## GOLDEN POTPOURRI
◄$$$ DOUBLE ALARM BELLS ON THE USTREASURY YIELD CURVE… THE 10-YEAR HAS HIT THE 2.4 LINE AGAIN, WHICH MEANT A LEHMAN MOMENT TEN YEARS AGO… THE FAST RISING 2-YEAR HAS REACHED A LEVEL TO FLATTEN THE YIELD CURVE, INDICATIVE OF ECONOMIC RECESSION. $$$
EuroRaj adds some fine points, which contain some intrigue. The 2-year USTreasury Bill is not rising so much as it is being raised out of desperation by the USTreasury control room mechanics. They wish to attract more USD demand. The Emerging Market FX currencies and stock market react negatively to a rising 2-year TBill. However, the EM group is showing a firm spine. The EM nations are totally ignoring it, thus delivering something of a massive blow (flipped bird) to the USFed and banker cabal. The rising 2-year TBill yield usually attracts USDollar investment, at the expense of the Euro. But such effect is also going into reverse. Of course, the rising 2-year yield is supposed to push down the Gold price, but that is also being ignored. Slowly, bit by bit, the banker cabal is facing FUBAR, as in effed up beyond all recognition. They have tampered with the bond market for far too long, with the zero rate bound (ZIRP) and QE bond monetization.
◄$$$ SHANGHAI IS ENCROACHING ON LONDON AS THE HUB OF THE METALS TRADING WORLD… THE COMPLAINT IS VERY STRANGE, AND BORDERS ON A PETTY POINT, SINCE DATA CAN EASILY BE COMBINED FROM TWO SOURCES… CHINESE TRADING MUDDLES A POPULAR SIGNAL OF GLOBAL GROWTH IN THE GLOBAL ECONOMY, BUT NOT REALLY… INSTEAD IT REMOVES SOME OF THE WESTERN DISTORTIONS IN MARKET RIGGING. $$$
Shanghai’s growth as a hub of the metals trading world threatens to erode the market’s reliability as a global economic indicator. Shanghai is encroaching on London as the hub of the metals trading world, a shift that threatens to erode the reliability of copper, zinc, and aluminum prices as a reliable indicator on the status of the global economy. What a stupid complaint! Trading volume on the Shanghai Futures Exchange nearly tripled in the period between April 2013 and July 2017, according to data from averages compiled by IHS Markit. Metric tons traded in Shanghai have climbed each year since 2013. The above criticism serves as a bizarre criticism for lost control, or at least shared control by China in the global metals market. The London and Wall Street connection had been distorting the copper market in the last couple years, mixing silver inventory data with copper data. The complaint of a watered down global indicator should be interpreted as one whereby the West is losing control, piece by piece, of the metals pricing mechanism. The most important indicator prices are gold, silver, and copper. If they wish for competence, then simply combine the London and New York data in a simple arithmetic exercise. What they are saying is they cannot rig the markets so easily, as the Shanghai data would tend to contradict and expose their fallacious data and rigged pricing in full view.
The bulk commodities form the key trading markets. They are crude oil, natural gas, wheat, corn, iron ore, copper, and coal. One by one, step by step, slowly and steadily China is doing them in CNY and not USD. But just as important, China is influencing the pricing systems and making more difficult market rigging mechanisms. The monopoly on pricing is lost by the West, which is a very good thing indeed. The Anglo-Americans are fretting over a lost urinal in which to piss, while nobody should feel sorry for them. They deserve kidney failure. See Wall Street Journal (HERE).
◄$$$ WASHINGTON’S ECONOMIC WAR AGAINST RUSSIAN GAS SUPPLIES TO EUROPE IS UNACCEPTABLE, CLAIMS EX-CHANCELLOR GERHARD SCHROEDER… HE CLAIMS THE USGOVT IS USING SANCTIONS TO FORCE MORE COSTLY NATGAS SUPPLIES ON THE GERMAN NATION… THE NORD STREAM 2 PIPELINE WILL DOUBLE THE CAPACITY OF THE EXISTING NORD STREAM PIPELINE, A VITAL ADDITION FOR THE GERMAN ECONOMY… NOTE THAT GERMANY REMAINS A POWERHOUSE EXPORT NATION, WHILE THE USECONOMY IS A HOLLOWED VACUOUS NATION AS PER INDUSTRIAL MIGHT. $$$
The United States would like to weaken Russia’s energy cooperation with the European Union, said former German Chancellor Gerhard Schroeder. He believes it unacceptable to create barriers to Russian gas deliveries to the German market. He spoke to Rossiya 24 news, stating “It is wrong if the Americans and the European Union somehow resist each other on this issue. And still there are attempts to create some difficulties for this [Nord Stream 2 gas pipeline] project. The fact the Americans will try entering the German market with the help of sanctions and to dominate with its liquefied shale gas is nothing but the signs of an economic war, and such war is unacceptable. [Germany is interested in gas which it] will receive for sure and which will be cheaper than shale gas.” The German resistance appears to be consolidated and uniformly opposed to the Washington NeoCon fascists.
The ex-chancellor said German authorities were correct to identify the Nord Stream 2 gas pipeline purely an economic project, which therefore should not be politicized. Last week, European Commissioner for Competition Margrethe Vestager curiously admitted the EU has no legal means to stop the pipeline, a white flag in surrender from the Brussels fascist center. The Nord Stream 2 pipeline will double the capacity of the existing Nord Stream pipeline, which goes from Russian sources under the Baltic Sea to Germany. The Gazprom-led project is to be constructed by German firms, and funded largely by German investments. It is opposed by the Baltic States and Poland, which both serve as US puppet socks.
During the EU summit on Friday, Polish Prime Minister Beata Szydlo described the Nord Stream 2 pipeline as a threat to European energy security. But his mouth and jaw were under control by the Washington masters, even the volume. Nonsense! The unreliable gas source is from the US-based shale region, which might be shut down from bankruptcy at any moment that creditors pull the plug. Russian President Vladimir Putin stated that Moscow faces obstacles constructing the new route despite the fact that diversification of gas supplies is cost-effective, beneficial to Europe, and serves to enhance the security of supplies. The Kremlin has repeatedly said the pipeline is strictly about business, accusing the United States of trying to obstruct the project. The US wants to export its own liquefied natural gas to Europe, even though at double the cost. The USGovt is has no priority for the EU Economy and its viability, only power and fascist extensions. See Russia Today (HERE).
◄$$$ COMBINED G-20 DEBTS ARE GROWING FASTER THAN GDP… THE SITUATION IS NOT SUSTAINABLE, WHILE SOVEREIGN BONDS ARE ON THE Q.E. CRUTCH AND BIG BANKS ARE INSOLVENT. $$$
Notice the three components of cumulative debt: businesses, household, and government. The Nominal Gross Domestic Product (solid black line) is growing much more slowly. The situation is not sustainable. Thanks to JimM in Monaco for the translation.
◄$$$ RIVAL CITIES HONG KONG AND SINGAPORE JOIN FORCES FOR FINANCIAL TECHNOLOGY IN A NEW COOPERATIVE AGREEMENT… WIDESPREAD COOPERATION WILL COME, BUT MOST IMPORTANTLY, MUTUALLY LINKED SYSTEMS WILL BE ACHIEVED USING DISTRIBUTED LEDGER BLOCKCHAIN TECH… FOSTERED AID TO START-UP FIRMS IS A HIGH PRIORITY, WITHIN A CONDUCIVE ENVIRONMENT TO ATTRACT NEW FIRMS AND THEIR EXECUTIVE OFFICERS. $$$
Hong Kong and Singapore, which have vied for supremacy as financial technology hubs in Asia over the past couple of years, have now decided to join forces. Their central banks have signed a fintech cooperation agreement that will foster collaboration on business referrals, joint innovation projects, information sharing, and the exchange of expertise. The accord was announced by Norman Chan, chief executive of the Hong Kong Monetary Authority (HKMA). Its first joint project will be on trade finance. The breakthrough deal was disclosed by Chan in a speech to open the HKMA Fintech Day. Financial technology has added a new dimension to the decades-old rivalry (if not conflict) between Singapore and Hong Kong. They vie for the role as Asia’s premier financial center. In recent months, both cities have directed hundreds of $millions to assist in funding startups and to build an environment conducive to innovation. There is a recognized need for collaboration between the regulators. The HKMA event is part of the Hong Kong Fintech Week, which will attract more than 3000 corporate executives. Singapore holds its fintech festival on November 13-17. Even their conferences set up rivalry in competition.
The regulators are in talks concerning cross-border infra-structure to connect the Hong Kong Trade Finance Platform with a similar structure in the Southeast Asian city state. Seven yet unnamed banks in Hong Kong have signed on to the HKTFP, an initiative based on distributed ledger technology led by the HKMA. They seek to digitize and share trade documents, automate processes, and reduce risks and fraud.
Fintech investments in Asia are poised to set a fresh record this year, according to a CB Insights report. Start-up companies from venture capital have raised more than US$5 billion in 2017 through September, closing in on the US$6.3 billion total from last year. The Hong Kong Chief Executive Carrie Lam pledged several initiatives to increase the city state’s innovation and technology sector, including HK$2 billion (=US$256 million) to co-invest with venture capital funds in local technology start-ups ventures. The HKMA chief Norman Chan also unveiled fintech initiatives with the Office of Financial Development Service of Shenzhen in southern China, including a talent development program. It involves a HK$7 million award for the development of outstanding fintech products and solutions, available for financial institutions in both cities. See China Daily (HERE).
◄$$$ US-BACKED SYRIAN KURDS HAVE TRANSFERRED A KEY GAS FIELD IN NORTHEAST IRAQ (KURDISH REGION) TO THE RUSSIANS AFTER SECRET TALKS… CLOSE TO A BILLION BARRELS OF OIL STANDS READY FOR PRODUCTION OVER TIME BY ROSNEFT… OUTPUT WILL ENTER INTO THE RUSSIAN OIL CONSORTIUM… THE UNITED STATES IS ABANDONING THE KURDISH REGION. $$$
In a move that surprised many observers of the ongoing war for Deir Ezzor province, the US-backed Syrian Democratic Forces (SDF) handed over one of Syria's largest gas fields to Russian forces, possibly as the result of direct talks between high ranking Russian officials and Kurdish leaders in northeastern Syria. The US got outflanked again in Iraq, where all US interests are being shed over time. The US so-called Reconstruction is seen as a sham and grand failure after over ten years of political conflict, financial fraud, and civilian killings. Much of the funds were stolen, like with the $2.5 billion to Tennet and Kissinger. The US initiatives were destructive, like most of their foreign policy directives, utter failures.
The Conoco gas plant (also locally called Al-Tabiya) is a primary feeder field, and lies on the eastern side of the Euphrates River outside of Deir Ezzor city. This area was recently liberated from ISIS as the Syrian Army and Russian forces approached from the west of the Euphrates. The Conoco field had been under control by ISIS since 2014, and was taken by the SDF on September 23rd as the mainly Kurdish force advanced from the east. The now fast crumbling Islamic State, a Langley and Mossad guerrilla militia, relied upon much of its financing through capture of many oil & gas sites in the resource rich Deir Ezzor province. The gas field, which had the largest capacity of any Syrian site before the conflict, is capable of producing 450 million cubic feet (13 million cubic meters) of natural gas per day. It is shown below from a vertical photo. It is named for the American company which first discovered gas reserves and built a processing plant at the location. However, ConocoPhillips turned the facility over to the state-run Syrian Gas Company in 2005 and has no current association with it.
The Kurdish interests do not align with Washington but rather with Damascus. Officials in the Syrian capital are ready to establish a constructive dialogue with the Kurds if they stop being seduced by the temporary US interest in the Levant (the ISIS state creation). So the relinquished Conoco field could mean that the Syrian Kurds now observe events in Iraq, read the writing on the walls, and know the US will eventually drop them. Perhaps that the US has been forced to save face and make good on its officially stated anti-ISIS goals. Washington must be concluding the need to start dealing directly with Syria-Russia as a team. The Kurds, if smart, will know that the USGovt will abandon them and let them be slaughtered. So they seek a partner, a protective shield. If indeed the Kurds are cutting separate deals with Russia, a US exit from Syria could be forced sooner rather than later. See Zero Hedge (HERE) and Wall Street Journal (HERE).
Russian oil giant Rosneft has signed production sharing agreements for five oil blocks in Iraqi Kurdistan, a region in defiance and in opposition with Iraq's central government over independence. The Kirkuk area has not shared oil revenues with the Baghdad central government, a point of Parliamentary debate and open conflict. Rosneft has made an announcement that it would pay up to $400 million (EUR 340 million) for an 80% stake in the venture as part of the deal with the Kurdish Autonomous Region of Iraq. Half of the amount could be paid in crude oil output from the blocks themselves. A joint exploration program and pilot production is to start next year, toward expansion. If successful, Rosneft pledges to start full scale development of the blocks in year 2021.
On record, the recoverable oil reserves at the five blocks stand at around 670 million barrels, whose estimate Rosneft engineers call conservative. For some time, Rosneft and Iraqi Kurdistan have been cooperating on crude purchases and sales. This new deal is more comprehensive. Rosneft stated, “[The new deal] will allow us to talk about full-fledged entry of the company in one of the most promising regions of the developing global power market.” In September, the Iraqi Kurds overwhelmingly voted to break off from Baghdad, a decision that led to an armed standoff with Iraqi troops, with consequent concern over continued oil supplies from the region. The Kurdish oil output will obviously enter the Russian Oil Consortium, for pooled sale outside the USDollar system. See Russia Today (HERE) and Bloomberg (HERE).
◄$$$ THE ASIAN INFRA-STRUCTURE INVESTMENT BANK NOW INCLUDES AFGHANISTAN… THINK IN TERMS OF BOTH INFRA-STRUCTURE ROADS, RAILWAYS, AND BRIDGES, WITH EXTENSION TO MINERAL MINING EXPLOITATION. $$$
The AIIB is a multi-lateral development bank investing in infra-structure across Pan-Asia. Their motto is LEAN, CLEAN, AND GREEN. Their website recently issued the following messages, which are cited in running form. “Big welcome to Afghanistan, who are now full members of AIIB. The Basel Committee on Banking Supervision assigns eligible AIIB liabilities a 0% risk weighting. Our pleasure to host you. A good meeting today in Beijing with Jin Liqun. We are giving up to $210 million in debt financing to help Egypt tap its renewal energy potential. We are really looking forward to co-hosting this event on November 1st.” The Afghan nation contains mountains of iron, copper, and gold mineral deposits, along with other widespread industrial metals, ripe for exploit. Although the original US War motives were to restrain the Taliban (which had nothing to do with the 9/11 attacks) and to develop with Chevron the oil deposits, nothing was done. Instead, the USMilitary captured the heroin business, made numerous agreements with Taliban tribes, attacked the rival tribes, and set up a vertically integrated production sector complete with chemical factories and trucking systems. The vast high ground poppy fields have been routinely protected by the USMilitary grunts, who are lied to as for dispatching heroin to Russia and China. The US-directed Afghan heroin project, worth over $800 billion per year, represents one of the grandest blemishes in US history, equal to the Chinese opium war with Great Britain a century ago.
