Tag: finance

We’ve noted for more than 5 years that the European crisis would spread in the following order … more or less:

Greece → Ireland → Portugal → Spain → Italy → UK

We also warned that the EU’s approach to economic problems in the periphery would lead the cancer to spread to the core. For example, we’ve repeatedly warned that:

• Bailing out the big European banks would just transfer the risk to the people

• Propping up stocks and asset prices won’t get Europe out of the crisis

• Covering up fraud by the European banks would sink the economy

Now, the IMF is forecasting that Italy could be in recession for two decades … and that it’s weakness could spread to the rest of the system.

Britain is – of course -in trouble.  But it’s not just Brexit …

Europe has been stuck in a downturn worse than the Great Depression for years.  The former Bank of England head Mervyn King said recently that the “depression” in Europe “has happened almost as a deliberate act of policy”. Specifically, King said that the formation of the European Union has doomed Europe to economic malaise.

He points out that Greece is experiencing “a depression deeper than the United States experienced in the 1930s”.

(Indeed, some say that the UK was smart to get out while it could.)

Even Germany’s largest bank, and the bank with the highest exposure to derivatives anywhere in the world – Deutsche Bank – is in big trouble.

Here’s its stock price:

And here’s its market capitalization:

In May, Moody’s downgraded Deutsche to a mere 2 notches above junk.

And credit default swaps – bets that a company is in risk of failing – against Deutsche have absolutely skyrocketed:

Deutsche Bank’s chief economist just said:

Europe is extremely sick and must start dealing with its problems extremely quickly, or else there may be an accident.

He’s calling for a $166 billion dollar bailout of European banks.

Similarly:

BlackRock Inc. Vice Chairman Philipp Hildebrand said earlier this month the European Commission should allow governments to take temporary equity stakes in their banks, similar to what the U.S. did with its Troubled Asset Relief Program during the 2008 crisis.

Europe has made bad choices since the 2008 crisis … so Europe’s economic crisis has spread from the periphery to the core.

via http://ift.tt/29ur1F5 George Washington

Submitted by John Whitehead via The Rutherford Institute,

“I could never again raise my voice against the violence of the oppressed in the ghettos without having first spoken clearly to the greatest purveyor of violence in the world today: my own government. For the sake of those boys, for the sake of this government, for the sake of the hundreds of thousands trembling under our violence, I cannot be silent.”—Martin Luther King Jr.

The latest shootings—in Texas, Minnesota, Louisiana, Illinois, New York, Missouri and every other state in the nation—are symptomatic of a psychotic outbreak by a nation that has been waging a war against its own citizens for too long.

We have long since passed the stage at which a government of wolves would give rise to a nation of sheep. As I point out in my book Battlefield America: The War on the American People, what we now have is a government of psychopaths that is actively breeding a nation of psychopathic killers.

We’re getting distracted, people.

Instead of focusing our ire on the architects of the American police state, who are responsible for turning the streets into mini-war zones, we’re getting distracted by the many voices eager to play the blame game by pointing their fingers at someone else.

Police groups are blaming President Obama and the Justice Department for failing to prosecute “cop killers.” Texas Republicans are blaming the Black Lives Matter movement for fomenting a “war on cops” mindset. Gun control advocates are blaming “gun lovers and their mouthpieces at the National Rifle Association” for America’s gun violence, reasoning that if all Americans were unarmed, police would not have to treat them as potential threats.

News outlets such as Rolling Stone and Mother Jones have concluded that racial bias is to blame for the “disproportionately high number of African-Americans among police shooting victims.” The Drug Enforcement Administration has suggested that illegal steroid use could be responsible for “police officers who exhibit rage, aggression and/or poor judgment (all symptoms of possible steroid abuse) in confrontations with citizens.”

Human Rights Watch blames police misconduct and excessive use of force on a systemic lack of accountability within law enforcement agencies and the criminal justice system. And civil rights advocates are blaming police militarization and the abundance of laws (overcriminalization) pushed by lawmakers for the nation’s over-policing, over-jailing and over-killing.

Yet in the midst of all this finger pointing, no one is stepping forward to take responsibility for the violence that is tearing the nation apart, deepening racial tensions, heightening police tensions, justifying all manner of civil liberties abuses, and pushing us ever closer to a state of lockdown.

Shame on President Obama for not taking personal responsibility for the blowback resulting from America’s endless wars abroad, the militarization of local police, and the ramifications of allowing police to use battlefield equipment such as drones, assault weapons, tanks, etc. How telling that the first domestic killing of an American citizen by a drone (in this case, a bomb-equipped police robot) should be carried out during the final term of a president whose targeted drone killings abroad have resulted in the deaths of thousands of innocent civilians.

 

Shame on Congress and the countless federal and state policy-making bodies for not taking responsibility for the overabundance of laws that have turned law-abiding citizens into criminals and police into the inflexible enforcers of a legal code that benefits the corporate elite at the expense of the working classes.

 

Shame on Corporate America, particularly the military industrial complex, for not taking responsibility for having militarized America’s police forces and subjected its citizenry to the tyranny of a heavily armed police state.

 

Shame on the various government agencies, from the FDA and Social Security Administration to the Department of Education, for not taking responsibility for ratcheting up tensions by using military firepower to advance their bureaucratic agendas.

 

Shame on Republicans and Democrats for not taking responsibility for having sidelined legitimate matters of concern such as police misconduct in favor of party politics and campaign contributions from special interest groups and unions.

 

Shame on the courts for not taking responsibility for allowing government agents to hide behind the shield of qualified immunity, rather than being held accountable for their actions.

 

Shame on law enforcement agencies for advancing the notion that the lives—and rights—of police should be valued more than citizens. Shame on them for not taking responsibility for allowing blind allegiance to the so-called “thin, blue line” to trump the constitutional rights afforded to every American equally.

 

Shame on communities for not taking responsibility for using SWAT teams that are armed to the teeth and ready for action to deliver mere search warrants, terrorizing and killing American citizens.

 

Shame on those who embrace violence as an answer to what ails America for not taking responsibility for their part in contributing to an environment that is growing increasingly tense with every new shooting. It’s a vicious cycle in which the police are becoming more hypersensitive, twitchy and quick to shoot at the slightest provocation, and the populace is growing more fearful, outraged and unconvinced that if they “just obey,” all will be fine.

 

Shame on the religious community for not taking responsibility for its deafening silence in the face of what can only be termed evil, despite its historic lineage of dissenters such as Jesus, Gandhi, Martin Luther King Jr. who dared to speak truth to power.

 

Shame on white Americans, black Americans, brown Americans and every other skin tone in between for not taking responsibility for their part in allowing racism, prejudice and bigotry to dictate justice in America.

