Tag: news

Equity markets are stronger on the back of financials  – helped by BoJ’s plan to steepen the Japanese bond curve – but judging by the strengthening in the Yen, FX markets are non-believers. The lack of additional easing is largely being heralded as a disappointment (no lower NIRP and no increased buying) and many are questioning the kneejerk bounce in stocks (as bank balance sheets face trauma from the ‘reverse twist’ effect on the long bonds).

 

Japanese stocks decoupled (but are rolling over…)

 

and US equities decoupled…

 

and not even the JGB curve held its steepening…

 

What happens next?

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One day after what was a rather disastrous hearing for Wells CEO John Stumpf, which culminated with a Senator telling the embattled chief executive he may want to consider going to prison, the bad news continued overnight when the bank that overtook Wells in the “biggest US bank by market cap” category, JPMorgan, downgraded Wells to Netural, cutting its price target from $53.50 to $48.00 as a result of “tough Senate hearings and mounting public scrutiny following the opening of fraudulent accounts” and because the “senate hearings are likely to expand probes.”

Here is the full note:

Senate Hearings Likely to Expand Probes; Uncertainty About Timing, Expenses – Downgrade to Neutral

We are downgrading Wells Fargo to Neutral following tough Senate hearings and mounting public scrutiny following the opening of fraudulent accounts. We expect these will result in additional investigations which would likely pressure expenses and revenues and continued media scrutiny with an election year – there is significant uncertainty about how much some issues will cost and how long they will take.

 

In our view: 1) Wells will need to spend a lot more on litigation, examining past violations in additional areas, and responding to requirements from more hearings, investigations and lawsuits; 2) revenues will likely face some slowdown in growth including potentially impact on cross-sell in Retail brokerage, a key focus in that area; 3) this is a material reputational hit given the large number of unauthorized accounts (2 million) and how long it went on; and 4) this will likely result in a shift to greater earnings growth from areas such as investment banking which carry lower multiple. Impact on earnings is hard to determine because of uncertainty about likely total expenses – no comparable lawsuit as this matter is very different from the mortgage crisis. The stock has fallen recently but the uncertain timeframe and earnings impact is likely to keep the stock under pressure. $1-2 bil increase in costs would lower EPS by $0.20-0.40 and imply 11.7x-12.3 P/E multiple respectively (if not tax deductible), which is within the range of regional banks – unclear if these penalties would be tax deductible. What is particularly disappointing to us is that we and investors have long held Wells Fargo management in very high regard – they have been smart contrarian thinkers and made thoughtful decisions. We expect management to turn this around but it will likely take some time and expense – hence the downgrade.

 

It is unclear whether this will lead to criminal prosecutions and lawsuits will expand – State Attorneys General, SEC, and potentially criminal investigations. Wells Fargo has been viewed as a core long term holding for many investors – uncertainty around these issues could drive more investors to exit.

 

There is significant uncertainty about some issues – 1) how to compensate customers whose credit scores were increased; 2) how to compensate employees who were fired for not meeting sales targets; and 3) how far back in time Wells will need to go to scrutinize sales. We expect the scrutiny is likely to require lot of investigations and increased compliance and training spending, pressuring expenses.

 

We do not expect this scrutiny to impact Wells’ capital but could slow dividend growth. If the fines/penalties go into several billions, that would add a little to operational risk RWA.

And some additional details from JPM as it hammers the nail in:

1. There is a lot of pressure from Congress for Wells to take more steps: 1) reimburse customers for impact on credit scores and hence increase in their borrowing costs because of unauthorized credit checks; 2) compensate employees who were fired for not meeting sales quotas that were too onerous and seem to have contributed to this problem; and 3) examine credit overdraft protection sales for
   unauthorized sales.
2. Timeline uncertain. There has been lot of focus on how long these unauthorized account openings have been going on. The fines were paid based on unauthorized openings from 2011 to 2015. On average 1,000 employees were fired each year from 2011 onwards for fraudulent transactions. However, the CEO seems to have been informed of this only in 2013. This time gap in information flow was surprising and troubling
3. Investigations by the Consumer Financial Bureau (CFPB), Office of the Comptroller of the Currency (OCC), and the City of Los Angeles revealed that Wells Fargo opened ~2 mil customer deposit and credit card accounts without customer authorization from 2011 to 2015. Regulators have been investigating whether Wells’ set sales goals for branch employees that were too aggressive which in turn encouraged fraudulent activity. In response Wells has fired over 5,300 employees, agreed to a $185 mil fine, and has incurred customer remediation charges in relation to $2.6 mil charged to customers in relation to the unauthorized accounts. It appears that these transactions were more prevalent in certain areas – Southwest (Los Angeles, Nevada and Arizona), New Jersey and Florida.
4. It does not seem that Wells made any material income from these transactions. However, change in the overall sales process may pressure revenues. The cross-sales that are being investigated do not appear to have added much to earnings – the overdraft fees that seem to have been generated were very small at $2.6 mil. In fact, cross-sales have declined a tad recently. We have generally focused more on analyzing receivables and transactions volume that drive revenues rather than crosssell.
5. Wells has recently been focused on increasing cross-sell in Retail Brokerage, the largest fee income category (11% of revenues). This pace of cross-sell could slow which would temper revenue growth in the business.
6. Mix of revenues and earnings could change. Community banking has accounted for 62-67% of net income over the past 3 years, while Wholesale banking accounted for 36-40% of net income. We would expect this mix to shift more to Wholesale Banking – the key business in Wholesale segment where Wells has low market share is investment banking. Faster commercial loan growth will depend on customer demand and the economy.
7. Wells Fargo’s capital position remains strong – CET1 ratio was 10.6% fully phased in at June 30, 2016 and we do not expect any impact on capital return.

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There was a time when former Harvard head and Democratic administration darling, Larry Summers, would draw out a crowd at every public appearance. Those days are gone, however, and now the formerly corpulent cogitator is forced to resort to Twitter for his rants, such as the one he unleashed early this morning when in “tweetstorm” of 11 consecutive tweets he slammed Yellen for even daring to think about tightening, and why a rate hike in September, or any other month, would be a big mistake.