It is believed that any Afghan economic development will occur alongside the USGovt continued efforts at producing over 1300 tons of heroin in that country on an annual basis. The profits from the US-led heroin output serve to reinforce the global fascist agenda with guerrilla war funding (see ISIS), with government official bribery (in sustaining USDollar banking system support), and with private elite staggering accounts (see Assn for Past Presidents Fund worth over $7 trillion).
◄$$$ BARCLAYS HAS BEEN SUED BY RED KITE FUND FOR $850 MILLION IN A COPPER MARKET ABUSE CASE… THE HEDGE FUND CLAIMS BARCLAYS MANIPULATED COPPER PRICES ON THE LONDON METALS EXCHANGE… THE CASE AGAINST BARCLAYS FOLLOWS THE UGLY LIBOR RIGGING CASE… RED KITE IS JOINED IN THE LAWSUIT BY A CHINESE OUTFIT. $$$
Red Kite Management Ltd is the world’s largest metals hedge fund. The hedge fund is suing Barclays Plc for alleged market abuse in the copper market, whose claim specifies a loss to the firm of at least $850 million between 2010 and 2013. The case pits a $2 billion hedge fund against a bank that has been hit by a number of scandals in previous years, including large fines for manipulating LIBOR, the benchmark for interest rates. Barclays is already widely perceived as a criminal banking enterprise, on the extreme defensive.
Red Kite, whose co-founder is the former UKGovt treasury official, alleges that Barclays allowed staff to share confidential information about its positions with the bank’s proprietary traders on the floor of the London Metal Exchange. The practice is akin to insider trading, but on the opposite side of the table. Barclays traders used the knowledge about Red Kite’s positions to profit by placing opposing trades, the fund said in court documents filed in October 2016, but only recently made public. Red Kite alleges the bank sought to manipulate the LME by ramping prices in an effort to manipulate the closing price, a benchmark widely used by traders. The implications are bigger than the case alone. The legal battle could resonate well beyond the hedge funds and banking community, since the allegations center on the valuation of trades in the $150 billion per year copper market. The LME uttered the usual boilerplate message about disciplinary action against any market manipulation and abuse.
Red Kite, founded in 2005 by Michael Farmer and David Lilley, is one of the last surviving hedge funds in commodities after prominent rivals closed shop over the last decade. The lawsuit covers the period of time to include the metal’s extreme peak period, when China’s economic boom drove copper prices above $10,000 per metric ton in 2011. The Red Kite claim is that Barclays traders in the commodities division, which handled proprietary trading, were able to view open positions from the prime brokerage division, which managed Red Kite’s account. This is in clear violation. A delicate point, however, must be argued. The proprietary traders knew their prime brokerage had only one client of substantial size, namely Red Kite, in the non-ferrous metals market. They easily could figure out Red Kite’s positions by quick inference, the fund alleged. The abuse had a pattern and openness about it. Details about Red Kite’s trades were circulated within the commodities division in a daily email. At least one third-party broker working for rival funds was also allowed to attend meetings at the LME where Red Kite’s positions were discussed, the claimants said. You can be sure that Red Kite has its witnesses all lined up.
As a result of opposing trades placed by Barclays, the Red Kite funds lost as much as $850 million, an estimate based on a tally of losses that includes net asset value declines, fees, damages, and management income. The exact figure might require further scrutiny, justified estimation, and more thorough examination, stated the Red Kite legal team. The publicity against Barclays will be awesome and horrendous, just like with the LIBOR case. HFZ Ltd, a joint venture between Red Kite and Maike Metals International, one of China’s largest metals and mining groups, is also named as a claimant in the case. Hence, consider this a joint hedge fund and Chinese challenge against the London criminal banking center. See Bloomberg (HERE).
◄$$$ STEPHEN LEEB CITES THE CHINESE PLAN FOR GOLD & CURRENCY… CHINA IS SET TO MAKE A MAJOR SPLASH WITH A NEW OIL BENCHMARK, JOINED FULLY BY RUSSIA AND WITH HALF A HEART BY THE SAUDIS… MAJOR CURRENCY REFORM IS NEAR… SMART MONEY IS RECOGNIZING THE OBVIOUS IMPLICATIONS OF THE PETRO-YUAN. $$$
Stephen Leeb is a savvy veteran with vision, whose work has continued for over 20 years. He is always loaded with insight, seeing the next turns and important global shifts. He hits the key points, the critical items which support the major changes underway in geopolitical finance. He talked about China’s plan with a gold-centric monetary system. Refer to Zhou Xiaochuan, the head of the Peoples Bank of China, their central bank. Leeb stated, “A couple of days ago, Zhou showed the complexity of Chinese messaging. In a few words he warned his compatriots against complacency while subtly signaling to the West that major currency changes are necessary. As I see it, his remarks, while not saying so explicitly, set the scene for what I have long seen as China’s plan for a gold-centric monetary system, with the first step the launching of an Eastern oil benchmark denominated and traded in Yuan, backed by Gold. As I pointed out in a recent King World News interview, to a large extent the Yuan already is backed by Gold in that more than 90 percent of trades on the Shanghai Gold Exchange are settled in gold. I also have argued that the intense efforts by Russia and Saudi Arabia to export the most oil to China was not an effort to shut down US oil production from shale. Rather, I saw it as each country furiously competing to have as much of its own oil as possible represented in the forthcoming new Eastern benchmark.” Watch also the Russian Oil Consortium linking with the Chinese structural platform. It will fortify the non-USD basis for the oil trade.
China's oil plans will be a wake-up call to the West, a confirmation coming out of Singapore. The move toward creating a so-called Petro-Yuan will be a huge story, claims Adam Levinson. It fills the Petro-Dollar void. He is the founder and chief investment officer of Singapore-based Graticule Asset Mgmt Asia. Besides serving as a hedging tool for Chinese companies, the contract will aid a broader government agenda of increasing the use of the RMB in trade settlement. Chinese oil companies will probably be anchor investors in Saudi Arabia’s initial public offering of its state oil company ARAMCO, he expects. But since complex, the Saudi deal will take time to unfold. See Bloomberg (HERE). As addendum, Jackass colleague Craig McC adds that gradually even so-called smart money is recognizing the obvious implications of the Petro-Yuan.
◄$$$ BIG PHARMA SUCCEEDED IN HAVING THE F.D.A. CLASSIFY GLYPHOSATE AS AN ANTIBIOTIC… THIS HIGHLY TOXIC SUBSTANCE IS INCLUDED IN MOST VACCINES, AND WORKS TO DESTROY THE GASTRO-INTESTINAL TRACT… JUST ONE MORE PIECE TO THE AGENDA-21 GENOCIDE PROGRAM. $$$
Glyphosate is the main ingredient in Monsanto’s RoundUp, the pesticide used in gardens to kill weeds, even on driveway and sidewalk cracks to kill unwanted growth. Incredibly it was patented as an antibiotic by the company, and approved for usage in vaccines by the Food & Drug Admin. It is known to destroy the gastro-intestinal (GI) tract in humans. There is no movement to remove it from vaccines by the Center for Disease Control. In the Jackass opinion, the CDC is a captured agency by Big Pharma. The CDC has been caught in collusion with Big Pharma, like for instance Novartis, in lacing vaccines with the actual viruses. The Monsanto Corp and Big Pharma are part of the evil collection of fascist corporate elements, working toward the Agenda-21 Genocide program. See Natural Society (HERE).
Nothing compares to the profits from narcotics. They have funded the movement toward the Global Fascist State. They pay for the ISIS hidden guerrilla army and well as bribes for nations to continue loyalty to the USDollar. They support the Wall Street banks, enabling survival. The Big Pharma firms love the low-cost supply chain, since it makes highly profitable the opioid business. The dedicated doctor corps are obligated to keep the prescriptions going. If only the dumbed down US population knew that the Afghan War was all about capturing the heroin global monopoly, they actually might get angry. Meanwhile, the street heroin is ten times cheaper than in 2000. People are dying by the droves, from street source and pharmacy source, both.
## CHINA RMB INTERNATIONALIZATION
◄$$$ CHINESE RMB USAGE IS RISING… IN ALL 60 COUNTRIES AND REGIONS USE RMB AS RESERVE CURRENCY… WITH US$1.49 TRILLION EQUIVALENT IN TRADE SETTLEMENT, THE RMB RANKS SIXTH IN TRADE PAYMENT USAGE AT 1.85% OF TOTAL TRADE. $$$
More than 60 countries and regions have adopted the Chinese renminbi (RMB), or officially called the Yuan, as a new reserve currency, according to the latest report by the Peoples Bank of China. The inclusion last October 2016 of the Chinese Yuan in the IMF Special Drawing Rights (SDR) basket as an international reserve currency has further promoted the international use of RMB. Its inclusion was pushed by Beijing. The European Central Bank invested 500 million Euros of its reserves in RMB-denominated assets during the first half of this year alone. The promoted usage is working, although slowly. The Yuan's cross-border financial transactions will continue to grow. Settlements using the currency reached 9.85 trillion Yuan (=US$1.49 trillion) to conduct cross-border trade settlements by the end of 2016, an annual tally. The PBOC report cited about 240,000 onshore companies as using the Yuan to conduct cross-border trade settlements at the time the year 2016 closed.
The Belt & Road Initiative has further driven the global adoption of the Yuan. The initiative is a giant smorgasbord of projects, contractors, funding agents, and more. Greater adoption of the Yuan for settlement is expected over time, thanks to China's economic growth and improved foreign exchange regime. Data from SWIFT transactions showed that Chinese Yuan is increasingly being used by financial institutions for global payments by value. However, its market share of 1.85% ranks only sixth among most popular currencies like the Euro, British Pound, Swiss Franc, and Japanese Yen. The PBOC report said China will further improve the market-based RMB exchange-rate regime to make the exchange rate more flexible and to ensure its stability in the global currency system. Zhang Yu, a researcher at Renmin University of China, said the RMB as an international payment currency will become more widely used with ease in Asia and especially Southeast Asia. See Peoples Daily Online (HERE).
As footnote, conditions can change rapidly and ratios can rise quickly from wider agreed upon adoption. If all Eurasian Trade Zone participant nations use the RMB to settle in trade, if all Emerging Market economies use the RMB to settle in trade, if all BRICS nations use RMB to settle in trade, then ratios rise fast.
◄$$$ CHINA TO TRADE ITS CURRENCY IN THE UNITED STATES, AS IT WORKS TO HAVE CONSTRUCTED FINANCIAL HUBS… THEIR BANK OF CHINA IN NEW YORK CITY IS THE CHOSEN SITE… THE GROWING USAGE OF THE “CNH” OFFSHORE YUAN CURRENCY IS KEY FOR SETTLEMENT AND SERVICES IN FOREIGN COUNTRIES. $$$
The People’s Bank of China announced late last year that it had awarded the Bank of China New York Branch clearing bank status for the new US-based Renminbi (RMB) Trading and Clearing Hub. The United States finally joins other financial centers which have been awarded this status, including Hong Kong and London. There are potential cost savings to be made for global corporates who use these hubs. By requesting their invoices be charged in RMB (renminbi) as opposed to USDollars, Standard Chartered estimates a 2% to 3% reduction in a company costs. The importance of China grows steadily. Many global corporations have exposure to China somewhere in their supply chain, the world’s largest trading participant. This exposure has increased the concern of global corporations in managing Chinese currency risk. At the same time, the increased internationalization of Chinese financial markets in general, and the renminbi in particular, has led to increased currency volatility. More trade usage and hedging means less volatility, and yet more usage from the coming stability. The scattered firms manage their RMB risk effectively by means of a number of RMB trading hubs, which act as clearing centers for renminbi currency trading.
Three options are presented for usage in hedged risk. First: Like many restricted currencies, the Chinese Yuan has both an onshore deliverable market and an offshore non-deliverable market. The onshore deliverable market is traded through CFETS (China Foreign Exchange Trade System) and is only accessible to Chinese domestic market participants, plus foreign participants with the required documentation. Non-Chinese corporations with real underlying export and import invoices have been able to deal into this market with the proper steps. Second: A less difficult path is the offshore non-deliverable market, which is open to all foreign participants. Importantly, since physical Yuan cannot be delivered and all trades are net settled in hard currency (usually USD terms), it is not ideal for global corporations which actually need to physically pay or receive Yuan. Third: Unique to China is another option, which is deliverable offshore Yuan, commonly known as CNH. The offshore CNH is tradeable through the RMB hubs and for global corporations. This channel alleviates many of the challenges of the other two solutions.
In each of the trading hubs, the PBOC has designated a specific clearing bank. The role of the clearing bank is to ensure efficient and smooth CNH trading in the local financial center among the trading partner firms like suppliers. In the event of an imbalance in supply or demand for Yuan, the clearer can access liquidity directly from the PBOC. Any corporate entity can now contact their regular banking group to trade CNH just as they would trade any other currency. In turn, they can reach out to the clearer to provide either pricing or clearing with settlement services. See Bloomberg (HERE) and VOA News (HERE).