 

And shame on so-called “patriotic” Americans who equate good citizenship with blind obedience to government authority and adulation of the military for not taking responsibility for holding their government officials accountable to the nation’s founding principles. Remember, “we the people” were entrusted with the power to make and unmake the government whenever it ran afoul of its primary purpose, which is to protect our lives, freedoms and property.

Clearly, there’s more than enough blame to go around, but the real question is what can “we the people” do about it? What can average Americans do to stay alive and counter the violence being inflicted on our communities? What can you do to push back against the power of the police state?

For starters, let’s all agree that violence can never be the answer. Violence will only give rise to more violence.

Stop buying into the “us vs. them” rhetoric being pushed by politicians, police unions and those who use the race card as a justification for bloodshed. No matter what color your skin is, what politics you subscribe to, how much money you’ve got, whom you love, where you live, whom you worship, what school you attend, where you work, or any other superficial label that is used to divide us: we all bleed red.

Put your prejudices behind you and stop dealing in stereotypes. Not all police are bloodthirsty. Not all young black men are thugs. Not all people who challenge government authority want anarchy.

In a police state, you’re either the one with your hand on the trigger or you’re staring down the barrel of a loaded down. In other words, we’re all in this together. The oppression and injustice—be it in the form of shootings, surveillance, fines, asset forfeiture, prison terms, roadside searches, etc.—will come to all of us eventually.

Stop allowing yourself the luxury of distraction and the sin of neutrality. These things happen—the madness and the mayhem—because good people stood by and did nothing.

The only real power we have to push back against the police state is as a unified body.

So what can you do on a practical level?

For starters, find common ground on the issue of gun control, especially as it pertains to government agents. Demilitarize the police. It’s worked in other countries.

Demand that police be held financially responsible for official misconduct.

Put your taxpayer dollars to work for you instead of against you for a change. Tell your elected representatives to stop investing in militarization, wars and weaponry that will only be used against you eventually. Instead, apply the same funds being wasted on endless wars abroad on badly needed infrastructure here at home. By putting more Americans to work rebuilding our communities and our economy, we’ll also strike at the heart of the poverty that drives crime.

Get informed about the workings of government. Get outraged about the corruption that has rotted our republic from the core. Get vocal about the need for transparency, accountability and reform. There are so many issues in need of attention. Pick just one to start with and raise hell about it. For instance, why has the government been spending three times more on jails and prisons than schools for the past 30 years?

Finally, take it upon yourself to interfere. Pay attention to what’s going on around you. Use those cell phones that are never far from your side and record police interactions in order to hold them accountable to playing by our rules, the rules of the Constitution. Most important of all, take a stand for freedom and humanity. “Neutrality,” as Holocaust survivor Elie Wiesel reminded us, “helps the oppressor, never the victim. Silence encourages the tormentor, never the tormented. Sometimes we must interfere. When human lives are endangered, when human dignity is in jeopardy, national borders and sensitivities become irrelevant. Wherever men and women are persecuted because of their race, religion, or political views, that place must – at that moment – become the center of the universe.”

via http://ift.tt/29Aj3NB Tyler Durden

Here we go again. China is primed for more bailouts as their corporations and State Owned Enterprises (SOE) continue burning through billions of yuan. At the turn of the month we learned Sinopec manipulated revenues. As Reuters reported at the time, some 12 subsidiaries of Sinopec had fake invoices among other faults. Chinese companies are loading up on debt and they are investing it terribly. 

Reuters also said 10 state-owned firms had "huge losses" driven primarily from bad investment decisions. Sinopec subsidiaries blew cash on 14 unused chemical plants as well acquiring two dozen fuel stations illegally. 

"China's national audit department reviewed the financials of the 10 largest state-owned companies including Aluminium Corporation of China (CHALCO), Sinopec and China National Offshore Oil Corporation (CNOOC), exposing huge losses in these firms as a result of low efficiency and bad investment decisions. The auditing office also pointed to wasted investments Sinopec's subsidiaries made, such as 14 unused chemical plants, and raised red flags on two dozen "illegally acquired" fuel stations."

Oh yeah, these guys are real winners when it comes to running business and making investments. As Citi pointed out, China's SOE's have Pre-tax Profit Margins and Liability-to-Asset ratios that do not appear to reflect wise decision making:

China's corporations are horrible with investment. We are not shocked by this. We expect many more Chinese bailouts to come as the country's money-gods lose total control of the monster they have unleashed through reckless monetary policy.

The investment decisions have become so bad that a source told Bloomberg that up to 10 SOE's may require a bail out:

China is considering providing about 10 of its state-owned enterprises with an aid package, people familiar with the matter said. Sinosteel Corp. is among those that may receive help, one of the people said

In an effort to throw the kitchen sink plus more at the equity market, China will now be deferring a portion of a $300 billion pension fund into the Chinese market. A wise choice?  Perhaps not, especially since the Chinese have painted themselves into another bailout corner.

With malinvestment as we saw re: Sinopec, to China's need to backstop at least 10 failing state-owned enterprises, and now the clear desperation of getting pension money exposed to the equity market, presumably ahead of more central bank stimulus, it's becoming evident that the Chinese are running out of options. Once the entire nation is invested in stocks and the central bank is buying hand over fist, the Chinese market manipulation will have jumped the shark, because their explosive Debt-to-GDP didn't seem to mark a turning point in the Chinese economic story as of yet:

But don't worry, the National Council for Social Security Fund in China that will manage the pension fund investments has an appreciation from the Chinese people akin to what some believe American's have for Warren Buffett, reportedly:

The NCSSF has "such a good reputation in being a value investor that if they take the lead, the signaling effect is actually quite strong," said Hong, who had predicted the start and peak of China’s equity boom last year. "It’s almost like Warren Buffett saying he is buying a stock."

Which is unique because frequent Zero Hedge readers may recall a different Chinese version of Warren Buffett:

On Thursday, we learn that yet another high profile businessman has apparently vanished and this time, it’s none other than “China’s Warren Buffett,” Guo Guangchang (worth some $7 billion at last count) whose conglomerate Fosun International is morphing into an insurance-focused investment group. Fosun spent more than $6 billion buying stakes in 18 overseas companies between February and July.

China just burning cash and it is amazing they have lasted this long.  How much longer will the cash pile burn? Maybe MOAR cash infusions is the answer…

via http://ift.tt/29zFLYM Tyler Durden

A very recently published Harvard study on racial bias in police use of force finds that, as the mainstream narrative proffers, black men and women are treated differently in the hands of law enforcement. However, in what the (African-American) author of the study calls "the most surprising result of my career," when it comes to the most lethal form of force – police shootings – the study finds no racial bias, contradicting the mental image of police shootings that many Americans hold.

As The NY Times reports, the study did not say whether the most egregious examples — the kind of killings at the heart of the nation’s debate on police shootings — are free of racial bias. Instead, it examined a much larger pool of shootings, including nonfatal ones. It focused on what happens when police encounters occur, not how often they happen. (There’s a disproportionate number of tense interactions among blacks and the police when shootings could occur, and thus a disproportionate outcome for blacks.) Racial differences in how often police-civilian interactions occur have been shown reflect greater structural problems in society.