This is what he said:

There are many reasons, each of which would be reason enough alone, for the Fed not to raise rates today 1/11

— Lawrence H. Summers (@LHSummers) September 21, 2016

The Fed should not raise rate because total hours worked in US are flat to down over last 6 months 2/11

— Lawrence H. Summers (@LHSummers) September 21, 2016

The Fed should not raise rates because inflation expectations are falling not rising 3/11

— Lawrence H. Summers (@LHSummers) September 21, 2016

The Fed should not raise rates because in the 8 year of recovery it should be targeting inflation above 2% so inflation averages 2%. 4/11

— Lawrence H. Summers (@LHSummers) September 21, 2016

The Fed should not raise rates because it lacks the tools to respond if a downturn comes 5/11

— Lawrence H. Summers (@LHSummers) September 21, 2016

The Fed should not raise rates because it will come as a shock at a fragile moment 6/11

— Lawrence H. Summers (@LHSummers) September 21, 2016

Fed should not raise rates b/ the economy is sign. weaker & inflation expectations weaker than when it erred (judged expost) last Dec. 7/11

— Lawrence H. Summers (@LHSummers) September 21, 2016

Fed should get off the idea credibility requires raising rates now, Dec or at any point b4 inflation expectations are accelerating. 8/11

— Lawrence H. Summers (@LHSummers) September 21, 2016

There are much better ways than rate increases for dealing with any concerns about bubbles 9/11

— Lawrence H. Summers (@LHSummers) September 21, 2016

The Fed should take on board that with the economy so slow over the last 3 quarters rates may not be below neutral now. 10/11

— Lawrence H. Summers (@LHSummers) September 21, 2016

Tightening now will induce artificial dollar strength, which is hardly a good thing given the magnitude of protectionist pressures 11/11

— Lawrence H. Summers (@LHSummers) September 21, 2016

 

While we are curious what Summers’ recommendation would be to burst the unprecedented cross-asset bubble without a rate hike, we are confident that  Larry has no reason for concern: this time the Fed will “listen to you”, because unless Yellen wants to unleash a fiasco in the market which has put odds for a September hike in the teens, there will be no hike in 5 hours.

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• Bank of Japan’s policy reset muddies markets’ risk mood (Reuters)
• BOJ overhauls policy focus, sets target for government bond yields (Reuters)
• BOJ Shifts Policy Framework to Targeting Japan’s Yield Curve (BBG)
• Fed Focus Turns to Dots as Hike Odds Fade: Decision-Day Guide (BBG)
• Oil jumps after surprise drop in U.S. crude inventories (Reuters)
• Hedge funders pony up for Hillary Clinton super-PAC (The Hill)
• Bill Clinton’s Speaking Fee Overlaps With Foundation Business (WSJ)
• AC Milan’s Chinese Buyer Said to Show False Bank Letter in Talks (BBG)
• Top Earners Back Clinton in Bloomberg Poll After Decades With GOP (BBG)
• Why Canadians Are Being Offered Cash to Abandon Their Homes (BBG)
• U.S. Charges N.Y. Bombing Suspect, Cites Views in His Notebook (WSJ)
• VW Sued for a Record $9.2 Billion in German Investor Lawsuits (BBG)
• Protest erupts after police kill black man in North Carolina (Reuters)
• Saudi Arabia’s Clout in Washington Isn’t What It Used to Be (BBG)
• Wealthy Kids Save More for College, Thanks to the IRS (BBG)
• OECD Sees Globalization Stalling as Weak Trade Hurts Economy (BBG)

 

Overnight Media Digest

WSJ

– The Federal Reserve isn’t likely to raise short-term interest rates at its policy meeting that wraps up Wednesday, but it could send signals about where borrowing costs are headed in the months and years ahead. http://on.wsj.com/2cleJQ4

– Japan’s central bank took an unexpected step Wednesday, introducing an interest-rate target for 10-year government bonds to step up its fight against deflation, following an internal review of existing measures that failed to achieve 2 percent inflation in a promised two-year time frame. http://on.wsj.com/2csWn34

– Former President Bill Clinton was paid by a fragrance industry trade group that later benefited from the family charity’s Haitian project. http://on.wsj.com/2cGe6nd

– U.S. intelligence agencies believe that Russian aircraft conducted the strike that targeted a humanitarian aid convoy in northern Syria on Monday, according to U.S. officials, challenging Russia’s assertion that it wasn’t behind the attack. http://on.wsj.com/2cXcHKB

– Wells Fargo & Co Chief Executive John Stumpf was attacked on Capitol Hill Tuesday by senators who contended that the bank’s leadership hadn’t taken enough responsibility for a scandal over its sales practices. http://on.wsj.com/2cldgt5

– The Justice Department filed charges late Tuesday against bombing suspect Ahmad Khan Rahami, saying that he ordered many of his explosive components online and raged in a journal against what he viewed as U.S. attacks on Muslims. http://on.wsj.com/2cIC6cH

– The U.S. Securities and Exchange Commission is investigating how Exxon Mobil Corp values its assets in a world of increasing climate-change regulations, a probe that could have far-reaching consequences for the oil and gas industry. http://on.wsj.com/2d5VXOy

– President Obama, in his eighth and final address to the U.N. General Assembly, tried to reconcile the global paradox that he says has taken shape during his two terms in office: a world more prosperous than at any time in recent history, yet rife with political and security crises. http://on.wsj.com/2cNDIzw

 

FT

The chief executive of Wells Fargo & Co came under attack from Congress on Tuesday for denying that the U.S. bank’s phantom accounts scandal was a co-ordinated “scam” and refusing to promise to claw back executive compensation.

Airbus Group Chief Executive Tom Enders plans to complete the integration of the aerospace group by sweeping away overlapping functions and appointing Fabrice Bregier, the head of its planemaker Airbus, as the group’s chief operating officer.

GlaxoSmithKline said on Tuesday it had chosen Emma Walmsley, head of consumer healthcare, as its new chief executive, making her the only female chief executive of a major global pharmaceuticals company. The move also raises questions about the future of Abbas Hussain, president of the group’s global pharmaceuticals division, who has been leading an overhaul of GSK’s core drugs business in recent years.

According to figures published by the UK financial regulator, 5,500 UK-registered companies rely on “passports” to do business in other European countries, which gives an idea about the scale of disruption that Brexit could cause. There is a fear among many that the UK will lose the passporting rights that allow finiancial services companies licensed in one EU state to provide those services across the bloc.