◄$$$ THE CHINESE YUAN IS DEFACTO BACKED BY GOLD, AND CAN BE REDEEMED IN GOLD BY OIL PRODUCERS EFFECTIVELY… THEY CAN USE A PORTION OF OIL SALE PROCEEDS TO PURCHASE GOLD WITHIN THE CHINESE SYSTEM, WITHOUT DETECTION BY THE EVERPRESENT (BIG BROTHER) SWIFT TRANSACTION AND DATA TRACKING SYSTEM… CHINA IS READY TO LAUNCH THE NEXT CHAPTER, WHERE TRADE AND BANKING ARE BUILT ATOP THE GOLD MANTLE… THE UNITED STATES IS NOT PREPARED, THUS THE CONSTANT THREATS AND INTIMIDATION, COMPLETE WITH SANCTIONS AND BIG OBSTRUCTIONS… CHINA IS READY TO LAUNCH THE NEXT CHAPTER… ISOLATION AWAITS THE UNITED STATES, FROM BYPASSES AND FROM ACTIVE AVOIDANCE, AS IT IS DECLARED A ROGUE STATE. $$$
Bill Holter is a solid competent warrior. He offered a summary of the Chinese currency situation, as it relates to the oil market, and has concluded that the Yuan is defacto backed by gold. His essay and justification serves as an excellent pep talk to the gold community. Holter is a very credible player in the gold community, who issues zero fluff. The Jackass, for instance, never passes an opportunity to read his essays that are published when they cross my desk, as something is always learned. The following is taken verbatim, except for minor edits to fit the newsletter style, and bold emphasis upon my decision. Much gratitude to Holter, who posted it on October 19th, on the JSMineset. He puts a lot of effort into its work, laden with courage.
This is a very important week. We had an IMF meeting over the weekend and an extremely bland communique. I am sure much more went on behind the scenes than this “don’t worry be happy” statement. China has their 29th Communist Congress the 18th and 19th this week. For sure it will contain pomp and circumstance as they install new and old leaders but the highlight will be their Five Year Plan discussions. We may (most probably) not be privy to the true core to the plan and only offered public tidbits for view, but we will see.
We can look back at the last five years and see China has readied herself to assume leadership for the world in many if not most areas previously led by the United States. They have set up credit facilities, devised a clearing system alternative to SWIFT, and made trade deals all over the world especially including the Middle East and other commodity rich areas. (And amassed a huge hoard of gold). They have also cozied up to Russia in many ways including militarily. We have also seen several instances where US Naval vessels may have been compromised technologically. In fact, I understand the Fitzgerald will have new electronics installed by Lockheed Martin. The main supporter of the USDollar (the military) may have been tested publicly and only understood by those watching closely?
The point is this: China is ready. They can now at this point begin to pull the trigger. Whether it is one big trigger or many smaller triggers, I do not know. (A betting man would wager many small triggers as the Chinese are a very polite society). I also do not know if one of the smaller triggers creates a domino effect, but I suspect so. Do not mistake this. China does have huge leverage and embedded fraud as does the West. The biggest difference as I have stressed for over two years is China actually created stuff, whereas the West took their plundered spoils and ate them. In other words, China has built out their infra-structure and actually has premade ghost cities ready to roll. The United States is left with 50-100 year old infra-structure, little manufacturing left and highly unfunded liabilities in pensions. The American party is over.
As I have maintained, the Chinese have an out (exit) in the case of imminent financial global collapse. They can simply mark up their gold holdings and fill the balance sheet black holes with appreciated gold. The US cannot do this, as gold has been leaked out for years and may not even be an asset at this point. We have received many questions regarding the supposed Chinese oil contract, settled in Yuan and backed by gold. We also received an extreme amount of questions regarding Koos Jansen’s article calling this a myth. First, if you recall when I first wrote about this, I suggested China would NEVER convert Yuan into THEIR gold. Rather, they would take presented Yuan and buy on the open markets including COMEX and LBMA (and expose their lack of inventory?). In this manner, they would simply be taking cash flows from the oil trade and using the cash as a way to break the paper pricing forced on physical markets by Dollar hegemony.
Yes I know, it has been said that people can currently take Dollars and buy gold, they can even take Yuan and buy gold already. So what the heck am I talking about? To this point it has not been a very good life decision to either accept non-Dollars for oil, or to take your Dollars and purchase gold. (Ask Saddam Hussein and Muammar Gaddafi about this!) Looking at this just under the surface, anyone who used a couple hundred $million (or God forbid more) to purchase gold would be seen. Do you see where I am going? They have, are and always will be seen and known if they use Dollars because of something called the SWIFT system. Conversely, should oil producers use their Yuan to buy gold, the US cannot track these trades because China’s clearing system will clear the trade!
Do you see the beauty of this? Oil producers using Yuan instead of Dollars will no longer fear buying gold because it can be done under cover of China’s clearing system. (I guess it should be asked, would a logical trade move toward someone’s liability or toward something with no one’s liability? Said another way, ending up with gold is true settlement as opposed to owning a liability yet to be settled). In addition, a freely trading and much higher gold in fiat terms is something the Chinese would desire as they have amassed maybe 20,000 tons or more. This, opposed to something the United States would not want, no longer being a major holder of gold. One might argue the previous sentences but good luck with that. See SGT Report (HERE).
The Jackass adds a few comments. The Yuan movements are not fully tracked by the USGovt, but they will try. In the meantime, many nations can convert oil sale proceeds into gold, or a portion of such sales without intense fear of retribution. The consequences could come in the form of formal trade sanctions, bank account freezes, discontinued trade agreements, and actually hidden terrorist activity using their handy ISIS client state. In simple terms, the big deal is that oil producers can use the Chinese clearing system to buy gold undetected by the US, without fear from SWIFT exclusion. Thus the extreme importance of the CIPS payment system promoted by China, and adopted by Russia. Expect the CIPS system to become widely adopted across the Eurasian Trade Zone and within the myriad One Belt One Road projects. The other immensely important point is that China can adjust the gold price alone, up double, up triple, if they see fit. They can wrest complete control of the gold market, by forcing exposure of the vacant Western gold vaults and the farcical facade fantasy of the Western gold pricing mechanism using paper.
◄$$$ SHANGHAI WILL ACCELERATE THE CONSTRUCTION OF CIPS PHASE II TO BUILD RMB CROSS BORDER PAYMENT AND CLEARING CENTER… PHASE I WAS TO FACILITATE TRADE, WHILE PHASE II HAS A GOAL TO BUILD TRADE AND GROW THE FLOW OF FUNDS. $$$
It is called the Along The Way construction action program, speeding up the RMB cross-border payment system (CIPS) phase II construction. Its goal is to build cross-border RMB payment and clearing. It further expands the free trade zone, along with the Shanghai free trade account feature. Issued by the Shanghai Municipal Government website that named the Shanghai service state Along The Way, the program builds a bridgehead role to play and points out that the program of action. It supports the establishment of a central clearinghouse headquarters in Shanghai. It enables the construction of RMB-denominated bonds, which are to be issued on the cross-border platform. It features the construction of Shanghai energy and carbon markets, as well as crude oil futures as soon as possible. Meanwhile, support is provided for the financial market in Shanghai and country (region) of bilateral business exchanges, clearing agencies, and stock market, intended to deepen international gold market activity with cooperation. See Reuters in original Chinese (HERE) for chuckles. Thanks to SuzieM for the translation, a Hat Trick Letter client.
SuzieM made some comments. Of course, the English version is absolutely silent about this entire movement, whether CIPS payment system or the various construction programs which act like consortiums. Reliance upon SWIFT for Chinese Yuan-based clearing has to be declining since the CIPS system came out. Its usage will only accelerate, as more FX pairs will be included. Phase II is soon to arrive which will facilitate investment and the flow of funds into Chinese Yuan (CNY). Phase I was designed to facilitate trade. One can only suspect parallel development with the oil contract launch and wider usage. We are seeing the next stage of development. The CNY is not losing share of global trade, but rather SWIFT is losing share of global CNY trade, a big distinction. Curiously it appears that SWIFT and CIPS are working together initially. The Beijing central bank recently stated that, “We are confident the inclusion of CIPS data into SWIFTRef’s database will greatly support cross-border RMB transactions going forward.” The Jackass suspects SWIFT officials want to infiltrate the Asian system in order to tap the data, to sneak a peak, and to research how to potentially control it. However, expect that China will use the Western banker transaction system in a manner to promote faster CIPS adoption and growth. Later, the Chinese officials will sever the link and go full bore independently.
◄$$$ CHINA LAUNCHES YUAN-RUBLE PAYMENT SYSTEM… IT IS DEDICATED FOR RUSSIAN-CHINESE TRANSACTIONS ALONE, AND SERVES AS ADJUNCT SYSTEM TO THE C.I.P.S. INTERNATIONAL SYSTEM LAUNCHED A WHILE BACK BY CHINA… ALSO, THE I.C.B.C CHINESE BANK HAS OPENED A CLEARING CENTER IN MOSCOW TO FACILITATE PAYMENT TRANSACTIONS, WHICH COMPLEMENTS THE RUSSIAN SVERBANK IN SHANGHAI TO FACILITATE GOLD PURCHASES… THINK OF THE P.V.P. SYSTEM AS THE BEIJING-MOSCOW WINDOW FOR BILATERAL TRADE, WHICH HAS GROWN TREMENDOUSLY IN RECENT YEARS… THIS WINDOW MIGHT BE USEFUL IN THE BACKSIDE PAYMENTS IN SOURCING GOLD FROM CHINA, LINKED TO THE EXTENSIVE ENERGY TRADE. $$$
The monetary regimes of China and Russia, two of the world's most resource-rich nations, are drawing closer and are becoming better integrated on the financial channels. In the latest push for convergence, China has established a payment versus payment (PVP) system for Chinese Yuan and Russian Ruble transactions. The move is designed to reduce risks and to improve the efficiency of its foreign exchange transactions. The PVP system for Yuan and Ruble transactions will streamline commerce and currency transactions between the two nations. It was launched on October 9th after receiving approval from China’s central bank. It marks the first time a PVP system has been established for trading the Yuan and foreign currencies. News of the event was posted on the website of the China Foreign Exchange Trade System (CFETS). PVP systems allow simultaneous settlement of transactions in two different currencies. Its primary elements are the Chinese and Russian currencies, at this point in time. Later it could expand to cover the Thai Bhat or other currencies in Southeast Asia or the Pacific Rim, even the Japanese Yen or South Korean Won (the bigger boys on the block).
According to CFETS, the system would reduce settlement risk as well as the exchange rate risk of transactions taking place in different time zones. It will improve foreign exchange market efficiency. CFETS said it plans to introduce PVP systems for Yuan transactions with other currencies based on China’s Belt & Road initiative, consistent with its goals toward the process of renminbi internationalization. Russia, however, is a top priority, the prototype role. The nation stands as the world's biggest oil producer, which recently became the largest source of oil for China, the world’s leading energy consumer.
To be sure, the monetary convergence between Beijing and Moscow is hardly new. The most notable recent development took place in April, when the Russian central bank opened its first overseas office in Beijing on March 14th, marking a step forward in forging a Beijing-Moscow alliance. They share a common goal to bypass the USDollar in the global monetary system, and to phase-in a gold-backed standard of trade. About the same time, the big Russian Sverbank opened offices in China, useful in the conversion of RMB cash for gold bullion. The alliance and cooperation between the two countries was a natural consequence from the Ukraine War and the Russian sanctions sponsored by the USGovt and EU Commission.
Vladimir Shapovalov, a senior official at the Russian central bank, said the two central banks were drafting a memorandum of understanding to solve technical issues around China’s gold imports from Russia, the efforts having begun in March. They are hiding nothing on motive and direction. If Russia is indeed set to become a major supplier of gold to China, a scenario hinted whereby Beijing would prepare to eventually unroll a gold-backed currency, the likelihood increases by an order of magnitude. Russia stands as the world's fourth largest gold producer after China, Australia, and the United States.
Furthermore, concurrent in development, when the Russian central bank was working to make bilateral relations closer, China was responding in kind with the establishment of a clearing bank in Moscow for handling transactions in Chinese Yuan terms. The Industrial & Commercial Bank of China (ICBC) officially started operating as a Chinese RMB clearing bank in Russia in early October. Events are moving fast. Broader trade beyond the energy sector is certain to come, like with Russian agriculture and technology. The ICBC center is bigger in their ambitions.
Dmitry Skobelkin is deputy head of the Russian Central Bank. He stated, “The financial regulatory authorities of China and Russia have signed a series of major agreements, which mark a new level of financial cooperation. The launching of renminbi clearing services in Russia will further expand local settlement business and promote financial cooperation between the two countries.” Russian financial analyst Irina Rogova told the Russian magazine Expert that the ICBC clearing center in Moscow could become a large financial hub for countries in the entire Eurasian Economic Union. This is what the Jackass steadily calls the Eurasian Trade Union. Think in terms of the One Belt One Road cornucopia of massive projects, and the clearing function done in the Russian capital using the giant ICBC Bank from China for projects in the former Soviet Republic. They trust Russia but want cooperation with China.
The creation of the ICBC clearing center, and the launch of PVP systems enable the two countries to further increase bilateral trade and investment while decreasing their dependence on the USDollar. It will create a pool of Yuan (RMB) liquidity in Russia that enables transactions for trade and financial operations to run smoothly. In expanding the use of national currencies for transactions, it could also potentially reduce the volatility of Yuan versus Ruble exchange rates. The clearing center has been one of several measures the Peoples Bank of China and the Russian Central Bank have been striving to achieve, so as to deepen their cooperation.
Something bigger lies on the planning table. The more significant measure under consideration is the previously reported push for joint organization of trade in gold. In recent years, China and Russia have been the world's most active buyers of the precious metal. On a visit to China last year, the deputy head of the Russian Central Bank Sergey Shvetsov said that the two countries want to facilitate more transactions in gold between the two countries. Shvetsov stated, “We discussed the question of trade in gold. BRICS countries are large economies with large reserves of gold and an impressive volume of production and consumption of this precious metal. In China, the gold trade is conducted in Shanghai, in Russia it is in Moscow. Our idea is to create a link between the two cities in order to increase trade between the two markets.” Hence the two nations wish to promote more gold movement among the BRICS nations. The Jackass has long expressed the opinion that the BRICS New Development Bank is a natural site to convert USTreasury Bonds and EuroBonds into gold bullion. It just needs linkage.
The conclusion is as plain as a giant billboard. China and Russia are continuing to shift away from USD-based trade, toward commerce which will eventually be backstopped by gold. What is gradually emerging is an Eastern Gold Standard, one shared between Russia and China, and which could someday backstop their respective currencies. See Zero Hedge (HERE).
The Jackass believes Russia wishes quietly to increase its gold reserves to the extremely high level known to China. It is estimated that Russian gold reserves, including all sources, lie around 25,000 to 30,000 tons. But China with its elder families and sovereign wealth funds, even the military and communist party funds, could conservative have triple that, as in over 80,000 tons gold. It is rumored the White Dragon Family might alone have at least 100,000 tons. We might be witnessing the opening of a gold window, a gold boulevard, which would enable Russia to double their gold reserves and put the two Eastern superpower nations on more even footing for widespread commercial trade with gold payment, for gold reserves in banking, and for gold backed currencies. As in other words, implementing the Gold Standard in the East.
