventually finishing +1.45%. Along with that move for Oil, Aluminium (+1.61%), Copper (+1.58%) and Zinc (+2.09%) were all up sharply too while Iron Ore rallied over 6% to close above $50/tn for the first time since October. The VIX finished over 5% lower and closed below 20 for the first time in three weeks, while credit markets had a strong day too with CDX IG and Main both finishing 5bps tighter. A sign of the better sentiment was also reflected in another strong day for primary issuance with nearly $19bn said to have priced in US IG alone which according to Bloomberg is the biggest start to a week since May last year.

Glancing at our screens this morning, after bourses in Asia had initially moved higher reflecting those gains on Wall Street last night, the rally has faded as markets head into the midday break. Not helping is a retreat for Oil with WTI down 1.5% while the news that the PBoC has weakened the CNY fix by the most (0.17%) since January 7th seems also to be weighing on sentiment. Bourses in China are leading the weakness with the Shanghai Comp and CSI 300 -1.26% and -1.27% respectively. Elsewhere the Nikkei (-0.31%), Hang Seng (-0.54%), Kospi (-0.28%) and ASX (-0.47%) are also down after initially opening up stronger. US equity market index futures are also pointing to a softer start, while Gold (+0.95%) and the Yen (+0.53%) are the ones benefiting from the weaker tone.

Moving on. Along with the better day for risk yesterday, European rates markets were a tad stronger too reflecting what was a fairly softish set of European PMI’s. The flash February Euro area composite was down 0.9pts and more than expected this month to 52.7 (vs. 53.3 expected), the second consecutive monthly decline and lowest in 13 months. This was primarily driven by the manufacturing print which fell 1.3pts to 51.0 (vs. 52.0 expected), although services was also slightly lower (-0.6pts to 53.0; 53.4 expected). Regionally it was the weakness in Germany which stood out with the manufacturing print down 2.1pts to 50.2 (vs. 51.9 expected), marking a 15-month low. The French composite also dipped below 50 following a drag from the services reading. Our European Economists highlighted in a note yesterday that the flash PMI’s suggest a sharp monthly fall (1.4pts) on average in the composite PMI of Italy, Spain and Ireland. They also note that the composite PMI for the Euro area is now consistent with +0.3% qoq growth and in line with their slightly lower outlook for H1 2016, but also raises the risk of a more material slowdown. Clearly the data also adds more fuel to the fire for the ECB to deliver next month.

Meanwhile, over in the US yesterday there was similar softness in the flash manufacturing PMI there, which declined 1.4pts to 51.0 (vs. 52.4 expected) and the lowest since October 2012. That said there was better news to come out of the Chicago Fed manufacturing activity index which was up over half a point to 0.28 (vs. -0.05 expected) in January.

Looking at the day ahead now, the focus shortly after we go to print this morning will be on Germany where the final revision to Q4 GDP is due (no change expected at +0.3% qoq). Shortly after this we’ll get a number of confidence indicator readings out of France before we return to Germany again with the IFO survey data for February. Interest in the US this afternoon is likely to be centered on the February consumer confidence print where the consensus is for a near 1pt decline to 97.2. We’ll also get more housing market data with January existing home sales and the December S&P/Case-Shiller house price index, while the February Richmond Fed manufacturing activity index print is also expected. There’s nothing in the way of Fedspeak today however it’ll be worth keeping an eye on the BoE where Governor Carney is due to speak to lawmakers this morning (10am GMT) on the outlook for the UK economy and monetary policy. The ECB’s Nouy is also due to speak this afternoon at a DB conference I’ll be attending.

via Zero Hedge http://ift.tt/1WG39QY Tyler Durden

 

 

Hold your real assets outside of the banking system in a private international facility  –>  http://ift.tt/1M1FiG5 

 

 

2012-2015 U.S. Gold Supply Deficit: A LOT

Posted with permission and written by Steve St. Angelo, SRSrocco Report (CLICK FOR ORIGINAL)

 

 

 

The U.S. suffered another sizable gold supply deficit in 2015. Matter a fact, the deficit was 50% larger than in 2014. In 2015, total U.S.gold demand was 118 metric tons (mt) higher than total supply versus 77 mt in 2014.