Black men and women are treated differently in the hands of law enforcement. They are more likely to be touched, handcuffed, pushed to the ground or pepper-sprayed by a police officer, even after accounting for how, where and when they encounter the police…

But Roland G. Fryer Jr., the African-American author of the study and a professor of economics at Harvard – which examined more than 1,000 shootings in 10 major police departments, in Texas, Florida and California, was "surprised" to find that when it comes to the most lethal form of force — police shootings — the study finds no racial bias.

Mr. Fryer said his anger after the deaths of Michael Brown and Freddie Gray and others drove him to study the issue. “You know, protesting is not my thing,” he said. “But data is my thing. So I decided that I was going to collect a bunch of data and try to understand what really is going on when it comes to racial differences in police use of force.”

In officer-involved shootings in these 10 cities, officers were more likely to fire their weapons without having first been attacked when the suspects were white. Black and white civilians involved in police shootings were equally likely to have been carrying a weapon. Both of these results undercut the idea that the police wield lethal force with racial bias.

…

However, for Mr. Fryer, who has spent much of his career studying ways society can close the racial achievement gap, the failure to punish excessive everyday force is an important contributor to young black disillusionment.

“Who the hell wants to have a police officer put their hand on them or yell and scream at them? It’s an awful experience,” he said. “I’ve had it multiple, multiple times. Every black man I know has had this experience. Every one of them. It is hard to believe that the world is your oyster if the police can rough you up without punishment. And when I talked to minority youth, almost every single one of them mentions lower level uses of force as the reason why they believe the world is corrupt.”

via http://ift.tt/29LUcWn Tyler Durden

For a few months in early 2016 it was cool to make fun of Kyle Bass’ career bet on Yuan devaluation; now that the Yuan is back to 6 year lows and sliding as China once again quietly loses control of its capital outflows, it is not so cool any more.

And with every passing day, it is only going to get worse because despite all the rhetoric, China’s economy is getting worse by the day.  As SocGen puts it, “there have been signs of reviving capital outflow pressure since early 2Q. If the deprecation continues apace, capital outflow pressure will build up further and potentially quite quickly. The fact that the PBoC keeps stepping up capital controls despite the innocuous official flow data seems to suggest that it is also expecting an uphill battle.“

And speaking of SocGen’s outlook for China’s currency , this is what the French bank – which just cut its Yuan forecast from 6.80 to 7.10 – thinks will happen next.

A New Normal for the RMB

 

We revise our peak forecast for USD-CNY to 7.10 from 6.80. Similar to immediately following the August devaluation, consensus is too complacent on the ability and willingness of policymakers to arrest the nearly three-year-old depreciation trend.

 

The new normal in recent months is gradual RMB depreciation that doesn’t create a negative feedback loop to other currencies or broader market sentiment. This could embolden policymakers to keep pushing the limits of depreciation, especially if speculative positioning stays subdued. Implied volatility, risk reversal, forward points, and the forward curve have all been unresponsive to the recent RMB weakness. This is partly due to the reluctance of speculative investors to add exposure after being burned by the RMB depreciation trade in January, but also because intervention remains ongoing despite not showing up in headline reserves or the forward book.

 

 

The best solution remains for policymakers to let the RMB find its market clearing price. This is not an exact science and we can only guesstimate what the level would be – 6.80 was our previous assumption but 7.10 now seems more realistic. The recent depreciation at a time when the dollar has not been strengthening suggests policymakers are increasingly giving in to capital flow pressures and are willing to the test the limits of depreciation. Further depreciation could reinforce capital outflows in the short term but should eventually help capital flows reach equilibrium.

 

 

7.10 peak – our base case, 80% probability

 

The next wave of RMB depreciation will see USD-CNY trade up to 7.10 by mid-2017. Since USD-CNY bottomed in early 2014, there have been five waves of depreciation and each has followed a predictable pattern: three to five months of USD-CNY increasing (+3.5% on average), followed by modest gains (+1%) spanning an equivalent time span, before another round of depreciation ensues. The predictability is  suboptimal from a policy perspective, but it appears to be the PBoC’s standard playbook. While there could be some consolidation or modest strength after the current depreciation phase ends (3.6% since April), the ensuing wave and medium-term path should see USD-CNY reach 7.10 over the next year.

 

Cumulative depreciation of 6% over the next year would be similar to what has been experienced since October. This would not be an atypical base case for a country in a structural slowdown, with perceptible credit and banking sector risks, an imbalance in the supply-demand of capital, a tenuous reserve adequacy position, and local residents harbouring a strong desire for FX diversification.
We continue to believe that consensus is underestimating the chances of CNY depreciation, both from the ability and willingness of policymakers to prevent further depreciation. Consensus is at 6.80 in one year, which was our prior out-of-consensus call immediately following the August devaluation (back in late August consensus was at 6.50).

 

 

A gradual and controlled depreciation with periods of stability and bouts of accelerated weakness is still the most likely scenario (80% probability). A move to 7.10 may continue to be absorbed by investors without disturbances to broader market sentiment occurring, and as such we see no need to revise our EM forecasts, which currently entail modest spot depreciation that broadly matches the forwards.

 

Importantly, the USD-CNH trading pattern since 2014, of only retracing a portion of its gains and never revisiting the lows after an up move, should remain in place. Coupled with little fundamental justification for a stronger CNH over a 12-month horizon and fairly neutral speculative positioning, it is unlikely that USD-CNH will trade below the 6.50-6.55 area.

 

8.0 – the new risk scenario, 20% probability

 

Back in January (CNY7.50 World) we identified USD-CNY trading up to 7.50 as the risk scenario for the currency. Given ongoing capital outflows, the ability of the market to absorb recent depreciation without negative consequences, the policy decision to weaken the renminbi when the USD has been stable, and our new forecast of 7.10, the risk scenario for CNY is now much higher.

 

The new risk scenario for CNY is 8.0 (20% increase in USD-CNY). We assign 20%  probability to this scenario. The caveat is that the pain threshold for the market appears to be much higher than before and the implications for the global financial markets will primarily depend on the speed of depreciation. We believe that it would take significantly more pressure on capital flows than what we have seen over the past few years, or an economic hard landing, for our risk scenario to unfold. Note that we have a 30% probability of a hard landing of the Chinese economy. We think that an economic hard landing might not necessarily trigger a sharp devaluation, as the authorities would most likely respond with strict capital controls amid concerns over capital flight.

 

Within the risk scenario, the path to 8.0 could be abrupt (not likely), slow (more likely), or fast (most likely).  

