Tag: finance

A State of Mind

Being Sovereign within Your Inner Space

The Sovereignty Series

By

Cognitive Dissonance

 

 

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The first installment of "The Sovereignty Series – You Can't Make Me" may be found here.

 

As I begin to openly discuss the concept of personal sovereignty I am discovering, as I often do with terms and concepts preloaded with divergent meaning and political overtones, that there are plenty of opinions but not much clear thinking, about personal sovereignty. Please note the bold emphasis placed squarely on the word ‘personal’.

There are those who claim there is no such thing as ‘personal’ sovereignty, that the proper term should be personal empowerment. And it is clear that most widely accepted definitions of ‘sovereignty’ would agree with that premise because they often refer to ‘government’ or ‘an independent state’ in conjunction with ‘sovereignty’. Here are some examples of online dictionary definitions that tend to agree with this ‘belief’.

The American Heritage Dictionary defines sov·er·eign·ty as………

1. Supremacy of authority or rule as exercised by a sovereign or sovereign state.

2. Royal rank, authority, or power.

3. Complete independence and self-government.

4. A territory existing as an independent state.

Random House chimes in with….

1. the quality or state of being sovereign.

2. the status, dominion, power, or authority of a sovereign; royalty.

3. supreme and independent power or authority in a state.

4. rightful status, independence, or prerogative.

5. a sovereign state, community, or political unit.

I could go on, but it is plain to see the general ‘consensus’ is that ‘sovereignty’ is the near exclusive domain of kings, dictators, governmental ‘states’ and political entities who claim independence and self rule. Of course, by this definition, if ‘sovereignty’ is not recognized or affirmed by others, particularly much larger and more powerful ‘others’, then sovereignty even on the state level ain’t worth a hill of beans.

Thus sovereignty is defined and codified in International Law, the rules by which those who are admitted to the Big Boys Club play nice with each other (at least as ‘nice’ as psychopaths can) in pretty much the same manner different organized crime ‘families’ have a code of conduct by which they attempt to coexist while ruling their respective corners of the universe.

 

 

Then there is the ‘Personal Sovereignty’ movement (for lack of a better term) that purports to anyone who will listen that the US is not a country, but in fact a corporation, and we citizens are simply individually numbered taxpaying cogs (semi ‘free’ indentured servants/slaves other say) mentally, physically and emotionally entangled and encumbered by Admiralty Law, everyday ‘law’ entirely contrary to old English common law, licensing, taxation in a thousand forms both hidden and in plain view and, perhaps most frighteningly, unaccountable administrative bureaucrats.

Actually I am not unsympathetic to the ‘Personal Sovereignty’ efforts in the least. There is much that I agree with when it comes to this line of reasoning. After all, ‘rules’ and ‘law’ exist simply to condition the mind so that the body may follow. They are a control mechanism that is disguised as reasonable, even beneficial, to those who are being controlled. My quibble with this movement is in the declaration and execution of personal sovereignty well before the individual mindset has been fully formed and embodied.

One thing seems clear to me. The ‘belief’ in what constitutes sovereignty is skewed towards those who presently hold power and away from those who supposedly empower the powerful. While it might seem contrary for the powerful (aka the powers that be) to enable and support others who presently hold power since they might just be rivals one day, this supposition only holds water if we believe the interests of the powerful aren’t aligned.

Because sovereignty on a ‘national’ or ‘country’ scale only works if other sovereign nations recognize each others’ sovereignty, it’s actually a giant case of “you scratch my back and I’ll scratch yours”. A little more to the right please.

My question is simple enough. If power, legitimacy, the ‘right’ to rule, whatever it is called and however it is justified, all flows from the people to the top as it is claimed in modern sovereignty theory, supposedly via the ‘democratic’ process of ‘free’ elections, thus the ‘sovereigns’ declaring themselves a representative of the people, or in the case of despots, abject terror that your head will be removed if you don’t support the ‘sovereign’, then what ‘power’ exactly is actually creating the claimed sovereignty?