Some added comments. It seems the PVP will facilitate oil payments, like maybe at the regional level, or possibly also for construction payments on the current extensive R-C energy pipeline in addition to future pipelines for oil and natgas. Soon enough, the long list of other companies will follow suit in using the PVP after the big companies show the lead. It seems like Russia wants gold for its oil sales to China, to start the process in gold payment for oil purchase. This is a huge hot poker up the US-UK-EU hind parts, if and when the oil volume promotes a related gold volume. Keep eyes on London, to see if China forces London to provide the gold to hand over to Russia. That would be a big ooops to the Washington Neocon megalomaniac morons.
A comment from a Hat Trick Letter client from Connecticut USA, taken verbatim. Jim Willie forecasted this long ago. Also the gold backed trade note is alive and well now for about two weeks. What does China do with the Rubles? Trade them for more gold. He who has the gold makes the rules. The price of gold in this venue is much higher than COMEX. One day this will blow the corrupt walls of COMEX apart at the seams, the LBMA also. The USDollar is worth nothing, no backing, except by hyper monetary inflation, bond fraud, and military aggression. So what will the trade world accept and require? Worthless SDRs or bonds therein, not likely. They are just lipstick on the same ugly pig. A new world is coming but not what the elites want, that is for sure. They cannot touch Russia and China, war or no war. Such is the motive for slapping the sanctions on Russia. The USGovt tried to break their economy, but no such luck. They just made it all happen sooner, with tighter relations between the two Eastern superpowers, and faster development of the many non-USD platforms.
◄$$$ RUSSIA PLANS TO LINK IRAN TO GLOBAL PAYMENT SYSTEMS, INCLUDING THE POPULAR MIR CREDIT CARD SYSTEM… IRAN HAS SECURED CORRESPONDENT RELATIONS WITH 900 BANKS… THE IRANIAN GOVT STRIVES TO BUILD ITS EXPORT TRADE, GIVEN THAT MANY OBSTACLES HAVE BEEN REMOVED… THE INTEGRATION OF IRAN WITHIN THE EURASIAN TRADE ZONE IS HAPPENING STEP BY STEP, DESPITE FEAR OF SPORADIC FITFUL US-BASED RETRIBUTIONS. $$$
Iran has signed a cooperation agreement with a Russian provider of banking technological solutions. They will connect the country’s financial network with global payment systems. The contract was signed between Iran’s Informatics Services Corporation (ISC) and Russia’s BPC Group of Companies. The two entities will cooperate in creating a standard banking card switch platform so as to provide a link between Iranian clients and international providers of financial services. ISC Managing Director Seyyed Aboutaleb Najafi told Iran’s IRNA news agency that the Central Bank of Iran (CBI) had delegated the mission to create a link to global payment systems to his company. The mission is consistent with the CBI future roadmap. Najafi said a tender had been accordingly announced and nine bidders were picked, out of which Russia’s BCP eventually won the contract. Two other final bidders were France’s Worldline and Russia’s Openway.
Najafi stated, “BPC has already carried out similar projects in several other countries. It has even already signed contracts with several Iranian banks to launch the switch platform needed to connect them to global payment services providers.” Earlier in May, Iran’s CBI announced that the Islamic Republic and Russia had agreed to integrate their bank card systems. The pact would enable Iranian and Russian citizens to use their cards in each other's countries. For instance, Iranian citizens who have the Shetab (Iran's national payment system) cards and those who have Russian MIR cards will be able to use ATMachines in both countries easily. See PressTV (HERE).
International sanctions have hampered Iran's ability to connect with the global banking network. The Tehran bankers are working to alleviate the obstacles, but in the East. The country has secured correspondent relations with 900 banks across the world. Less than a year has passed since the Iran's Nuclear Deal with several world powers was implemented, but Iran has managed to establish ties with foreign banks with each passing month. They have accumulated almost one thousand banks with which they have correspondent relations, huge progress indeed. China, France, Russia, the United Kingdom, and the United States, plus Germany reached a Joint Comprehensive Plan of Action regarding Iran's nuclear program, with the Iranian Govt. The 16th day of January 2016 marked the Implementation Day of JCPOA. Consider the pact a rescission of the USGovt sanctions, marking their official end, insofaras the community of nations is concerned for recognition. Despite the accord, even though sanctions were lifted nine months ago, the world's major banks continued to stay away because they fear being penalized by remaining and continuing obstructive petty US sanctions. They stayed clear out of basic fear of bully tactics by Washington, like freezing even accounts from European banks. As a result, Iran's efforts to rebuild its foreign trade and lure investment have remained slow.
The financial status of the new Rouhani Admin (regime) is currently improving. Mahmoud Vaezi is chief of staff for President Rouhani. He stated, “We will inject liquidity into the banks and insist that the banks do not take up [irrelevant] business ventures and allocate loans to serve the country's manufacturing output. The private banks must also support the private sector just like their public sector peers. The private sector must gradually become strong enough to engage in exports and as long as we do not have exports, we will not know the true meaning of trade. The current administration has stressed strengthening the country by helping the private sector from the outset.” Vaezi spoke at an event in the northern province of Mazandaran, which was attended by businessmen, exporters, and manufacturers. He generally commended the performance of state banks of the province in allocating loans to production units. Reassuring manufacturers that the government is striving to solve the problems facing them such as the shortage of working capital and the prevalence of unnecessary regulations, the official warned producers against expecting the government to solve their problems overnight.
Vaezi is working diligently to integrate Iran into the Eurasian Trade Zone and various pockets of Western Europe. The World Bank in its latest analysis forecast the Iranian Economy to grow at an annual average rate of 4.5% in the period 2016 to 2018. According to the bank, its oil & gas sector is projected to grow by 14.5% in 2016 up from 12.9% in the spring. Their energy sector is leading the entire domestic growth parade. Interestingly, Iran has another Rial value on their currency held in their systems outside the United States with other countries. The higher exchange rates for the Iran Rial is already present in international banks, since January 2017. See Financial Tribune (HERE).
## CENTRAL BANK BLOATED FAILURE
◄$$$ USFED SUDDENLY HAS COLD FEET ABOUT THE Q.E. UNWIND… THEY ARE ALL TALK, AND WHEN ACTION IS TAKEN, OTHER REVERSAL COUNTER ACTIONS ARE IN PLACE… THE USGOVT DEBT HAS EXPLODED IN THE LAST COUPLE MONTHS… THE WESTERN CENTRAL BANKS ARE RUNNING SCARED, REALIZING OPENLY THAT THEIR STIMULUS HAS FAILED TO CONTAIN INFLATION AND FAILED TO PROMOTE ECONOMIC GROWTH… IN NO WAY CAN MONETARY POLICY BE MADE NORMAL, WAY TOO LATE. $$$
The last USFed meeting ended on September 20th with a momentous announcement, confirming what had been telegraphed for months: the QE unwind would begin October 1st. The unwind would proceed at the pace announced at its June 14th meeting. It would shrink the USFed balance sheet, which it calls Balance Sheet Normalization, and undo what serial bouts of QE have done. They have been gradually destroying the entire bond market, with a threat to wreck the corporate bond market next. Monetary policy, if truth be told, can never be made normal again, not with interest rates and surely not with the central bank balance sheet. The genie is so far out of the bottle, that the bottle is no longer visible for returning back inside it. The bottle was long ago lost in the ugly sea of heretical liquidity, now with QE in its sixth year. They promised at the start of QE it would be six to nine months.
The pace of the shrinkage was supposed to be $10 billion per month for the first three months, and then it would accelerate every three months until it hits $50 billion per month at this time next year. That was the announcement. But the reality check shows the opposite occurring. The USFed released its weekly balance sheet for the week ending October 18th. The clock has moved two and half weeks with three weekly balance sheet releases into the supposed QE unwind period. The USFed in two weeks time has added about $10 billion, not reduced it at all. Total assets on October 4 were $4.460 trillion. Total assets on October 11 were $4.459 trillion. Total assets on October 18 were $4.470 trillion. The central bank, the august criminal banking colossus, the ring leader for the corrupt Wall Street banks, is doing the opposite of what it had claimed. But they lie about everything, including the status of the USEconomy, and even more so the status of the US banking sector.
The USFed plan was for dumping $6 billion in USTreasury securities and reducing by $4 billion its mortgage backed securities. The result is the opposite, again. Since October 4th, the USFed has actually added $176 million in USTreasurys and now holds $2,465.6 billion of UST of all maturities, a new all-time record high. No sign of any unwind on the entire stage. The announced balance sheet normalization process is not taking place. The opposite is the reality.
Wolf Street has proposed a few conclusions, the lead items being a tease, since so little guidance is given and so much pessimism with sarcasm is deserved. Observers are left with several possible conclusions: 1) The whole QE-unwind announcement was a hoax to test how stupid everyone is. But doubtful. 2) The people running the OMO are on vacation and have been replaced by algorithms or interns. They just keep doing what the folks now on vacation have been doing for years. But again doubtful. 3) The FOMC told the public what it wants to have done but forgot to tell its own people at the Trading Desk. But doubtful too. 4) There is willfulness in it, a sign that they are not ready, or that they want to give the markets more time to become accustomed to an important reversal. This could be the case. 5) They are seeing something that worries them, and they are holding off in order to get a clearer picture. Such a viewpoint might make sense, but this should also be doubted because their decision to commence the QE-unwind on October 1st was unanimous. Since then nothing of sufficient enormity in global markets has changed. Comment is warranted, as the QE policy has received some harsh broad criticism as a failure, not promoting economic growth, and even failing to produce a modicum of price inflation from their twisted meter.
Contrast the birth of QE, the most aggressive Zimbabwe style of hyper monetary inflation in US history. When QE was hatched, imitating the Bank of Japan, despite all the harsh criticism laid at the BOJ doorstep, the date was 2008. The USFed kicked it off with an explosive vengeance. The folks at the Trading Desk were highly aggressive. In the 10 weeks between 3 September 2008 and 12 November 2008, they purchased $1.3 trillion of securities, expanding the balance sheet by 144%. Some people might say that a few weeks are not enough time to judge the USFed on its QE unwind. However, the first month should confirm the signals, not send them in the opposite direction to cause doubt and confusion. See Wolf Street (HERE).
George of the COMEX gives the USFed some leeway to begin their reductions. Doubling the amount of reduction in the 1Q2018 would give them a chance to turn the balance sheet down. Right now the interest on the balance sheet is larger than the maximum reduction allowed, something few look at. Here is the bigger question. Do the bonds then get retired and taken out of the system, or instead does it all flow to the USDept Treasury as supplied profit with a boast of successful policy? It is wise not to bet against the latter. The numbers are silly really. The spin is $600 billion in reductions planned. But the central bank is at roughly a $1 trillion run rate. They spent hundreds of $billions using extraordinary measures, which was immediately paid back as soon as the USGovt debt ceiling was lifted and the deadline extended. This is pure Ponzi Scheme. That also does not include $trillions printed and funneled under the table annually in recent years, done by both the USFed and the Exchange Stabilization Fund at the USDept Treasury. The USTreasury Bond qualifies easily as the biggest asset bubble in modern history, except maybe for the US housing market and its associated mortgage bond market. In fact, all financial markets in the US are grand asset bubbles. The current car market and student loan markets are the next bubbles to pop.
Jim Willie has been calling the current situation with risk of breakdown the Systemic Lehman Breakdown, which sums it up well. What comes soon is a Lehman type breakdown which extends far beyond the US, UK, Canadian, and Western European housing & mortgage bond markets, to the entire greater bond market, including sovereign bonds. The Jackass adds here that the sovereign bond market is ripe to burst, starting with Italy and Greece, even Spain and France.
EuroRaj made a few quick observations. The USGovt debt is exploding. It has reached $20.42 trillion, with $420 billion added in the last 20 days. The cash deficit for 2016-2017 was $865 billion, without a declared recession. It is all lies, everything about the USFed and USDept Treasury accounting. They like to present QE as a success, but it is all smoke & mirrors like enormous lies & corruption. The entire debt structure is broken.
◄$$$ THE USFED MONETARY POLICY CANNOT BE MADE NORMAL… SUCH A TASK IS NOT POSSIBLE… REVERSAL OF POLICY WOULD KILL THE ENTIRE FINANCIAL SYSTEM AND ECONOMY, BOTH… THE USGOVT SPENDING MACHINE IS OUT OF CONTROL, REGARDLESS OF BUDGET LAYOUT DETAILS… THE USGOVT SPENDS TRIPLE WHAT IT RAISES IN TAXES. $$$
The Jackass does not believe any normalization can be accomplished, not in any world rooted in reality. The entire system is far too dependent upon easy money and debt monetization after several years. In no way can the USFed balance sheet reduction occur without causing a US financial failure and breakdown. Furthermore, interest rates cannot be raised beyond 3% without causing a powerful recognized USEconomic failure and breakdown. The USFed and Euro Central Bank have painted themselves into a corner even four or five years ago, and the impossibility of balance sheet reduction will make the conclusion very clear in a consensus.
The reality is truly a horror show, something best described by absurdity laced with corruption, made worse by desperation. Below is a chart showing Government total expenditures (red line) alongside the total Federal current tax receipts (blue line). The details are shown for source of taxes, with personal tax (green line) and corporate tax (purple line). As of 2Q2017, total expenditures exceed current tax receipts (personal and corporate) by three times. The more remarkable observation is that the situation has been out of control with triple or more expenditures since the 1980 decade. That is precisely when the US corporations began to outsource industry, in pure national suicide. Then again, that was the urged plan adopted from the Rockefeller Institute.