 

NYT

– The Securities and Exchange Commission has requested information from Exxon Mobil Corp on the company’s longstanding policy of not writing down the value of oil reserves, as other energy companies have done in the recent past, Exxon Mobil confirmed. http://nyti.ms/2cl9XSG

– The United Nations secretary general, Ban Ki-moon, is expected to announce on Wednesday that he has secured enough commitments from world leaders to ensure that the 2015 Paris climate accord will enter into legal force this year, binding the next U.S. president, whoever it is. http://nyti.ms/2clde4v

– For more than two hours testifying before the Senate Banking Committee on Tuesday, Chief Executive John Stumpf expressed regret that Wells Fargo had created as many as two million bogus bank and credit card accounts without its customers’ consent. But the more Stumpf tried to explain, the more skeptical the senators became. http://nyti.ms/2cl9QH2

– The judge overseeing the investigation into the colossal scandal around Brazil’s national oil company accepted corruption charges on Tuesday against the nation’s former president, Luiz Inacio Lula da Silva, setting the stage for a trial of one of Latin America’s most influential political figures. http://nyti.ms/2clb3hj

– John Boehner, the former speaker of the House who left Congress and his leadership post last year, is joining Squire Patton Boggs, a Washington-based law firm long known for its lobbying work. http://nyti.ms/2clbiJm

– State-owned Postal Savings Bank of China Co Ltd, one of the country’s biggest lenders, on Wednesday priced shares for its initial public offering next week at $0.61 each, valuing the new shares at $7.4 billion, according to a person familiar with the offering who was not authorized to speak publicly about the pricing. But only a fraction of those shares will be held by non-government investors, as Chinese state-run companies have already pledged to buy up most of them. http://nyti.ms/2clbCYp

 

Britain

The Times

The prospect of a spin-off of GlaxoSmithKline’s consumer healthcare division receded yesterday when the pharmaceuticals group appointed the head of the division to succeed Sir Andrew Witty as group chief executive. (http://bit.ly/2cHRLsP)

Royal Bank of Scotland’s sale of a smaller lender to Santander is on the brink of collapse after talks broke down over the price of the business. (http://bit.ly/2cHSkCR)

The Guardian

Amazon has been found guilty of shipping dangerous goods by air. The items included lithium-ion batteries and flammable aerosols, which were flown in and out of the UK between January 2014 and June 2015. (http://bit.ly/2cHS6vR)

The European Commission will direct a further crackdown on tax avoidance by reviving a long-stalled plan to overhaul how companies report their profits, according to Europe’s most-senior tax policy official. (http://bit.ly/2cHS72C)

The Telegraph

Bernard Matthews has confirmed that 2,000 jobs will be preserved at Europe’s biggest turkey company after a pre-pack deal was reached to offload the business to food tycoon Ranjit Boparan, known as the “Chicken King.” (http://bit.ly/2cHRW7x)

Microsoft has unveiled plans to buy back $40 billion of its own stock as part of a long-running programme by the cash-rich firm to support its share price and bolster its earnings. (http://bit.ly/2cHSquj)

Sky News

Sports Direct has bowed to pressure and ditched a plan for its own lawyers to lead a review of the company’s working practices and governance. (http://bit.ly/2cHSk5R)

Sky News understands that the owners of Ed’s Easy Diner have appointed corporate financiers at KPMG to undertake a rapid hunt for new financing. (http://bit.ly/2cHT37h)

The Independent

More than 5,000 financial services firms are “at risk” if Britain leaves the Single Market after Brexit, a senior Conservative MP has warned. (http://ind.pn/2cHSJWf)

Indonesia’s tax authorities are planning to bill Alphabet’s Google more than $400 million in back taxes and fines that the search giant allegedly owes from 2015. (http://ind.pn/2cHSqe1)

 

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While the BOJ may have disappointed with its latest iteration of monetary policy, now known as “QQE with Curve Control”, Asian and European stocks as well as U.S. equity index futures rallied in early trading perhaps on the back of the bounce in the USDJPY which has now completely faded. That said, the BOJ’s “Reverse Operation Twist” which hopes to steepen the JGB curve, has provided support to global financial institutions, which are broadly higher.

For those who missed the earlier explainer, here is what happened in a nutshell: The BOJ left the -0.10% policy rate unchanged as generally expected, however the breaking news is the introduction of QQE with ‘yield curve control’. The BoJ has scrapped the average maturity targeting for JGB’s and has stated that it will buy JGB’s so ‘10y yields remain around the current level’. The statement also includes the passage that the ‘monetary base may fluctuate to achieve yield-curve control’ and that the BoJ is ‘committed to expanding the monetary base until CPI is stable above 2%’. As DB’s Jim Reid effectively put it, the main takeaway to us is a tweaking of QQE rather than outright further stimulus.

And while both 10Y JGB yields and the USDJPY jumped in the initial kneejerk reaction, they have since recovered much of the earlier move, and worse – the USDJPY was trading at session lows.

Meanwhile, treasuries and the dollar were little changed before the Fed policy decision at 2pm Eastern, while oil rallied before a meeting of producers next week.

Banks and insurers led gains in equities as the BOJ refrained from moving deeper into negative interest-rate territory and shifted the focus of its stimulus to controlling the yield curve, Bloomberg reports.

After sliding in the aftermath of the announcement from Japan’s central bank, the yen and government bonds pared losses. A gauge of the dollar’s strength held near a seven-week high, while oil jumped toward $45 a barrel.  The BOJ’s shift, which includes plans to target 10-year JGB yields at around the current level of 0%, gives it scope to keep loosening policy to revive growth and inflation, while limiting the negative impact on financial companies’ earnings. “Going forward the BOJ said it can still undertake further easing, and given its new framework will allow it to undertake more negative rate cuts while mitigating the downside impact on financial institutions’ profitability,” Mansoor Mohi-uddin, a Singapore-based strategist at Royal Bank of Scotland Group Plc. “The risk is for more easing action in the fourth quarter.”

And now all eyes turn to the Fed which will be hard pressed not to disappoint like the BOJ, which as we noted earlier, generated a largely negative kneejerk response among Wall Street commentators. Yellen will make her announcement in just over 7 hours, where – with all but four of 102 economists surveyed by Bloomberg predicting the Fed will hold off from raising interest rates – she is expected to do nothing, while lowering rate hike expectations further. As a reminder, this is where the Fed’s infamous “dots” were one year ago: we show this just in case anyone still had any faith in the Fed’s “forward guidance.”

In won’t stop with Yellen however: central bank authorities will continue to hog the limelight on Thursday with speeches due from the new governor of the Reserve Bank of Australia as well as the heads of the European Central Bank and the Bank of England. In addition, central banks in countries including New Zealand, Norway and South Africa have policy decisions due that day.

Meanwhile, in global markets, the MSCI All-Country World Index rose 0.4% as, with the Stoxx Europe 600 Index gaining 0.8 percent and the MSCI Asia Pacific Index up 1.4%. Japan’s Topix index jumped 2.7%, with gauges of banks and insurers soaring more than 5 percent on optimism higher long-term bond yields will alleviate a squeeze on their profits. Japanese markets will be shut Thursday for a holiday.