Is it my implied consent, which is supposedly captured by the act of my ‘voting’? What if I don’t vote or I voted for the other guy? Might it be my tax dollars, which I wouldn’t actually pay if I didn’t agree with my leadership? Most likely not since my taxes are collected at the point of an implied gun with no choice on my part required. How about my adoration supplied on bent knee, which is compelled of me at the end of a despot’s gun? What exactly of mine and yours is actually being transferred to support the sovereign, to legitimize its use of power in my name?

 

 

This is where it all gets a little fuzzy in the more detailed articles, explanations and dissertations about ‘sovereign’ and ‘sovereignty’ that I’ve perused online. It almost seems like black magic is employed, where spells are cast by witching cabals that are designed to corral the very essence of our inner energy, and then redirects it towards those special entities entitled to rule the roost and wear the crown.

OK, enough sarcasm from me. But the last paragraph is not as farfetched as it may seem or sound. We are all susceptible to, and influenced by, ritualistic behavior of all sorts, so to rule out ‘black magic’ in any way, shape or form might be just as silly as it would be for others to even consider it. Considering all the influences exerted upon ‘us’ humans, including subliminal programming, propaganda, advertising, the money meme, nationalism, herd behavior and so on, it is not as farfetched as it may seem to at least consider if we can just get past our preconceived notions and prejudices.

I bring that up simply to press home a point. The general consensus among those who claim sovereignty, the popular belief among those who are ruled, and certainly widely disseminated definitions and descriptions all point to sovereignty being predominately a physical attribute held by a political entity that may or may not be derived from those who live within the boundaries of that political entity or ‘state’.

In my first installment of “The Sovereignty Series – You Can’t Make Me!” I discussed how one of the ways ‘we’, ultimately meaning our personal sovereignty, are hijacked is through our language, and that we enable this hijacking by self victimization via the words, phrases and altered meanings of our language. We only have ourselves to blame for playing their game on their field by their rules.

In that article I left a comment that stated plainly and frankly my view regarding personal sovereignty and where it all begins. I said, “Personal sovereignty is a ‘State’ of Mind long before it is a state of being.” Too often we think of personal defense via weapons, financial flexibility and independence by way of diversified asset stashes and physical precious metals or even physical isolation in the form of a self sufficient homestead tens, even hundreds, of miles from ‘civilization’ as required ingredients that ‘create’ or endow personal sovereignty.

There is no doubt that any and all of those attributes will go a long way towards our ability to secure our physical being. And just like the political ‘state’ whose sovereignty isn’t recognized by more powerful ‘others’, if you or I are denied our physical/financial freedom it is extremely difficult to assert our physical personal sovereignty with any semblance of credibility. Thus I will not argue that it isn’t highly desirable to acquire the tools that enable our physical/financial freedom and flexibility.

 

 

But our “State of Mind” makes all the difference regardless of our personal war chest, isolation, financial assets or lack thereof. If our mind and spirit are still shackled by the ‘slave’ state of mind, the day to day practice of personal sovereignty is for all intents and purposes completely foreign to us and entirely beyond our grasp.

While I will dig deeper into the various “State of Mind” attributes of a individual sovereign in later chapters of “The Sovereignty Series”, of paramount importance to creating this mindset is to begin taking personal responsibility for all our thoughts, actions and interactions regardless of whether we feel we are ‘in control’ of the underlying circumstances or not. 

If we are to declare that we are sovereign, then ultimately the ‘buck’ starts and stops here. Being sovereign implies that we answer to no one, though it is obvious that one person surround by one thousand hostiles is severely constrained. But true personal sovereignty is constrained only of the physical being, while the “State of Mind” can only be constrained by us.

While Mahatma Gandhi and Nelson Mandela (to name just two) were physically incarcerated for years, decades in Mandela’s case, these individuals practiced personal sovereignty by continuing to think and ‘be’ sovereign, both in mind and spirit. Based upon their public writings they accepted full responsibility for their ‘constrained’ situation, and worked tirelessly while in prison to build upon and expand their efforts to help free the minds of others they had encouraged to be sovereign.  

