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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

The last time we hosted a video by RealVision’s Raoul Pal, he laid out what indicators he looks at to decide if the next crisis has arrived, of which global ISM was notable but global trade was the key one, and explained that while the Fed is clearly aware of the economy’s deteriorating condition, it is Yellen’s job to preserve a sense of confidence and security until the bitter end.

In his latest video released this past week, we are that much closer to the end as the title of his interview with Grant Williams makes clear: The Reset Part 2.

In it Pal, who like us has been skeptical on the future of Deutsche Bank and most other European banks, walks us through his thoughtsfor predicting the collapse of several European banks from a Macro perspective. He explains what CoCo bonds are and how they are creating a market death-spiral for bank stocks which will ultimately trade at 0.

 

In the full 45-minute long video, Grant and Raoul discuss the impact and influence of monetary policy in this current economic environment, the policies in place and the possible monetary strategies/tactics to fend of deflation.

Raoul also takes aim at the global liquidity crisis, QE and the effects on the real economy and financial markets. The point at the fact that on a global spectrum, they’re no longer booming and growing economies of any significant magnitude – namely China – can no longer absorb all the deflationary waves of other economies. Raoul reflects on how much of CB liquidity injections (i.e.QE)/monetary expansion has been mainly flowed into the institutions which cannot provide that liquidity to the markets nor the real economy, creating massive mechanical financial black holes of illiquidity.

They two go through the probabilistic outcomes we could expect in the “next” recession; from a Chinese implosion, Japanese collapse, European banking sector crash, USD bull run, loss of Central Bank omnipotence, and other less than enjoyable outcomes.

Raoul then looks at what a NIRP world would look like, where wealth is taxed upon and considers the possibilities in portfolio construction and attractive trades such as long Treasuries. Here, Pal goes one better than Guggenheim which forecast the 10 Year at below 1% by year end, and forecasts that the yield on the 10Y will slide to 0.5% posing a complex systemic risks to pension funds and along with Central Banks, could begin to own large chunks of stock markets.

Naturally, with a rather sour outlook on risky assets, Pal then looks at the dynamics of gold as an and explains how he believes the market and price-action will react and play out.

As Pal says: “In the end, we are just part of the business cycle, if you create a debt super-cycle, you are going to get a bust.”

Finally, they both discuss the different unwinds of this Kondratieff winter
phase, acknowledging the possibilities of a “Fourth Turning” in the form
of geopolitical unrest, a.k.a. war.

And while there is much more in the full interview, here is the real question Pal is trying to answer before the big reset:

“I think the most likely outcome, in the next recession one of the big uglies comes out.

 

I don’t know which one it’s going it be – it’s a race between China and a 50% deval versus a total collapse internally of their economy because of their credit bubble; whether it’s Japan which we have all been waiting for and it hasn’t happened but maybe it happens; or maybe it’s the European banking sector forcing the hand of everybody else, and suddenly all the collateral in the system is worthless again because the European government bonds are worthless again; whether it’s just the loss of central bank control over the monetary system; whether it’s the dollar wildly overshooting and then maybe some debt jubilee and debt forgiveness that needs to happen.

 

There’s a whole host of things, it’s almost impossible to know which one it is but what we need to care about is not trying to spot the one it’s about is there going to be a domino effect.”

 

As usual, RealVision has provided Zero Hedge readers with a free trial to its extensive one of a kind video library of countless informative interviews, which can be accessed at the following link.

via Zero Hedge http://ift.tt/1KFLs3k Tyler Durden