◄$$$ USD-BASED DEBT ISSUED OUTSIDE THE UNITED STATES BY GOVERNMENT AND NON-BANKS HAS BEEN ON A GROWTH SURGE WITHOUT BOUNDS… NOTHING HAS BEEN FIXED SINCE THE LEHMAN FAILURE. $$$
◄$$$ EURO CENTRAL BANK BALANCE SHEET IS OUT OF CONTROL, WHILE THE USFED BALANCE SHEET IS LIKELY A GRAND LIE… EUROZONE BALANCE SHEET HAS JUMPED TO 40.5% OF GDP… LEADING CENTRAL BANKS OWN 20% OF THEIR RESPECTIVE GOVERNMENT TOTAL DEBT… THE MAJOR CENTRAL BANKS ATE TOO MUCH, AND OUR HOUSE HAS CONSTIPATION. $$$
Major central banks are out of control, owning one fifth of their government total debt. The figures are staggering, even top-line data. Without any recession or crisis, major central banks are purchasing more than $200 billion per month in government and private debt, led by the Euro Central Bank and the Bank of Japan. Observe the nationalization of the secondary bond market. The EuroCB started the process of corporate bond ownership, extending from the sovereign bond, in a highly dangerous move. Consider that
- The Federal Reserve owns more than 14% of the US total public debt.
- The ECB and BOJ balance sheets exceed 35% and 70% of their GDP.
- The ECB owns 9.2% of the European corporate bond market and more than 10% of total sovereign debt in main European countries.
- The Bank of England owns between 25% and 30% of the UK sovereign debt.
- The Bank of Japan is now a top 10 shareholder in 90% of the Nikkei.
Daniel Lacalle of the Von Mises Institute wrote, “Monetization is a perfect system to nationalize the economy, passing all the risks of excess spending and imbalances to taxpayers. And it always ends badly. Because two plus two does not equal twenty-two. As we tax the productive to perpetuate and subsidize the unproductive, the impact on purchasing power and wealth destruction is exponential. To believe that this time will be different and governments will spend all that massive very expensive free money wisely is simply delusional. The government has all the incentives to over-spend as its goal is to maximize budget and increase bureaucracy as means of power. It also has all the incentives to blame its mistakes on an external enemy. Governments always blame someone else for their mistakes. Who lowers rates from 10% to 1%? Governments and central banks. Who is blamed for taking excessive risk when it explodes? You and me. Who increases money supply, demands credit flow, and imposes financial repression because savings are too high? Governments and central banks. Who is blamed when it explodes? Banks for reckless lending and de-regulation.
Of course, governments can print all the money they want. What they cannot do is convince the public that it has a value, that the price and amount of money they impose is real from brutal government edict. Hence lower real investment, and lower productivity is spewn through the native economies. Citizens and companies are not crazy for not falling into the trap of low rates and high asset inflation. They are not amnesiac. It is called financial repression for a reason, and citizens will always try to escape from theft.”
These lessons and principles are utterly basic, but never learned. Bad monetary decisions are made on economic development across the board for numerous nations, that is, except for Germany. The governments do not issue productive money, rather just a promise of higher revenues from higher taxes, higher prices, and confiscation of wealth in the future. Money supply growth is a loan that government borrows. It must be used wisely, but usage for stock & bond market infusion is not wise. No wonder that government spending to GDP is now almost 40% in the OECD nations and rising, the tax burden is at all-time highs, and public debt soars. See the Daniel Lacalle essay on Zero Hedge (HERE) and also Financial Times (HERE).
◄$$$ JPMORGAN AND CITIGROUP BOTH HAVE BOOSTED CONSUMER LOAN LOSS RESERVES… THE TWO GIANT BANKS ARE PREPARED FOR SEVERE LOSSES IMMINENTLY… THEY SPEAK PUBLICLY ABOUT A RECOVERY WHEN THE RECESSION WORSENS IN REALITY. $$$
◄$$$ PRINCE DRAGHI IS BEING DRAGGED INTO OPEN DISPUTE OVER EUR 1 TRILLION IN LOANS GOING SOUR (GONE SOUR) FROM ITALY… NOTE THE GERMAN CREDITOR BANKS AT ODDS WITH THE ITALIAN BROKEN BANKS IN A CONTINUED CONFLICT… NOTHING RESOLVED EVER IN FASCIST BANKING PRACTICES, YET ANOTHER NEGATIVE RESULT OF RECKLESS MONETARY POLICY… THE LOANS POPPED UP AFTER SHOVED UNDER THE RUG FOR TWO YEARS… ITALY STANDS OUT AS HAVING THE BIGGEST NON-PERFORMING LOAN PORTFOLIO IN WESTERN EUROPE… IT CANNOT BE RESOLVED OR COVERED, AT EUR 326 BILLION AND GROWING… AFTER WATCHING THE GREEK TRAGEDY EPISODE PLAYED OUT, ITALY REFUSES TO GO DOWN THE SAME POISON PILL AND FOREIGN PREDATORY PATH. $$$
For a few years, much attention has been given to the Italian banking system for its gargantuan non-performing loans. They have been over EUR 300 billion for at least two years. There is no potential for their resolution, and the big banks do not want to declare them in default. So they linger and fester like gangrene on legs, preventing the Italian Economy from walking. Their non-performing loans are not being cleaned up in any manner whatsoever, but rather the vast majority are swept under the rug and not even acknowledged. They do not go away. Prince Draghi cannot handle them, since more pre-occupied by the sovereign debt which is also massive. In recent days, EuroCB head Mario Draghi has been dragged into the open conflict between Frankfurt and Rome over how to deal with hundreds of billions of Euros locked in sour loans held by Italian banks. The German banks reside primarily in Frankfurt, their financial center. The EuroCB president has insisted last week that the problem must be finally sorted out. It has lingered too long, the gangrene spreading to the entire body Italian. Give Prince Draghi some credit here, for a desire to clean the Italian banking house, and to achieve some better controlled books, even if not in bonafide reform. However, Draghi has always been a friend of the big banks, in directing them favors and even bargains on assets.
Italian central bankers accuse the Single Supervisory Mechanism (SSM) for European banking oversight to be guilty of jeopardizing the country's economic and financial recovery. In other words, the Italian officials do not appreciate the scrutiny given to their wrecked insolvent ruinous banking system. Their central bank made a comment, from the Bank of Italy. An unnamed official stated, “Large fire sales of non-performing loans at excessively low prices would only unnecessarily erode the banks for their funds, to the exclusive advantage of a few specialised investors.” He objects to liquidation and re-investment with continued risk, since the Italian Govt has not enacted reforms either. He objects to highlighting the absent value of bank assets in Italy. Supporters of the tougher provisioning rules say Italy is again sticking its head in the sand, with ongoing delays for the return of the European banking system to even remotely decent health.
Still lurking in the bank weeds is a gigantic backlog of EUR 915 billion of non-performing exposures held by banks. They are directly supervised by the SSM. In total, Italian lenders hold EUR 326 billion of loans gone bad, declared irreparably impaired. They are doing nothing with them, unless and until a run on a bank occurs. Then they dump the portfolio on the next bank, with no resolution, just a big news item of an entire bank sold for a single Euro in an emergency gesture to avoid a bank failure. Such is not progress, and surely not a step toward remedy. Liquidation with loss is the solution, although painful and disruptive temporarily. Such steps cause political problems, since foreign banks (as in German) gobble up the deeply impaired assets. This entire episode was played out in Greece already, and Italy refuses to repeat that very ugly episode, thus the endless delays. See Financial Times (HERE).
The Italian nation truly needs to exit the common Euro currency union, to re-launch the Lira currency, to devalue it, and to enjoy the stimulus. To be sure, the process would come with pain and loss, but the stimulus of a lower Lira currency would be very real for their economy. Imagine nice Italian leather shoes or a high fashion dress (or suit) or a case of fine wine an Alpha Romeo sports car at a 30% discount. Orders would back up in forming an impressive order flow suddenly. People would go back to work, and companies would expand. Banks would eventually recover, although only somewhat. It is all forbidden by the EU Commission, due to the common Euro currency which strangles countries like Italy. See also Spain, Portugal, and even France. If a comparative analysis were to be done, it would conclude that France is no different from the PIGS nations, the broken economies of Southern Europe.
◄$$$ IMF WARNED THAT THE NINE LARGEST BANKS ARE IN REAL TROUBLE… IN REALITY, THE AUGUST CRIMINAL BANK OFFICE WOULD BE HARD PRESSED TO FIND NINE HEALTHY BANKS IN ALL OF WESTERN EUROPE… ALL THE BIG BANKS ARE KEPT ALIVE VIA Q.E. BY PRINCE DRAGHI AND DERIVATIVE MACHINERY, HERESY MIXED WITH GIMMICKS. $$$
It came as a surprise admission, nonetheless, of bank sector distress. The central banks and major banks in cooperation have consistently declared via Bank Stress Tests that the continent has reasonably sturdy banks. It is all a big lie. Without the abundant liquidity provided by QE bond purchases at the Euro Central Bank, the deeply insolvent big banks in several countries would have failed. The simple formula is easy: insolvency + illiquidity = bankruptcy. The only incidents of lost liquidity have occurred in the highly publicized bank runs. The EuroCB provides the basis for a giant river of liquidity, thus preventing the big banks from failing. In truth, they have been insolvent for several years, and in real trouble ever since 2007 when the mortgage bond bust occurred. The next threat will be of amplified liquidity for USDollar distress taking place, from global rejection or distrust, and urgent response from panicky central bankers. The dismantled and failing Petro-Dollar defacto standard is the current problem. It is dying. See YouTube video (HERE).
◄$$$ BANKS ARE HOLDING OVER $1 TRILLION IN INTEREST-ONLY MORTGAGES... PRINCIPAL PAYMENTS BEGIN TO JUMP SOON… THIS WAS A MAJOR PROXIMAL CAUSE FOR THE MORTGAGE BUST IN 2007 AND 2008… HISTORY REPEATS, AS THE CREDIT MARKET SIMPLE RINSES AND REPEATS, NEVER WORKING TOWARD REFORM. $$$
Banks have made a huge amount of interest-only loans, at historically low interest rates, to home buyers who spend a large portion of their income on interest payments. The big lesson of the US mortgage meltdown is that the risks on these mortgages are all correlated. When some debtors stop paying back an interest-only loan, that is a fair predictor that others will not pay back their loans either. They live in the same boat, under similar conditions. The Reserve Bank cautions that one third of citizens in the United States do not have more than one month’s repayment buffer.
From here, interest rates are going to go up, the only question being when. The interest-only period on loans (typically five years) rolls off and principal payments start must be made, just a matter of time. Harken back ten years, which few people remember well. One proximate cause of the US mortgage meltdown was borrowers with five-year adjustable rate mortgages (ARMs) had to contend with huge jumps in loan repayment schedules. They urgently needed for their home loans to be refinanced to be serviceable. They were not, and thus were defaulted upon. When the market could not bear that refinancing, defaults rose sharply, seen in the national statistics. Then the collapse of US investment bank Bear Stearns, then Lehman, to spawn the Global Financial Crisis which really has not ended. In the last ten years the system has seen a massive rinse and repeat of the very same abuse. The reckless home loan underwriting was repeated. The bust awaits again, but this time it will be a Systemic Lehman Event. See The Conversation (HERE).
## GOLDEN CHINESE OIL VS USDOLLAR WATER
◄$$$ GOLD BACKED YUAN TRADE NOTE WILL SOON HIT THE GLOBAL FINANCIAL TABLES… THE TEMPLES WILL BE VERY DISRUPTED… OIL PRODUCERS WILL BE GIVEN THE INVITATION TO JOIN THE NON-USD PARADE, EVEN TO ACCEPT OIL PAYMENT IN GOLD TERMS… THE PETRO-DOLLAR IS YIELDING TO A COMBINATION OF OIL FOR YUAN OR GOLD… NATIONS WILL JOIN, SINCE THEY HATE THE HEGEMON AMERICANS, WHO HAVE USED THE KING DOLLAR TO WAGE WAR, TO INFLICT TERROR, TO FLOAT DEAD BANKING SYSTEM, AND TO SUSTAIN A BANKRUPT USECONOMY… THE GLOBAL PARADIGM SHIFT IS IN MIDDLE GEAR. $$$
Another major secular change under way in the crude oil market comes from the geopolitical arena. It is a true tectonic shift of global proportions. China, as the world’s largest importer of oil, is no longer comfortable purchasing oil in a currency over which it has no control. The nation has taken some bold new steps that allow it to circumvent the use of the USDollar. In the Hat Trick Letter, these developments have been called the building of non-USD platforms. They are many, and they are study, no longer minor, and certain to mature. China has agreed with Russia to purchase Russian oil and natural gas in RMB terms. This began in 2015 and has continued. The main target now in China’s eyes is Saudi Arabia. They will eventually relent and grant China the right to buy Saudi oil in RMB terms. It is coming, and cannot be stopped, even by US threats. As an example of China’s newfound power to influence oil exporters, China has persuaded Angola to accept the Yuan in oil trade payment. A little known fact, the West African nation is the world’s second largest oil exporter to China. Their acceptance serves as evidence that efforts made by Beijing to speed up internationalization of the Yuan are succeeding. The incredible growth rates of the Chinese Economy and its thirst for oil have endowed it with tremendous negotiating strength that continues to lead other countries to cater to China’s needs at the expense of their historically favored client, the United States.
China is set to launch an oil exchange by the end of the year that is to be settled in their Yuan currency. In conjunction with the Shanghai Gold Exchange in operation, also denominated in Yuan, any country will now be able to trade and hedge oil, circumventing USDollar transactions. They will be able to enjoy the flexibility to take payment in Yuan or Gold, then to exchange gold into any global currency. As China further forges relationships through its One Belt One Road (OBOR) initiative, it will surely pull other exporters into its orbit so as to secure a reliable flow of supplies from multiple sources. The OBOR is a grand club, bringing together the many requisite pieces for very large construction and development projects. In doing so, the Chinese will pressure the various countries on terms of the trade, as they work to exclude the USDollar.
As the world’s second largest oil exporter, Russia has responded effectively to sanctions imposed by the USGovt and EU Commission, the primary center of the Fascist Axis. Russia has made clear moves toward circumventing the USDollar in oil trade and international trade. In addition to agreeing to sell crude oil and natural gas to China in exchange for Yuan currency, Russia recently announced that all financial transactions conducted in Russian seaports will now be made in Rubles. The boycott in the East continues effectively. The belt in One Belt One Road is clearly fashioned around the Russian and Chinese Economies, and furthermore is centered upon the energy trade. As the Petro-Dollar fades in sunset, the new energy standard linked to currencies will be formed with Yuan and Ruble. Clearly, there is a concerted effort from the East to reset the economic world order. All of these developments leave the geopolitical arenas, even global financial markets, vulnerable to a paradigm shift that has recently begun. See the commentary by John Curran of Caxton Associates on King World News (HERE).