The Topix rose by more than the Nikkei 225 Stock Average as Japan’s central bank said its on-going purchases of exchange-trade funds will be concentrated more heavily on the broader benchmark.

Futures on the S&P 500 Index added 0.4 percent, having extended gains after the BOJ’s announcement.

More important than stocks, Japan’s 10-year bond yield increased by as much as seven basis points to 0.005 percent after the BOJ said it would adjust purchases of sovereign debt to keep the rate around zero. It subsequently declined to minus 0.035 percent. The rate on 10Y USTs rose by one basis point to 1.70 percent and Germany’s yield increased by two basis points to zero.

Market snapshot

• S&P 500 futures up 0.4% to 2140
• Stoxx 600 up 0.9% to 344
• FTSE 100 up 0.4% to 6859
• DAX up 1% to 10497
• German 10Yr yield up less than 1bp to -0.02%
• Italian 10Yr yield down less than 1bp to 1.25%
• Spanish 10Yr yield down 2bps to 0.96%
• S&P GSCI Index up 1% to 353.6
• MSCI Asia Pacific up 1.4% to 141
• Nikkei 225 up 1.9% to 16808
• Hang Seng up 0.6% to 23670
• Shanghai Composite up less than 0.1% to 3026
• S&P/ASX 200 up 0.7% to 5340
• US 10-yr yield down less than 1bp to 1.68%
• Dollar Index down 0.01% to 96.01
• WTI Crude futures up 2.1% to $44.98
• Brent Futures up 1.8% to $46.71
• Gold spot up 0.4% to $1,320
• Silver spot up 1.2% to $19.44

Global Headline News

• Fed Focus Turns to Dots as Hike Odds Fade: Decision-Day Guide: FOMC meeting may be ‘contentious’ even if hawks outnumbered
• BOJ Shifts Policy Framework to Targeting Japan’s Yield Curve: Board keeps benchmark interest rate unchanged at minus 0.1%
• Yen Pares Drop Versus Dollar After BOJ Shifts Policy Framework: Currency bounces back from weakest level since Sept. 14
• Stocks Rise as BOJ Policy Boosts Banks Before Fed; Oil Climbs: Stocks rallied around the world as tweaks to BOJ’s monetary stimulus offered support to financial institutions
• BOE to Cut Rates Again as Economists See Sharp Slowdown in 2017: Growth will slow to 0.7%, worst outcome since last recession; BOE’s Saunders Says U.K. May Be Stronger Than Economists Predict: Says rise in jobless rate would be an argument for lower rates
• Oil Advances Near $45 as OPEC May Hold Formal Meeting in Algiers: Algeria says 1m barrel-a-day cut needed for rebalancing
• VW Investors Sue for 8.2 Billion Euros in Germany Over Diesel: investors seeking damages for losses stemming from the company’s emissions-cheating scandal
• America Movil CEO Says Co. Interested in Buying Oi: co. is monitoring Oi’s judicial recovery process, Valor Economico reports, citing interview

* * *

Looking at regional markets, Asian stocks shrugged off early caution and traded mostly higher following the BoJ policy overhaul announcement. Nikkei 225 (+1.9%) initially underperformed with sentiment weighed on by poor trade figures after exports fell for an 11th consecutive month, however the index shrugged off losses after the BoJ policy decision in which they kept rates unchanged at -0.1% and monetary base unchanged but left the door open for future rate cuts and expansion in monetary base, while it maintained its commitment to hitting the 2% inflation target and introduced QQE with yield curve control. Elsewhere, ASX 200 (+0.7%) was lifted by commodity names as WTI crude futures advanced to test USD 45/bbl after a 7.5mln bbl drawdown in API crude inventories, while Shanghai Comp (+0.1%) and Hang Seng (+0.6%) were indecisive as all focus turned to the BoJ. 10yr JGBs weakened significantly with pressure seen after the BoJ announced to adopt QQE with yield curve control and to targets 10yr yields to hover around 0%.

Top Asian News

• BOJ Shifts Policy Framework to Targeting Japan’s Yield Curve: Stocks surge while yen weakens
• Japan’s 10-Year Bonds Tumble After BOJ Targets Yield Near Zero: 10-year govt bond yields went positive for first time since March
• China Paves Way for Major Government Influx Into Venture Capital: Country’s cabinet urges state sector to play bigger role
• China’s Postal Bank Said Poised to Raise $7.4 Billion in IPO: Lender plans to price its sale of 12.1b shares at HK$4.76 apiece, below midpoint of marketed range
• RBA’s New Boss Greeted by Trader Bets That Cuts Almost Done: Swaps show 73% chance RBA rate won’t go any lower in 2016
• AC Milan’s Chinese Buyer Said to Show False Bank Letter in Talks: Chinese group said to give letter showing funding capability

In Europe, Christmas came early for central bank fans today, with the BoJ dictating newsflow and price action this morning, ahead of the Fed and RBNZ rate decisions later on in the day. The BoJ inspired gains in the Nikkei filtered through to European bourses, with all major indices in the green and the DAX hovering around the 10500 level. On a sector breakdown, financials are among the best performers this morning, again following on from their Japanese counterparts in the wake of the BoJ’s bank-friendly yield curve targeting, with analysts at RBC suggesting they cannot rule out the ECB taking similar measures in the future. European fixed income markets have seen less of an impact from the BoJ, largely shaking off the latest developments and trading modestly lower this morning, albeit closing the opening gap to see the German benchmark hovering around the 164.00 level. In terms of supply from the session, the German 2021 Bobl auction was relatively well-received with a b/c of 1.7 but failed to cause much traction in the Bobl future.