• Scenario 1: one-off devaluation (<10% probability): A one-off move (i.e. step devaluation) where the PBoC then chooses to defend the new level. There would be enormous political backlash with the  appearance of any active pursuit of devaluation. This would also be too risky for Beijing’s taste given that no one can say for sure how much depreciation is enough to equilibrate supply and demand. However,  we assign it a nonzero probability because the authorities might ultimately decide it is the best way to realign expectations and halt domestic capital outflows.

• Scenario 2 (free float over the next year – >70% probability): The PBoC fast-tracks currency reforms through a big-bang approach to currency flexibility because either: a) capital outflows remain large and the depletion of FX reserves too great; or b) it deems the domestic and global financial markets able to absorb the shock.
• Scenario 3 (slow and steady move – 20% probability): The current strategy of steady depreciation picks up pace and intervention is used to limit overly destabilising volatility. The risk to a steady creep higher in USD-CNY is a build-up in speculative pressures and resident outflows that creates a vicious cycle of depreciation.

Finally, here is SocGen with its best ways to trade the coming Yuan devaluation:

Long USD-CNH: In our view, over a one-year horizon, being long USD-CNH has attractive risk-return characteristics on a 6% spot move, 2.5% negative carry, and limited potential for CNH to strengthen on a sustained basis. However, the entry point is critical to achieving a favourable PnL outcome and it might be prudent to wait until CNH consolidates or strengthens modestly to enter long USD-CNH positions.

 

Vanilla calls or call spreads are too expensive: Both these structures are too expensive when considering the probability-weighted terminal value of CNH a year from now. For example, a one-year 25d USD-CNH call has a breakeven at 7.37 while a 25d/10d call spread needs to see a move to the 7.50 area for risk-return to be attractive.

 

Buy 1-year call spread (6.85/7.20 strikes) and sell 1y-year 6.55 put: Under the premise that USD-CNH only retraces a modest portion of the recent gains (similar to past experience) coupled with no strong arguments for sustained appreciation on fundamental grounds, selling downside optionality can cheapen the cost of the call spread quite significantly. For example, the indicative cost of a 6.85/7.20 call spread is 1.43%, compared with a cost of 0.42% in a structure that buys the same call spread and also sells a 6.55 put. The 70% cost reduction entails unlimited losses below 6.55 but the position can be delta-hedged.

 

But 1-year 6.85 USD-CNH call with a knock-out at 8.0: Owning a 1-year 6.85 call option is quite expensive (indicative cost of 3% of notional) and has a poor breakeven (7.05). Whereas owning a 1-year 6.85 call with a knock out at 8.0 (our risk scenario) entails a 60% cost reduction over the vanilla call. The risk is limited to the premium paid. Positive PnL at expiry accrues above 6.90, but if the barrier level (8.0) is hit at any point over the life of the trade the structure is knocked out and the premium is lost. The structure has risk-reward of 10-1.

 

Short RMB against an abridged CFETS basket: Whether the CNY stabilises against the USD, depreciates modestly in an orderly and controlled manner (our base case), or experiences stronger depreciation (our risk scenario), the trade-weighted basket will be at best stable and could continue to fall. To mitigate fluctuations in the USD-CNY exchange rate, investors can short the trade-weighted exchange rate. An abridged CFETS index that includes the USD (36% weight), EUR (325), JPY (13%) and AUD (19%) is able to track the larger thirteen currency CFETS index very closely (link). The abridged basket is highly liquid and has similar negative carry as being long USD-CNH (22bp/month).

And with that, good luck in catching up to Kyle Bass.

via http://ift.tt/29tIHl3 Tyler Durden

Jeff Bezos has marked another milestone. Nearly one year to the day following Amazon’s surpassing of Walmart’s market capitalization on the heels of a great report on AWS (Amazon Web Services) growth numbers, Amazon has surpassed another American business icon’s market capitalization, that of Warren Buffett’s Berkshire Hathaway…

 

Notably tomorrow is Amazon Prime Day 2016.

Leaving the big question – when does Amazon rise to Apple’s market cap level or will Apple fall to Amazon’s market cap level? Place your bets…

 

Charts: Bloomberg

via http://ift.tt/29LNShp Tyler Durden

For all the talk about the surging yen as the biggest threat to Japan’s embattled economy, the truth is that there is another soaring currency (and asset) that is far more troubling for Shinzo Abe.

Gold.

While in past decades, the natural instinct of Japanese savers when faced with financial uncertainty has been to rush into the “safety” of cash (after all why allocate funds to government bonds that yield almost, or less, than nothing) as we recently showed in Safes Sell Out In Japan and Demand For Big Bills Soars As Japan Stuffs Safes With 10,000-Yen Notes, now something has changed. That something is increasing loss of faith in Japan’s currency.

Take the case of Tetsushi Kudo, a 50-year-old office worker, who as Bloomberg writes, bought a one-ounce gold coin this month for the first time. With stocks slumping and zero percent interest on savings, he says it won’t be the last.

“I want to buy gold every year as a birthday present for my daughter,” Kudo said at a store in Tokyo’s posh Ginza district where he made the 162,000 yen ($1,600) purchase. “She will thank me for the gift when she grows up because gold will have value wherever she goes.”

What a delightful epiphany: if ordinary, 50-year-old Japanese citizens can get it why not Nobel-prize winning economists? 

Ignore that please.

Individual investors like Kudo drove a 60% jump in sales of the precious metal in June from May at Tanaka Holdings Co., the operator of Japan’s largest bullion retailer, as the yen’s rebound against the dollar made it more affordable. Why the surge into gold? Because far behind the glitzy facade of Abenomics, which is really just the BOJ intervening daily in the USDJPY via trust banks, and manipulating the Nikkei to give the impression that all is well, the people have checked out. According to Bloomberg, while Prime Minister Shinzo Abe’s ruling party scored a convincing victory in July 10 upper house elections, confidence in his economic policies is crashing. A July 2-3 Asahi newspaper poll showed 55% of those surveyed support a new direction versus 28% for maintaining course.

While both gold and the Yen have soared in 2016, it has been for oddly similar reasons. The yen’s 20% gain this year, slightly less than that of USD-denominated gold, has been a reflection of Japanese investors fleeing from overseas markets due to pessimism about global growth rather than confidence in their own economy. As for the reason why Japanese interest in gold has soared, it is an even simpler one: fear that the days of the Yen as a stable currency are numbered.  Gold in yen terms has risen 7.5% this year, compared with the 28% jump in the dollar-based price of the metal

Gold sales more than tripled at Tanaka’s shops on June 24, when the Japanese currency jumped to an almost three-year high against the dollar after the U.K. decided to exit the European Union. Japan’s Topix stock gauge dropped the most in five years the day after the Brexit referendum, while 10-year sovereign bond yields tumbled further below zero.