According to figures put out by the USGS, World Gold Council and Thomson Reuters GFMS,the U.S. had a total of 553 mt of gold supply compared to 671 mt of total demand… leaving a 118 mt shortfall for 2015:

Here is how I arrived at the figures shown in the chart above:

U.S. Gold Supply & Demand Figures 2015

Domestic Mine Supply = 213 mt

Gold Imports = 265 mt

Estimated Scrap = 75 mt

Total Supply = 553 mt

Gold Exports = 478 mt

Domestic Consumption = 193 mt

Total Demand = 671 mt

Total Deficit = 118 mt

American gold consumption increased from 179 mt in 2014 to 193 mt in 2015. The majority of the increase was due to higher Gold Bar & Coin investment. According to the World Gold Council Full Year 2015 Report, Americans purchased 132 mt of Gold Jewelry and 47 mt of Bar & Coin in 2014 versus 120 mt of Gold Jewelry and 73 mt of Bar & Coin investment in 2015.

What was interesting was the huge spike of U.S. Gold Bar & Coin demand during the third quarter of 2015. This was at the same time when the retail silver market suffered extensive shortages with upwards of two month wait times on certain products. Americans purchased 33 mt of Gold Bar & Coin in Q3 2015, 45% of the total for the year.

While some precious metal investors do not trust any of the data that comes from the World Gold Council or Thomson Reuters GFMS, I believe the figures for the U.S. are pretty accurate. If we look at Gold Eagle sales from July-Sept 2015, they totaled 397,000 oz while Gold Buffalo sales were 74,000 oz. Thus, total sales of these two official gold coins equaled 471,000 oz or 14.6 metric tons. The remaining 18.4 mt of Gold & Bar & Coin for Q3 2015 was in from other official coins and bars (such as Gold Maples) and private bars and rounds.

U.S. Exports Every Bit Of Its Gold Supply In 2015

Now, if we were to exclude U.S. gold scrap supply and domestic consumption, this would be the result:

U.S. domestic gold mine supply of 213 mt and imports of 265 mt (478 mt) is the same total of gold exports at 478 mt. Basically, the United States exported every bit of its mine supply and imports abroad.

U.S. Four-Year Gold Supply Deficit Equals One Hell Of A Lot Of Gold

If we add up total gold supply and subtract total demand since 2012, the United States suffered one hell of a deficit:

As we can see from the chart above, the U.S. experienced annual gold supply deficits since 2012. In 2011, the U.S. actually enjoyed a 215 mt surplus. What was interesting is that during the years when the price of gold surged (2009-2011), the U.S. reported more annual surplus. However, since the price of gold peaked (2011), it has been one annual deficit after another. I believe this is due to a significant “Trend Change” by the Eastern countries to acquire as much gold as they can get.

If we add up the annual gold supply deficits from 2012 to 2015, it totals 568 mt, or a massive 18.3 million oz (Moz). To give you an idea of how much gold that is, it equals all the Gold Eagles sold by the U.S. Mint from 1988-2015, 18.3 Moz:

So, in just the past four years, the total U.S. gold supply deficit equals all the U.S. Gold Eagle sales for the past 28 years. That’s a one hell of a lot of gold. It amounts to a $22 billion gold supply deficit, based on a $1,200 current market price multiplied by 18.3 Moz.

I will be writing more articles on the U.S. and Global gold supply-demand forces. However, the basic takeaway is this… physical gold continues to be drained from the WEST and shipped to the EAST. As we can see from the data in this article, the U.S. continues to export all of its domestic mine supply and imports abroad, while using its scrap supply for consumption purposes.

Which means, the present American Gold Ownership Strategy is to EXPORT IT ALL, JUST LET US KEEP THE SCRAPS.

 

 

Please email with any questions about this article or precious metals HERE

 

 

 

2012-2015 U.S. Gold Supply Deficit: A LOT

Posted with permission and written by Steve St. Angelo, SRSrocco Report (CLICK FOR ORIGINAL)

 

 

 

 

 

 

via Zero Hedge http://ift.tt/1p09sUX Sprott Money

In their latest report: “Eliminating cash will also eliminate the checks and balances on banking policy and practice”, Stefan Wieler and Josh Crumb from GoldMoney Insights™ show with comprehensive data that eliminating the largest bank notes in circulation is as good as eliminating cash altogether. It becomes evident fighting crime is not the main goal of a phase out of large bills. By eliminating cash, important checks and balances for commercial and central banks will disappear.