While ‘sovereignty’ is often conflated with a political entity within physical boundaries, oftentimes because such a ‘sovereign’ has a greater ability to exercise physical cohesion and mount defensive positions, personal sovereignty, while not affording each of us an equal opportunity to exercise physical security, offers us much greater prospect of implementing the personally sovereign “State of Mind”. 

 

03-10-2014

Cognitive Dissonance

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Mere days ahead of Crimea’s referendum to join Russia (or not) and following reports of shots fired between Russian and Ukrainian forces, the Ukraine Defense Ministry reports (via Facebook):

• *UKRAINE LIEUTENANT COLONEL DEFECTS TO RUSSIAN FORCES: MINISTRY
• *UKRAINE OFFICER IN CHARGE OF CRIMEA UNIT DEFECTS: UKR MINISTRY
• *OFFICER CONVINCES ‘SEVERAL’ SOLDIERS TO DEFECT: DEF MINISTRY

It would appear Crimea is annexing itself as this comes just one week after the head of Ukraine’s Navy defected.

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European sovereign bond spreads have not batted an eyelid during the recent Russia-Ukraine crisis… and why should they, Draghi will do “whatever it takes.” Even HY credit in Europe is holding up – despite an ugly squeeze wider on Friday (chatter that positioning in very long credit). But with Europe’s VIX above 20, the broad European stock index is now below pre-Putin levels. What is perhaps most stunning is that while investors have piled out of German, Swiss, and French stocks in the last few days, they have backed-up-the-truck in “new normal” safe-haven Portugal. The reason proferred by some – Portugal is further from Ukraine (and less dependent on Russia’s gas) – which of course is the critical swing factor for an economy that remains crushed aside from trade with Germany.

 

Stocks are back below Putin levels…

 

As investors have flushed their core German stock holdings and bid Portugal (and Italy) to the moon…

 

Which just exacerbates the remarkable divergence among European stocks this year…

 

We are sure somewhere this all makes sense…It would appear the ‘safe-haven’ seekers have forgotten that if Germany comes under pressure from Russian sanction retaliation then Europe is in trouble… but hey, why worry, just buy the worst…

Charts: Bloomberg

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With surveillance and online privacy now front-and-center in many people’s minds, the 2014 SXSW Interactive Festival is hosting a “Virtual Conversation with Edward Snowden” this morning focused on the impact of the NSA’s spying efforts on the technology community, and the ways in which technology can help to protect us from mass surveillance. Hear directly from Snowden about his beliefs on what the tech community can and must do to secure the private data of the billions of people who rely on the tools and services that we build.

 

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One month ago, when we last looked at the incredible amount of Chinese new loan issuance, a topic which even the mainstream media is slowly starting to circle in on as the primary source of hot money flow creation in the world, we found the highest loan notional issued by the country’s semi-sovereign banks since 2009, and the largest one-month ever monthly total in the largest aggregated, Total Social Financial, series, which rose by an unprecedented CNY2.6 trillion, or over $400 billion in one month! That was just before the tremors surrounding first the potential defaults of several Chinese shadow-banking Trusts, and certainly before the first official corporate bond default which took place last week.

Overnight, the PBOC released its latest, February, loan data. As expected, it reveals something else entirely.

In the month in which there were pervasive fears that China would let one or more Trusts go bankrupt (a fear which was unfounded as China did bail out two shadow trusts in February, only to finally allow a corporate bond default last week), loan creation ground if not to a halt, then certainly was significantly impacted, and its collapse may explain the abysmal February trade data as well, which far more than merely indicating calendar effects from the Chinese Lunar New Year, shows that something dramatically changed with the well-greased Chinese economic machine. That something was an abrupt drop in credit.

To wit: Chinese banks made 644.5 billion yuan ($105.21 billion) worth of new yuan loans in February, lower than a forecast of 716 billion yuan and below the previous month’s 1.3 trillion yuan, central bank data showed on Monday.

Looking at the bigger picture, total social financing in February stood at 938.7 billion yuan, well below the previous month’s 2.58 trillion yuan, and also well below expectations.