“For investors, buying gold is similar to casting a no-confidence vote,” saidItsuo Toshima, 68, an investment adviser and former regional manager for the World Gold Council in Tokyo. “Gold is the unprintable currency, unlike the yen. The yen’s appreciation in spite of the adoption of the negative-rate policy has kindled skepticism about the policy’s benefits. It’s also led to investors seeking to protect their assets in case Abenomics fails.”

Another traditional lament said about gold is that it pays no dividend. Well, when the return on other “safe assets” is negative – as it the case in Japan – gold does have a relative real return. Indeed, gold’s lack of yield isn’t a big draw-back for investors at a time when almost 90% of Japanese government bonds have yields below zero, according to Eiichiro Kato, a general manager at Tanaka’s precious metals retail department. The benchmark 10-year JGB yield was at minus 0.28 percent on Monday.

And then there are the philosophical questions.

“We don’t know who will take responsibility for reducing Japanese government debt,” said Akihiro Morishige, a senior economist at Mitsubishi Research Institute.

What reduction in Japanese government debt?

“If trust in Japan’s fiscal policy decreases, Japanese long-term interest rates may soar towards 5 percent by 2030.”

Make that 500%.

What makes Japan’s gold rush more unique than in most countries is that many are not only buying gold as protection against a crash, they are storing it abroad as protection against confiscation as we reported last week.  Japanese buyers of gold to store in Switzerland jumped 62% in the first six months from the second half of 2015 because of negative interest rates and concern the yen will eventually weaken, according to BullionVault Ltd., an online trading and storage company. Also: due to fears that Abe will pull an “Executive Order 6102”, and force gold confiscation from the population.

Meanwhile, as they flood into gold, Japanese investors are retreating from riskier assets as the nation’s shares plunge. Households’ holdings of equities decreased 9.9% from a year earlier at the end of March and investment trusts fell 3.7 percent while their cash and bank deposits rose 1.3 percent to 894 trillion yen, the second-highest amount on record, according to BOJ data.

“Gold is attractive because its prices don’t move much, compared with other assets,” said Kudo, the buyer of the coin in Ginza. “I may lose lots of money if I buy stocks without doing much research on them.”

Come to think of it, he is 100% right; making things worse, he may – and likely will – lose lots of money even if he buys stocks having done lots of research on them.

The good thing about gold: no sellside research required.

via http://ift.tt/29LK6Vn Tyler Durden

Authored by Nomi Prins, via TomDispatch.com,

“Establishment: A group in a society exercising power and influence over matters of policy, opinion, or taste, and seen as resisting change.” — Oxford Dictionary

Early on in his presidential bid, Donald Trump began touting his anti-establishment credentials. When it worked, he ran with it. It was a posture that proved pure gold in the Republican primaries, and was even, in one sense, true. After all, he’d never been part of the political establishment nor held public office, nor had any of his family members or wives.

His actual relationship to the establishment is, however, complex in an opportunistic way. He’s regularly tweeted his disdain for it. (“I wish good luck to all of the Republican candidates that traveled to California to beg for money etc. from the Koch Brothers. Puppets?”) And yet, he clearly considered himself part of it and has, at times, yearned for it. As he said early on in his run for the presidency, “I want the establishment — look, I was part of the establishment.  Let me explain. I was the establishment two months ago. I was like the fair-haired boy. I was a giver, a big giver. Once I decided to run, all of a sudden I’m sort of semi-anti-establishment.”

An outsider looking to shake up the government status quo? An insider looking to leverage that establishment for his own benefit?   What was he?  He may not himself have known.

He once rejected the idea of taking establishment (or Super PAC) money, only — more recently — to seek it; he rebuffed certain prominent establishment players, only to hire others to help him (and fire yet more of them).  He’s railed against the establishment, then tried to rally it to his side (even as he denounced it yet again). Now, with the general election only four months away, it turns out that he’s going to need that establishment if he is to have a hope in hell of raising the money and organizing the troops effectively enough to be elected. There, however, is the rub: power brokers don’t suffer the slings and arrows of “outsider” scorn lightly.

As a result, if he now needs the establishment more than he’d publicly admit, it may not matter.  He may find himself ostracized by the very party he’s set to represent.

Once upon a time not so long ago, making America great again involved a bankroll untainted by the Republican political establishment and its billionaire backers. There would, The Donald swore, be no favors to repay after he was elected, no one to tell him what to do or how to do it just because they had chipped in a few million bucks.  But for a man who prides himself on executing only “the best” of deals (trust him) this election has become too expensive to leave to self-reliance.

One thing is guaranteed: Donald Trump will not pony up a few hundred million dollars from his own stash.  As a result, despite claims that he would never do so, he’s finally taken a Super PAC or two on board and is now pursuing more financial aid even from people who don’t like him. Robert Mercer and his daughter Rebekah, erstwhile influential billionaire backers of Ted Cruz, have, for instance, decided to turn their Make America Number 1 Super PAC into an anti-Hillary source of funds — this evidently at the encouragement of Ivanka Trump.

In the big money context of post-Citizens United presidential politics, however, these are modest developments indeed (particularly compared to Hillary's campaign).  To grasp what Trump has failed to do when it comes to funding his presidential run, note that the Our Principles Super PAC, supported in part by Chicago Cubs owners Marlene Ricketts and her husband, billionaire T.D. Ameritrade founder J. Joe Ricketts, has already raised more than $18.4 million for anti-Trump TV ads, meetings, and fundraising activities. (On the other hand, their son, Pete, Republican Governor of Nebraska, has given stump speeches supporting Trump.)

To put this in context, that $18.4 million is more than the approximately $17 million that all of Trump’s individual supporters, the “little people,” have contributed to his campaign.  (He is no Bernie Sanders who raised $220 million from individuals in the 2016 campaign season.) Even with all his wealth, Trump is in a funding nightmare, lacking the confidence of the Republican party and its most generous loyalists.

To be sure, other establishment billionaires have expressed support for Trump, like funding kingpin Sheldon Adelson who said he’d fork over $100 million to the Trump cause. It’s just that he hasn’t done that yet. Chris Christie is similarly trying to help raise funds for the campaign.  But the man-who-would-be-veep hasn’t had much luck. So far, at least, Trump’s biggest establishment supporters have been more talk than action.

The Trump Team

In addition to the usual money not flowing in from the usual crowd, there’s the issue of actually preparing to staff a future administration with the usual people, not to speak of the seasoned set of advisers that normally surround presidential candidates. Increasingly, it seems that they may not be available or have already left the proverbial building — and that’s a problem.

Trump has vowed to fill his administration with “the best people.” (In a perfect world, they would, of course, be his clones.) Yet so far, he’s been pursuing what he has characterized as a “lean” strategy, which means that few are yet on board and it’s getting late in the game to fake it.