The war on cash is accelerating with the ECB likely firing the first shots and eliminating the EUR500 note. At the same time, former Treasury Secretary Larry summers is promoting to abandon the USD100 bill. Our latest find is a video that shows how one stacks a million dollar in $100 bills in a suitcase. You know, one of those used in Miami Vice. The video runs up and down Bloomberg all day yesterday. The story that supports the attack on cash is the everywhere the same: Large bills, so they say, are used predominately by criminals. Eliminate the large bills, eliminate the problem. Interestingly, the fiercest advocates for a phase-out of cash are all lifelong economists. They have spent their entire career analyzing interest rates, currencies and other economic parameters. Most of them are not experts on crime. It would be much more credible that the recent push to phase out cash is actually coming from people that are experts in the field rather than economists that have very different agenda. What becomes evident when going through the academic papers and op-eds that are flooding the market recently is that there is actually a blatant lack of hard evidence that large bills are not simply used as a counterparty risk free store of value by law-abiding citizens rather than criminals. They simply all quote each other, until one believes that there actually has been a comprehensive study that showed credible and hard evidence that large bills have no other function in the market than to facilitate crime.

At the same time, the true intentions are concealed and the huge risks for not having cash omitted. In the Bloomberg video ‘campaign’ they fail to mention monetary policy at all, and in fact take the pitch a step farther and seem to suggest that the international community put pressure on Switzerland, a sovereign country with an ‘independent’ central bank, to eliminate the 1000 Swiss Franc as well. And again, all in the name of fighting crime, with no much supporting evidence and not a single hint of their primary objective (because a public debate on taxing savings – even more – is probably a debate they don’t expect they would win cleanly).       

Digging further, the advocates for an abandonment of cash claim that their focus is on the large denominations only, as apparently those bank notes are predominately used for criminal activities. Smaller bills, we are reassured, will not be affected. However, our colleagues Stefan Wieler and Josh Crumb at GoldMoney have taken a closer look at the spins of academics and central bankers and found that:

“While most advocates for phasing out large bills are not getting tired emphasizing that smaller bills would not be affected, we show that the largest bills of each currency account for over 2/3 of all bank notes in circulation. Hence, all the problems we think will emerge with a complete phase-out of cash would in our view already materialize by eliminating the largest bills. We collected data on bank notes and coins in circulation for the 11 most traded currencies in the world plus the Indian Rupee, Brazilian Real and the Russian Ruble. The countries issuing these currencies account for about 77% of global GDP. Combined, all the currency in circulation is about USD5.2tn at current exchange rates. Importantly, the largest bills account for about USD3.6tn, or close to 70%.”

 

By phasing out the largest bills, gold outweighs currency as percentage of total physical money by 3:1 from currently 1:1

Source: GoldMoney Research

 

Stefan and Josh as show that Cash has an important checks and balance functions on commercial banks:

“One important finding we present is the systematically important use of large-denomination cash bills in times of market volatility. Eliminating the ability of savers to redeem cash and store it would remove important checks and balances on commercial banks. But by eliminating cash, not just does this remove important checks and balances on commercial banks, it also removes checks and balances on central banks: Since the 2008/2009 credit crunch, central banks around the world have held interest rates at historical lows. The US Federal reserve has held the FED lending rate near zero for nearly 7 years. Other banks have followed, and some didn’t stop there. ……………..As the push for negative interest rates intensifies, central banks face the dilemma that savers might simply opt to pull their money out of banks altogether and store cash at home or in a safe. ……. A phase out of cash, and be it just the largest bills, would effectively remove this checks and balances on central banks as well. It is therefore obvious that central banks are not honest with their constituents of why they push for a cashless society.”