 

It gets worse: as SocGen calculates, Total social financing (TSF) recorded a gain of CNY 939bn in February. The sharp decline from the January level (CNY 2580bn) can be mostly attributed to seasonality but the TSF was also down yoy (1071bn last February), which dragged total credit growth down to a 20-month low of 17.1% yoy from 17.5% yoy, according to our estimate.

 

Breaking down the loan creation by various components, va SocGen:

Yuan loans increased notably less than expected by CNY 645bn (Cons. 730bn, SG 750bn). Although it was still 25bn more yoy, growth of outstanding loans inched down to 14.2% yoy from 14.3% yoy. However, once again, non-bank credit saw a much bigger slowdown. Entrusted loans increased CNY 80bn, CNY 63bn less yoy and the lowest in 20 months. Probably due to easier interbank liquidity conditions lately, the net increase in bond financing was up to CNY 99.5bn from the very depressed levels in the past two months. However, the first bond default that occurred on 7 March will likely reverse this nascent improvement trend. New trust loans had a sharp fall of CNY 104bn from January to CNY 78bn, the second smallest monthly increase since mid-2012. Reportedly, formal banks have started to distance themselves from the trust sector by scaling back trust product distribution to banks’ clients. It may also be the beginning of investors adjusting for the long over-due first defaults of trust products. Whichever the case, the near-term prospect for trust financing is not beautiful.

This latest money and credit report again supports our view that credit growth is still sliding and will likely remain so in the near term. In H2 2013, the credit slowdown was mostly responding to higher interbank rates, as intended by the PBoC. From here onwards, the downward pressure will come from follow-up regulatory tightening of the Document 107 issued by the State Council in January and, more critically, from financial market participants’ adjustments to fast rising default risk. Such adjustments are necessary for China in the long run to develop a healthy financial market, but are nothing if not risky in the short term. We think that the policymakers will run more default experiments, but at the same time stand ready to intervene so as to avoid a systemic financial crisis. Our central scenario remains that there will be disruptions but not a meltdown, but the risk is tilting to the downside.

Finally, the French bank’s conclusion is hardly welcome for China bulls:

China’s total credit growth slowed further in February, again driven by shadow banking deceleration. Lower interbank rates have not really helped ease credit conditions. It seems that the rising default risk has started to erode Chinese investors’ confidence. Together with continued regulatory tightening on banks’ off-balance-sheet activity, we are certain that this slowing credit trend has further to go and will inflict real pain on the economy. The season of weak Chinese data has just begun.

That’s ok, all of the above, too, is priced into the USDJPY algos.

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AUDJPY (and therefore US equities) is sliding this morning after the ubiquitous pre-open melt-up providing a green open for retail investors to believe in. Notably, from the close before Putin’s press conference, the Nasdaq is underperforming all major indices (and Trannies soaring) but this morning has seen almost one-way traffic since the open. Treasuries are unch today as are precious metals (recovering from early losses) and the USD is modestly higher driven by AUD and GBP weakness.

 

S&P futures have retraced half the post-Putin gains…

 

And notably from the close before Putin’s press conference, Nasdaq is underperforming (and Trannies soaring)

 

But AUDJPY remains in charge…

 

Charts: Bloomberg

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by Keith Weiner

 

Gold went up and silver went down this week. It’s natural for most people to say, “gold went up”, but it’s the most unnatural phenomenon. The dollar is paper scrip issued by the Fed. The fine print tells you that it’s irredeemable, which is like a promise to give you a kilo of sugar that will never be honored. The quantity of this paper is rising while its quality is falling. Everyone knows that its value is unstable, and over long periods of time its value falls alarmingly. And yet we still presume to use this paper to measure the value of gold!

Amazing.

Anyways, in comparison to the undefined unit known as the dollar—which we don’t know if it moved up or down or sideways—gold moved up. Gold went up by fourteen pieces of paper, engraved with the picture of George Washington. Silver—by the moving and nonobjective reference point of copper clad zinc coins stamped with the image of Abraham Lincoln—moved even more. Silver went down, and now it can be bought with a stack of those copper colored slugs that’s 26 shorter than last week. We could as well say that silver went down by an inch and a half, because a stack of 26 pennies is about that tall.