Usually by this time in the election cycle, nominees have pulled together their inner circle, mostly from well-known or rising establishment players, including policy wonks by the bucketful.  He hasn’t.  According to Vin Weber, a D.C.-based partner at Mercury, which bills itself as a global, high-stakes public strategy firm, who crafted Mitt Romney’s “policy shop” in 2012, the lack of infrastructure is unprecedented. Romney’s policy shop was first formed 18 months before the 2012 election and fine-tuned in January 2012. We’re in July 2016 and from Trump on this score — nothing. Nada. “Nobody in Washington that I know of,” Weber says, “is assembling a staff for an incoming Trump administration.”

Given his public war with his party, Trump may find himself without anyone left to fire.  It’s one thing to cut back on government, another to have no one around to do anything.

Maybe winging it on national policy and disparaging those who might someday make such policy is endearing in The Donald, but not to the Washington establishment.  Whatever the case, it might be useful before the Republican convention, which already promises to be a bizarre spectacle, to consider who Trump’s “best people” are — and aren’t — at the moment. Who are his most loyal advisers and supporters? Who would take a political bullet for him or put that bullet in him?

For the answers to such questions, it’s necessary to consider three categories: blood, money, and power. In the land of Trump (and Clinton), of course, blood — that is, family — comes first; financial interests, second; and the political power-elite (a.k.a. the establishment), last.

For Trump, family is foremost; general election finances are still remarkably lacking; and that final group remains infinitesimal, given how big the Washington establishment actually is.  And do note that this has not been because The Donald hasn’t tried to broaden his establishment support. He just seems congenitally unable to succeed at it.  It’s a deal he can’t broker. His supporters may think of him as one of them, but his outsider status has come about by default, not by strategic choice, and it shows.

Trump’s most loyal support comes from his family who make up his core “board of advisers.”  They are anything but inside-the-Beltway types.  If, however, he were to make it to the Oval Office, they could certainly be the new Clintons, the latest bloodline in Washington.

So from family to finances to establishment, here’s a rundown on key players in Trump World, who’s up and who’s down, who’s in and who’s out.

Trump’s Establishment Gets on Board

Ivanka Trump, Campaign Adviser

Omnipresent in his campaign, daughter Ivanka is the executive vice president of development and acquisitions in the Trump Organization. She “actively participates in all aspects of both Trump® and Trump branded projects.” The presidency is, of course, the ultimate branded project and were the economy to fall off a cliff one Trumpian day, the White House might make the perfect Trump luxury condo building.

For all practical purposes, Ivanka, not wife Melania, is Trump’s “first lady” (in waiting). She appeared on the presumptive board of The Apprentice and Celebrity Apprentice.  It was widely rumored that she was the one who had the clout to get Corey Lewandowski, the campaign manager who lifted Trump to victory in the primaries, fired. Put another way, the “establishment apprentice” got the shaft because he crossed the person with the real power in Trump’s campaign.

Jared Kushner, Campaign Adviser-in-Law

Ivanka’s husband, real-estate developer Jared Kushner, tried to persuade one and all that his ownership of the New York Observer didn’t make the paper’s endorsement of The Donald any less objective.

Before the turn of the twentieth century, the Stillmans (bankers) married the Rockefellers (industrialists) to breed young Stillman-Rockefellers who controlled a chunk of the banking sector for decades while advising multiple presidents. Depending on the fate of Donald Trump’s presidential bid, perhaps the 2009 Jared-Ivanka merger (wedding) will someday be seen in the same light.  It was, after all, witnessed by an array of movie stars, television personalities, and politicians like former New York City Mayor Rudy Giuliani and present New York Governor Andrew Cuomo.

If Trump is elected, Kushner could wind up appointed, say, Secretary of Real Estate. (Okay, that post doesn’t actually exist — yet.) Kushner set up critical meetings between Trump and key Republican dignitaries and leaders that were meant to elevate his father-in-law’s relationship with the party establishment.

In early May, the New York Times reported that “Donald J. Trump has asked his son-in-law, Jared Kushner, to begin quietly compiling a blueprint for a transition team should he win the White House in November.” If his recent actions are a guide, Kushner will undoubtedly try to snag some significant establishment players as the race progresses.

Paul Manafort, New Campaign Manager

Manafort, a man of controversy, comfortable with wealth and luxury (though refusing any cash compensation for being on the Trump Train), has 40 years of work for the Republican Party establishment under his belt. In addition to being a former principal at the lobbying firm of Black, Manafort, Stone, and Kelly, he played a leading role in George H.W. Bush’s nomination at the 1988 convention, Bob Dole’s in 1996, George W. Bush’s in 2000, and John McCain’s in 2008.

For a campaign selling anti-establishmentism, having a manager from the inner circles of D.C. might seem like sheer Trumpocrisy, but such seeming contradictions are the essence of The Donald.

Manafort, by the way, has kept an apartment in Manhattan’s Trump Tower, which, as we know, is “one of the world’s elite luxury residences, catering to public figures, athletes, celebrities, and other affluent sophisticates.” In other words, he’s establishment with a view.

Michael Glassner, Deputy Campaign Manager

Glassner is another classic insider. An adviser to the George W. Bush campaign of 2000, he became a top adviser to Sarah Palin in the 2008 election (which may have been a recommendation in Trump’s eyes). He had also once been an adviser to Bob Dole and the Southwest regional political director for the American Israeli Public Affairs Committee. Glassner is one of the small team of Trump’s establishment guys reportedly responsible for his chaotic preparations for the Republican National Convention in Cleveland. 

Donald F. McGahn II, Chief Legal Counsel

McGahn, one of Washington’s best-connected lawyers, is legal counsel for Trump and a partner at Jones Day, the elite law firm that lists anti-trust and government regulation as its top specialties. By February 2016, the firm had already received more than $500,000 in payments from the Trump campaign.

According to MSNBC’s Zachary Roth, McGahn “was a crucial player in creating the out-of-control campaign finance system that his boss now denounces.”  He has helped connect Trump with Republican congressional leaders at his D.C. offices, further dispelling the myth that Trump is anti-establishment.

Steven Mnuchin, National Finance Chairman

Not to be outdone by Hillary’s Wall Street connections, Trump recently bagged a former Goldman Sachs partner to run his fundraising operation (the one he used to say he didn’t need). In terms of Mnuchin’s own political contributions, like the firm he once worked for, he’s spread the wealth around. He donated to both Romney and Obama. He also contributed to Hillary Clinton’s Senate and presidential campaigns. In 2012, he donated $20,000 to the Republican National Committee. Overall, Mnuchin has contributed more than $120,000 to political groups over the past two decades, slightly favoring Democrats.

Shades of Trump, according to Variety, he left Relativity Media, where he had been a co-chairman, two months before it filed for Chapter 11 bankruptcy in 2015. He also led a group of billionaire investors that took over beleaguered California bank IndyMac from the FDIC at a bargain price during the financial crisis, profiting, that is, from the pain of California's foreclosure victims.