They then conclude that

 “However, just as NIRP has not led to desired effect and to a lot of unwanted side-effects such as soaring assets prices, ZIRP achieve the same even without the ability to store cash. Gold has been the money of choice for 1000’s of years. The value of the total above ground stocks of gold and the value of all currency in circulation is currently about the same. Removing the largest bills from the equation would mean that gold would have to assume a much larger role. Our sister company Bitgold has revolutionized the way people can save and spend in gold. As the cash phase-out advances, the appeal to hold gold as a savings asset without banking risk will only increase. We present the significance of large bills as a portion of physical currency circulating in the global monetary system and show that by removing them, gold would outweigh currency as percentage of total physical money by 3:1 from currently 1:1. “

 

The full report including all tables and charts can be accessed here: http://ift.tt/1WFBorR

via Zero Hedge http://ift.tt/1KGhP1L Gold Money

Authored by Eric Zuesse,

An analysis of Federal Election Commission records, by TIME, which was published on 23 October 2015, showed that the 2012 donors to Romney’s campaign were already donating more to Hillary Clinton’s 2016 campaign than they had been donating to any one of the 2016 campaigns of (listed here in declining order below  Clinton) Lindsey Graham, Rand Paul, Carly Fiorina, Chris Christie, Rick Perry, Mike Huckabee, Donald Trump, Bobby Jindal, Rick Santorum, George Pataki, or Jim Gilmore. Those major Romney donors also gave a little to two Democrats (other than to Hillary — who, as mentioned, received a lot of donations from these Republican donors): Martin O’Malley, Jim Web, and Lawrence Lessig. (Romney’s donors gave nothing to Bernie Sanders, and nothing to Elizabeth Warren. They don’t want either of those people to become President.)

Clinton is the only Democratic candidate who is even moderately attractive to big Republican donors.

In ascending order above Clinton, Romney’s donors were donating to: John Kasich, Scott Walker, Ben Carson, Marco Rubio, Ted Cruz, and Jeb Bush. The top trio — of Bush, Cruz, and Rubio — together, received around 60% of all the money donated for the 2016 race by the people who had funded Mitt Romney’s 2012 drive for the White House.

So: the Democrat Hillary Clinton scored above 14 candidates, and below 6 candidates. She was below 6 Republican candidates, and she was above 11 Republican candidates (Lindsey Graham, Rand Paul, Carly Fiorina, Chris Christie, Rick Perry, Mike Huckabee, Donald Trump, Bobby Jindal, Rick Santorum, George Pataki, and Jim Gilmore). The 6 candidates she scored below were: Jeb Bush, Ted Cruz, Marco Rubio, Ben Carson, Scott Walker, and John Kasich.

This means that, in the entire 17-candidate Republican  field, she drew more Republican money than did any one of 11 of the Republican candidates, but less Republican money than did any one of 6 of them. So, if she were a Republican (in what would then have been an 18-candidate Republican field for 2016), she would have been the 7th-from-the-top recipient of Romney-donor money.

Therefore, to Republican donors, Hillary Clinton is a more attractive prospect for the U.S. Presidency than was 64% of the then-current  17-member Republican field of candidates.

Another way to view this is that, to Republican donors, a President Hillary Clinton was approximately as attractive a Presidential prospect to lead the nation as was a President Graham, or a President Kasich — and was a more attractive prospective President than a President Lindsey Graham, a President Rand Paul, a President Carly Fiorina, a President Chris Christie, a President Rick Perry, a President Mike Huckabee, a President Donald Trump, a President Bobby Jindal, a President Rick Santorum, or a President George Pataki.

To judge from Clinton’s actual record of policy-decisions, and excluding any consideration of her current campaign-rhetoric (which is directed only at Democratic voters), all three of those candidates who were in Clinton’s Republican-donor league — Graham, Clinton, and Kasich — would, indeed, be quite similar, from the perceived self-interest standpoint of the major Republican donors.

As to whether any one of those three candidates as President would be substantially worse for Republican donors than would any one of the Republican big-three — Bush, Cruz, and Rubio — a person can only speculate.

However, the main difference between Clinton and the Republican candidates is certainly the rhetoric, not  the reality. The reason for that Democratic rhetoric is that Ms. Clinton is competing right now only  for Democratic votes, while each one of the Republican candidates is competing right now only  for Republican votes.

Hillary Clinton’s rhetoric is liberal, but her actual actions in politics have been conservative, except for her nominal support for liberal initiatives that attracted even some Republican support, or else that the Senate vote-counts (at the time when she was in the Senate) indicated in-advance had no real chance of becoming passed into law. In other words: her record was one of rhetoric and pretense on a great many issues, and of meaningful action on only issues that wouldn’t embarrass her in a Democratic primary campaign, to attract Democratic voters.