Top European News

• U.K. Business Activity Has Slowed, Remains Positive: BOE says in quarterly agents’ summary of business conditions
• Arrow Global Said to Attract Interest From Buyout Firms: Firms including Apax said to have weighed potential takeover
• ABB to Sell Cable Business to NKT Cables for $934 Million: ABB to announce progress on review at investor day Oct. 4
• Ubisoft to Sell $445 Million of Bonds to Finance Game Projects: Bonds are convertible into shares to after five years
• Inditex Earnings Beat Estimates as Zara Owner Expands Online: Sales increased 13% during first weeks of 3Q
• Luxury London Home Values to Fall Most Since 2008 on Brexit: Savills says buyers will wait to see outcome of negotiations
• Majestic Wine Plunges as Naked U.S. Setback Leads to Profit Blow: Shares fall most since market debut almost 20 years ago
• Aviva Is Looking at M&A Opportunities in Poland: CEO Tells Puls: Co. seeks to boost its presence in Polish property insurance, CEO tells newspaper
• Diageo Says Set Up to Deliver Stronger Results in FY17: co. comments in statement

In FX, the Bloomberg Dollar Spot Index held near its highest level since July. The yen slipped 0.1 percent to 101.82 per dollar, paring a drop of as much as 1.1 percent. The BOJ said that the monetary base target, which previously had been set at annual increases of 80 trillion yen ($780 billion), may now fluctuate in the short term as policy makers seek to control the yield curve. It also pledged to expand the monetary base until inflation is stable above the 2 percent target. “BOJ’s talk about increasing the amount of base money until inflation gets to 2 percent has seen the yen weaken off,” said Roger Bridges, the chief global strategist for interest rates and currencies in Sydney at Nikko Asset Management Co.’s Australian unit. “We need to wait a couple of days to see the wash-out to determine if the yen weakness will continue.”

In commodities, crude oil climbed as much as 2.5 percent to $45.14 a barrel ahead of a government update on U.S. stockpile levels. Inventories fell by 7.5 million barrels last week, the American Petroleum Institute was said to have reported late on Tuesday ahead of the official figures. Algeria’s energy minister said OPEC may turn its informal talks next week into a formal session, a hint that major producers may agree measures to limit output and support prices. “History suggests that OPEC action is unlikely, but there will be talk and that will move the market,” said Evan Lucas, a market strategist at IG Ltd. in Melbourne. “The API data gave the market a boost, but prices are coming from a low base.” Nickel fell 0.4 percent in London, after jumping 6 percent in the last two sessions, ahead of the results of a mining audit by the Philippines. It has climbed about 16 percent in 2016 as the Philippines — the biggest supplier of the mined metal — shutters sites for failing to meet environmental standards. The government could tell more mines to stop operating, Environment and Natural Resources Secretary Gina Lopez said on Monday.

* * *

US Event Calendar

• 7am: MBA Mortgage Applications, Sept. 16 (prior 4.2%)
• 10:30am: DOE Energy Inventories
• 2pm: FOMC Rate Decision (Upper Bound), est. 0.5% (prior 0.5%); (Lower Bound), est. 0.25% (prior 0.25%); Fed Summary of Economic Projections
• 2:30pm: Yellen holds news conference after FOMC meeting

Bulletin Headline Summary from RanSquawk and Bloomberg

• European equities trade higher after BoJ stood pat on rates and pace of bond-buying but opted to tweak other parameters of its monetary policy
• Despite initial upside in USD/JPY, the pair has trimmed some of its gains ahead of the FOMC with some also cynical about the latest stimulus efforts from the central bank
• Looking ahead, highlights include DoE inventories and RBNZ and FOMC rate decisions
• Treasuries rebounded from session lows after BOJ shifted the focus of its monetary stimulus from expanding the money supply to controlling interest rates; FOMC statement at 2pm, presser at 2:30pm, with Fed seen keeping rates unchanged, suggesting one increase by year-end.
• BOJ will reduce investments in the Nikkei 225 Stock Average and buy more exchange-traded funds tracking the Topix index, following criticism its ETF buying is distorting the stock market
• The BOJ’s shift of focus to control bond yields is fueling speculation that the nation’s investors will put more money into U.S. dollar assets as they chase higher returns
• ECB has created a task force of national central bank staff to consider economic reforms, according to people familiar with the matter, who asked not to be identified because the initiative hasn’t been publicly announced
• The BOE will cut interest rates close to zero later this year as concern persists about the longer-term impact of the Brexit vote, according to a survey
• The U.K. should maintain EU regulations covering everything from working hours to chemicals until after the government sets out its plans for Brexit, said British manufacturers anxious to avoid a policy vacuum and safeguard access to their biggest export market
• OPEC probably won’t clinch a deal to limit oil production in Algiers next week as members stay focused on either boosting output or defending their market share, according to a Bloomberg survey
• Volkswagen AG investors filed lawsuits seeking a total of 8.2 billion euros ($9.2 billion) for losses stemming from the company’s emissions-cheating scandal

DB’s Jim Reid Concludes the overnight wrap

We’re straight to it this morning with the BoJ meeting outcome which annoyingly only came through just as we would normally be going to print. So here are our quick interpretations. The -0.10% policy rate has been left unchanged as generally expected, however the breaking news is the introduction of QQE with ‘yield curve control’. The BoJ has scrapped the average maturity targeting for JGB’s and has stated that it will buy JGB’s so ‘10y yields remain around the current level’. The statement also includes the passage that the ‘monetary base may fluctuate to achieve yield-curve control’ and that the BoJ is ‘committed to expanding the monetary base until CPI is stable above 2%’.

It’s early days and there is a lot of detail to sift through but these are the initial headlines and the main takeaway to us is a tweaking of QQE rather than outright further stimulus. We’ll have to wait and see what the full reaction is from markets in terms of whether or not it’s seen as disappointing but the price action so far has been supportive. The most interesting move so far has come in JGB’s with the 10y yield up 7bps and a shade below 0% at -0.007%, despite the statement talking about targeting 10y yields at the same level. They briefly traded in positive territory for the first time since March. 2y yields are 2bps higher and 30y yields are 4bps higher. The Yen is currently 0.60% weaker at 102.33 but it’s been pretty volatile. The Nikkei and Topix are up between 1% and 2%, led by the banks and insurers which are both up over 5% no doubt relieved that there is no interest rate cut and a steeper curve so far. The rest of Asia is firmer but gains are alot more modest. Gold (-0.30%) is the only notable mover in the commodity complex. All eyes on Kuroda’s press conference at 7.30BST.

So that’s one central bank (nearly) out the way but with one more to go today. The Fed is up next with the outcome due at 7pm BST and the post statement conference from Fed Chair Yellen to follow shortly after. A reminder that we’ll also get the updated dot plots and the latest summary of economic projections. With regards to the outcome, DB doesn’t expect the Fed to move this month, a view also shared by the wider market however the key might be just how hawkish the hold can sound. DB’s Peter Hooper expects the statement of risks to be upgraded to ‘nearly balanced’ from ‘have diminished’ – which would be a strong signal ahead of December – and that Yellen should indicate that there was an active discussion of a rate hike this time, but that they decided to hold for now because of mixed signals in both growth and inflation. Yellen will also have to acknowledge that a rate hike by the end of the year is a reasonable expectation if data comes in consistent with the committee’s expectations, but she will probably also do her best to focus as little as possible on ‘December’ specifically. On that note, it’s likely that a substantial majority of the dots will likely shift down to one 25bp rate hike this year (in June a significant majority were projecting at least two hikes this year). What might be interesting is how many remain above one hike this year and how many expect no hike at all. Peter expects at least two in the former and zero to three in the latter.