◄$$$ CHINA PLANS TO LAUNCH THE PETRO-YUAN IN TWO MONTHS… THE SUNSET OF THE PETRO-DOLLAR CREATES A VACUUM, FILLED BY CHINA AND ITS CURRENCY… THE CHINESE YUAN IS THE DOMINANT GROWING CURRENCY AS PER INDUSTRIAL MIGHT… THE DESIRE TO REPLACE THE KING DOLLAR AS GLOBAL RESERVE CURRENCY AND LEADING PLATFORM IS UNIVERSAL ACROSS THE COMMUNITY OF EASTERN NATIONS… THE ONLY NATION NOT TO COMPREHEND THE PARADIGM SHIFT IS THE AMERICANS. $$$
The supremacy of king global currency does not last forever. Debt suffocation, passage of time, deep decay, profound fraud, widespread abuse, and the gathering storm of opposing defiance tend to undermine the supremacy. They come, they go, they yield to the next. The USDollar is no different. Its time to step down has arrived. The World Bank's former chief economist Robert Zoellick publicly has stated his opinion on the wisdom to replace the USDollar with a single global super-currency, saying it will create a more stable global financial system. The King Dollar is being dethroned and deposed. Next on the controlling helm will be the Chinese Yuan, possibly combined in some manner with the Russian Ruble.
The defiance has gone global. More than just a currency that has faded in strength, the King Dollar is seen as a serious problem. Chinese economist Justin Yifu Lin recently was interviewed by Bruegel, a Brussels-based policy research think tank. He stated “The dominance of the greenback is the root cause of global financial and economic crises. The solution to this is to replace the national currency with a global currency.” The writing is on the wall in opposition to the USDollar hegemony, replete with bond abuse complemented by military aggression in its defense. As Russian President Vladimir Putin said almost two months ago during the BRICs summit in Xiamen, “Russia shares the BRICS countries’ concerns over the unfairness of the global financial and economic architecture, which does not give due regard to the growing weight of the emerging economies. We are ready to work together with our partners to promote international financial regulation reforms and to overcome the excessive domination of the limited number of reserve currencies.”
As Pepe Escobar recently noted, to say these nations wish to overcome the excessive domination of the limited number of reserve currencies is the most polite way of stating what the BRICS nations prefer to bypass the USDollar and to avert trade activity within the Petro-Dollar system entirely. Beijing is ready to step up the game, raising the stakes to a global level, even upsetting the geopolitical balance of financial power, better described as hegemony. Soon China will launch a crude oil futures contract priced in Yuan. The US monopoly is going away. Then next Russia as well as Iran can bypass USGovt sanctions by trading energy in their own currencies, or in RMB terms. Iran is emerging as the other key node of Eurasian integration. Also, Venezuela might soon adopt usage. Built into the new contract and maverick system is a double win for China. The Yuan currency will be fully convertible into gold on both the Shanghai and Hong Kong exchanges. Indications are of no problem if energy providers prefer to be paid in physical Gold instead of Yuan. Li Zhoulei is an analyst with Everbright Futures in Shanghai. He stated, “Approval of the trading rules by the securities regulator marks the clearance of a major hurdle toward launch of the contract. The latest rules raised entry threshold for investors from the draft rules, which shows the government wants to avoid volatility when it first starts trading.” The final adjustments, calibration, and tweaks are being made.
The key development is the USDollar bypass, demoted from global reserve status. Since 2013, the first hint at the birth of the Petro-Yuan has been in the works. With the new disruptive oil contract, China is effectively lobbing the first powerful shot across the bow of the USS Dollar. It used to be a powerful ship at sea. In a sequence of time, it will become part of a Dual Universe of USD vs RMB, then later find itself to be a derelict at sea. The USDollar in no way can compete against Gold, not even with war as key defense. Within two months it becomes a reality, as China prepares to roll out a Yuan-denominated oil contract. See Zero Hedge (HERE).
◄$$$ GOLD FOR OIL HAS BEEN THE KEY TO THE GLOBAL MONETARY SYSTEM FOR THE LAST 45 YEARS. $$$
Research analyst Ronan Manly reminds us of an old saying has that gold and oil always move in opposite directions, referring to physical movement and not price movement. It means that ultimately the payment for oil comes from money founded in gold. He makes several solid points about the historical events and their significance, regarding the gold pool and the BIS role. See Bullion Star (HERE).
- The Bank For Intl Settlements, instead of taking gold outright, places it where it is needed.
- In effect the governments are selling gold in any form to keep it from being used as real money in oil deals.
- Make no mistake, the BIS knows gold will eventually be priced in several $thousand per ounce.
- Westerners should not be too upset with the central banker actions, since they are buying you time.
◄$$$ CENTRAL BANKS HEDGING AGAINST GEOPOLITICAL RISK WITH GOLD… THEIR COMBINED GOLD RESERVES HAVE INCREASED BY OVER 10% SINCE THE LEHMAN INCIDENT… MOST GROWTH HAS BEEN IN EMERGING MARKET NATIONS, WHOSE CURRENCIES ARE UNDER PRESSURE… SIGNIFICANCE IS NOT MUCH REALLY, BUT THE SIGNAL HAS MEANING. $$$
Central banks around the world are adding to their gold stashes, particularly in emerging markets, as they try to shore up their currencies amid rising geopolitical tensions. In some cases, nations work to defend against USGovt economic pressure. The Emerging Market story is different, as they have been harmed by the global economic recession and the lower income from commodity price declines. The total amount of central bank holdings of gold has risen by about 7% over the five years to 2016, according to the World Gold Council. It is up over 10% since the Lehman failure (kill job) in 2008. Last year, central banks were net buyers of gold, for the seventh year in a row, according to Thomson Reuters GFMS. As of the end of July, they held some 33,400 tons of gold reserves collectively. Monetary authorities have been increasing their reserves of the precious metal mainly to defend their currencies from decline.
The trend is expected to continue for a while. Keep in mind that official gold reserves are murky. The true national official gold reserves are a matter of state secret and national security. For instance, Russia has official gold reserves cited at 1729 tons as of end July. It is a bad joke played at the Western banker cabal. In reality the Kremlin vaults contain between 25,000 and 30,000 tons gold. In the 1990 decade during consulting work, The Voice saw it.
Because Russia depends on oil & gas exports for most of its foreign currency earnings, lower energy prices have worked to put strong downward pressure on the Ruble currency. While the value of a currency is affected by the creditworthiness of a country, the value of gold is not subject to sovereign risk. It is only subject to severe corruption in financial markets, with horrendous price suppression fashioned by frequent paper contract dumps. Moscow strives to protect the value of the Ruble by increasing its gold reserves. Another factor behind Russia's revealed growing gold hoard is the economic sanctions the USGovt and the EU Commision, both fascist core elements.
Other Eastern nations join the gold accumulation party. The Central Asian nation of Kazakhstan (which includes one Hat Trick Letter client) has been purchasing gold for nearly five years. The Kazakh holdings have surged 170% over that period to 280.9 tons, most of it mined domestically. The country prefers gold in its banking reserves function, which can be converted into various currencies. They do not use the USTreasury Bond in their banking system, and thus can be dubbed a terrorist nation. At the end of 2011, Turkey began allowing commercial banks to use gold for the reserves required to be placed as assets at the central bank. The step was taken in response to the rapid slide in the Turkish Lira currency, which fell hard after the jet downing incident with Russia, and other skirmishes linked to Syria. The Turkish Economy suffers from a worsening current account deficit, and other factors like a vanished tourism industry (which is rebounding slowly). This has motivated the Turkish central bank's gold reserves to grow since 2012 by about 60% in volume terms, having reached 482.9 tons. When their domestic Lira currency plunged again late last year, President Erdogan urged people to buy the Lira and gold. See Nikkei Asian Review (HERE).
◄$$$ RUSSIAN CENTRAL BANK COULD START BUYING GOLD ON THE MOSCOW EXCHANGE IN A MORE OPEN TRANSPARENT PROCESS… TO DATE THEY HAVE BEEN BUYING GOLD IN THE OVER THE COUNTER MARKET… THE MOVE WOULD RAISE THE PROFILE OF GOLD AND INCREASE LIQUIDITY ON THE MOEX… RUSSIA IS STOCKPILING GOLD BULLION IN THE OPEN IN A BIG WAY. $$$
Russia’s central bank could start buying gold for its official reserves on the Moscow Exchange (MOEX). The Russian central bank is one of the world’s largest holders of bullion. The switch in purchase pattern would boost the currently low turnover in gold trading on the Moscow Exchange, which launched a precious metals market only recently in 2013. The bank has been regularly buying gold as it wrestles with weaker oil prices and Western sanctions. They have been sourcing gold on the over-the-counter (OTC) market instead. Buying gold on the exchange would be a smoother process than buying on the OTC. The exchange’s turnover in gold trading is still relatively low. It would also improve transparency in the country’s gold market, something the central bank has been working on across financial markets. Igor Marich is managing director of the Moscow Exchange’s money and derivatives market. He mentioned not having been informed of when the central bank might start buying gold on the bourse.
Metallinvestbank is the main precious metals market maker on the Moscow Exchange. Other players in the gold and silver market include Otkritie Bank, Promsvyazbank, Maritime Bank, and Russian Agricultural Bank, according to the exchange. See Reuters (HERE).
The Russian Central Bank has significantly increased the pace of its official revealed gold purchases. In the period between January and September 2017, the bank bought 4.2 million troy ounces of the precious metal worth over $5 billion, a notable 15% more than in the same period last year. As of October 1st, the Russian Central Bank holds $73.6 billion in gold reserves, compared with $65.5 billion a year ago. Russia increased its purchases of gold bullion after sanctions were imposed by the United States and the European Union following events in Ukraine and Crimea. Since then, according to the World Gold Council, the Russian Central Bank has been adding some 100 tons to its gold reserves each six months, more than any other central bank in the world. See Sputnik Intl (HERE).
◄$$$ A MAJOR UNKNOWN FACTOR TO PUSH UP SILVER PRICE CAN BE FOUND IN THE ENERGY MARKET… FUTURE NEW ENERGY TECHNOLOGY WILL BECOME AN EXPLOSIVE FACTOR TO BE REFLECTED IN THE SILVER PRICE… THE ENERGY MARKET IS KEY, AS IT CONSOLIDATES FOLLOWING THE IMPACT FROM THE CRUDE OIL COLLAPSE… CENTRAL BANKS HOLD AMPLE SILVER BULLION, NEVER HAVING PARTED WITH IT… GOVERNMENT SALES HAVE COMPLETELY HALTED, WHICH COULD MEAN THEY KNOW SOMETHING IS COMING… PLUS, AN UNUSUAL POSITIVE SIGNAL IN THAT SCRAP METAL SILVER MARKET HAS DRIED UP AS A MARGINAL FACTOR. $$$
SRS Rocco has provided a stellar article, exposing the importance of the energy market on silver price, which is consistent with the Jackass team expectations and future viewpoint. Precious metals investors need to understand the coming silver price surge will not occur due to the typical supply and demand forces. While mainstream analysts continue to produce silver price forecasts based on Supply & Demand factors, they fail to include one of the most important key factors. It is the energy market, which is in disarray. Furthermore, central banks have not dumped silver bullion on the market during the past three years. Lastly, scrap silver supply is almost totally depleted, removing a major buffer to prevent price surges.
There does not seem to be a correlation between global industrial silver demand and the silver price, in SRS Rocco’s view. The industrial silver demand only increased 17 million oz (Moz) in 2011 compared to 2008. However, the price more than doubled from $14.99 to $35.12 per oz silver. On the other hand, as the silver price declined by half in 2015 versus 2012, industrial silver demand only declined by 30 Moz (600 Moz down to 570 Moz). Thus, rising or falling industrial silver demand is not a factor that determines the silver market price. Consider that many analysts have suggested that a falling silver price would generate more industrial consumption. Unfortunately, as the silver price peaked and declined in 2011, so has industrial demand. This is inelastic demand, which follows economic performance and output.
On another point, some readers might believe that the decline in industrial silver consumption is due to less silver being used in photographic applications. This claim is true on the demand side, but not on its effect on the actual silver price. If the photographic silver usage is removed from industrial demand, it can be seen that industrial consumption of 529 Moz in 2007 was higher than the 517 Moz in 2016. No direct correlation can be seen in the graph.
Regardless, forecasts for industrial silver consumption have been consistently wrong. In an article SRS Rocco wrote back in 2014, he stated the following on industrial silver demand, “I have always stated that industrial silver demand, especially solar power demand, will not be much of determining factor in setting the price in the future. Wall Street analysts continue to regurgitate that industrial silver demand will grow for the next 5 to 10 years. Hogwash! When the peak of global oil production takes place within the next several years, this will impact Global GDP growth. As a matter of fact, world economic activity will contract along with the decline in global oil production. Which means, demand for silver in industrial applications will decline as well.” Not all is lost, since three zingers lie hidden for pushing the silver price much higher. Industrial demand is NOT the key to silver.
Global silver scrap supply is running low even at higher prices. Check the historical data. Global silver scrap supply has hit the lowest level in a decade. According to the data in the 2017 World Silver Survey, global silver scrap supply peaked in 2011 at 260 Moz and fell to a low of 140 Moz last year. Witness a 46% decline in just five short years. The last time global silver scrap supply was this low was in 1990 when the market only recycled 135 Moz of silver. Furthermore, the price of silver was $4.82 in 1990. Therefore, with a price nearly four times higher in 2016, silver scrap supply is about the same as it was in 1990. The conclusion is clear. It suggests that the market has already recycled a lot of the easy and accessible silver scrap supply.
Understanding the changing dynamics of industrial silver consumption and silver scrap supply is essential for determining long-term valuations of the metal rather than short-term yearly price signals. A paradoxical conclusion comes, that industrial silver consumption and scrap supply have not really made much impact on the silver price as much as the price of oil. The Jackass believes that removing the scrap buffer will finally made a difference, when demand surges from various sources. The silver price will respond favorably without the buffer in place.
As we can see in the chart above, the price of silver has run parallel to the spikes in the crude oil price. Conclude that the silver price was based more on the volatile oil price rather than supply and demand fundamentals in the silver market. However, it is important to know how the individual silver Supply & Demand sector fundamentals are changing over an extended period. For example, Net Government silver sales supplemented the market for many years, keeping the silver price down. From 1999 to 2013, government sales of silver from all nations totalled 774 million ounces (Moz), but the trend halted suddenly. Net government sales were a mere 24.6 Moz in 2011-2013.