Wouldn’t it make more sense to say that the dollar went down by about a quarter of a milligram of gold?

Here is the graph of the metals’ prices.

            The Prices of Gold and Silver

We are interested in the changing equilibrium created when some market participants are accumulating hoards and others are dishoarding. Of course, what makes it exciting is that speculators can (temporarily) exaggerate or fight against the trend. The speculators are often acting on rumors, technical analysis, or partial data about flows into or out of one corner of the market. That kind of information can’t tell them whether the globe, on net, hoarding or dishoarding.

One could point out that gold does not, on net, go into or out of anything. Yes, that is true. But it can come out of hoards and into carry trades. That is what we study. The gold basis tells us about this dynamic.

Conventional techniques for analyzing supply and demand are inapplicable to gold and silver, because the monetary metals have such high inventories. In normal commodities, inventories divided by annual production can be measured in months. The world just does not keep much inventory in wheat or oil.

With gold and silver, stocks to flows is measured in decades. Every ounce of those massive stockpiles is potential supply. Everyone on the planet is potential demand. At the right price. Looking at incremental changes in mine output or electronic manufacturing is not helpful to predict the future prices of the metals. For an introduction and guide to our concepts and theory, click here.

Here is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. The ratio rose 1.44 points—2.3%. In other words, silver fell by about 11mg of gold.

            The Ratio of the Gold Price to the Silver Price

The data has been showing for a long time that, while supply and demand in gold is slightly tight, it’s loose in silver. Speculators are stretching the silver price higher by several dollars. When will they let go and let it snap back down to neutral, or even overshoot? It’s hard to say, but the world seems to be in a credit contraction mode right now. There are ongoing declines in many currencies. Forget the Ukrainian hryvnia, Venezuelan bolivar, and Argentenian peso. It’s also happening in the Brazilian real, Russian ruble, Indian rupee, and perhaps beginning in the Chinese yuan (and in many others too).

We will get to the point where people are desperate to get gold and silver and dump paper. That buying frenzy—and accompanying collapse of almost everything else—is still ahead of us. In the meantime, we appear now to be firmly in a period of squeezing the debtors.

The whole point of using leverage to buy gold or silver futures is speculation. The speculators are trying to front-run the real buyers of the metals—the people who buy to take it home, and not sell regardless of price.

It may be due to the pressures of credit contraction. Or it’s possible that silver demand is falling relative to gold because it has a substantial non-monetary (i.e. industrial) use and gold is almost purely monetary. Either way, the demand for silver metal, relative to the demand for gold metal, is quite a bit lower than it was a few years ago. The current silver price under $21 only partially reflects this fact.

For each metal, we will look at a graph of the basis and cobasis overlaid with the price of the dollar in terms of the respective metal. It will make it easier to provide terse commentary. The dollar will be represented in green, the basis in blue and cobasis in red.

Here is the gold graph.

            The Gold Basis and Cobasis and the Dollar Price

The cobasis went sideways while the dollar fell (i.e. the price of gold rose). This suggests buyers of real metal, not speculators, led the price action this week. The neutral price of gold went up another twenty-five bucks, to around $1470.

Now let’s look at silver.

            The Silver Basis and Cobasis and the Dollar Price

Silver’s pattern still hasn’t really changed. We see a rise in the dollar price as measured in silver (i.e. a drop in the silver price as measured in dollars). And with this price move, we see the cobasis rise a bit. Silver futures were sold.

The cobasis is still quite negative.

 

© 2014 Monetary Metals

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Today’s AM fix was USD 1,334.25, EUR 961.55 and GBP 800.87 per ounce.
Friday’s AM fix was USD 1,348.25, EUR 971.22 and GBP 805.17 per ounce.

Gold fell $11.30 or 0.82% on Friday, to $1,339.20/oz. Silver dropped $0.65 or 2.2% at $20.89/oz.

For the week, gold’s positive momentum continued and gold eked out slight gains of 1.3%.