All that to look forward to later then. Unsurprisingly markets were treading water a bit again yesterday ahead of the two aforementioned big central bank meetings today. The S&P 500 (+0.03%) and Stoxx 600 (-0.08%) finished little changed after paring earlier gains. An announcement after the close from Microsoft that the board has approved a $40bn stock buyback and also a quarterly dividend increase, combined with better than expected earnings from FedEx has however helped US equity futures to nudge up modestly during the Asia session this morning. In commodity markets WTI Oil closed up +0.43% and is up another +1.82% this morning and so hovering close to $45/bbl again with another round of noisy headlines ahead of next week’s meeting playing its part. The latest twist is a suggestion from Algeria’s Energy Minister that the talks may end up being a formal discussion after all, with the Minister playing up the need for a reduction of 1m barrels a day to re-balance the market. Credit markets meanwhile were relatively unchanged in Europe but slightly wider in the US. CDS indices rolled yesterday to the new series so as you’ll see in the market data of today’s EMR we’ve left the intraday moves blank to avoid any confusion.

The most significant price action yesterday came in sovereign bond markets however where yields fell across the board and curves flattened ahead of the BoJ. More than anything this appeared to just reflect the market paring back recent steepening hopes, and that remains to be seen following the BoJ decision. 10y Bund yields were down 3.4bps on the day and back in negative territory once again at -0.021% having spent a total of 7 days trading north of zero. Led by the long end, Treasury yields were down a couple of basis points while the 5y 30y spread, which had widened for 11 days in succession, has now tightened for each of the last 3 sessions.

There wasn’t a huge amount to report on the data front. In the US housing starts in August were down more than expected (-5.8% mom vs. -1.7% expected) to an annualised rate of 1.14m from 1.21m with weakness seemingly coming from a big decline in the South (which accounts for the biggest region for building). Building permits (-0.4% mom vs. +1.8% expected) were also soft. The Atlanta Fed have chopped their Q3 GDP forecast again, with the 2.9% forecast down from 3.0% although that largely reflects last Friday’s CPI report.

Elsewhere it’s worth also highlighting the latest leg lower for Sterling below $1.30 following a -0.32% decline yesterday. A flurry of Brexit related news, all of which suggesting rising risks of a potential hard Brexit and also a prolonged and difficult negotiating period appears to be to blame. One story which stood out yesterday was the news that roughly 5,500 UK registered companies rely on passports to operate in other countries in the EU according to the Financial Conduct Authority. Another 8,000 businesses authorized in other EU states do business in the UK and so therefore also rely on the passport system. The FT noted that there are growing fears that the UK will lose passporting rights once it leaves the EU, however the numbers suggest that the EU would have much to lose from restricting access to the single market for the UK, so it looks to be an interesting back and forth debate.

Today’s diary is clearly dominated by the FOMC meeting outcome this evening at 7pm BST, followed half an hour later by Fed Chair Yellen’s speech. In terms of data it’s very quiet today with just the August public sector net borrowing data in the UK due to be released along with China’s leading economic index print this afternoon. Between now and the Fed however expect the focus to be on the post-BoJ reaction in markets for now.

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A man wielding a knife was shot and wounded by security officials outside Israel’s embassy in the Turkish capital, Ankara, according to the Israeli Foreign Ministry spokesperson. Speaking to Reuters in a text message, an Israeli Foreign Ministry spokesman said the attacker was “wounded before he reached the embassy” adding that “the assailant was shot and wounded by a local security man,” he said, adding that all staff at the embassy are safe.

Israeli officials said he had tried to storm the embassy. The Times of Israel reported that the assailant tried to stab a security guard, who then fired a warning shot before shooting the man in the leg.

A spokesman for the Israeli Foreign Ministry, Emmanuel Nahson, said the man was wounded in the foot. He said: “We don’t know if he was attacking police officers or the embassy itself.”

 

As RT adds, several embassies in Ankara were closed late last week amid reports of a possible militant attack, among which those of Britain and Germany. Turkey has been caught up in a series of deadly attacks in the past year, by jihadist group Islamic State and Kurdish militant groups.

Bomb disposal experts are examining a suspicious package at the scene.

SON DAK?KA!
?srail Elçili?inde güvenlik görevlisine b?çakl? sald?r? oldu. http://pic.twitter.com/gLYi7aijCM

— T.C Ayla (@81aylaC) September 21, 2016

According to the Daily Sabah, gunshots were heard in front of the embassy building, and all staff were sent into hiding as the incident unfolded. Police units, ambulances, and a bomb squad were dispatched to the scene.  Authorities have blocked the street off to traffic following the incident.

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In a decision that came dramatically late, hitting shortly after midnight east coast time, the Bank of Japan finally unveiled its much anticipated QE revision which it called “QQE with Yield Curve Control”, and which when stripped of all the rhetoric was basically the Reverse Operation Twist we previewed two weeks ago: an attempt to steepen the yield curve without lowering rates further, and without purchasing more securities; in fact the BOJ did largely nothing which is why as the chart below show, the USDJPY is now precisely where it was before the BOJ announcement.

 

Some more details: as reported last night, the BOJ presented its new and improved monetary policy dubbed “QQE with Yield Curve Control,” (because “QQE infinity” as Goldman Sachs just called it sounds a little aggressive), in which the BOJ said it would buy JGBs such that 10-year yield remain at the current level of around zero percent. The BOJ will also buy JGBs at designated yields, and offer fixed-rate funds-supplying operations for up to 10 years; the BOJ also hopes to exceed its 2% inflation target and may also set lower bound to purchasing yields.

• Central bank left negative interest rate at -0.1% as well as annual pace of JGB purchases at 80t yen
• BOJ commits to expanding monetary base until year-on- year rate of increase in CPI exceeds the 2% target
• Kuroda said after decision that excessive drop in yield curve could harm the economy; says framework change is not tapering and BOJ isn’t reaching limits for bond purchases

Most importantly, however, the BOJ unexpectedly left both the policy rate and its QE unchanged today, with the ongoing policy summarized as follows.