While Central Banks sold a lot of silver into the market, the extra supply did not impact the silver price as much as the surging oil price. The important factor to understand about the liquidation of Central Bank silver stocks is that most of this supply has already been sold into the market. According to the data from the 2017 World Silver Survey, Central Banks did not sell any silver into the market over the past three years, as in zero. They are strong hands, not letting go their last hoard of silver. They must know it will become a monetary metal.
SRS Rocco makes three key conclusions. 1) Central Banks supplemented the market with much needed silver, but this supply is mostly depleted. They have exhausted their buffer. 2) Central Bank silver sales should not be a fundamental used to determine a short-term silver price. Instead, focus should be put on how the lack of future government supply will impact the market. 3) Banks held a great deal of old official silver coins as stocks for decades. The United States Govt had the most (reported as 5 billion oz silver under President Teddy Roosevelt in 1905), but this stockpile was liquidated decades ago. The remaining official stocks were held by a few Central Banks, such as China, Russia, and India. These three governments were the primary source of Central Bank silver sales for the past two decades. Note that supply has been severely depleted and will no longer supplement the market in the future as it did in the past.
Industrial silver consumption is not a fundamental that determines the silver price. Rather, it reveals how the global economy is disintegrating, with respect to energy utilization. Furthermore, Central Bank silver sales and scrap supply should not be used to forecast short-term silver price movements. On the other hand, these two fundamentals provide data that suggests silver supply from reliable sources have been severely depleted. They have lost their important buffer. Unfortunately, these fundamentals have yet to push silver much to higher prices. SRS Rocco believes these fundamentals will have a powerful effect on the future silver price. The past is NOT prologue to the future in this case.
Frustrated precious metals investors need to realize the following three important key factors. A) The Silver Market fundamentals are pointing to a perfect storm in the future as reliable past supplies cannot be counted on in the future. B) Most of the physical silver investment is held in tight hands, like Central Banks unwilling to part with any more supply. C) The disintegrating Energy Industry is the most critical factor and the UNKNOWN fundamental that will impact the value of silver in the future.
Of the three key factors above, the third one (the UNKNOWN Disintegrating Energy Industry) will impact the future value of the silver the most. To date, strangely, most of the individuals in the precious metals community are still unaware of how energy will affect the silver price and market in the future. Instead, many in the Alternative Media continue to focus the silver market in regards to the economic and financial industry. The Jackass adds that the Voice has made numerous comments in the last couple months, that the silver supply will become so critically important to the new energy devices and technology, that he expects silver to be taken almost completely out of the market for sale. Its price will skyrocket, and be available only for corporate crucial sales, but at a very high price. Owners of the metal will be duly rewarded. The roll-out of new energy technology is just around the corner. See SRS Rocco (HERE).
Sky Crane, the Jackass colleague, added some comments. “Likely the largely unknown properties of silver like its lesser known conductive properties of field energies like scalar waves and other magnetic and inductive properties of field energies (known but still repressed or in classified development) will have a very powerful effect on the future silver price. I think many things like this are being saved for predestined roles in a series of dramatic events coming. The impact of their unveiling will mostly affect those who remained undeterred by years of dreary price movements. When technology like this is revealed, it is always accompanied by a huge spinoff. Silver is at the cutting edge of some of its essential tech development and will raise its consumption by an order of magnitude.” The Jackass adds that Crane’s view is very much consistent with the Voice.
◄$$$ GERMANY'S LARGEST BANK HAS BEEN REFUSING DELIVERIES OF PHYSICAL GOLD AFTER CUSTOMER REQUESTS… THE GOLD FRAUD CONTINUES, IN BOTH GERMANY AND SWITZERLAND… THESE COUNTRIES HAVE MASSIVE BANK SHORTS IN GOLD, AND WISH NOT TO BE EXPOSED… THEY ROUTINELY FORCE LIQUIDATION IN CASH, NOT GOLD DELIVERY AS STIPULATED ON FUND CONTRACTS… BEWARE THE FINE PRINT… THE SWISS BANKERS ARE IN A CLASS UNTO THEMSELVES IN CRIMINAL. $$$
Formal investments in gold are supposed to be represented by a certain amount of physical gold in storage, and are expected to be available on demand for delivery to the client. Such is not the case when customers request their gold at Deutsche Bank, the largest German bank participating in the gold exchange. Instead, the bank officially refused physical delivery of gold after a request, stating a vague change in business policy. The actual reason that such requests are refused is that a surge of investors seeking a safe haven during a period of currency crisis has strained the bank’s meager deposits, and they do not wish to publicize their acute short position. The fraud extends to Xetra-Gold, a large German investment instrument.
Clients of Germany’s biggest bank who have invested in the exchange traded commodity Xetra-Gold are facing problems when they want to obtain physical gold, according to the German analytic Godmode-Trader.de website. The Xetra-Gold is a bond on the Deutsche Bourse commodities market, and Deutsche Bank is a designated sponsor. On the website, Xetra-Gold says its clients have the right for physical delivery of gold. They lie, which is blatant fraud. Xetra-Gold issues the following policy, but does not honor it. Instead, the fraud is linked to the paper gold network.
“Physically backed: The issuer uses the proceeds from the issue of Xetra-Gold to purchase gold. The physical gold is held in custody for the issuer in the Frankfurt vaults of Clearstream Banking AG, a wholly owned subsidiary of Deutsche Bourse. In order to facilitate the delivery of physical gold, the issuer holds a further limited amount of gold on an unallocated weight account with Umicore AG & Co.”
The fraud is direct and blatant. Despite claims that every virtual gram of gold is backed by the same amount of physical gold, clients have been refused the precious metal upon demand. According to Godmode Trader, its reader “sought physical delivery of his holdings of Xetra-Gold. For this he approached, as instructed by the German Bourse document, its principal bank in Deutsche Bank.” However, he was told that the service was no longer available for reasons of business policy. The article went on to say it is not yet clear whether other banks are still delivering gold through Xetra. The Xetra-Gold fund says its holdings amount to over 85 tons of gold, and its assets under management reach EUR 3.5 billion. See Activist Post (HERE) and Russia Today (HERE).
The Voice made a comment on the gold fund fraudulent practice. He stated, “The article is one year old but still significant. Finally they nail the crooked banks. The big banks have sold approximately 60 thousand tons of gold to gullible investors, who remain unaware that the gold behind their investment does not even exist. That is nearly 25 years of annual global production in gold mine output. They have called us crazy for having made these allegations for years. Finally the truth is coming out on the colossal fraud. We have been correct all along.”
The Jackass adds a story of a good friend named EddyD. Back in 2010, we had a healthy dispute over his ZKB gold fund investment, which was several $million in size. The Zurich Cantonal Bank (aka Zurcher Kantonalbank) was of the highest repute, word had it. EddyD was insistent that his contract form on the fund stipulated gold delivery upon demand. But the Voice disagreed, being familiar with their ongoing fraud. EddyD finally visited Zurich and demanded to have a shipment to another world renown gold vault service, one with better integrity. The ZKB officials refused, and pointed to the fine print in the fund contract. It stated that the fund had the right to force cash delivery if they judged market pressures justified the change in delivery terms. EddyD was furious, since he had to sell out, accept cash, then repurchase the gold in large quantity. It cost him the buying premium, and well over $100k. The Swiss banks are loaded with fraud.
In the following years, the Swiss banks colluded with the USGovt to permit a takeover of both UBS and Credit Suisse, with a change in policy. The justification was flimsy, in tax dodge accounts and Iran sanctions violations. The result was hidden in the actual consequence. The USGovt banker group ransacked the bullion banks for both large banner Swiss banks, and stole the Arab gold. It was used to supply the Chinese in very large demand over the years 2013 to 2015. The Swiss bankers are dirty, have always been dirty, and proof lies at the root in the World War II events and aftermath. Thefts were numerous. The Jackass knows a man in Ohio USA, whose grandfather’s estate worth $5 million was stolen by the Swiss bankers. His German grandfather escaped Nazi Germany, sold out of his successful foundry, and invested the fortune in the Swiss banks, who claimed the records were lost. He soon afterward died, whose widow left the challenge of recovery to my Ohio friend. After ten years and extensive $100k in costs incurred, the Ohio man gave up, calling the $5 million stolen and lost.
## CRYPTO CURRENCIES GO GOLDEN
◄$$$ BITCOIN COMMENTS BY THE VOICE… OTHER COMMENTS BY SKY CRANE… EVOLUTION IS OCCURRING QUICKLY, WITH TREMENDOUS DISRUPTION. $$$
Preamble by the Jackass. This section is intended to serve as a discussion chapter, a source of information, and to provoke thought. The crypto currency (CC) space, in addition to blockchain technology, is evolving rapidly. The coverage here is not complete by any means, but it provides some decent information. The emphasis is placed on touching the gold currency concept as a priority.
The Voice gave the following, taken verbatim. People do not understand yet what blockchain is really all about. There are approximately 3 to 5 million people into crypto currencies at this point in time. Bitcoin is allowing people to transact directly with each other without any gatekeepers skimming transaction fees. There are only 21 million bitcoins; hence there cannot be inflation in Bitcoin valuation. It is the divisibility of Bitcoins that makes it fungible. The real change will come when hard asset backed crypto money is going to be launched. That will wipe out crypto currencies and kill the banks, since it is the return to sound money with 21st Century technology. People understand as much about blockchain and crypto currencies and crypto-money as they did understand about the Internet in 1995.
And the shakeout in the crypto currency markets will be as brutal as it was in the when the DotCom bubble was pricked. Bitcoin will go to $1 million per Bitcoin level in two to five years. It is pure math.
Sky Crane from the Jackass team gave the following, taken verbatim. Few really understand the cryptos and Bitcoin on a working level because it has not yet penetrated the financial micro markets where most people do business. So they are still mostly spectators of the cryptos, waiting to be told what to do. That change will come soon. There are already plenty of instructions available to get started on the internet. Speculation regarding a true cryptos failure is folly. Smart contracts and apps for your phone will blow Visa and other credit/debit cards out of the water. Global smartphone penetration is the key timing factor.
Some news has come on the silly front. I think there is a ZERO chance of Bitcoin becoming the new US Sheiss Dollar. It would be like turning a diamond into a turd, turning used toilet paper into a nice silk glove. The new Sheiss Dollar will be a most manipulated currency, and most likely with an extremely fraudulent basis. How could the US even acquire sufficient Bitcoin with USDollars? They have all not even been created yet.
A few quality cryptos, especially the ones using other tokens like Etherium for their updating the blockchain capabilities and emerging sovereign cryptos, will eventually emerge from the crowd and become the benchmarks for a new financial paradigm. Populous has a great bright future, for blockchain invoices within businesses. Coins, tokens, and the attached smart contracts that can verify real peer-to-peer (P2P), like Atomic P2P, with transparent public ledger verification, will dis-intermediate the fiat currency gatekeepers systems with low cost, utility, and verification. The SWIFT bank transaction system is toast really! When 3% of the population are involved in cryptos, they will have achieved the critical demographic purchase required to take over, because the early adopters and the innovators drive the rest of the herd. We are supposed to be around 1.5% right now. At 10% it becomes mainstream.
◄$$$ BITCOIN CONCLUSION FROM CAPITAL TRADING GROUP. $$$
In conclusion and as always we leave you with the weekly settlements. It is no shock to us that Bitcoin has surpassed $5000 once again, and was up some 29% last week alone. We have spoken with many wealthy individuals. They continue to question us on both the valuation as well as the technology. In fact, they almost laugh at the thought of Bitcoin, as they drive away in their Tesla cars. What is funny is the fact that people have the audacity to say Bitcoin is a bubble. Really? We would rather they ask, how is that with Bitcoin $5000 apiece, why is someone willing to pay 5000x per US Dollar? Once again, valuation is unique to one’s individual reality, or should we say perception. How many trillions is the internet worth? What did its invention do to revolutionize many industries? I am sure there is a number, but we don’t really care. What we know is the technology behind Bitcoin is a force to be reckoned with and the old guard is clearly on notice. Death to the Fiat we like to say, but then again that is just us. Then again, maybe the real truth behind the prices of things is that the fiat is becoming less and less valued, for if wealth is simply measured by debt, then we would rather own digital and metal and bet on the future. In fact an astute investor just today reminded us that three dimes (30 cents) bought a gallon of gas in 1964, and those same 1964 dimes today will still buy a gallon of gas ($3.50, due to silver content). We said that is interesting, but that is hard money for you. Keynesians will not admit it, but we don’t care. We know in the future that Gold & Silver will store value and fiat will be inflated away. It is inherent to its design, unfortunately!
◄$$$ THE WAR BETWEEN DE-CENTRALIZED CRYPTO CURRENCIES AND SOVEREIGN GOVERNMENTS MIGHT BE ABOUT READY TO GET UNDERWAY… WHEN CRYPTOS CROSS THE PEER-TO-PEER BOUNDARY FOR PAYMENTS AND TRANSACTIONS, AND MOVED TO ACTUAL COIN EXCHANGE MARKETS WITH BID & ASK VALUATIONS, THEY BECAME A THREAT TO THE MONEY CHANGERS AND FIAT CURRENCY MANAGERS… REFER TO THE CENTRAL BANKS… CRYPTO CURRENCIES HAVE BEGUN TO ACT LIKE FOREX CURRENCIES BUT WITH A STRONGER MORE SECURE STRUCTURE WITH BLOCKCHAIN FOR THEIR USAGE IN BUSINESS. $$$
Up until now most governments have treated crypto currencies as little more than a nuisance as their market cap has not been enough to be seen as a threat to primary markets, and their acceptance by the public has been sparse at best. However, with the advent of China beginning to crack down on the facilities that make the trading of Bitcoin and other crypto currencies quite easy for investors, the war between de-centralized currencies and sovereign government controls may be on the cusp of getting underway.
Over the past two days two well known Captains of Industry in the United States have both mentioned the Damocles Sword that hangs over the heads of the world's nearly 1000 crypto currencies, and are intimating that should these digital currencies become too great a threat, then governments will be more than willing to focus their power on ending them as a medium of exchange, the same way that the USGovt uses sanctions and the military exercises against leaders and nations that threaten USDollar hegemony as the global reserve currency. The battle lines have been drawn between sovereign governments and the legitimacy of crypto currencies, warned anti-virus software pioneer John McAfee during the first global blockchain technology event in Hong Kong. The comment came immediately after China imposed a ban on crypto currency sales and trading on exchanges earlier this month.