Who’s Gone From the Trump Train?

The list of those who have jumped off or were thrown from the Trump train is also heavy on establishment types, though most weren’t exactly from its crème de la crème. Among them were:

Corey Lewandowski, Former Campaign Manager

Lewandowski developed his establishment muscle working for various Koch Brother initiatives and was legislative political director of the Republican National Committee in 2001. He had also worked for three congressional representatives and, most recently, the conservative advocacy group Americans for Prosperity, a Koch brothers-funded organization.

According to the Wall Street Journal's analysis of Federal Election Commission documents, Lewandowski was “paid $20,000 a month,” — the equivalent of an annual salary of $240,000, “or 45% more than 2012 GOP nominee and multimillionaire Mitt Romney paid his senior staffers.” He was involved in a notorious incident with a female Breitbart reporter.  It seems that, organizationally, he lost out to Paul Manafort, alienated Ivanka, and in June was fired by Trump.  He hit the tracks running — CNN promptly hired him as an on-air analyst for a reported $500,000.

Stuart Jolly, Former National Field Director

Jolly resigned on April 18th. He had previously worked at the Oklahoma chapter of the Koch brothers' flagship group, Americans for Prosperity, and also at the Education Freedom Alliance, an organization focused on expanding school choice and free-market economics.

Upon leaving he offered this advice to Trump: "My hope is that you will continue to listen to those who have propelled you to victory." However, he soon returned as a national adviser for political and fundraising activities at the pro-Trump Super PAC, Great America.

Roger Stone, Former Top Adviser

Stone, too, has been an establishment GOP operative for decades. In 1974, he left his position as staff assistant for Senator Bob Dole amid controversy over Nixon White House "dirty tricks." Five years later, he co-founded the National Conservative Political Action Committee where he developed a knack for creating negative campaign ads.  Before he resigned from the Republican Party on his blog in 2012, he had worked on 12 Republican presidential campaigns.

The story of his fate in the Trump campaign is murky. The Donald insists he fired Stone, while Stone insists that he was the one who said, “You’re fired!”

Rick Wiley, Veteran Republican Adviser

An establishment player and a former political director for the Republican National Committee, he was removed as Trump's national political director in May 2016, two months after having been brought on board by Paul Manafort. The media cited various unnamed sources offering various reasons why.  Whatever the explanation, he was in and then he was out, because measured thinking about position selection isn’t a Trump priority.  Wiley now works for the Republican National Committee.

Who Doesn’t Want to Be Seen at Trump Station?

The list of establishment players exhibiting no interest in associating with The Donald or an absolute animus against him seems to expand by the day. It includes, of course, Mitt Romney, Jeb Bush, George W. Bush, and Lindsey Graham, among so many others — key players all in the Republican Party. Romney typically didn’t mince words, saying, “Donald Trump is a phony, a fraud. His promises are as worthless as a degree from Trump University. He’s playing the American public for suckers: he gets a free ride to the White House and all we get is a lousy hat.”

Romney might be wrong about the hat.

Meanwhile, a troop of prominent Republicans are heading for the hills, not the party’s convention. Congressional representatives are going into opposition; convention delegates pledged to Trump are restless and other delegates are muttering about revolt. A former Republican national security adviser and a former Republican treasury secretary (and former Goldman Sachs chairman and CEO) have thrown their support to Hillary and the establishment cast of characters thinking about heading for the exits continues to lengthen. 

If much of the rest of the establishment follows the present pattern and departs Trump Station, what will this election look like? If history is any guide, family is not enough in American politics, only in banking. A candidate needs a party establishment for everything from experience to organization to money.

Trump himself lacks experience in government or public service of any sort. He’s essentially at sea when it comes to what it might mean to govern this country.  In this, he is anything but typical among Republican frontrunners who became president.  William Taft was a former secretary of war. Herbert Hoover was secretary of commerce. Warren Harding was a senator. Calvin Coolidge was his vice president. Dwight Eisenhower was a decorated general. Richard Nixon was his vice president and had been in Congress for years. Ronald Reagan was, yes, an actor, but had also been the governor of California. George H.W. Bush had been a congressman, an ambassador, and director of the CIA. His son was, of course, governor of Texas.

If Trump continues to play the outsider card (as he essentially must, given what his supporters now expect) and continues to alienate ever more of the establishment, he’s likely to find himself fighting a battle of diminishing returns in his own party. And what about that establishment’s money? After all, what’s an election these days but a pile of donated money and backroom deals?

We know he raised significantly less than Jeb, Ted, and Marco and still beat them in the primaries, and that undoubtedly gave him a certain unrealistic sense of what was possible in a presidential campaign. The result: this May his campaign raised only $1.3 million to Hillary’s $42.5 million. If that’s a sign of what’s to come and his supporters, unlike those of Bernie Sanders (the only true populist in the race) don’t begin to up the ante drastically, watch out.

Unsurprisingly, establishment pockets are looking a good deal less deep these days when it comes to him, though Trump has begun to say that he might need to find up to $1.5 billion to run this race.  Key establishment money-raising figures have now visibly turned their backs on him, just as he did on them.

The Koch brothers are not atypical in refocusing the future contributions of their Super PACs on Republican races in the Senate and House. Charles Koch even signaled the possibility, however faint, of taking a further step and using his money for the other side. "We would have to believe [Hillary’s] actions would be quite different than her rhetoric. Let me put it that way," he said in an interview on ABC's This Week. When asked if it was possible that another Clinton could be better than a Republican, he added, "It's possible." (With establishment money, all things are possible.)

Outside groups — PACs and Super PACs on both sides of the aisle — have already spent a combined $34.1 million on Senate and House races, according to a Bloomberg News analysis of Federal Election Commission data. That’s nearly double the amount spent at this point in the 2012 campaign. The Freedom Partners Action Fund Super PAC, a political arm of the Koch empire, has divided nearly $10 million among four key Senate races in Wisconsin, Nevada, Pennsylvania, and Ohio. It has, however, kicked in only $36,000 for anti-Hillary efforts and not a penny for Trump.

American Crossroads, a Karl Rove Super PAC, is also opting to focus on Republicans in the Senate, though so far it has doled out just $100,000 for that effort and $135,000 against Hillary. Rove has called Trump “a petty man consumed by resentment and bitterness,” which tells you all you need to know about where he’s likely to put his outfit’s money this election season.

It’s increasingly clear that the GOP establishment is playing a different end game than The Donald. Whether Trump or Hillary wins, they want a Congress stacked in favor of their needs, and perhaps many of them are looking to a Paul Ryan run in 2020 as their saving grace.

Trump Wins

So here’s a question for that ultimate insider of outsiders: Can Donald Trump actually lose the 2016 election?  Let’s say Hillary beats him, as the polls of the moment suggest she will.  Has he lost?  Probably not.