In terms of her actual record in U.S. public office, it’s indistinguishable from that of Republican politicians in terms of corruption, and it’s indistinguishable from Republican politicians in terms of the policies that she carried out as the U.S. Secretary of State for four years. Her record shows her to be clearly a Republican on both matters (notwithstanding that her rhetoric has been to the exact contrary on both matters).

In a general-election contest against the Republican nominee, Clinton would move more toward the ideological center, and so also would any one of the Republican candidates, who would be nominated by Republican primaries and so running against her in the general election, to draw votes from the center as well as from the right. The rhetorical contest would be between a center-right Clinton and a slightly farther-right Republican; but, at present, the rhetorical contest is starkly  different on the Democratic side than it is on the Republican side, simply because the candidates are trying right now to appeal to their own Party’s electorate (Democrats=left; Republicans=right) during the primary phase of the campaign, not addressing themselves now to the entire electorate (as during the general-election campaign).

Only in the general-election contest do all of the major candidates’ rhetoric tend more toward the center. The strategic challenge in the general election is to retain enough appeal to the given nominee’s Party-base so as to draw them to the polls on Election Day, while, at the same time, being close enough to the political center so as to attract independent voters and crossover voters from the other side.

A good example of the fudging that typically occurs during the general-election phase would be the 2012 contest itself. Both Barack Obama and Mitt Romney drew closer to the rhetorical center during the general-election matchup; but they were actually much more similar to each other than their rhetoricever  was. (After all, Obamacare is patterned upon Romneycare.) During the general-election Romney-Obama contest, Romney famously said that Russia "is without question our number one geopolitical foe, they fight for every cause for the world's worst actors.” Then, Obama criticized that statement, by saying, "you don't call Russia our No. 1 enemy — not Al-Qaida, Russia — unless you're still stuck in a Cold War mind warp.” But, now, as President, Obama’s own National Security Strategy 2015  refers to Russia on 17 of the 18 occasions where it employs the term “aggression," and he doesn’t refer even once to Saudi Arabia that way, even though the Saudi royal family (who control that country) have been the major funders of Al Qaeda, and though 15 of the 19 perpetrators on 9/11 were Saudis — none of them was Russian — and though 92% of the citizenry in the nation that the Saud family owns and whose ‘news’ media and clerics drum into those people’s heads the holiness of jihad, approve of ISIS (which the Saud family prohibit inside Saudi Arabiua even while supporting and funding the jihadists in Syria and elsewhere), and though the Sauds as the country’s leaders are using American weapons and training to bomb and starve-to-death Yemenis. Instead of calling the Saudi regime “aggressors,” we supply arms to them, and cooperate with them against their major oil-competitor, Russia. (For example, we arm the Saudi-funded jihadists that Russia is bombing in Syria, because Syria is a key potential pipeline route into Europe for Saudi oil and Qatari gas, to replace Russian oil and gas in Europe. So, we support the jihadists, even though Obama’s rhetoric opposes them — and even though Obama killed Osama bin Laden, whose Al Qaeda was funded mainly by the Saud family and their friends. Hillary Clinton is even more hawkish against Russia than is Obama. She would be even better for Republican donors than Obama has been.)

Also regarding such fudging: on 27 March 2009, President Obama in secret told the assembled chieftains of Wall Street, “My administration is the only thing between you and the pitchforks. … I’m protecting you.” Romney could have said the same, if he had been elected. And President Obama’s record has now made clear that he indeed has fulfilled on that promise he made secretly to them. The reality turned out to be far more like Romney, than like Obama’s campaign rhetoric had ever been. Similarly, on Obama’s trade-deals (TPP, TTIP, and TISA), he has been very much what would have been expected from Romney, though Obama in the 2008 Democratic Presidential primaries had campaigned against Hillary Clinton for her having supported and helped to pass NAFTA. Obama’s trade-deals go even beyond NAFTA, to benefit international mega-corporations, at the general public’s expense.

What Hillary’s fairly strong appeal to Romney’s financial backers shows is that the wealthy, because of their access to leaders in government, know and recognize the difference between what a candidate says in public, versus what the winning public official has said to them (in private) and actually does  while serving in office. They know that she keeps her promises to them, not  her promises to the electorate.