Inflation history table: How the price of everyday items changed over 40 years – (Lloyds Private Banking via Daily Telegraph)

Gold retreated in all currencies for a second day after U.S. jobs data was slightly better than expected. Bullion for immediate delivery fell 0.4 % to $1,336.00 in London.

Gold sold off sharply on Friday after the data and was down $25 in minutes in concentrated selling. The sell off was unusual as the data did not merit such a sharp, sudden sell off especially given that the fundamentals, including the geopolitical situation, remain highly supportive.

Gold in US Dollars (Bloomberg)

Prices posted a fifth weekly gain last week, climbing to a four-month high of $1,354.87 on March 3, as tension between Ukraine and Russia escalated. This has led to an increase in safe haven demand which has contributed to gold’s 10% gains so far in 2014.

Platinum lost $3.20, or 0.2%, to $1,483.60 an ounce, ending around 2.5% higher for the week, while palladium rose 65 cents, or 0.1%, to $781.80 an ounce, up roughly 5% for the week.

Russia is among the world’s biggest producers of platinum and palladium. Its conflict with Ukraine and tensions with the U.S. is leading to worries about supplies of the precious metals.

Gold Hedges Against Massive Inflation In Bread, Beer, Eggs, Fuel and Property 
A new study has shown how the British pound has depreciated significantly in the last 40 years and how gold has again acted as hedge against inflation and currency debasement.

 

Gold in British Pounds – 2000 to March 10 2013 (Bloomberg)

The value of the pound has shrunk so rapidly over the last 40 years that a pound in 1973 is worth the equivalent of just nine pence today, the study by Lloyds Bank Private Banking has found.

The study found £9.48 in 1973 would have the same spending power as £100 today. The rising cost of retail goods means someone who was a millionaire 40 years ago would need £10,553,000 today to enjoy the same spending power, according to Lloyds Bank, which analysed data from the Office for National Statistics.

Everyday staples that we eat and consume now cost a huge amount more due to the massive 91% depreciation of the pound in the last 40 years.

– Beer surged by more than 20.5 times in cost. A pint of a beer has shot up by 1,948% from 14p to £2.87 per pint.

– Bread and the cost of a loaf of bread costs a whopping 12 times more – up 1,082% from 11p to £1.30.

– Milk costs nearly 8 times more. A pint of milk went up 667% from 6p to 46p.

– Coffee in its instant form (per 100g) cost nearly 10 times more from 28p to £2.67.

– Apples cost 7 fold more. From 28p per kilo to £2.02 per kilo for a rise of 622%.

– Sausages cost 8 times more. A kilo of sausages went from 58p to £4.84 or 735%.

– Butter costs nearly 11 times more. A 250 gramme slab of butter went from 13p to $1.42 or 992%.

– Carrots cost 8 times more. A kilo bag of carrots now costs 91p, up from 11p or a rise of 723%.

– Sugar costs nearly 9 times more. A kilo bag of sugar now costs 93p, up from 11p – up 787%.

– Eggs costs 8 times more. A dozen eggs now cost £2.78, up from 33p or a rise of 743%.

– Flour costs 8 times more. A 1.5kg bag of flour went from 15p to £1.19 or a rise of 724%.

– Petrol or diesel costs nearly 18 times more. A litre of diesel went from 8p to £1.41 or 1,727%.

– Residential property costs 18 times more. The price of the average detached house went from £16,980 to £305,391. The family home now costs 1,699% more.

Soaring inflation in recent months has put pressure on cash strapped households. However, the recent surge in inflation is less than that seen between 1973 and 1983, which saw the biggest rise in the cost of day-to-day items, at an annual average rate of a whopping 13.6%.

The lowest increase in inflation came during the period 1993 to 2003, with an annual increase of 2.6%, according to official data.

In the past ten years to 2013, inflation averaged 3.3% per year, with the highest levels coming post recession from 2008 and on.

If retail prices were to rise by 2.8% annually – in line with government targets – the value of money would decline by a further 67% over the next 40 years.