After all, he’s brought his brand to a far broader global audience on a stage so much larger than any Apprentice imaginable. He could lose dramatically, blame the Republican establishment for being mean to him, and then expand the Trump brand into new realms, places like Russia, where he’s long craved an opening. Vladimir Putin and he could golf together bare-chested while discussing the imminent demise of the American empire. "My country could have been great again," he could sigh, "if only it had voted me in." His consolation prize: a Trump Casino in Moscow’s Red Square?

In other words, whether the establishment supports him or not, whether he wins on November 8th or not, his brand wins, which means that he triumphs.

Consider this: the Old Post Office building on Pennsylvania Avenue with views of the White House is already wrapped in blue Trump International banners as it’s being converted into a luxury hotel. Due to open two years ahead of schedule and two months before Election Day, it’s one of Ivanka’s projects.  It ensures that her father has branded the avenue regardless of whether he ends up in the White House or not. Given the property’s location and what its “presidential suite” is sure to look like, working in the Oval Office might prove to be a downgrade.

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Piling on to Italy’s growing mountain of worries, this evening the IMF itself warned that Europe’s third largest economy would grow by less than 1% this year and only marginally faster in 2017, slashing its previous forecasts of 1.1% and 1.25% growth for the next two years, mostly as a result of the most convenient scapegoat available in Europe at the moment: Brexit (which has become to Europe as “cold weather” has been to the US for the past two years).

Christine Lagarde’s organization said Italy was “recovering gradually from a deep and protracted recession”, but said the healing process was likely to be “prolonged and subject to risks”. It used its article IV consultation – an annual economic and financial health check – to stress that Italy was vulnerable to a cocktail of threats that could have knock-on effects for the rest of Europe and the world.

The IMF dour outlook may be overly generous. While economists have been racing to downgrade Italy’s outlook since the British referendum, Italy’s own employers’ lobby Confindustria now sees growth of just 0.8% this year dropping further to 0.6% in 2017.  Italy, long one of Europe’s most sluggish economies, will struggle to close the gap with its peers even if recent reforms are fully implemented, the IMF report said.

The punchline: only by around 2025 will Italian output return to its 2008 peak before the global financial crisis, according to the IMF. In the same period, growth among Italy’s euro zone partners is expected to rise by 20–25% above their pre-crisis levels. In other words, Italy is now in the middle of what will end up being a two-decade recession.

“The authorities thus face a monumental challenge. The recovery needs to be strengthened to reduce high unemployment faster and buffers need to be built, including by repairing strained bank balance sheets and decisively lowering the very high public debt,” the report said.

“Downside risks arise from delays in addressing bank asset quality, intensified global financial market volatility – including from Brexit, the global trade slowdown weighing on exports, and the refugee influx and security threats that could further complicate policymaking,” said the IMF. “If downside risks were to materialise, regional and global spillovers could be significant, given Italy’s systemic weight.”

And speaking of Italy’s weakest links, the banks, the IMF said that “risks are tilted to the downside,” listing a raft of issues including the poor asset quality of Italy’s banks, financial market volatility and the impact of a global trade slowdown on exports.

“If downside risks were to materialize, regional and global spillovers could be significant given Italy’s systemic weight,” it said.

In an assessment that will hardly help Italian bank stocks, the IMF said that the country’s banks, which are saddled with some 360 billion euros of bad loans and whose share prices have fallen by more than 50 percent this year, are a particular threat to the economic outlook, the IMF said. “Unless asset quality and profitability problems are addressed in a timely manner, lingering problems of weaker banks can eventually weigh on the rest of the system,” it warned.

Finally, in keeping with the tradition of having political involvement, Lagarde sided with the side of Renzi and against Merkel and Dijsselbloem, both of whom have denied Italy’s repeated pleas for a bailout, saying that If EU-wide stress tests show that financial stability is at risk, there is scope for Italy to use public money to recapitalize its banks, the head of the IMF’s mission to Italy, Rishi Goyal, said in a conference call.

To what extent this could be done without triggering losses to investors under newly adopted “bail-in” rules would depend on negotiations between Italy and the EU, Goyal said.

It was also unclear just who would determine what conditions would define a financial system under stress.

Italy’s public debt, the highest in the euro zone after Greece’s, will not fall this year as targeted by the government of Prime Minister Matteo Renzi, the IMF said. In a forecast made before the UK referendum, the IMF said Italy’s debt would edge up to a new all-time peak of 132.9 percent of gross domestic product from 132.7 percent last year.

Italy’s finance minister, Pier Carlo Padoan, vows there is not banking crisis.

Still, all of this may be moot if various unconfirmed rumors of Italian cashless ATMs end up being true. What is most troubling, however, if past is prologue is the desperate plea by Italy’s finance minister, Pier Carlo Padoan, to restore some confidence in Italy’s banks, to wit:

• PADOAN SAYS THERE’S NO LOOMING BANKING CRISIS IN ITALY

Traditionally, it is such “political” (and futile) statements such as that one – especially when everyone knows they are false – which do precisely the opposite of their intended goal, and emerge just days before the worst case scenario becomes a reality.

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Just hours after Kimberly-Clark, the consumer-products giant that owns Kleenex and Huggies, said it will shutter its Venezuela operations after years of grappling with soaring inflation and a shortage of hard currency and raw materials, Venezuela retaliated by announcing it would seize the factory.

Over the weekend, Kimberly-Clark said that the South American nation’s deteriorating economic situation had made “it impossible to continue our business at this time.”  The company had made a number of hard-to-find staples in Venezuela such as diapers and face tissues.

As Bloomberg adds, the decision will likely to add to shortages that have gripped Venezuela for the past few years after the ruling socialists capped the price on many consumer basics below production costs.” As we have documented repeatedly, desperate shoppers now routinely spend long hours in front of stores to purchase essential products ranging from toilet paper to rice. At the same time, companies face hefty losses on price-controlled goods, while the products are often flipped on the black market for many times their sticker price.

So in retaliation, Venezuela’s government announced it had seized the factory.  Labor Minister Owaldo Vera said Monday that the socialist government took the action at the request of the 971 workers at the factory that the company decided to shutter. The seizure follows a similar takeover from 2014 when Clorox announced it was closing its doors.

“Kimberly-Clark will continue producing for all of the Venezuelans,” Vera said in a televised statement from the factory surrounded by workers chanting pro-government slogans. That statement was not exactly true: former workers of the company would continue producing under the observation of government management. We doubt this “forced restructring” will survive more than a few months.

Maduro’s socialist government accused Kimberly-Clark of failing to properly notify the government of its plans. The Irving, Texas-based company did not comment Monday about Venezuela’s actions.

Kimberly-Clark joins Bridgestone, General Mills, Procter & Gamble and other multinational corporations in scaling back operations in Venezuela amid its economic crisis. More will follow.

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