Among core issues in the US$150 billion industry are how nations can apply taxation to crypto currency transactions and whether there should be curbs on the ability for Bitcoin and other virtual currencies to facilitate global fund flows. McAfee told the South China Morning Post about the growing conflict between governments and the fugitives subculture who back the development of virtual currencies. He stated, “Today will go down in history as the beginning of the war between the proponents of crypto currency and the world governments. If governments are not able to know what the movement is, they will be unable to collect revenues. That is going to cause panic in some countries. China sees it already.” Furthermore, the Bitcoin status varies in different jurisdictions. Australia announced it would remove the double taxation on transactions involving crypto currencies like Bitcoin, while China has yet to define the legal status of virtual currencies.
The irony of course with the McAfee's stated viewpoint is that he is a extremely strong proponent of Bitcoin and crypto currencies. As a corporate executive he has the pragmatism to realize that governments will not stand idly by should de-centralized currencies threaten their authority and hegemony. Then there is the two-faced CEO of JPMorgan Chase Bank Jamie Dimon, who not only recently lambasted Bitcoin in a public interview, but did so hypocritically when information emerged that his bank's own brokers were profiting on the trade. After a recent Bitcoin price decline, JPMorgan used their European hidden slush fund connections within subsidiaries to buy BTC heavily. Just three months ago, JPMorgan suffered the shame of launching a crypto coin offering which failed miserably. Its value went to zero, since it was designed with centralized features of control.
Yet Dimon has a trump card up his sleeve, since his connections to government give him the confidence that at any time the USGovt will crack down on crypto currencies the same way they do with any other uncontrolled form of currency. And JPM can have insider notice of a price slam. In India, the criminal banker Dimon stated “Right now these crypto things are kind of a novelty. People think they are kind of neat. But the bigger they get, the more governments are going to close them down. It is creating something out of nothing that to me is worth nothing. It will end badly.” The USDollar is created out of nothing, used by the hundreds of $billions to monetize federal debt. That seems as corrupt as can be conceived. What a hypocrite and criminal, both. Recall that many computer firms 30 years ago called the personal computer and Apple computers as toys, only effective for games. They were wrong, loud wrong, dead wrong.
Dimon is openly concerned that with Bitcoin, Ethereum, and various Initial Coin Offerings (ICOs), for which there are now crypto currencies everywhere. Dimon warned that governments will eventually crack down on crypto currencies and will attempt to control them by threatening anyone who buys or sells Bitcoin with imprisonment, which would force digital currencies into becoming a black market. He sounds psychotic and delusional. Imagine the sovereign bond market and mortgage bond market exposed to corruption, if structured with the blockchain. The MERS title database would have been exposed before the bond bust in 2007. Be sure to consider that the USGovt via its handy Langley security agency is controlling the global monopoly on heroin, assuring Wall Street bank profits from the money laundering. The USGovt is the criminal organization issuing threats.
The Daily Economist made an excellent conclusion. “Had Bitcoin stayed firm to its original scope of being a peer-to-peer medium of exchange, then it is unlikely that sovereign governments would have both become interested in the crypto currency, and come to see it as a threat to their authority and hegemony. However, once it grew to the point that it was being traded in the [exchange] markets, and provided an means to escape capital controls imposed by these same governments, then at a certain point regulators and authorities had no choice but to begin to react, and this more than anything could be the flaw in the ultimate expansion of de-centralized money becoming a viable alternative to the current global monetary system.” See The Daily Economist (HERE).
◄$$$ RUSSIA AND CRYPTO… KING VLAD ENDORSES RUSSIA'S NEW CURRENCY, THE CRYPTO-RUBLE. $$$
See Sputnik Intl (HERE). Sky Crane had several thoughts on Russia announcing a Ruble crypto currency officially. Sovereigns and many elites with big stakes in the current system are trying to get out of the dying central bank debt model by attempting create their own national currency based crypto currencies through the central banks. Russia is pointing the way here with the announcement of an exclusive legal Ruble based crypto vehicle, and making any others illegal, in order to create and trade openly in Russia. Actually I am surprised they did it this way. The problem is that although the banks can do this, their crypto will only work if other cryptos not under their control are made illegal and an effective enforcement of that is possible. In my humble opinion, this will do nothing but encourage the free cryptos and propel their prices further. The central banks or sovereign crypto versions will have to eat themselves as they are forced to consolidate in an endless spiral downward, like when they try to enter the open markets to trade. As Jimi Hendricks said, “Castles made of sand melt into the sea eventually.”
This is the fatal flaw of the idea of sovereign (proprietary and exclusionary) crypto surrogates. They could only represent the debt of the banks as they have no assets left. Who would want to buy the banks with burden of debts wrapped in a crypto? Has anyone been to a USTBond auction lately? No one there but the USDept Treasury and the USFed officers. Even if the elite put vast portions of the current fiat money into these central banks cryptos, these cryptos would tend to be posted with enormous notional value in price, with whatever fiat currency was used to buy them. They will be rejected by thinking crypto investors. These two groups will now duke it out and the central banks will lose, because they cannot gate keep the internet for much longer. Therefore true P2P and atomic P2P will prevail by the choice of users who wish to avoid central bank and government intermediations and expenses.
The inter-connectivity of the internet is not going to be controlled, because its most virulent innovations are now coming from the hackers (the new reliable entities). Anything in the media is shit for sheep. Hackers are the real cyber warriors. The official agenda and central bank cryptos will lose out because the mindset of the best hackers is not for sale. These bright minds can see much more possibility in a free-for-all electronic world, because it allows the incentive and reward for innovation to develop without the restrictions. And that is their lifeblood, if not their drug.
◄$$$ RUSSIA’S CENTRAL BANK MADE FIRST STEP IN CREATING UNITED EURASIAN CURRENCY… THE POTENTIAL ARISES FOR WIDER USAGE OF AN ENDORSED CRYPTO FOR THE EMERGING EURASIAN TRADE ZONE. $$$
Russia’s new crypto-Ruble just changed the game, right under our noses. It is not the power of gold but rather crypto currency that attacks the central bank castles. After President Putin gave the endorsement, project developers are free to use the coin. See South Front (HERE) and Gold Goats 'n Guns (HERE). As footnote, know that after the cryptos do considerable damage knocking down castle gates, the golden horses and gilded cannons will follow. With them will come the golden platforms for trade, banking, and currencies.
◄$$$ KAZAKHSTAN TO GET INTO THE CRYPTO CURRENCY GAME WITH THEIR OWN SOVEREIGN CURRENCY. $$$
As a former Soviet Republic, and key player in the Eurasian Trade Zone from the Russian corner, the Kazakhs are in a position to advance the usage of crypto currencies in trade and commerce. See The Daily Economist (HERE).
◄$$$ BLOCKCHAIN IS CHANGING MONEY AND BUSINESS… IT WILL CONTINUE MOVING FORWARD IN AN UNSTOPPABLE MANNER. $$$
Don Tapscott sums up what is coming and happening right now. Numerous financial service sectors are not prepared for the effect, and many will face ruin like the shopping malls did from e-commerce online. A tremendous new disruptive technology has begun to make an impact. See YouTube video (HERE).
◄$$$ GOLD BACKED CRYPTO CURRENCY LIONSGOLD HOPES TO PROVIDE AN ALTERNATIVE TO BANK ACCOUNTS BY END OF THE YEAR… HELLOGOLD IS A GOLD BACKED CRYPTO CURRENCY THAT SEEKS TO ATTRACT THE BILLIONS OF PEOPLE WHO WISH TO AVOID BANKS. $$$
They are coming out of the woodwork. For details on LionsGold, see The Daily Economist (HERE). More evidence of gold in the monetary system. For details on HelloGold, see The Daily Economist (HERE).
◄$$$ ROB KIRBY ON EVOLVING GOLD AND CRYPTO SYNERGY. $$$
Rob Kirby raises numerous excellent questions on the development and evolution of crypto currencies, as they relate to gold. See YouTube (HERE). Where does the Exchange Stabilization Fund (run by the USDept Treasury to rig dozens of financial markets) go with gold and crypto-currency (CC)? What will be its new corrupt role, as the US fiat currency crisis progresses and eviscerates many participants financially, amidst wider economic damage? As the Chinese power up, how will CCs feature going forward in the gold RESET? What does this augur for personal holders of precious metals? Digitization could be mean entrapment within blockchain financial architectures? Will this present new counter-party risks, or will it really be risk free? What might be the form of state interventions, if any, in CC ventures within the United States and around the world? Can physical gold stand free from these developments, or will Gold become inextricably interwoven?
The Jackass has in the August Hat Trick Letter presented some key questions also. How will gold storage be managed, given the de-centralized theme of even gold-backed crypto currencies? Who will be in charge of audits and verification of gold vault contents? Expect regional storage to be a solution, where community trust exists and where distances will be relatively short.
◄$$$ CHlNA/NWO TO SHUT DOWN BITCOIN EXCHANGES… RUSSIA TO SHUT DOWN CRYPTO CURRENCY TRADING… THE WEST IS SURELY PROTECTING THEIR FRAUDULENT FIAT PAPER MONEY, BUT THE ASIANS MIGHT BE PROTECTING THEIR GOLD. $$$
China's second biggest Bitcoin exchange responded to a report that the Beijing officials are shutting all virtual exchanges. See YouTube video (HERE) and Zero Hedge (HERE).
Russia has made moves to ban websites offering crypto currency. See TruNews (HERE) and Silver Doctors (HERE).
◄$$$ JAPAN’S BIG BANKS PLAN A DIGITAL CURRENCY LAUNCH… J-COIN IS DESIGNED TO WEAN THE JAPANESE POPULATION OFF HEAVY DEPENDENCE UPON CASH… ELEVEN JAPANESE CRYPTO CURRENCY EXCHANGES GRANTED APPROVAL TO OPERATE. $$$
For the J-Coin launch, see Financial Times (HERE). For the granted approval for Japanese crypto currencies to operate, see Coinivore (HERE).
◄$$$ TRUE BLOCKCHAIN WOULD DESTROY AND LIKELY UNCOVER FRAUD AT THE D.T.C.C. FOR STOCK CERTIFICATE OWNERSHIP. $$$
True Blockchain would destroy and likely uncover fraud at the DTCC, which clears 100 million transactions per day. The DTCC acts as the custodian of $49 trillion in assets which the public takes for granted in ownership. The stocks are largely made up of Street Name Book Entry stocks and bonds.
In Blythe Master's Digital Asset Holdings company, the witch from JPMorgan described a system in a white paper regarding blockchain's future structure in the financial system. It is not quite the de-centralized version we are expecting. “Two parts of a transaction will be necessary for anyone to have a complete picture of what is happening. The first is the transaction itself, with the price and counter-party and other details known only to the user. That part stays on a local server at a bank, for example, as it does today. The second part is the fingerprint, which everyone in the network can see but not everyone can interpret.” See DTCC (HERE).
◄$$$ BLOCKCHAIN MATTERS MORE THAN YOU MIGHT IMAGINE… ITS IMPACT WILL SOON BE FELT IN MANY FINANCIAL SERVICES… IT COULD BECOME A UNIVERSAL TOOL, ENSURING MORE SECURITY AND LESS STANDARD FINANCIAL SYSTEM FRAUD. $$$
For general overview of the impact, see YouTube video (HERE). For some details on nine industries which the blockchain is lined up to potentially disrupt, see YouTube video (HERE).
◄$$$ BITCOIN COULD CONSUME AS MUCH ELECTRICITY AS DENMARK BY 2020… ITS PRIMARY TASKS REQUIRE ENERGY, FOR WHICH ACTIVITY IS GROWING EXPONENTIALLY. $$$
It is important to keep a grip on the energy expended in verification and validation for the blockchain structures. The inherent value of many crypto currencies is based upon electronic work. But it requires energy. The encryption methods ensure safety, but to place the items within the blockchain in secure manner, more energy is required. Some players actually derive coin rewards for conducting standard accounting tasks. These also require energy. The estimates on energy consumption are rising for the crypto sector, the growth for which is exponential just like with the internet many years ago. Consider the energy expenditure for the supply chain, online banking, online trading, and online news gathering, which is all standard today. See MotherBoard (HERE).
◄$$$ ENCRYPTION VIA ELLIPTIC CURVE CRYPTOGRAPHY EXPLAINS USAGE OF 256-BIT… THE METHODS ARE VERY ADVANCED… THE ELLIPTIC METHOD AT 256-BIT ACCOMPLISHES THE SAME AS 2048-BIT ON THE SAME R.S.A. ENCODED METHODS. $$$
The Jackass had made comments about the perceived lacking security from a mere 256-bit encryption scheme which has become standard for the crypto space. My mistake has been clarified in a fascination note from a computer engineer. Much gratitude to a kind helpful fellow from France, who supplied the following information via the Golden Jackass Contact Us window. He explains the elliptic methods, his note presented almost verbatim.
Hello Mr Willie, I am a french computer scientist and I am more than a little bit interested by Bitcoin technology. I just wanted to comment on the size of the encryption. You mentioned the 1024-bit standard size. This size is for RSA, which is based on the difficulty of finding prime numbers. Bitcoin does not use RSA, and to be sure, any 256-bit for RSA would indeed be not secure. Bitcoin currently uses Elliptic Curve Cryptography (ECC) on a standard basis. It is another mathematical problem which is different than RSA, hence the difference in the key sizes. You can read about it on page 20 of the NIST document. The equivalent for 256-bit ECC is 2048-bit RSA. Therefore it is very advanced and highly secure. See NVL Pubs (HERE) for the PDF file.
ECC is faster because manipulating 2048 bits for numbers is quite slow. In fact, when we talk about 1024 or 2048 bits with RSA as encryption, it is never using RSA for the whole communication. This would be extremely slow. In the encryption using RSA (like SSL) the 1024-bit RSA is only used for symmetric key exchange, which means that the actual communication will be using most likely AES-128 bit or AES-256. Even when the elliptic curve method is used for SSL certificate, it is only for to share a common symmetric key. The rest of the communication is using AES. The Jackass checked the meaning of RSA, which stands for its developers Ron Rivest, Adi Shamir, and Leonard Adleman in 1977.
Thanks to the following for charts StockCharts, Financial Times, UK Independent, Wall Street Journal, Zero Hedge, UK Independent, Bloomberg, Business Insider, Calculated Risk, Shadow Govt Statistics, Market Watch, and many more.