If inflation follows this pattern, consumers would need £311 in 2053 to have the same spending power as an individual with £100 today – or more than £3 million to enjoy the equivalent lifestyle of a millionaire today.

Lloyds based the calculation on estimates that a 2.8% rise in Retail Prices Index (RPI) inflation would be consistent with the government’s 2% target for Consumer Price Inflation.

Conclusion
Media coverage of the study tended to focus on the fact that the average price of a pint of lager increased from 14p in 1973 to £2.87 in 2013.

Little attention or coverage was given to the fact that gold has risen in value by more than beer, bread, apples, milk, sausages, butter, carrots, sugar, coffee, eggs, flour, diesel and even the beloved residential property in the form of the average detached house.

Therefore, gold had acted as a store of value and hedge against currency depreciation and inflation in the UK in the last 40 years, as it has done throughout recorded history.

On the back of the study, banking giants Lloyds warned that in 40 years, an individual would need £3 million to enjoy the same lifestyle as a millionaire today. Alternatively, millionaires could allocate a portion of their hard earned cash to gold to hedge against inflation. Investors and savers would be prudent to do the same.

Investing and saving are about protecting and growing one’s wealth in the long term. The recent poor performance of gold has garnered much attention and negative comment. Gold’s long term and historical performance as an important hedge against inflation continues to be unappreciated … for now.

Our latest report, ‘Gold Is Safe Haven According To Academic and Independent Research‘ looks at the academic and independent research on gold as a safe haven asset and hedge against inflation in more detail and can be read here.

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The Turkish Lira is tumbling this morning (+150pips at 2.22); rapidly devaluing back towards pre-emergency-rate-hike levels and Turkish bond yields have surged back to levels seen in mid-2009. The driver appears to be the release of several political prisoners, suggesting the President is starting to lose control and given that ‘political stability’ is the key factor for many of these EM debt markets. The government, however, remains adamant that an “operation” by some institutional holders of lira bonds to “threaten” Turkey’s economy started after the probe into government corruption began in mid-December.

As Bloomberg notes,

Economy Minister Nihat Zeybekci says “operation” to undermine Turkey’s economy started after emergence of Dec. 17 probe into alleged govt corruption, state-run Anatolia news agency reports.

 

Zeybekci links lira volatility to “operation” by some institutional holders of Turkey’s lira bonds: Anatolia

 

Holders of Turkey debt dumped lira bonds, increased FX positions to “threaten” Turkish economy

 

Zeybekci says action against economy destined to fail

However one glance at the chart of Turkish bonds and it’s clear the selling began amid Taper fears last summer and was merely exacerbated by corruption concerns and EM crisis flows (and who would lock in rates for an allegedly corrupt government)

 

It would appear the driver of today’s weakness is an apparent loss of control by the President as several political prisoners are released by Turkey’s 13th high criminal court:

Turkey’s 13th high criminal court rejects release of some suspects in Ergenekon trial today, while 21st criminal court released others in same case, saying parliament’s abolition of specially authorized courts meant they had to be set free, HT reports.  

 

* 21st court decided today to release Ergenekon suspects Tuncay Ozkan, Levent Goktas and Sedat Peker, who were being     tried for alleged involvment in the so-called Ergenekon plot to overthrow Prime Minister Recep Tayyip Erdogan’s govt  

 

* 13th court, in contrast, didn’t release suspects, saying that parliament had no authority to dissolve the specially authorized courts that saw the cases, known in Turkish as OYMs  

 

* HSYK, the body that appoints judges and prosecutors – and which was re-structured by the govt amid a corruption probe – says 13th court overstepped its authority and parliament does have the authority to open or shut courts down

 

* Nationalist lawyer known for suing authors including murdered Armenian journalist Hrant Dink and Nobel Prize-winning author Orhan Pamuk for “insulting Turkishness” freed today, state-run TRT reports.  

 

* Kerincsiz among suspects freed after being jailed in so-called Ergenekon trial of people alleged to be plotting a coup against Prime Minister Recep Tayyip Erdogan

 

* Lieutenant General Mehmet Eroz also freed, TRT says

Chart: Bloomberg

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