Hillary Clinton is a good investment for a billionaire — even  for the 70% of them who are Republicans. And, based on those 2015 donation-figures, it seems that they would prefer a President Hillary Clinton, over a President Donald Trump. However, their three favorite candidates, in order, were: Jeb Bush, Ted Cruz, and Marco Rubio. But, in a Clinton-versus-Trump contest, Hillary Clinton would likely draw more money from Republican mega-donors than Trump would, and, of course, she would draw virtually all of the money from Democratic mega-donors.

In such an instance, Hillary Clinton would probably draw a larger campaign-chest (especially considering super-pacs) than any candidate for any political office in U.S. (or global) history. Hillary Clinton would almost certainly be the most-heavily-marketed political product in history, if she becomes nominated and ends up running against Trump.

*  *  *

Investigative historian Eric Zuesse is the author, most recently, of  They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of  CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.

via Zero Hedge http://ift.tt/20RRWxR Tyler Durden

Following The Bank of Japan's voyage into NIRP never-never-land, the market has sent a clear signal of its displeasure and now a growing number of Japanese officials (and former officials) are questioning Kuroda and Abe's Peter-Pan-ic dream that 'they' can fly. Having called for sub-zero rates more than two decades ago, Takeshi Fujimaki, the Japanese banker turned opposition lawmaker, warns "The BOJ is trapped," now that QQE efforts have flattened the yield curve, since "if the curve is steep, banks can make profits even at negative rates. It was a mistake to adopt negative rates after QQE." But it is Fujimaki's parting comment that should have most concerned, "Japan has ballooning debt and the BOJ is financing debt, that’s the problem… it will bust and there will be hyperinflation."

 

First – once again the lying ensues:

• *KURODA: BOJ EASING IS HAVING INTENDED EFFECTS

Doesn't look like it…

 

Governor Haruhiko Kuroda’s decision to charge for some deposits parked at the central bank is punishing those who hold the cash he just spent 2 1/2 years pumping into the economy. And, as Bloomberg reports, the BOJ is boxing itself into a corner because it won’t be able to stop its asset purchases once inflation takes hold, raising the specter of fiscal collapse as yields soar, 65-year-old Takeshi Fujimaki, the Japanese banker turned opposition lawmaker, said.

"The BOJ is trapped,” Fujimaki, who has been predicting an eventual default in Japan over the past 20 years, said in a Feb. 16 interview at his office in Tokyo. “Minus rates weaken the yen and push up inflation, but the BOJ doesn’t have the courage to expand negative rates because that will expedite a fiscal collapse."

 

While the European Central Bank has the same policies, Japan’s problem is that it adopted them in the reverse order, flooding the system with cash under qualitative and quantitative easing and then penalizing holders of cash with negative rates, Fujimaki said. That includes the central bank that now owns more than a third of the country’s government bonds.

 

“As a result of QQE, the yield curve has flattened and because bank deposits aren’t negative, banks are suffering from reserve curve that’s hurting their profitability,” said Fujimaki, who was briefly at Soros Fund Management in 2000, joined the Tokyo office of Morgan Guarantee Trust Co. in 1985 and won his upper house seat in July 2013. “If the curve is steep, banks can make profits even at negative rates. It was a mistake to adopt negative rates after QQE.”

It certainly seems like a problem…

 

As Bloomberg concludes, Japan has the world’s heaviest debt burden, with the ratio of borrowing to gross domestic product more than twice the average for Group of Seven nations. It will rise to 250 percent by 2018 from 246 percent in 2015, according to the International Monetary Fund.