Effectively the BOJ telegraphed a shift in policy framework toward focusing entirely on the yield curve for the foreseeable future. In other words, instead of expanding its QE, the BOJ was forced to defend that its action today was not tantamount to tapering QE, and was instead focused merely on undoing the damage that its January NIRP decision inflicted on banks, insurance companies and the economy.

Well, that’s central banking for you.

To be sure, the BOJ may yet decide to expand JGB purchases or cut the negative rate further as soon as its next meeting ending on Nov. 1. Some economists suggested it should wait until after the Federal Reserve’s rate decision later Wednesday before acting. A Fed rate hike, though deemed unlikely this month, would probably help the BOJ’s cause by weakening the yen versus the dollar.

Meanwhile, inflation indicators and expectations have sagged. Japan’s core consumer prices fell in July at the fastest pace since Kuroda took the helm of the BOJ in March 2013. Market participants this year have shrugged off Kuroda’s repeated vows that he would act whenever necessary, helping drive the yen to long-term highs. It has gained about 18 percent this year.

In any case, in kneejerk reaction, the USD/JPY climbed as much as 1.1% to 102.79 before paring all gains; the yield on the 10-year JGB climbed to as high as 0.005%, before trading at -0.035%.

And that was it in a nutshell.

The Wall Street response was quick, and very disappointed with what the BOJ unveiled.  The best response came from Bloomberg’s Mark Cudmore who slammed the BOJ’s “simple act of illusion“as follows:

The Yen Monster Will Rise Again

 

The BOJ needed to shock and awe, and instead has just performed a simple act of illusion. The bank’s new policies will only create enough noise and distraction to postpone the inevitable conclusion that its actions have been insufficient yet again. 

 

The uninspiring new steps announced today are more like minor rule amendments instead of a switch to a whole new game in the contest versus deflation. Unless the Fed can surprise hawkishly later today, expect the yen to rally again very soon.

 

Volatility is assured for the rest of the day as the market exchanges interpretations, with the press conference set to add further context and spin.

 

Yield-curve targeting may weaken the yen in the short-term. But the challenges of implementing such policy, combined with the fact that the BOJ is only aiming to maintain current 10-year yields means that it’s arguably just retaining the recent status quo. It’s gloss that will quickly fade.

 

Ultimately, it doesn’t really matter how Kuroda justifies these actions. The bank is very far from its inflation target and hasn’t produced an exciting enough new weapon for the fight. Consensus 2016 CPI forecasts for Japan have recently fallen to as low as -0.2% from +0.8% at the beginning of the year. Simultaneously, 2017 consensus has fallen to 0.6% from 2%.

 

Now over to the Fed decision in New York before a Japanese holiday tomorrow ensures a messy 24 hours of trading beckons

* * *

The rest of Wall Street was not any happier. Here, courtesy of Bloomberg,is a summary of most reactions:

Nomura Securities (Yunosuke Ikeda, head of FX strategy for Japan)

• What BOJ probably wanted to do in comprehensive review is to maintain the capacity for more monetary easing and curb concerns about QE limit
• However, it is possible for USD/JPY to see downward pressure if investors see today’s decision as opening the way for tapering of QE; traders and investors probably want to take profit on USD/JPY positions ahead of FOMC. They may want to sell the pair before touching the upper end of the ichimoku cloud

JPMorgan (Masaaki Kanno, chief economist)

• BOJ unexpectedly left policy rate and QE unchanged today, indicating a shift in policy framework toward focusing more on yield curve in the near term
• Decision suggests BOJ is not so serious about achieving 2% inflation rate so soon and is more worried about the limit of tools and the negative impact of the NIRP

Morgan Stanley (analysts including Hans Redeker)

• USD/JPY is influenced by shape of curve and less by level of yield for now; JPY would weaken only if inflation expectations rise; that could rise via risk- supportive impact from a stronger banking sector that could push USD/JPY to 105 initially

Standard Chartered (economist Betty Rui Wang and macro strategist Mayank Mishra)

• BOJ’s aim of overshooting inflation target suggests monetary easing will last longer than previously expected, while introduction of yield curve control seems an attempt to address concerns about sustainability of asset purchasing policy
• Longer easing is positive for USD/JPY at the margin

BNP Paribas (strategists including Steven Saywell)

• BOJ policy announcement not likely to generate a lot more upside for USD/JPY, unless the Fed raises rates later today
• Expects Fed to raise rates by 25bps today; targets USD/JPY at 108 by year-end

CIBC (Jeremy Stretch, head of FX strategy)

• Additional easing from BOJ, or support from a Fed rate rise, will be required to see substantial USD/JPY upside from here; short-term boost in Japanese stocks provided support for USD/JPY

Mizuho Securities (Hiroko Iwaki, senior foreign bond strategist)

• Long-end Treasury bonds are sold in response to sell-off in similar-maturity debt in Japan after BOJ decision; doesn’t expect bear-steepening of U.S. curve to continue
• Short end of Japan’s curve is firmly anchored, so BOJ- led steepening is unlikely to continue

Norinchukin Research Institute (Takeshi Minami, chief economist)

• First option for the monetary policy seems to have shifted to deepening negative interest rate to steepen the yield curve; today’s decision sets up the environment to do that in the future
• 10-year yield may trade near 0% as the BOJ commits to that line; the central bank probably wants to steepen the curve up to 5-year tenor and therefore, close attention should be paid to repurchase program
• BOJ didn’t add to easing, but delivers framework for further easing, reducing downside risk for USD/JPY

Bank of Tokyo-Mitsubishi UFJ (Minori Uchida, Tokyo-based head of global market research)

• Japanese bank shares, JGB 10-year yield and USD/JPY are rising on waning concerns over side effects of negative rate policy following BOJ’s decision
• Flexible monetary base target may spur speculation of reduced QE; BOJ’s scrapping of target for average maturity of govt bond holdings would shorten average maturity, not add to existing accommodative policy
• Today’s BOJ decision is unlikely to put downward pressure on yen, making it hard for USD/JPY to rise above 103; maintains view that USD/JPY will gradually drop, falling below 100 level toward year-end

RBC Capital Markets (Sue Trinh, head of Asia FX strategy)

• BOJ appears to be laying the groundwork for more easing going forward but wants to take care of the banks first
• From a monetary-policy perspective this is a bit underwhelming as there are no aggressive moves
• Expects USD/JPY to move below 100 in coming weeks, if Fed holds rates unchanged

Nordea (Amy Zhuang, senior analyst)

• BOJ shift in policy framework could be read as sign that it is reaching a limit with easing and isn’t as confident about monetary policy as its policy assessment suggests
• Reluctance to cut rates further may reflect resistance from financial institutions, which have complained about impact of negative rates on earnings and about low long- term yield