“Japan has ballooning debt and the BOJ is financing debt, that’s the problem,” Fujimaki said. “The yen will weaken further and the risk heightens of a hard landing. There is no debate on an exit policy, so once the economy improves, it will bust and there will be hyperinflation. ”

And finally, as if that was not enought, just tonight we get more Peter-Pan(ic) ravings – this time from Aso:

• *ASO: SALES TAX IMPORTANT FOR CONFIDENCE IN GOVT. BONDS
• *ASO: NO DOUBT THAT JAPAN ECONOMIC FUNDAMENTALS ROBUST

Well with JGB yields at record lows after all the idiocy they have done, "confidence" may be misplaced. But as far as "robust" economic fundamentals – that is a fairy tale that noone believes:

There's this…

• *JAPAN 4Q PRIVATE CONSUMPTION FELL 0.8% Q/Q

Or this…
 

 

Oh, and this…

 

 

But apart from that – yeah, it's robust. Are Japanese leaders simply relying on a media that is now under their direct control and a population aging into senility that will soon be unable to comprehend anything?

via Zero Hedge http://ift.tt/1Ujt7Lv Tyler Durden

By Keith Dicker of IceCap Asset Management

Journey to the Center of the Earth 

Question: Why is the world in an economic funk?

Answer: Private Capital is running away from trouble

Chart 2 shows two variables. The BLUE line shows the amount of quantitative easing or money printing in the USA. Up until September 2008, the amount of money made available to the economy increased in a gradual manner. Thereafter it became a gong show.

The RED line shows the Velocity of Money. Velocity of money is just another way to measure how well the economy is doing. And, while they are loathe to admit it, it is one of THE most important data points monitored by central banks every minute of the day.

Velocity of money measures how fast money swishes around an economy. The faster it swishes around, the faster the economy is growing. Naturally, the opposite is also true and this is what is happening today.

“Why is the world in an economic funk?” is the wrong question. Instead, the correct question to ask is “why is the velocity of money declining?”

And more importantly, “Why, despite the printing of trillions of Dollars, Yen, Sterling and Euros, is the Velocity of Money declining?”

The answer of course is quite simple: Private Capital does not like the actions by central banks and governments, and is therefore withdrawing their money from the global economy. And it is heading towards the center of the earth. Yes, it really is as simple as that.

Yet, the irony is that our central banks and governments have no clue as to the risks they have created.

They honestly believe their efforts to stimulate the economy is groovy. But since their stimulus isn’t working – the answer is to do more of the same.

Maybe we should make them all memorize Einstein’s quote “Insanity: doing the same thing over and over again and expecting different results.”

Yes, the insanity continues. And judging by recent actions, it will continue for a while longer, until that is, the bond market makes them stop.

Fortunately, we are getting closer to a resolution. And when (not if) it happens, it will be spectacular.

The question of course is “will you see it coming”?

* * *

By our estimate, today’s market is equivalent to late 2006 or early 2007. We could be off by as many as 12-15 months, and until it happens most investors, advisors and managers will continue to sing along, whistling happy-go-lucky tunes.

We wish them luck.

Meanwhile, if you find it difficult understanding the banking and insurance industry don’t feel bad, after all they do play by different accounting rules than every other company.

Instead, simply follow interest rates around the world. The closer long-term rates get to ZERO%, and the increase in government bonds trading at NEGATIVE interest rates, the closer we are experiencing a fairly big shift in financial markets.

To understand why we expect the bond bubble to end sooner versus later, grab a drink and stare at Chart 3 on this page.

Currently, over $5.5 TRILLION of bonds pay investors a NEGATIVE INTEREST RATE. In other words, investors are PAYING governments for the privilege of lending them money.

If you don’t understand interest rates, just accept that interest rates should always be a POSITIVE #. Otherwise, it just doesn’t make sense, it’s illogical. it’s ridiculous. It’s absurd. Yet, this is the journey created by our central banks and governments all in the name of making the world a better place.

From a different perspective – these negative interest rates should be viewed as your best financial gift ever.

Understanding why this is happening, tracking the absurdity behind it all and monitoring global interest rates will provide you the little nudge needed to know when the bubble will break. We’re not there yet. But, we’re getting a lot closer.

No market acts in isolation. Stocks, bonds, currencies, gold, Super Bowl tickets – they are all influenced by each other.

When the bond market reaches its zenith, it will likely be getting little fan fare – instead, other asset classes such as stocks and currencies will still be getting all of the attention (again – sorry Bonfire of the Vanities).

We anticipate significant capital running away from perceived dangers, and towards the bond market for safety.

And once this capital is resting comfortably, that dreaded “oops” feeling suddenly appears, making investors’ faces turn white – the bond market was the biggest trouble after all.

* * *

Read the full presentation in the pdf below

via Zero Hedge http://ift.tt/21mBHuP Tyler Durden