Baring Asset Management (Khiem Do)

• It seems there’s domestic political pressure for the BOJ not to hurt banks’ profits anymore
• Don’t know how they’re going to control the yield curve; that’s a very big question mark

Daiwa (Hideyuki Ishiguro)

• BOJ’s policies are a “pass” and may bring the Nikkei Index to 17,000, led by financials
• BOJ hinting it has space for additional easing is overall positive for Japan stocks

Tayo Securities (Ryuta Otsuka)

• Positive for banks, no huge surprise; may get diverse views on direct meddling with the yield curve
• BOJ’s stance that ETF buying won’t get out of control was hinted at in past, which led to some selling in Fast Retailing

Julius Baer (Mark Matthews)

• Japan’s yield curve will be more “artificial” than other countries
• Positive for Japan banks as yen may weaken amid other QE programs and likely rise in Fed’s interest rate at some point

KGI Fraser (Nicholas Teo)

• Knee-jerk reaction to BOJ may reverse depending on Fed
• BOJ didn’t go with full force to easy monetary policy
• Has reserved some bullets for Nov. or Dec. meetings as it waits for Fed decision

Sumitomo Mitsui Trust (Ayako Sera)

• Decision to buy more in Topix is “good news” for the market
• Investors trading arbitrage between Nikkei Index and futures may have harder time
• Topix buying should relieve some of the impact BOJ is having on the market

Saxo Capital (Kay Van-Petersen)

• BOJ decision is indicative of focus on steepening the yield curve; positive for banks and life insurers
• Overall it looks like they’ve done something, but it isn’t a game changer

Jefferies (Sean Darby)

• Disappointing and underwhelming given all the pronouncements and rhetoric
• Board vote was quote poor as well at 7-2
• Equities seeing relief but generally market will take it as monetary tightening because the yield curve has moved up

* * *

So there you have it: key central bank announcement one of two, was largely as we predicted, and worse, judging by both the USDJPY and Nikkei futures, it was also a dud. Furthermore, the BOJ now has to tame the long end of the JGB curve in its attempt to steepen it, something which with hundreds of trillions in yen fighting the BOJ, it may have a tough time doing. In other words, the VaR shock scenario is still in play.

And now we shift our attention to Yellen in 8 hours: she better not disappoint as well.

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Submitted by Martin Armstrong via ArmstrongEconomics.com,

Question:

Over the years you have made several comments about directional changes and have alluded to the idea that a crossroads is coming in that we will either enter another Dark Age or we will see the light towards greater liberty and freedom. More recently, you mentioned the year 2032 as a critical year in this regard.

 

In addition, you have mentioned that Trump winning the election would postpone the inevitable chaos, but that HRC winning would speed it along.

 

In terms of the distal effects of the November election on 2032, does either Trump or Clinton winning increase the likelihood of entering a Dark Age over something more hopeful? Should we be attempting to kick the can down the road or should we get it over with?

 

Answer:

Hillary is just corrupt and rotten to the core. She represents everything that is wrong with our political economy. Politicians no longer care about the people. Every election promises “change” in some variation.

That is admitting something is broken, but it always comes down to the same thing – it’s just about them.

Indeed, it was Mark Twain who put it best during the last century: “If voting made any difference, they wouldn’t let us do it.” We must understand that this has been an age old battle between the rulers and the people. In Athens where Democracy was born, they constantly fought to seize power back and even made Pericles stand trial. Government has always sought to bribe the people creating a welfare state. The Romans knew that the way to power was to promise everything but give them bread and circuses (sport games) and they could maintain power. It was Decimus I?nius Iuven?lis, commonly known as Juvenal, who was a Roman poet active in the late 1st and early 2nd century AD that wrote that phrase:

… Already long ago, from when we sold our vote to no man, the People have abdicated our duties; for the People who once upon a time handed out military command, high civil office, legions — everything, now restrains itself and anxiously hopes for just two things: bread and circuses

[…] iam pridem, ex quo suffragia nulli / uendimus, effudit curas; nam qui dabat olim / imperium, fasces, legiones, omnia, nunc se / continet atque duas tantum res anxius optat, / panem et circenses. […]

(Juvenal, Satire 10.77–81)

Nothing has changed. Many people can name every person on some sports team but cannot name their political minister, congressman, or whatever lofty title they call themselves. The judge in a courtroom demands to be called “honorable” as do all public servants. They make a mockery of the very word.

We are approaching the grave danger of a Dark Age beginning from the aftermath of 2032. Hopefully, I will be gone by then and will not have to face this horrible event. Yet Dark Ages are reoccurring events throughout history and in all cultures. The Greeks endured their between the Homeric Age that marked the end of the Mycenaean civilization around 1100 BC, to the first signs of the Greek cities (poleis) rising again in the 6th century BC (508–322 BC). It was during the 9th century BC (900-801BC) that we begin to see the rise of great cities outside of Greece including Carthage, which was founded by the Phoenicians.

Japan went through its Dark Age, which also lasted about 600 years and the same impact was endured in Europe with the collapse of Rome in 476AD. Dark Ages seem to come in units of 3 so they are 300 or 600 years. The cause is always political corruption.

In the case of Japan, each new emperor devalued the money in circulation with a decree that it was worth 10% of his new coins. There was no intrinsic value since they were bronze or iron. This process led people NOT to hoard money. Chinese coins were sought after since they would not be devalued. Eventually, nobody would accept Japanese coins and they ceased to be issued for 600 years. People used Chinese coins or bags of rice.

The Roman Monetary Crisis that saw silver vanish by 268AD, was naturally followed by  an attempt to restore the monetary system. A new bronze coin was introduced in 295AD known as the Follis. Again, one 52 year cycle saw its collapse from over 16 grams to under just 2 grams.

By the time you come toward the very end of the Roman Empire, you rarely find any bronze and when you do, it is less than an American penny. Coinage is debased because of the corruption in government. Those who think restoring the gold standard would do anything are wrong. Such monetary reforms appear repeatedly throughout history with little lasting impact. The system as we know it is always doomed to failure simply because we are satisfied as a whole with bread and circuses and let politicians run wild in their greed. Hillary is the example for everyone to see.

I will gather all the accounts and this is on my bucket-list of books to complete. We do have a choice. We can understand what is coming and WHY, and perhaps take that first step out of darkness and move into the light of a realistic political system that ends the bribing of citizens and this eternal battle of political corruption. We need a REAL democracy without career politicians. Only then can we hope to advance as a society.

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